UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q/A


(Mark One)


x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the quarterly period ended March 31, 2008




OR




o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period
             to




Commission
file number: 814-00672




NGP
Capital Resources Company


(Exact
name of registrant as specified in its charter)





Maryland
            20-1371499(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      employer
              identification
      number)1221
      McKinney Street, Suite 2975
              Houston,
      Texas
            77010(Address
      of principal executive offices)
            (Zip
      Code)




(713)
752-0062


(Registrant’s
telephone number, including area code)


Securities registered pursuant to
Section 12(b) of the Act:





Common
      Stock, par value $.001 per share
            The
      NASDAQ Stock Market LLC(Title
      of class)
            (Name
      of exchange on which registered)





Securities
registered pursuant to Section 12(g) of the Act: None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes  ̈   No x


Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.


Yes  ̈   No x


Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes 
x   No  ̈


Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer      ̈
                    Accelerated
      filer     x
                    Non-accelerated
      filer      ̈
                    Smaller
      reporting company      ̈(Do
      not check if smaller reporting
company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes  ̈   No x





As of May
7, 2010, there were 21,628,202 shares of the registrant’s common stock
outstanding.








TABLE OF
CONTENTS
 
 PART
      I - FINANCIAL INFORMATION
                  
                  1Item
      1. Consolidated Financial Statements
                  
                  1Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                  
                  29Item
      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
                  
                  38Item
      3. Defaults Upon Senior Securities
                  
                  38Item
      4. Submission of Matters to a Vote of Security Holders
                  
                  38Item
      5. Other Information
                  
                  38Item
      6. Exhibits
                  
                  39
 
 i




Explanatory
Note
 
 We are filing this Amended Quarterly
Report on Form 10-Q/A to our Quarterly Report on Form 10-Q for the three month
period ended March 31, 2008, which we refer to as the Amended Filing, to restate
our unaudited consolidated financial statements and related disclosures for the
three-month period ended March 31, 2008, as discussed in Note 2 to the
accompanying restated unaudited consolidated financial
statements.  Our original Quarterly Report on Form 10-Q for the
quarter ended March 31, 2008, which we refer to as the Original Filing, was
filed with the Securities and Exchange Commission on May 8, 2008.
 
 Background
of the Restatement
 
 On March, 15, 2010, our Board of
Directors and the members of the Audit Committee of our Board of Directors
concluded that the Company should restate its financial statements for the years
ended December 31, 2007 and December 31, 2008 and for each of the quarters in
2007 and 2008 and the first three quarters in 2009, which we collectively refer
to as the Affected Periods.
 
 The determination to restate the
financial statements for the Affected Periods was made in connection with
management’s assessment of accounting errors it discovered as part of a process
to remediate a material weakness in internal controls previously disclosed in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2008
and the Company’s Quarterly Reports on Form 10-Q in 2009.  While the
Company has taken steps to remediate the previously disclosed material weakness,
the material weakness existed throughout the quarterly periods of 2009, and at
December 31, 2009, the Company had not yet remediated the material
weakness.  The Company anticipates that it will complete its testing
of the additional internal control processes designed to remediate the
previously disclosed material weakness in 2010.
 
 The errors and consequent restatements
described below principally involved non-cash accounting entries related to net
deferred tax assets and liabilities that typically arise as a result of timing
differences in tax and GAAP (book) accounting.  Taxable Net Investment
Income, which is the primary determinant of the Company’s distributable income,
has not been affected in any of the Affected Periods by these
restatements.
 
 The Company’s assessment of certain
identified accounting errors results in the following adjustments to previously
reported periods:
 
 1.      In the
quarter ended March 31, 2007, the Company failed to record a deferred tax
liability with respect to approximately $2.1 million in unrealized appreciation
on an investment in partnerships. Similarly, in the quarters ended June 30,
2007 and September 30, 2007, the Company failed to record deferred tax
liabilities with respect to approximately $4.0 million and $2.0 million,
respectively, in unrealized appreciation on an investment.
 
 2.      In the
quarter ended September 30, 2008, the Company realized a $12.34 million pre-tax
gain on this same investment (as compared to the $8.15 million of unrealized
appreciation previously recorded in 2007).  The reversal of the
previously unrecorded deferred tax liability in 2008 resulted in the incorrect
recording of a net tax deferred tax asset of $3.8 million at year end
2008.
 
 Unrelated
to the restatements, we have reclassified certain balance sheet, statement of
operations and statement of cash flows amounts to conform to the presentation in
our most recently-filed Annual Report on Form 10-K. These reclassifications were
primarily related to the disaggregation of investments in portfolio securities,
investment income, net realized capital gain (loss) on investments and net
unrealized gain (loss) on investments into separate classifications according to
level of control.
  ii
  Restatement
of Other Financial Statements
 
 We have restated our financial
statements for the years ended December 31, 2007 and December 31, 2008 in our
Annual Report on Form 10-K for the year ended December 31, 2009, which was filed
on March 31, 2010.  We have not amended, and we do not intend to
amend, either of our previously filed Annual Reports on Form 10-K for the years
ended December 31, 2007 or December 31, 2008.  With the filing of this
Amended Filing, we are concurrently filing amendments to our Quarterly Reports
on Form 10−Q for each of the quarters ended March 31 in the Affected Periods and
plan to subsequently file amendments to our Quarterly Reports on Form 10-Q for
each of the other quarters in the Affected Periods.  For this reason,
readers should no longer rely on those previously issued financial statements
and the related information contained in such previously filed reports for the
Affected Periods.
 
 For the convenience of the reader, this
Amended Filing sets forth the Original Filing, as modified and superseded where
necessary to reflect the amendment and restatement of our unaudited consolidated
financial statements and related disclosures.  The following items
have been amended principally as a result of, and to reflect, the
restatement:
 
 ·
              Part
      I – Item 1. Consolidated Financial
Statements;
 ·
              Part
      I – Item 2. Management’s Discussion and Analysis of Financial Condition
      and Results of Operations;
 ·
              Part
      I – Item 4. Controls and
Procedures;
 ·
              Part
      II – Item 1.A. Risk Factors; and
 ·
              Part
      II – Item 6. Exhibits.
 
 In accordance with applicable rules of
the Securities and Exchange Commission, this Amended Filing includes
certifications from our Chief Executive Officer and Chief Financial Officer
dated as of the date of this filing.
 
 The remaining items contained in this
Amended Filing consist of all other items originally contained in the Original
Filing and are included for the convenience of the reader.  The
sections of the Original Filing which were not amended are unchanged and
continue in full force and effect as originally filed.  This Amended
Filing speaks as of May 8, 2008, the date we filed the Original Filing, and has
not been updated to reflect events occurring subsequent to the date of the
original filing other than those associated with the evaluation of and resulting
restatement of the Company’s consolidated financial
statements.





iii




PART I - FINANCIAL
INFORMATION
 Item
1. Consolidated Financial Statements.


NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
BALANCE SHEETS
 
 (Unaudited)March 31, 2008
                    
                    
                    December 31, 2007(As Restated)
                    
                    
                    (As Restated)AssetsInvestments
      in portfolio securities at fair valueControl
      investments- majority owned (cost:  $24,898,371 and
      $21,488,105, respectively)
                    
                    $
                    33,080,186
                    
                    
                    $
                    29,669,857Affiliate
      investments (cost:  $15,073,325 and $0
      respectively)
                    
                    
                    15,073,325
                    
                    
                    
                    -Non-affiliate
      investments (cost:  $237,769,059 and $256,459,349
      respectively)
                    
                    
                    234,405,712
                    
                    
                    
                    254,558,716Investments
      in corporate notes at fair value
                      (cost:  $11,620,610
      and $11,631,599, respectively)
                    
                    
                    8,661,000
                    
                    
                    
                    8,955,500Investments
      in U.S. Treasury Bills, at amortized cost which approximates fair
      value
                    
                    
                    143,978,220
                    
                    
                    
                    163,925,625Total
      investments
                    
                    
                    435,198,443
                    
                    
                    
                    457,109,698Cash
      and cash equivalents
                    
                    
                    8,744,574
                    
                    
                    
                    18,437,115Accounts
      receivable and other current assets
                    
                    
                    73,123
                    
                    
                    
                    61,319Interest
      receivable
                    
                    
                    877,410
                    
                    
                    
                    647,839Prepaid
      assets
                    
                    
                    1,714,153
                    
                    
                    
                    2,020,655Total
      current assets
                    
                    
                    11,409,260
                    
                    
                    
                    21,166,928Total
      assets
                    
                    $
                    446,607,703
                    
                    
                    $
                    478,276,626Liabilities
      and stockholders' equity (net assets)Current
      liabilitiesAccounts
      payable
                    
                    $
                    510,915
                    
                    
                    $
                    928,761Management
      and incentive fees payable
                    
                    
                    2,148,721
                    
                    
                    
                    2,032,107Dividends
      payable
                    
                    
                    7,000,133
                    
                    
                    
                    9,012,671Deferred
      tax liability
                    
                    
                    2,770,924
                    
                    
                    
                    2,770,924Total
      current liabilities
                    
                    
                    12,430,693
                    
                    
                    
                    14,744,463Deferred
      tax liability
                    
                    
                    94,019
                    
                    
                    
                    116,221Long-term
      debt
                    
                    
                    191,250,000
                    
                    
                    
                    216,000,000Total
      liabilities
                    
                    
                    203,774,712
                    
                    
                    
                    230,860,684Commitments
      and contingencies  (Note 8)Stockholders’
      equity (net assets)Common
      stock, $.001 par value, 250,000,000 shares authorized;17,500,332
      shares issued and outstanding
                    
                    
                    17,500
                    
                    
                    
                    17,500Paid-in
      capital in excess of par
                    
                    
                    245,684,499
                    
                    
                    
                    245,684,499Undistributed
      net investment income (loss)
                    
                    
                    (2,816,075
                    )
                    
                    
                    20,714Undistributed
      net realized capital gain  (loss)
                    
                    
                    859,133
                    
                    
                    
                    859,133Net
      unrealized appreciation (depreciation) of portfolio securities and
      corporate notes
                    
                    
                    (912,066
                    )
                    
                    
                    834,096Total
      stockholders’ equity (net assets)
                    
                    
                    242,832,991
                    
                    
                    
                    247,415,942Total
      liabilities and stockholders' equity (net assets)
                    
                    $
                    446,607,703
                    
                    
                    $
                    478,276,626Net
      asset value per share
                    
                    $
                    13.88
                    
                    
                    $
                    14.14
 
 (See
accompanying notes to consolidated financial statements)
  1
  NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
 
 For the Three Months EndedMarch 31, 2008
                  
                  
                  March 31, 2007(As Restated)
                  
                  
                  (As Restated)Investment
      incomeInterest
      income:Control
      investments - majority owned
                  
                  $
                  120,914
                  
                  
                  $
                  1,007,278Affiliate
      investments
                  
                  
                  194,779
                  
                  
                  
                  -Non-affiliate
      investments
                  
                  
                  8,636,423
                  
                  
                  
                  7,213,226Royalty
      income, net of amortization:Control
      investments - majority owned
                  
                  
                  28,015
                  
                  
                  
                  -Non-affiliate
      investments
                  
                  
                  517,835
                  
                  
                  
                  200,751Other
      income
                  
                  
                  40,370
                  
                  
                  
                  55,507Total
      investment income
                  
                  
                  9,538,336
                  
                  
                  
                  8,476,762Operating
      expensesManagement
      fees
                  
                  
                  1,800,206
                  
                  
                  
                  1,564,509Professional
      fees
                  
                  
                  208,979
                  
                  
                  
                  153,596Insurance
      expense
                  
                  
                  198,817
                  
                  
                  
                  132,423Interest
      expense and fees
                  
                  
                  2,441,076
                  
                  
                  
                  1,557,196State
      franchise taxes
                  
                  
                  9,516
                  
                  
                  
                  -Other
      general and administrative expenses
                  
                  
                  738,600
                  
                  
                  
                  651,553Total
      operating expenses
                  
                  
                  5,397,194
                  
                  
                  
                  4,059,277Net
      investment income before income taxes
                  
                  
                  4,141,142
                  
                  
                  
                  4,417,485Benefit
      (provision) for income taxes
                  
                  
                  22,202
                  
                  
                  
                  (11,471
                  )Net
      investment income
                  
                  
                  4,163,344
                  
                  
                  
                  4,406,014Net
      increase (decrease) in unrealized appreciation (depreciation) on portfolio
      securities and corporate notesControl
      investments- majority owned
                  
                  
                  63
                  
                  
                  
                  2,110,662Non-affiliate
      investments
                  
                  
                  (1,746,225
                  )
                  
                  
                  1,619,324Benefit
      (provision) for taxes on unrealized gain
                  
                  
                  -
                  
                  
                  
                  (713,924
                  )Total
      net unrealized gain (loss) on investments
                  
                  
                  (1,746,162
                  )
                  
                  
                  3,016,062Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                  
                  $
                  2,417,182
                  
                  
                  $
                  7,422,076Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations per common share
                  
                  $
                  0.14
                  
                  
                  $
                  0.42
 
 (See
accompanying notes to consolidated financial statements)
  2
  NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (NET ASSETS)
 
 Net Unrealized
                                
                                
                                TotalPaid-in Capital
                                
                                
                                Undistributed
                                
                                
                                Undistributed
                                
                                
                                Appreciation (Depreciation)
                                
                                
                                Stockholders'Common Stock
                                
                                
                                in Excess
                                
                                
                                Net Investment
                                
                                
                                Net Realized
                                
                                
                                of Portfolio Securities,
      and
                                
                                
                                EquityShares
                                
                                
                                Amount
                                
                                
                                of Par
                                
                                
                                Income (Loss)
                                
                                
                                Capital Gain (Loss)
                                
                                
                                Corporate Notes
                                
                                
                                (Net Assets)Balance
      at December 31, 2007 (as restated)
                                
                                
                                17,500,332
                                
                                
                                $
                                17,500
                                
                                
                                $
                                245,684,499
                                
                                
                                $
                                20,714
                                
                                
                                $
                                859,133
                                
                                
                                $
                                834,096
                                
                                
                                $
                                247,415,942Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                4,163,344
                                
                                
                                
                                -
                                
                                
                                
                                (1,746,162
                                )
                                
                                
                                2,417,182Dividends
      declared
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (7,000,133
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (7,000,133
                                )Balance
      at March 31, 2008 (unaudited & as restated)
                                
                                
                                17,500,332
                                
                                
                                $
                                17,500
                                
                                
                                $
                                245,684,499
                                
                                
                                $
                                (2,816,075
                                )
                                
                                $
                                859,133
                                
                                
                                $
                                (912,066
                                )
                                
                                $
                                242,832,991
 
 (See
accompanying notes to consolidated financial statements)
  3
  NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 For The Three Months EndedMarch 31, 2008
                      
                      
                      March 31, 2007(As Restated)
                      
                      
                      (As Restated)Cash
      flows from operating activitiesNet
      increase in stockholders' equity (net assets) resulting from
      operations
                      
                      $
                      2,417,182
                      
                      
                      $
                      7,422,076Adjustments
      to reconcile net increase in stockholders' equity (net assets) resulting
      from operations to net cash provided by (used in) operating
      activitiesPayment-in-kind
      interest
                      
                      
                      (1,728,817
                      )
                      
                      
                      (1,115,048
                      )Net
      amortization of premiums, discounts and fees
                      
                      
                      (301,353
                      )
                      
                      
                      (381,727
                      )Change
      in unrealized (appreciation) depreciation on portfolio securities and
      corporate notes
                      
                      
                      1,746,162
                      
                      
                      
                      (3,729,986
                      )Effects
      of changes in operating assets and liabilitiesAccounts
      receivable and other current assets
                      
                      
                      (11,804
                      )
                      
                      
                      420,203Interest
      receivable
                      
                      
                      (229,571
                      )
                      
                      
                      179,779Prepaid
      assets
                      
                      
                      306,502
                      
                      
                      
                      238,584Accounts
      payable
                      
                      
                      (301,232
                      )
                      
                      
                      36,309Income
      taxes payable
                      
                      
                      -
                      
                      
                      
                      11,471Current
      portion of deferred income taxes
                      
                      
                      -
                      
                      
                      
                      713,924Non-current
      deferred income taxes
                      
                      
                      (22,202
                      )
                      
                      
                      -Purchase
      of investments in portfolio securities
                      
                      
                      (25,776,473
                      )
                      
                      
                      (58,354,311
                      )Redemption
      of investments in portfolio securities
                      
                      
                      28,024,331
                      
                      
                      
                      587,526Net
      sale of investments in U.S. Treasury Bills
                      
                      
                      19,947,405
                      
                      
                      
                      38,719,021Net
      cash provided by (used in) operating activities
                      
                      
                      24,070,130
                      
                      
                      
                      (15,252,179
                      )Cash
      flows from financing activitiesBorrowings
      under revolving credit facility
                      
                      
                      10,000,000
                      
                      
                      
                      5,285,000Repayments
      on revolving credit facility
                      
                      
                      (34,750,000
                      )
                      
                      
                      -Dividends
      paid
                      
                      
                      (9,012,671
                      )
                      
                      
                      -Net
      cash provided by (used in) financing activities
                      
                      
                      (33,762,671
                      )
                      
                      
                      5,285,000Net
      decrease in cash and cash equivalents
                      
                      
                      (9,692,541
                      )
                      
                      
                      (9,967,179
                      )Cash
      and cash equivalents, beginning of period
                      
                      
                      18,437,115
                      
                      
                      
                      12,334,329Cash
      and cash equivalents, end of period
                      
                      $
                      8,744,574
                      
                      
                      $
                      2,367,150
 
 (See
accompanying notes to consolidated financial statements)
  4
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 March
31, 2008
 (Unaudited)
 
 Portfolio Company
                                                                                                                    
                                                                                                                    Energy Industry Segment
                                                                                                                    
                                                                                                                    
                                                                                                                    Investment (1) (2) (4)
                                                                                                                    
                                                                                                                    
                                                                                                                    Principal
                                                                                                                    
                                                                                                                    
                                                                                                                    Cost
                                                                                                                    
                                                                                                                    
                                                                                                                    Fair Value (3)TARGETED
      INVESTMENTSControl
      Investments- Majority Owned (50% to 100% owned)Rubicon
      Energy Partners,
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Subordinated Secured
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    5,000,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    5,000,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    5,000,000LLC
      (12)
                                                                                                                    
                                                                                                                    Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    Multiple-Advance
      Term Loan(LIBOR
      + 8.00%, due 5/01/2010)LLC
      Units (4,000 units) (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,000,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    12,000,000TierraMar
      Energy LP (12)
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    Overriding
      Royalty Interest
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    18,185
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    200,000Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    Class
      A Preferred LP Units (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    15,880,186
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    15,880,186Total
      Control Investments- Majority Owned (50% to 100% owned)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    24,898,371
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    33,080,186Affiliate
      Investments- (5% to 25% owned)Bionol
      Clearfield, LLC (12)
                                                                                                                    
                                                                                                                    Alternative
      Fuels and
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Secured Tranche C
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    5,000,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    5,049,283
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    5,049,283Specialty
      Chemicals
                                                                                                                    
                                                                                                                    
                                                                                                                    Construction
      Loan(LIBOR
      + 7.00%, due 09/06/2016)BioEnergy
      Holding, LLC (12)
                                                                                                                    
                                                                                                                    Alternative
      Fuels and
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Secured Notes
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    10,000,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    9,051,510
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    9,051,510Specialty
      Chemicals
                                                                                                                    
                                                                                                                    
                                                                                                                    (15.00%,
      due 03/06/2015)BioEnergy
      International Warrants (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    595,845
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    595,845BioEnergy
      Holding Units (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    376,687
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    376,687Total
      Affiliate Investments- (5% to 25% owned)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    15,073,325
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    15,073,325Non-Affiliate
      Investments- (less than 5% owned)Alden
      Resources, LLC (12)
                                                                                                                    
                                                                                                                    Coal
      Production
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Secured
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    36,285,168
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    33,452,204
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    33,452,204Multiple-Advance
      Term Loan(LIBOR
      + 8.00% cash, +10.00% PIK - until 2/29/2008)cash
      only thereafter, due 1/05/2013)Royalty
      Interest
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    2,613,803
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    2,660,000Warrants
      (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    100,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    100,000Anadarko
      Petroleum Corporation
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    Multiple-Advance
      Net Profits Interest
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    52,575,286
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    52,600,647
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    52,600,6472007-III
      Drilling Fund (12)
                                                                                                                    
                                                                                                                    Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    (Due
      4/23/2032)BSR
      Loco Bayou, LLC (12)
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Secured
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    2,978,367
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    2,572,869
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,710,781Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK - until 8/15/08,cash
      only thereafter, due 8/15/2009) (8)Overriding
      Royalty Interest (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    20,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    20,000Warrants
      (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    10,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -Chroma
      Exploration &
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    9,154
      Shares Series A Participating
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    2,221,710
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -Production,
      Inc. (12)
                                                                                                                    
                                                                                                                    Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    Convertible
      Preferred Stock (8)8,359
      Shares Series AA Participating
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    2,089,870
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,567,402Convertible
      Preferred Stock (8)8.11
      Shares Common Stock (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -Warrants
      (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    -Crossroads
      Energy, LP (12)
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Secured
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,143,476
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,088,225
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    4,088,225Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    Multiple-Advance
      Term Loan(LIBOR
      + 5.50%, due 6/29/2009)Overriding
      Royalty Interest
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    7,432
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    250,000DeanLake
      Operator, LLC (12)
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Secured
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    13,195,080
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    12,972,829
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    12,972,829Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    Multiple-Advance
      Term Loan(LIBOR
      + 7.00%, due 6/25/2010)Overriding
      Royalty Interest
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    19,458
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    20,000Warrants
      (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    10,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    10,000Formidable,
      LLC (12)
                                                                                                                    
                                                                                                                    Oil
      & Natural Gas
                                                                                                                    
                                                                                                                    
                                                                                                                    Senior
      Secured
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    37,000,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    37,000,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    37,000,000Production
      and Development
                                                                                                                    
                                                                                                                    
                                                                                                                    Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK ,due
      5/31/2008)Warrants
      (5)
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    500,000
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    500,000
 
 (See
accompanying notes to consolidated financial statements)
 
 5
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 March
31, 2008
 (Unaudited)
 (Continued)
 
 Portfolio Company
                                                                                
                                                                                Energy Industry Segment
                                                                                
                                                                                
                                                                                Investment (1) (2) (4)
                                                                                
                                                                                
                                                                                Principal
                                                                                
                                                                                
                                                                                Cost
                                                                                
                                                                                
                                                                                Fair Value (3)TARGETED
      INVESTMENTS - ContinuedNon-Affiliate
      Investments- (less than 5% owned)- continuedNighthawk
      Transport I, LP (12)
                                                                                
                                                                                Energy
      Services
                                                                                
                                                                                
                                                                                Second
      Lien
                                                                                
                                                                                
                                                                                
                                                                                14,328,347
                                                                                
                                                                                
                                                                                
                                                                                13,427,546
                                                                                
                                                                                
                                                                                
                                                                                13,427,546Term
      Loan B(The
      greater of 12.5% or LIBOR + 8.00%,due
      10/03/2010)LP
      Units (5)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                224
                                                                                
                                                                                
                                                                                
                                                                                150,000Warrants
      (5)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                850,000
                                                                                
                                                                                
                                                                                
                                                                                850,000Second
      Lien
                                                                                
                                                                                
                                                                                
                                                                                1,595,043
                                                                                
                                                                                
                                                                                
                                                                                1,569,974
                                                                                
                                                                                
                                                                                
                                                                                1,569,974Delayed
      Draw Term Loan B(The
      greater of 12.5% or LIBOR + 8.00%,due
      10/03/2010)Resaca
      Exploitation, LP (12)
                                                                                
                                                                                Oil
      & Natural Gas
                                                                                
                                                                                
                                                                                Senior
      Secured
                                                                                
                                                                                
                                                                                
                                                                                26,993,572
                                                                                
                                                                                
                                                                                
                                                                                26,515,386
                                                                                
                                                                                
                                                                                
                                                                                26,515,386Production
      and Development
                                                                                
                                                                                
                                                                                Multiple-Advance
      Tranche A Term Loan(LIBOR
      + 6.00%, due 5/01/2012)Overriding
      Royalty Interest
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                29,127
                                                                                
                                                                                
                                                                                
                                                                                400,000Senior
      Secured Tranche B Term Loan
                                                                                
                                                                                
                                                                                
                                                                                6,000,000
                                                                                
                                                                                
                                                                                
                                                                                6,000,000
                                                                                
                                                                                
                                                                                
                                                                                6,000,000(LIBOR
      + 9.00%, due 11/30/2007) (7)Overriding
      Royalty Interest
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                29,127
                                                                                
                                                                                
                                                                                
                                                                                400,000Senior
      Subordinated
                                                                                
                                                                                
                                                                                
                                                                                4,000,000
                                                                                
                                                                                
                                                                                
                                                                                4,000,000
                                                                                
                                                                                
                                                                                
                                                                                4,000,000Secured
      Convertible Term Loan(6.00%
      cash, 8.00% PIK, due 5/01/2012)Sonoran
      Energy, Inc. (12)
                                                                                
                                                                                Oil
      & Natural Gas
                                                                                
                                                                                
                                                                                Warrants
      (5)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                10,000
                                                                                
                                                                                
                                                                                
                                                                                10,000Production
      and DevelopmentTammany
      Oil & Gas, LLC (12)
                                                                                
                                                                                Oil
      & Natural Gas
                                                                                
                                                                                
                                                                                Senior
      Secured
                                                                                
                                                                                
                                                                                
                                                                                23,285,796
                                                                                
                                                                                
                                                                                
                                                                                22,940,718
                                                                                
                                                                                
                                                                                
                                                                                22,940,718Production
      and Development
                                                                                
                                                                                
                                                                                Multiple-Advance
      Term Loan(LIBOR
      + 6.00%, due 3/21/2010)Overriding
      Royalty Interest (5)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                200,000
                                                                                
                                                                                
                                                                                
                                                                                300,000Venoco,
      Inc. (11)
                                                                                
                                                                                Oil
      & Natural Gas
                                                                                
                                                                                
                                                                                Senior
      Notes (6)
                                                                                
                                                                                
                                                                                
                                                                                8,000,000
                                                                                
                                                                                
                                                                                
                                                                                7,969,143
                                                                                
                                                                                
                                                                                
                                                                                7,260,000Production
      and Development
                                                                                
                                                                                
                                                                                (8.75%,
      due 12/15/2011)Venoco,
      Inc. (11)
                                                                                
                                                                                Oil
      & Natural Gas
                                                                                
                                                                                
                                                                                Senior
      Notes (6)
                                                                                
                                                                                
                                                                                
                                                                                4,000,000
                                                                                
                                                                                
                                                                                
                                                                                3,948,767
                                                                                
                                                                                
                                                                                
                                                                                3,630,000Production
      and Development
                                                                                
                                                                                
                                                                                (8.75%,
      due 12/15/2011)Total
      Non-Affiliate Investments- (less than 5% owned)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                237,769,059
                                                                                
                                                                                
                                                                                
                                                                                234,405,712Subtotal
      Targeted Investments (63.67% of total investments)
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                $
                                                                                277,740,755
                                                                                
                                                                                
                                                                                $
                                                                                282,559,223
 
 (See
accompanying notes to consolidated financial statements)
 
 6
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 March
31, 2008
 (Unaudited)
 (Continued)
 
 Issuing
      Company
                                                                    
                                                                    Energy
      Industry
      Segment
                                                                    
                                                                    
                                                                    Investment
      (1) (2)
      (4)
                                                                    
                                                                    
                                                                    Principal
                                                                    
                                                                    
                                                                    Cost
                                                                    
                                                                    
                                                                    Fair
      Value
      (3)CORPORATE
      NOTESPioneer
      Natural Resources Co. (11)
                                                                    
                                                                    Oil
      & Natural Gas
                                                                    
                                                                    
                                                                    Senior
      Notes, 7.2%, due 2028
                                                                    
                                                                    
                                                                    $
                                                                    10,000,000
                                                                    
                                                                    
                                                                    $
                                                                    11,620,610
                                                                    
                                                                    
                                                                    $
                                                                    8,661,000Production
      and DevelopmentSubtotal
      Corporate Notes ( 1.95% of total investments)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    11,620,610
                                                                    
                                                                    
                                                                    $
                                                                    8,661,000GOVERNMENT
      SECURITIES
      (10)U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    $
                                                                    8,000,000
                                                                    
                                                                    
                                                                    $
                                                                    8,998,495
                                                                    
                                                                    
                                                                    $
                                                                    8,998,495U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,993
                                                                    
                                                                    
                                                                    
                                                                    11,997,993U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,993
                                                                    
                                                                    
                                                                    
                                                                    11,997,993U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,994
                                                                    
                                                                    
                                                                    
                                                                    11,997,994U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,993
                                                                    
                                                                    
                                                                    
                                                                    11,997,993U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,993
                                                                    
                                                                    
                                                                    
                                                                    11,997,993U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,994
                                                                    
                                                                    
                                                                    
                                                                    11,997,994U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,993
                                                                    
                                                                    
                                                                    
                                                                    11,997,993U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,993
                                                                    
                                                                    
                                                                    
                                                                    11,997,993U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,994
                                                                    
                                                                    
                                                                    
                                                                    11,997,994U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 3.073%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    12,000,000
                                                                    
                                                                    
                                                                    
                                                                    11,997,993
                                                                    
                                                                    
                                                                    
                                                                    11,997,993U.S.
      Treasury Bills
                                                                    
                                                                    Government
                                                                    
                                                                    
                                                                    U.S.
      Treasury Bills, 0.253%, due 04/03/2008
                                                                    
                                                                    
                                                                    
                                                                    15,000,000
                                                                    
                                                                    
                                                                    
                                                                    14,999,792
                                                                    
                                                                    
                                                                    
                                                                    14,999,792Subtotal
      Government Securities (32.41% of total investments)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    143,978,220
                                                                    
                                                                    
                                                                    $
                                                                    143,978,220CASHSubtotal
      Cash (1.97% of total investments)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    8,744,574
                                                                    
                                                                    
                                                                    $
                                                                    8,744,574TOTAL
      INVESTMENTS, CASH AND CASH
      EQUIVALENTS
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    442,084,159
                                                                    
                                                                    
                                                                    $
                                                                    443,943,017LIABILITIES
      IN EXCESS OF OTHER ASSETS
      (9)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    (201,110,026
                                                                    )NET
      ASSETS
      (9)
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    242,832,991
  NOTES TO CONSOLIDATED
SCHEDULE OF INVESTMENTS
 (1)
              All
      investments are pledged as collateral for obligations uder the Company's
      credit facilities.
 (2)
              Percentages
      represent interest rates in effect at March 31, 2008, and due dates
      represent the contractual maturity
dates.
 (3)
              Fair
      value of targeted investments is determined by or under the direction of
      the Board of Directors.
 (4)
              All
      investments are in entities with primary operations in the United States
      of America.
 (5)
              Non-income
      producing securities.
 (6)
              Upon
      the March 30, 2006 closing of Venoco, Inc.'s TexCal acquisition, Venoco
      Inc.'s senior notes became collateralized by second priority
      liens.
 (7)
              Forbearance
      granted on maturity date until February 29, 2008.  The Manager
      is in the process of renegotiating the Tranche B note with
      Resaca.
 (8)
              Non-accrual
      status.(9)
              As
      restated.
 (10)
              Level
      1 security per SFAS No.
      157 heirachy.
 (11)
              Level
      2 security per SFAS No.
      157 heirachy.
 (12)
              Level
      3 security per SFAS No.
      157 heirachy.




(See accompanying notes to
consolidated financial statements)


7


NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2007
 
 Portfolio Company
                                    
                                    Energy Industry Segment
                                    
                                    Investment (1) (2) (4)
                                    
                                    Principal
                                    
                                    
                                    Cost
                                    
                                    
                                    Fair Value (3)TARGETED
      INVESTMENTSControl
      Investments- Majority Owned (50% to 100% owned)Rubicon
      Energy Partners, LLC
                                    
                                    Oil
      & Natural Gas
                                    
                                    Senior
      Subordinated Secured
                                    
                                    
                                    2,285,000
                                    
                                    
                                    
                                    2,285,000
                                    
                                    
                                    
                                    2,285,000Production
      and Development
                                    
                                    Multiple-Advance
      Term Loan(LIBOR
      + 8.00%, due 5/01/2010)LLC
      Units (4,000 units) (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    4,000,000
                                    
                                    
                                    
                                    12,000,000TierraMar
      Energy LP
                                    
                                    Oil
      & Natural Gas
                                    
                                    Overriding
      Royalty Interest
                                    
                                    
                                    
                                    
                                    
                                    
                                    18,248
                                    
                                    
                                    
                                    200,000Production
      and Development
                                    
                                    Class
      A Preferred LP Units (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    15,184,857
                                    
                                    
                                    
                                    15,184,857Total
      Control Investments- Majority Owned (50% to 100% owned)
                                    
                                    
                                    
                                    
                                    
                                    
                                    21,488,105
                                    
                                    
                                    
                                    29,669,857Non-Affiliate
      Investments- (less than 5% owned)Alden
      Resources, LLC
                                    
                                    Coal
      Production
                                    
                                    Senior
      Secured
                                    
                                    
                                    35,459,204
                                    
                                    
                                    
                                    32,528,411
                                    
                                    
                                    
                                    32,528,411Multiple-Advance
      Term Loan(LIBOR
      + 8.00% cash, +10.00% PIK - until 2/29/2008)cash
      only thereafter, due 1/05/2013)Royalty
      Interest
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,627,152
                                    
                                    
                                    
                                    2,660,000Warrants
      (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    100,000
                                    
                                    
                                    
                                    100,000Anadarko
      Petroleum Corporation
                                    
                                    Oil
      & Natural Gas
                                    
                                    Multiple-Advance
      Net Profits Interest
                                    
                                    
                                    71,325,081
                                    
                                    
                                    
                                    71,347,702
                                    
                                    
                                    
                                    71,347,7022007-III
      Drilling Fund
                                    
                                    Production
      and Development
                                    
                                    (Due
      4/23/2032)BSR
      Alto, LLC
                                    
                                    Oil
      & Natural Gas
                                    
                                    Senior
      Secured
                                    
                                    
                                    2,428,449
                                    
                                    
                                    
                                    2,345,468
                                    
                                    
                                    
                                    2,345,468Production
      and Development
                                    
                                    Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK - until 8/17/08,cash
      only thereafter, due 8/17/2009)Overriding
      Royalty Interest
                                    
                                    
                                    
                                    
                                    
                                    
                                    28,885
                                    
                                    
                                    
                                    -Warrants
      (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    10,000
                                    
                                    
                                    
                                    -BSR
      Loco Bayou, LLC
                                    
                                    Oil
      & Natural Gas
                                    
                                    Senior
      Secured
                                    
                                    
                                    2,926,309
                                    
                                    
                                    
                                    2,592,998
                                    
                                    
                                    
                                    1,730,910Production
      and Development
                                    
                                    Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK - until 8/15/08,cash
      only thereafter, due 8/15/2009) (9)Overriding
      Royalty Interest  (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    20,000
                                    
                                    
                                    
                                    20,000Warrants
      (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    10,000
                                    
                                    
                                    
                                    -Chroma
      Exploration &
                                    
                                    Oil
      & Natural Gas
                                    
                                    9,154
      Shares Series A Participating
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,221,710
                                    
                                    
                                    
                                    -Production,
      Inc.
                                    
                                    Production
      and Development
                                    
                                    Convertible
      Preferred Stock (9)8,359
      Shares Series AA Participating
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,089,870
                                    
                                    
                                    
                                    2,089,870Convertible
      Preferred Stock8.11
      Shares Common Stock (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Warrants
      (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Crossroads
      Energy, LP
                                    
                                    Oil
      & Natural Gas
                                    
                                    Senior
      Secured
                                    
                                    
                                    4,188,715
                                    
                                    
                                    
                                    4,124,169
                                    
                                    
                                    
                                    4,124,169Production
      and Development
                                    
                                    Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK - until 12/29/07,cash
      only thereafter, due 6/29/2009)Overriding
      Royalty Interest
                                    
                                    
                                    
                                    
                                    
                                    
                                    8,029
                                    
                                    
                                    
                                    250,000DeanLake
      Operator, LLC
                                    
                                    Oil
      & Natural Gas
                                    
                                    Senior
      Secured
                                    
                                    
                                    12,709,080
                                    
                                    
                                    
                                    12,465,888
                                    
                                    
                                    
                                    12,465,888Production
      and Development
                                    
                                    Multiple-Advance
      Term Loan(LIBOR
      + 7.00%, due 6/25/2010)Overriding
      Royalty Interest
                                    
                                    
                                    
                                    
                                    
                                    
                                    19,648
                                    
                                    
                                    
                                    20,000Warrants
      (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    10,000
                                    
                                    
                                    
                                    10,000Formidable,
      LLC
                                    
                                    Oil
      & Natural Gas
                                    
                                    Senior
      Secured
                                    
                                    
                                    34,421,803
                                    
                                    
                                    
                                    34,421,803
                                    
                                    
                                    
                                    34,421,803Production
      and Development
                                    
                                    Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, +7.50% PIK ,due
      12/31/2007) (8)Warrants
      (5)
                                    
                                    
                                    
                                    
                                    
                                    
                                    500,000
                                    
                                    
                                    
                                    500,000
 
 (See
accompanying notes to consolidated financial statements)
  8
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2007
 (Continued)
 
 Portfolio Company
                                      
                                      Energy Industry Segment
                                      
                                      Investment (1) (2) (4)
                                      
                                      Principal
                                      
                                      
                                      Cost
                                      
                                      
                                      Fair Value (3)TARGETED
      INVESTMENTS - ContinuedNon-Affiliate
      Investments- (less than 5% owned)- continuedNighthawk
      Transport I, LP
                                      
                                      Energy
      Services
                                      
                                      Second
      Lien
                                      
                                      
                                      14,901,476
                                      
                                      
                                      
                                      13,929,840
                                      
                                      
                                      
                                      13,929,840Term
      Loan B(LIBOR
      + 8.00%, due 10/03/2010)LP
      Units (5)
                                      
                                      
                                      
                                      
                                      
                                      
                                      224
                                      
                                      
                                      
                                      150,000Warrants
      (5)
                                      
                                      
                                      
                                      
                                      
                                      
                                      850,000
                                      
                                      
                                      
                                      850,000Second
      Lien
                                      
                                      
                                      1,655,695
                                      
                                      
                                      
                                      1,628,633
                                      
                                      
                                      
                                      1,628,633Delayed
      Draw Term Loan B(LIBOR
      + 8.00%, due 10/03/2010)Resaca
      Exploitation, LP
                                      
                                      Oil
      & Natural Gas
                                      
                                      Senior
      Secured
                                      
                                      
                                      26,993,572
                                      
                                      
                                      
                                      26,493,374
                                      
                                      
                                      
                                      26,493,374Production
      and Development
                                      
                                      Multiple-Advance
      Tranche A Term Loan(LIBOR
      + 6.00%, due 5/01/2012)Overriding
      Royalty Interest
                                      
                                      
                                      
                                      
                                      
                                      
                                      29,821
                                      
                                      
                                      
                                      400,000Senior
      Secured Tranche B Term Loan
                                      
                                      
                                      6,000,000
                                      
                                      
                                      
                                      6,000,000
                                      
                                      
                                      
                                      6,000,000(LIBOR
      + 9.00%, due 11/30/2007) (7)Overriding
      Royalty Interest
                                      
                                      
                                      
                                      
                                      
                                      
                                      29,821
                                      
                                      
                                      
                                      400,000Senior
      Subordinated
                                      
                                      
                                      4,000,000
                                      
                                      
                                      
                                      4,000,000
                                      
                                      
                                      
                                      4,000,000Secured
      Convertible Term Loan(6.00%
      cash, 8.00% PIK, due 5/01/2012)Sonoran
      Energy, Inc.
                                      
                                      Oil
      & Natural Gas
                                      
                                      Warrants
      (5)
                                      
                                      
                                      
                                      
                                      
                                      
                                      10,000
                                      
                                      
                                      
                                      10,000Production
      and DevelopmentTammany
      Oil & Gas, LLC
                                      
                                      Oil
      & Natural Gas
                                      
                                      Senior
      Secured
                                      
                                      
                                      24,285,796
                                      
                                      
                                      
                                      23,902,648
                                      
                                      
                                      
                                      23,902,648Production
      and Development
                                      
                                      Multiple-Advance
      Term Loan(LIBOR
      + 6.00%, due 3/21/2010)Overriding
      Royalty Interest (5)
                                      
                                      
                                      
                                      
                                      
                                      
                                      200,000
                                      
                                      
                                      
                                      300,000Venoco,
      Inc.
                                      
                                      Oil
      & Natural Gas
                                      
                                      Senior
      Notes
                                      
                                      
                                      8,000,000
                                      
                                      
                                      
                                      7,967,385
                                      
                                      
                                      
                                      7,920,000Production
      and Development
                                      
                                      (8.75%,
      due 12/15/2011)Venoco,
      Inc.
                                      
                                      Oil
      & Natural Gas
                                      
                                      Senior
      Notes
                                      
                                      
                                      4,000,000
                                      
                                      
                                      
                                      3,945,870
                                      
                                      
                                      
                                      3,960,000Production
      and Development
                                      
                                      (8.75%,
      due 12/15/2011)Total
      Non-Affiliate Investments- (less than 5% owned)
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      256,459,349
                                      
                                      
                                      
                                      254,558,716Subtotal
      Targeted Investments (59.79% of total investments)
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      $
                                      277,947,454
                                      
                                      
                                      $
                                      284,228,573
 
 (See
accompanying notes to consolidated financial statements)
  9
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2007
 (Continued)
 
 Issuing Company
                                                  
                                                  Energy IndustrySegment
                                                  
                                                  Investment (1) (2) (4)
                                                  
                                                  Principal
                                                  
                                                  
                                                  Cost
                                                  
                                                  
                                                  Fair Value(3)CORPORATE
      NOTESPioneer
      Natural Resources Co.
                                                  
                                                  Oil
      & Natural Gas
                                                  
                                                  Senior
      Notes, 7.2%, due 2028
                                                  
                                                  $
                                                  10,000,000
                                                  
                                                  
                                                  $
                                                  11,631,599
                                                  
                                                  
                                                  $
                                                  8,955,500Production
      and DevelopmentSubtotal
      Corporate Notes ( 1.88% of total investments)
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  11,631,599
                                                  
                                                  
                                                  $
                                                  8,955,500GOVERNMENT
      SECURITIESU.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  $
                                                  8,000,000
                                                  
                                                  
                                                  $
                                                  7,994,660
                                                  
                                                  
                                                  $
                                                  7,994,660U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.713%, due 01/10/2008
                                                  
                                                  
                                                  12,000,000
                                                  
                                                  
                                                  
                                                  11,991,990
                                                  
                                                  
                                                  
                                                  11,991,990U.S.
      Treasury Bills
                                                  
                                                  Government
                                                  
                                                  U.S.
      Treasury Bills, 2.471%, due 01/10/2008
                                                  
                                                  
                                                  36,033,000
                                                  
                                                  
                                                  
                                                  36,011,065
                                                  
                                                  
                                                  
                                                  36,011,065Subtotal
      Government Securities (34.45% of total investments)
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  163,925,625
                                                  
                                                  
                                                  $
                                                  163,925,625CASHSubtotal
      Cash (3.88% of total investments)
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  18,437,115
                                                  
                                                  
                                                  $
                                                  18,437,115TOTAL
      INVESTMENTS, CASH AND CASH EQUIVALENTS
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  471,941,793
                                                  
                                                  
                                                  $
                                                  475,546,813LIABILITIES
      IN EXCESS OF OTHER ASSETS (10)
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  (228,130,871
                                                  )NET
      ASSETS (10)
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  247,415,942
 
 NOTES TO CONSOLIDATED
SCHEDULE OF INVESTMENTS
 
 (1)
              All
      investments are pledged as collateral for obligations under the Company's
      credit facility.
 (2)
              Percentages
      represent interest rates in effect at December 31, 2007, and due dates
      represent the contractual maturity
dates.
 (3)
              Fair
      value of targeted investments is determined by or under the direction of
      the Board of Directors.
 (4)
              All
      investments are in entities with primary operations in the United States
      of America.
 (5)
              Non-income
      producing securities.
 (6)
              Upon
      the March 30, 2006 closing of Venoco, Inc.'s TexCal acquisition, Venoco
      Inc.'s senior notes became collateralized by second priority
      liens.
 (7)
              Forbearance
      granted on maturity date until February 29, 2008.  The Manager
      is in the process of renegotiating the Tranche B note with
      Resaca.
 (8)
              Maturity
      dated extended until March 31,
2008.
 (9)
              Non-accrual
      status.
 (10)
              As
      restated.
 
 (See
accompanying notes to consolidated financial statements)
  10
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
FINANCIAL HIGHLIGHTS
 (Unaudited)
 
 For the Three Months EndedMarch 31, 2008
                  
                  
                  March 31, 2007(As restated)
                  
                  
                  (As restated)Per
      Share Data  (1)Net
      asset value, beginning of period
                  
                  $
                  14.14
                  
                  
                  $
                  13.96Net
      investment income
                  
                  
                  0.24
                  
                  
                  
                  0.25Net
      realized and unrealized gain (loss) on portfolio securities and corporate
      notes (3)
                  
                  
                  (0.10
                  )
                  
                  
                  0.17Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                  
                  
                  0.14
                  
                  
                  
                  0.42Dividends
      declared
                  
                  
                  (0.40
                  )
                  
                  
                  (0.27
                  )Net
      asset value, end of period
                  
                  $
                  13.88
                  
                  
                  $
                  14.11Market
      value, beginning of period
                  
                  $
                  15.63
                  
                  
                  $
                  16.75Market
      value, end of period
                  
                  $
                  16.42
                  
                  
                  $
                  15.81Market
      value return  (2)
                  
                  
                  7.68
                  %
                  
                  
                  (4.03
                  )%Net
      asset value return (2)
                  
                  
                  0.62
                  %
                  
                  
                  2.76
                  %Ratios
      and Supplemental Data($
      and shares in thousands)Net
      assets, end of period
                  
                  $
                  242,833
                  
                  
                  $
                  246,063Average
      net assets
                  
                  $
                  245,124
                  
                  
                  $
                  244,661Common
      shares outstanding at end of period
                  
                  
                  17,500
                  
                  
                  
                  17,422Total
      operating expenses/average net assets (4)
                  
                  
                  8.86
                  %
                  
                  
                  6.73
                  %Total
      operating expenses less management and incentive fees and interest
      expense/average net assets (4)
                  
                  
                  1.90
                  %
                  
                  
                  1.55
                  %Total
      operating expenses less management and incentive fees/average net assets
      (4)
                  
                  
                  5.90
                  %
                  
                  
                  4.14
                  %Net
      investment income/average net assets (4)
                  
                  
                  6.83
                  %
                  
                  
                  7.30
                  %Net
      increase (decrease) in net assets resulting from operations/average net
      assets (4)
                  
                  
                  3.97
                  %
                  
                  
                  12.30
                  %Portfolio
      turnover rate
                  
                  
                  11.43
                  %
                  
                  
                  0.24
                  %
 
 (1) Per
Share Data is based on common shares outstanding at end of period.
 (2)
Return calculations assume reinvestment of dividends and are not
annualized.
 (3)
Calculated as a balancing amount necessary to reconcile the change in net assets
value per share with the other per share information presented.  This
amount may not agree with the aggregate gains and losses for the period because
the difference in the net asset value at the beginning and end of year may not
equal the per share changes of the line items disclosed.
 (4)
Annualized.
 
 (See
accompanying notes to consolidated financial statements)
  11
  NGP
CAPITAL RESOURCES COMPANY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 March
31, 2008
 (Unaudited)
  Note
1:                      Organization
 
 NGP
Capital Resources Company (the “Company”) was organized as a Maryland
corporation in July 2004. The Company has elected to be regulated as a business
development company (“BDC”) under the Investment Company Act of 1940, as amended
(the “1940 Act”).  In addition, for federal income tax purposes the
Company has elected to be treated as a regulated investment company (“RIC”)
under the Internal Revenue Code of 1986, as amended (the “Code”).  The
Company has several subsidiaries that are single member limited liability
companies and wholly owned limited partnerships established to hold certain
portfolio investments or provide services to the Company in accordance with
specific rules prescribed for a company operating as a RIC.  These
subsidiaries are: NGPC Funding GP, LLC, a Texas limited liability company; NGPC
Nevada, LLC, a Nevada limited liability company; NGPC Funding, LP, a Texas
limited partnership; NGPC Asset Holdings GP, LLC, a Texas limited liability
company; NGPC Asset Holdings, LP, a Texas limited partnership; NGPC Asset
Holdings II, LP, a Texas limited partnership; NGPC Asset Holdings III, LP, a
Texas limited partnership and NGPC Asset Holdings IV, LP, a Texas limited
partnership.  The Company consolidates the results of its subsidiaries
for financial reporting purposes. The Company does not consolidate the financial
results of its portfolio companies.
 
 The
Company was created to invest primarily in small and mid-size private energy
companies, which are generally defined as companies that have net asset values
or annual revenues of less than $500 million and are not issuers of publicly
traded securities.  The Company’s investment objective is to generate
both current income and capital appreciation through debt investments with
certain equity components.
  The
Company is managed and advised, subject to the overall supervision of the
Company’s Board of Directors, by NGP Investment Advisor, LP (the “Manager”), a
Delaware limited partnership owned by NGP Energy Capital Management, LLC, and
NGP Administration, LLC (the “Administrator”), the Company’s
administrator.
  Note
2:                      Restatement
of Consolidated Financial Statements
 
 Background of the
Restatement
 
 On March 15, 2010, our Board of
Directors and the members of the Audit Committee of our Board of Directors
concluded that we should restate our consolidated financial statements for the
years ended December 31, 2007 and December 31, 2008, and for the quarters in
2007 and 2008 and the first three quarters of 2009 (collectively, the “Affected
Periods”).
 
 The determination to restate the
financial statements for the Affected Periods was made in connection with
management’s assessment of accounting errors it discovered as part of a process
to remediate a material weakness in internal controls previously disclosed in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2008
and the Company’s Quarterly Reports on Form 10-Q in 2009. While the Company has
taken steps to remediate the previously disclosed material weakness, the
material weakness existed throughout the quarterly periods of 2009, and at
December 31, 2009, the Company had not yet completed its assessment as to
whether the material weakness had been fully remediated. The Company anticipates
that it will complete its testing of the additional internal control processes
designed to remediate the previously disclosed material weakness in
2010.
 
 The errors and consequent restatements
described below principally involved non-cash accounting entries related to net
deferred tax assets and liabilities that typically arise as a result of timing
differences in tax and GAAP (book) accounting. Taxable Net Investment Income,
which is the primary determinant of the Company’s distributable income, has not
been affected in any of the Affected Periods by these restatements.
 
 The Company’s assessment of certain
identified accounting errors results in the following adjustments to previously
reported periods:
 
 1.           In
the quarter ended March 31, 2007, the Company failed to record a deferred tax
liability with respect to approximately $2.1 million in unrealized appreciation
on an investment in partnerships.  Similarly, in the quarters ended
June 30, 2007 and September 30, 2007, the Company failed to record deferred tax
liabilities with respect to approximately $4.0 million and $2.0 million,
respectively, in unrealized appreciation on an investment.
 
 2.           In
the quarter ended September 30, 2008, the Company realized a $12.34 million
pre-tax gain on this same investment (as compared to the $8.15 million of
unrealized appreciation previously recorded in 2007). The reversal of the
previously unrecorded deferred tax liability in 2008 resulted in the incorrect
recording of a net deferred tax asset of $3.8 million at year end
2008.
 
 Unrelated
to the restatements, we have reclassified certain  balance sheet,
statement of operations and statement of cash flows amounts to conform to the
presentation in our most recently-filed Annual Report on Form 10-K. These
reclassifications were primarily related to the disaggregation of investments in
portfolio securities, investment income, net realized capital gain (loss) on
investments and net unrealized gain (loss) on investments into separate
classifications according to level of control.
 
 Impact of the Restatement
and Reclassification
 
 The
restatement and reclassification adjustments detailed below to our previously
filed consolidated financial statements reflect adjustments which principally
involved non-cash accounting entries related to net deferred tax assets and
liabilities, which impact the consolidated balance sheets, consolidated
statement of operations and consolidated statement of cash
flows.
  12
 
 The
effects of the restatement on the unaudited consolidated balance sheets at March
31, 2008 and December 31, 2007 are summarized in the following
table:
 
 As PreviouslyReported
                            
                            
                            Reclassifications
                            
                            
                            As Reclassified
                            
                            
                            Restatement
                            
                            
                            As RestatedConsolidated
      Balance Sheets:For
      the Three Months Ended March 31, 2008Investments
      in portfolio securities at fair value
                            
                            $
                            282,559,223
                            
                            
                            $
                            (282,559,223
                            )
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Control
      investments - majority owned
                            
                            
                            -
                            
                            
                            
                            33,080,186
                            
                            
                            
                            33,080,186
                            
                            
                            
                            -
                            
                            
                            
                            33,080,186Affiliate investments
                            
                            
                            
                            
                            
                            
                            15,073,325
                            
                            
                            
                            15,073,325
                            
                            
                            
                            -
                            
                            
                            
                            15,073,325Non-affiliate investments
                            
                            
                            -
                            
                            
                            
                            234,405,712
                            
                            
                            
                            234,405,712
                            
                            
                            
                            -
                            
                            
                            
                            234,405,712Accounts
      receivable and other current assets
                            
                            
                            29,373
                            
                            
                            
                            -
                            
                            
                            
                            29,373
                            
                            
                            
                            43,750
                            
                            
                            
                            73,123Total
      current assets
                            
                            
                            11,365,510
                            
                            
                            
                            -
                            
                            
                            
                            11,365,510
                            
                            
                            
                            43,750
                            
                            
                            
                            11,409,260Total
      assets
                            
                            
                            446,563,953
                            
                            
                            
                            -
                            
                            
                            
                            446,563,953
                            
                            
                            
                            43,750
                            
                            
                            
                            446,607,703Deferred
      tax liabilities - current
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,770,924
                            
                            
                            
                            2,770,924Total
      current liabilities
                            
                            
                            9,659,769
                            
                            
                            
                            -
                            
                            
                            
                            9,659,769
                            
                            
                            
                            2,770,924
                            
                            
                            
                            12,430,693Deferred
      tax liabilities - non-current
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            94,019
                            
                            
                            
                            94,019Total
      liabilities
                            
                            
                            200,909,769
                            
                            
                            
                            -
                            
                            
                            
                            200,909,769
                            
                            
                            
                            2,864,943
                            
                            
                            
                            203,774,712Paid-in
      capital in excess of par
                            
                            
                            245,881,078
                            
                            
                            
                            -
                            
                            
                            
                            245,881,078
                            
                            
                            
                            (196,579
                            )
                            
                            
                            245,684,499Undistributed
      net investment income (loss)
                            
                            
                            (2,962,385
                            )
                            
                            
                            -
                            
                            
                            
                            (2,962,385
                            )
                            
                            
                            146,310
                            
                            
                            
                            (2,816,075
                            )Net
      unrealized appreciation (depreciation) of
                              portfolio
      securities, corporate notes
                            
                            
                            1,858,858
                            
                            
                            
                            -
                            
                            
                            
                            1,858,858
                            
                            
                            
                            (2,770,924
                            )
                            
                            
                            (912,066
                            )Total
      stockholders’ equity (net assets)
                            
                            
                            245,654,184
                            
                            
                            
                            -
                            
                            
                            
                            245,654,184
                            
                            
                            
                            (2,821,193
                            )
                            
                            
                            242,832,991Total
      liabilities and stockholders' equity (net assets)
                            
                            
                            446,563,953
                            
                            
                            
                            -
                            
                            
                            
                            446,563,953
                            
                            
                            
                            43,750
                            
                            
                            
                            446,607,703Net
      asset value per share
                            
                            
                            14.04
                            
                            
                            
                            -
                            
                            
                            
                            14.04
                            
                            
                            
                            (0.16
                            )
                            
                            
                            13.88For
      the Year Ended December 31, 2007Investments
      in portfolio securities at fair value
                            
                            $
                            284,228,573
                            
                            
                            $
                            (284,228,573
                            )
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Control
      investments - majority owned
                            
                            
                            -
                            
                            
                            
                            29,669,857
                            
                            
                            
                            29,669,857
                            
                            
                            
                            -
                            
                            
                            
                            29,669,857Non-affiliate investments
                            
                            
                            -
                            
                            
                            
                            254,558,716
                            
                            
                            
                            254,558,716
                            
                            
                            
                            -
                            
                            
                            
                            254,558,716Accounts
      receivable and other current assets
                            
                            
                            17,569
                            
                            
                            
                            -
                            
                            
                            
                            17,569
                            
                            
                            
                            43,750
                            
                            
                            
                            61,319Total
      current assets
                            
                            
                            21,123,178
                            
                            
                            
                            -
                            
                            
                            
                            21,123,178
                            
                            
                            
                            43,750
                            
                            
                            
                            21,166,928Total
      assets
                            
                            
                            478,232,876
                            
                            
                            
                            -
                            
                            
                            
                            478,232,876
                            
                            
                            
                            43,750
                            
                            
                            
                            478,276,626Deferred
      tax liabilities - current
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,770,924
                            
                            
                            
                            2,770,924Total
      current liabilities
                            
                            
                            11,973,539
                            
                            
                            
                            -
                            
                            
                            
                            11,973,539
                            
                            
                            
                            2,770,924
                            
                            
                            
                            14,744,463Deferred
      tax liabilities - non-current
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            116,221
                            
                            
                            
                            116,221Total
      liabilities
                            
                            
                            227,973,539
                            
                            
                            
                            -
                            
                            
                            
                            227,973,539
                            
                            
                            
                            2,887,145
                            
                            
                            
                            230,860,684Paid-in
      capital in excess of par
                            
                            
                            245,881,078
                            
                            
                            
                            -
                            
                            
                            
                            245,881,078
                            
                            
                            
                            (196,579
                            )
                            
                            
                            245,684,499Undistributed
      net investment income (loss)
                            
                            
                            (103,394
                            )
                            
                            
                            -
                            
                            
                            
                            (103,394
                            )
                            
                            
                            124,108
                            
                            
                            
                            20,714Net
      unrealized appreciation (depreciation) of portfolio securities,
                              corporate
      notes and commodity derivative instruments
                            
                            
                            3,605,020
                            
                            
                            
                            -
                            
                            
                            
                            3,605,020
                            
                            
                            
                            (2,770,924
                            )
                            
                            
                            834,096Total
      stockholders’ equity (net assets)
                            
                            
                            250,259,337
                            
                            
                            
                            -
                            
                            
                            
                            250,259,337
                            
                            
                            
                            (2,843,395
                            )
                            
                            
                            247,415,942Total
      liabilities and stockholders' equity (net assets)
                            
                            
                            478,232,876
                            
                            
                            
                            -
                            
                            
                            
                            478,232,876
                            
                            
                            
                            43,750
                            
                            
                            
                            478,276,626Net
      asset value per share
                            
                            
                            14.30
                            
                            
                            
                            -
                            
                            
                            
                            14.30
                            
                            
                            
                            (0.16
                            )
                            
                            
                            14.14
  13
 
 The
effects of the restatement on the unaudited consolidated statements of
operations for the three month periods ended March 31, 2008 and March 31, 2007
are summarized in the following table:
 
 As PreviouslyReported
                      
                      
                      Reclassifications
                      
                      
                      As Reclassified
                      
                      
                      Restatement
                      
                      
                      As RestatedConsolidated
      Statements of Operations:For
      the Three Months Ended March 31, 2008Investment
      incomeInterest
      income:
                      
                      $
                      8,952,116
                      
                      
                      $
                      (8,952,116
                      )
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Control
      investments - majority owned
                      
                      
                      -
                      
                      
                      
                      120,914
                      
                      
                      
                      120,914
                      
                      
                      
                      -
                      
                      
                      
                      120,914Affiliate
      investments
                      
                      
                      -
                      
                      
                      
                      194,779
                      
                      
                      
                      194,779
                      
                      
                      
                      -
                      
                      
                      
                      194,779Non-affiliate
      investments
                      
                      
                      -
                      
                      
                      
                      8,636,423
                      
                      
                      
                      8,636,423
                      
                      
                      
                      -
                      
                      
                      
                      8,636,423Royalty
      income:
                      
                      
                      545,850
                      
                      
                      
                      (545,850
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Control
      investments - majority owned
                      
                      
                      -
                      
                      
                      
                      28,015
                      
                      
                      
                      28,015
                      
                      
                      
                      -
                      
                      
                      
                      28,015Non-affiliate
      investments
                      
                      
                      -
                      
                      
                      
                      517,835
                      
                      
                      
                      517,835
                      
                      
                      
                      -
                      
                      
                      
                      517,835Benefit
      (provision) for income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      22,202
                      
                      
                      
                      22,202Net
      investment income
                      
                      
                      4,141,142
                      
                      
                      
                      -
                      
                      
                      
                      4,141,142
                      
                      
                      
                      22,202
                      
                      
                      
                      4,163,344Net
      unrealized gain (loss) on investmentsNet
      increase (decrease) in unrealized appreciation
                        (depreciation)
      on portfolio securities, corporate notes:
                      
                      
                      (1,746,162
                      )
                      
                      
                      1,746,162
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Control
      investments - majority owned
                      
                      
                      -
                      
                      
                      
                      63
                      
                      
                      
                      63
                      
                      
                      
                      -
                      
                      
                      
                      63Non-affiliate
      investments
                      
                      
                      -
                      
                      
                      
                      (1,746,225
                      )
                      
                      
                      (1,746,225
                      )
                      
                      
                      -
                      
                      
                      
                      (1,746,225
                      )Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                      
                      
                      2,394,980
                      
                      
                      
                      -
                      
                      
                      
                      2,394,980
                      
                      
                      
                      22,202
                      
                      
                      
                      2,417,182For
      the Three Months Ended March 31, 2007Investment
      incomeInterest
      income:
                      
                      $
                      8,421,255
                      
                      
                      $
                      (8,421,255
                      )
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Control
      investments - majority owned
                      
                      
                      -
                      
                      
                      
                      1,007,278
                      
                      
                      
                      1,007,278
                      
                      
                      
                      -
                      
                      
                      
                      1,007,278Non-affiliate
      investments
                      
                      
                      -
                      
                      
                      
                      7,213,226
                      
                      
                      
                      7,213,226
                      
                      
                      
                      -
                      
                      
                      
                      7,213,226Royalty
      income:Non-affiliate
      investments
                      
                      
                      -
                      
                      
                      
                      200,751
                      
                      
                      
                      200,751
                      
                      
                      
                      -
                      
                      
                      
                      200,751Benefit
      (provision) for income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (11,471
                      )
                      
                      
                      (11,471
                      )Net
      investment income
                      
                      
                      4,417,485
                      
                      
                      
                      -
                      
                      
                      
                      4,417,485
                      
                      
                      
                      (11,471
                      )
                      
                      
                      4,406,014Net
      unrealized gain (loss) on investmentsNet
      increase (decrease) in unrealized appreciation
                        (depreciation)
      on portfolio securities, corporate notes:
                      
                      
                      3,729,986
                      
                      
                      
                      (3,729,986
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Control
      investments - majority owned
                      
                      
                      -
                      
                      
                      
                      2,110,662
                      
                      
                      
                      2,110,662
                      
                      
                      
                      -
                      
                      
                      
                      2,110,662Non-affiliate
      investments
                      
                      
                      -
                      
                      
                      
                      1,619,324
                      
                      
                      
                      1,619,324
                      
                      
                      
                      -
                      
                      
                      
                      1,619,324Benefit
      (provision) for taxes on unrealized gain
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (713,924
                      )
                      
                      
                      (713,924
                      )Total
      net unrealized gain (loss) on investments
                      
                      
                      3,729,986
                      
                      
                      
                      -
                      
                      
                      
                      3,729,986
                      
                      
                      
                      (713,924
                      )
                      
                      
                      3,016,062Net
      increase (decrease) in stockholders' equity
                        (net
      assets) resulting from operations
                      
                      
                      8,147,471
                      
                      
                      
                      -
                      
                      
                      
                      8,147,471
                      
                      
                      
                      (725,395
                      )
                      
                      
                      7,422,076Net
      increase (decrease) in stockholders' equity (net assets)
                        resulting
      from operations per common share
                      
                      
                      0.47
                      
                      
                      
                      -
                      
                      
                      
                      0.47
                      
                      
                      
                      (0.05
                      )
                      
                      
                      0.42
  14
 
 The
effects of the restatement on the unaudited consolidated statements of cash
flows for the three-month periods ended March 31, 2008 and March 31, 2007 are
summarized in the following table:
 
 As PreviouslyReported
                      
                      
                      Reclassifications
                      
                      
                      As Reclassified
                      
                      
                      Restatement
                      
                      
                      As RestatedConsolidated
      Statements of Cash Flows:For
      the Three Months Ended March 31, 2008Cash
      flows from operating activitiesNet
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                      
                      $
                      2,394,980
                      
                      
                      $
                      -
                      
                      
                      $
                      2,394,980
                      
                      
                      $
                      22,202
                      
                      
                      $
                      2,417,182Effects
      of changes in operating assets and liabilitiesNon-current
      portion of deferred income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (22,202
                      )
                      
                      
                      (22,202
                      )For
      the Three Months Ended March 31, 2007Cash
      flows from operating activitiesNet
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                      
                      $
                      8,147,471
                      
                      
                      $
                      -
                      
                      
                      $
                      8,147,471
                      
                      
                      $
                      (725,395
                      )
                      
                      $
                      7,422,076Effects
      of changes in operating assets and liabilitiesIncome
      taxes payable
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      11,471
                      
                      
                      
                      11,471Current
      portion of deferred income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      713,924
                      
                      
                      
                      713,924
  Note
3:                      Significant
Accounting Policies
  The
interim unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The interim consolidated
financial statements have been prepared by management of the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the “SEC”).  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) have been
omitted pursuant to such rules and regulations, although the Company believes
the disclosures included herein are adequate to make the information presented
not misleading.  In the opinion of management, all adjustments which
are of a normal recurring nature considered necessary for presentation of the
information have been included.  These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2007. Interim results are not
necessarily indicative of results for a full year.
 
 The
following is a summary of the significant accounting policies consistently
applied by the Company in the preparation of its consolidated financial
statements:
  Use
of Estimates
  The
interim consolidated financial statements have been prepared in accordance with
GAAP that require management to make estimates and assumptions that affect the
amounts reported in the interim consolidated financial statements and the
accompanying notes to the interim consolidated financial
statements.  Actual results could differ from these
estimates.
  15





Cash
and Cash Equivalents




Cash and
cash equivalents consist of demand deposits and highly liquid investments with
original maturities of three months or less when purchased. Cash and cash
equivalents are carried at cost, which approximates fair value.





Prepaid
Assets




Prepaid
assets consist of premiums paid for directors’ and officers’ insurance and
fidelity bonds with a policy term of one year, fees associated with the
establishment of the policy or credit facility, and registration expenses
related to the Company’s shelf filing. Such premiums and fees are amortized
monthly on a straight-line basis over the term of the policy or credit
facility.  Registration expenses are deferred and will be charged as a
reduction of capital upon the sale of shares.




Concentration
of Credit Risk




The
Company places its cash and cash equivalents with financial institutions and, at
times, cash held in checking accounts may exceed the Federal Deposit Insurance
Corporation insured limit.




Valuation
of Investments




Investments
are carried at fair value, as determined in good faith by the Company’s Board of
Directors.  On a quarterly basis, the investment team of the Manager
prepares valuations for all of the assets in our portfolio companies and
presents the valuations to the Company’s Valuation Committee and Board of
Directors.  The valuations are determined and recommended by the
Valuation Committee to the Board of Directors, which reviews and ratifies the
final portfolio valuations.





Investments
in securities for which market quotations are readily available are recorded in
the financial statements at such market quotations as of the valuation date
adjusted for appropriate liquidity discounts, if applicable. For investments in
securities for which market quotations are unavailable, or which have various
degrees of trading restrictions, the investment team prepares valuation
analyses, as generally described below.





Using the
most recently available financial statements, forecasts and, when applicable,
comparable transaction data, the investment team of the Manager prepares
valuation analyses for the various securities in the Company’s investment
portfolio. These valuation analyses are prepared using traditional valuation
methodologies, which rely on estimates of the asset values and enterprise values
of portfolio companies issuing securities.




The
methodologies for determining asset valuations include estimates based
on:  the liquidation or sale value of a portfolio company’s assets,
the discounted value of expected future net cash flows from the assets and third
party valuations of the portfolio company’s assets, such as engineering reserve
reports of oil and gas properties.  The investment team of the Manager
considers some or all of the above valuation methods to determine the estimated
asset value of a portfolio company.





The
methodologies for determining enterprise valuations include estimates based
on:  valuations of comparable public companies, recent sales of
comparable companies, the value of recent investments in the equity securities
of a portfolio company and also on the methodologies used for asset
valuations.  The investment team of the Manager considers one or all
of the above valuation methods to determine the estimated enterprise value of a
portfolio company.





Debt Securities: The Company
records its investments in non-convertible debt securities at fair value which
generally approximates cost  plus amortized original issue discount,
or OID, to the extent that the estimated asset or enterprise value of the
portfolio company exceeds the outstanding debt of the portfolio company. The
Company records its investment in convertible debt securities at fair value
which generally approximates the higher of: 1) cost plus amortized OID, to the
extent that the estimated asset or enterprise value of the portfolio company
equals or exceeds the outstanding debt of the portfolio company; and 2) the
Company’s pro rata share, upon conversion, of the residual equity value of the
portfolio company available after deducting all outstanding debt from its
estimated enterprise value. If the estimated asset or enterprise value is less
than the sum of the value of the Company’s debt investment and all other debt
securities of the portfolio company pari passu or senior to the
Company’s debt investment, the Company reduces the value of its debt investment
beginning with its junior-most debt investment such that the asset or enterprise
value less the value of the outstanding pari passu or senior debt is
zero.




16




Equity Securities: The
Company records its  investments in preferred and common equity
securities (including warrants or options to acquire equity securities) at fair
value based on its pro rata share of the residual equity value available after
deducting all outstanding debt from the estimated enterprise value.





Property-Based Equity Participation
Rights: The Company records its investments in overriding royalty and net
profits interests at fair value based on a multiple of cash flows generated by
such investments, multiples from transactions involving the sale of comparable
assets and/or the discounted value of expected future net cash flows from such
investments. Appropriate cash flow multiples are derived from the review of
comparable transactions involving similar assets. The discounted value of future
net cash flows is derived, when appropriate, from third party valuations of a
portfolio company’s assets, such as engineering reserve reports of oil and gas
properties.





Due to
the uncertainty inherent in the valuation process, such estimates of fair value
may differ significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be material.
Additionally, changes in the market environment and other events that may occur
over the life of the investments may cause the gains or losses ultimately
realized on these investments to be different from the valuations currently
assigned.




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement on Financial Accounting Standards No. 157, Fair Value Measurements
(“SFAS No. 157”). This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157
applies to fair value measurements already required or permitted by existing
standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The changes to current generally accepted accounting
principles from the application of SFAS No. 157 relate to the definition of fair
value, the methods used to measure fair value and the expanded disclosures about
fair value measurements.





As of
January 1, 2008, the Company adopted SFAS No. 157. The Company has
performed an analysis of all existing investments to determine the significance
and character of all inputs to their fair value determination. Based on this
assessment, the adoption of this standard did not have a material effect on the
Company’s net asset value.




Securities
Transactions, Interest and Dividend Income Recognition





All
securities transactions are accounted for on a trade-date basis. Interest income
is recorded on the accrual basis to the extent that such amounts are expected to
be collected. Premiums and discounts are accreted into interest income using the
effective interest method. Detachable warrants, other equity securities or
property interests such as overriding royalty interests obtained in conjunction
with the acquisition of debt securities are recorded separately from the debt
securities at their initial fair value, with a corresponding amount recorded as
a discount to the associated debt security. Income from overriding royalty
interests is recognized as received and the recorded assets are charged
depletion using the unit of production depletion method. The portion of the loan
origination fees paid that represent additional yield or discount on a loan are
deferred and accreted into interest income over the life of the loan using the
effective interest method. Upon the prepayment of a loan or debt security, any
unamortized loan origination fees are recorded as interest income and any
unamortized premium or discount is recorded as a realized gain or loss. Market
premiums or discounts on acquired loans or fixed income investments are accreted
into interest income using the effective interest method. Dividend income is
recognized on the ex-dividend date. Accruing interest or dividends on
investments is deferred when it is determined that the interest or dividend is
not collectible. Collectability of the interest and dividends is assessed, based
on many factors including the portfolio company’s ability to service its loan
based on current and projected cash flows as well as the current valuation of
the portfolio company’s assets.





Payment-in-Kind
Interest and Dividends





The
Company may have investments in its portfolio that contain payment-in-kind
(“PIK”) provisions. PIK interest or dividends, computed at the contractual rate
specified in each investment agreement, are added to the principal balance of
the investment and recorded as interest or dividend income.  For
investments with PIK interest or dividends, the Company bases income accruals on
the principal balance including any PIK.  If the portfolio company’s
asset valuation is not sufficient to cover the contractual interest, the Company
will not accrue interest or dividend income on the investment.  To
maintain the Company’s RIC status, this non-cash source of income must be paid
out to stockholders in the form of dividends, even though the Company has not
yet collected the cash.  For the quarter ended March 31, 2008, PIK
interest income totaled $1,728,817, and there was no PIK dividend
income.  For the quarter ended March 31, 2007, PIK interest income
totaled $1,115,048, and there was no PIK dividend income.




17




Net
Realized Gains or Losses and Net Change in Unrealized Appreciation or
Depreciation




Realized
gains or losses are measured by the difference between the net proceeds from the
repayment or sale and the amortized cost basis of the investment, considering
unamortized fees and prepayment premiums, and without regard to unrealized
appreciation or depreciation previously recognized, and include investments
charged off during the year, net of recoveries. Net unrealized appreciation or
depreciation reflects the change in portfolio investment values during the
reporting period including the reversal of previously recorded unrealized
appreciation or depreciation, when capital gains or losses are
realized.





Fee
Income Recognition




Fees
primarily include financial advisory, transaction structuring, loan
administration, commitment and prepayment fees. Financial advisory fees
represent amounts received for providing advice and analysis to companies and
are recognized as earned when such services are performed, provided collection
is probable. Transaction structuring fees represent amounts received for
structuring, financing and executing transactions and are generally payable only
if the transaction closes. Such fees are deferred and accreted into interest
income over the life of the loan using the effective interest method. Commitment
fees represent amounts received for committed funding and are generally payable
whether or not the transaction closes. On transactions that close within the
commitment period, commitment fees are deferred and accreted into interest
income over the life of the loan using the effective interest method. Commitment
fees on transactions that do not close are generally recognized over the period
the commitment is outstanding. Prepayment and loan administration fees are
recognized as they are received.  For the quarter ended March 31,
2008, the Company accreted approximately $0.3 million of fee income into
interest income, compared to approximately $0.4 million of fee income for the
quarter ended March 31, 2007.




Dividends




Dividends
to stockholders are recorded on the ex-dividend date. The Company currently
intends that its distributions each year will be sufficient to maintain the
Company’s status as a RIC for federal income tax purposes and to eliminate
excise tax liability.  The Company currently intends to make
distributions to stockholders on a quarterly basis of substantially all of its
net taxable income.    The Company also intends to make
distributions of net realized capital gains, if any, at least
annually.  However, the Company may in the future decide to retain
such capital gains for investment and designate such retained amount as a deemed
distribution.  The amount to be paid out as a dividend, if any, is
determined by the Company’s Board of Directors each quarter and is based on the
annual taxable earnings estimated by the Manager. Based on that estimate, a
dividend is declared each quarter and paid shortly thereafter.




18




Prior to
2005, the Company was treated as a “C” corporation and had no taxable income and
therefore did not declare a dividend for that period.  The following
table summarizes the Company’s dividend history:





Dividend
History





Declaration Date
                        
                        Amount
                        
                        Record Date
                        
                        Payment DateMarch
      18, 2005
                        
                        $
                        0.120
                        
                        March
      31, 2005
                        
                        April
      15, 2005June
      17, 2005
                        
                        $
                        0.125
                        
                        June
      30, 2005
                        
                        July
      15, 2005September
      19, 2005
                        
                        $
                        0.140
                        
                        September
      30, 2005
                        
                        October
      14, 2005December
      15, 2005
                        
                        $
                        0.275
                        
                        December
      27, 2005
                        
                        January
      4, 2006March
      10, 2006
                        
                        $
                        0.160
                        
                        March
      31, 2006
                        
                        April
      17, 2006June
      14, 2006
                        
                        $
                        0.180
                        
                        June
      30, 2006
                        
                        July
      14, 2006September
      14, 2006
                        
                        $
                        0.250
                        
                        September
      29, 2006
                        
                        October
      13, 2006December
      7, 2006
                        
                        $
                        0.330
                        
                        December
      19, 2006
                        
                        December
      29, 2006March
      19, 2007
                        
                        $
                        0.265
                        
                        March
      30, 2007
                        
                        April
      13, 2007June
      13, 2007
                        
                        $
                        0.310
                        
                        June
      29, 2007
                        
                        July
      13, 2007September
      12, 2007
                        
                        $
                        0.350
                        
                        September
      28, 2007
                        
                        October
      12, 2007December
      12, 2007
                        
                        $
                        0.515
                        
                        December
      28, 2007
                        
                        January
      4, 2008March
      6, 2008
                        
                        $
                        0.400
                        
                        March
      31, 2008
                        
                        April
      11,
2008




19





The
Company has established an “opt out” dividend reinvestment plan for its common
stockholders. As a result, if the Company declares a dividend, then a
stockholder’s cash dividend will be automatically reinvested in additional
shares of the Company’s common stock unless the stockholder, or his or her
broker, specifically “opts out” of the dividend reinvestment plan and elects to
receive cash dividends. It is customary practice for many brokers to “opt out”
of dividend reinvestment plans on behalf of their clients unless specifically
instructed otherwise. As of April 11, 2008, holders of 1,693,284 shares, or
approximately 9.7% of outstanding shares, were participants in the Company’s
dividend reinvestment plan.





The
Company’s plan provides for the plan agent to purchase shares in the open market
for credit to the accounts of plan participants unless the average of the
closing sales prices for the shares for the five days immediately preceding the
payment date exceeds 110% of the most recently reported net asset value per
share.





The table
below summarizes participation in the Company’s dividend reinvestment
plan:





Dividend Reinvestment Plan
Participation





Common Stock DividendsParticipating
                        
                        
                        Percentage of
                            Outstanding
                        
                        
                        Total
                        
                        
                        Cash
                        
                        
                        Purchased
                          in
                          Open
                        
                        
                        Newly Issued SharesDividend
                        
                        Shares
                        
                        
                        Shares
                        
                        
                        Distribution
                        
                        
                        Dividends
                        
                        
                        Market
                        
                        
                        Amount
                        
                        
                        SharesMarch
      2005
                        
                        
                        -
                        
                        
                        
                        0.0
                        %
                        
                        $
                        2,088,012
                        
                        
                        $
                        2,088,012
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        -June
      2005
                        
                        
                        1,215,870
                        
                        
                        
                        7.0
                        %
                        
                        $
                        2,175,013
                        
                        
                        $
                        2,023,029
                        
                        
                        $
                        151,984
                        
                        
                        $
                        -
                        
                        
                        
                        -September
      2005
                        
                        
                        1,488,904
                        
                        
                        
                        8.6
                        %
                        
                        $
                        2,436,014
                        
                        
                        $
                        2,227,567
                        
                        
                        $
                        208,447
                        
                        
                        $
                        -
                        
                        
                        
                        -December
      2005
                        
                        
                        1,660,140
                        
                        
                        
                        9.5
                        %
                        
                        $
                        4,785,028
                        
                        
                        $
                        4,328,488
                        
                        
                        $
                        456,540
                        
                        
                        $
                        -
                        
                        
                        
                        -March
      2006
                        
                        
                        1,618,940
                        
                        
                        
                        9.3
                        %
                        
                        $
                        2,784,016
                        
                        
                        $
                        2,524,986
                        
                        
                        $
                        259,030
                        
                        
                        $
                        -
                        
                        
                        
                        -June
      2006
                        
                        
                        1,410,227
                        
                        
                        
                        8.1
                        %
                        
                        $
                        3,132,018
                        
                        
                        $
                        2,878,177
                        
                        
                        $
                        253,841
                        
                        
                        $
                        -
                        
                        
                        
                        -September
      2006
                        
                        
                        1,270,634
                        
                        
                        
                        7.3
                        %
                        
                        $
                        4,350,025
                        
                        
                        $
                        4,032,366
                        
                        
                        $
                        317,659
                        
                        
                        $
                        -
                        
                        
                        
                        -December
      2006
                        
                        
                        1,111,045
                        
                        
                        
                        6.4
                        %
                        
                        $
                        5,742,033
                        
                        
                        $
                        5,375,388
                        
                        
                        $
                        -
                        
                        
                        $
                        366,645
                        
                        
                        
                        22,168March
      2007
                        
                        
                        1,355,671
                        
                        
                        
                        7.8
                        %
                        
                        $
                        4,616,901
                        
                        
                        $
                        4,257,648
                        
                        
                        $
                        -
                        
                        
                        $
                        359,253
                        
                        
                        
                        22,692June
      2007
                        
                        
                        1,363,066
                        
                        
                        
                        7.8
                        %
                        
                        $
                        5,407,938
                        
                        
                        $
                        4,985,387
                        
                        
                        $
                        -
                        
                        
                        $
                        422,550
                        
                        
                        
                        24,694September
      2007
                        
                        
                        1,438,143
                        
                        
                        
                        8.2
                        %
                        
                        $
                        6,114,379
                        
                        
                        $
                        5,611,029
                        
                        
                        $
                        -
                        
                        
                        $
                        503,350
                        
                        
                        
                        30,678December
      2007
                        
                        
                        1,605,164
                        
                        
                        
                        9.2
                        %
                        
                        $
                        9,012,670
                        
                        
                        $
                        8,186,010
                        
                        
                        $
                        826,659
                        
                        
                        $
                        -
                        
                        
                        
                        -
                        (1)March
      2008
                        
                        
                        1,693,284
                        
                        
                        
                        9.7
                        %
                        
                        $
                        7,000,133
                        
                        
                        $
                        6,322,815
                        
                        
                        $
                        -
                        
                        
                        $
                        677,318
                        
                        
                        
                        41,482
                        (1)





(1) Shares
were issued on April 11, 2008 for the March 2008 dividend. See above and
Note 4 for futher detail.




20




Note
4:                      Credit
Facilities and Borrowings




Under the
terms of the Company’s Second Amendment to Treasury Secured Revolving Credit
Agreement (the “Treasury Facility”), the lenders party thereto and SunTrust
Bank, as administrative agent for the lenders, have extended credit available
under the Treasury Facility to an amount not to exceed $175 million by obtaining
additional commitments from existing lenders or new lenders.  The
total amount committed and outstanding under the Treasury Agreement as of March
31, 2008 was $126.25 million, which was unchanged compared to the committed and
outstanding amounts as of December 31, 2007.  Proceeds from the
Treasury Facility are used to facilitate the growth of the Company’s investment
portfolio and provide flexibility in the sizing of its portfolio investments.
The Treasury Facility has a three-year term and bears interest, at the Company’s
option, at either (i) LIBOR plus 25 basis points or (ii) the base rate. As of
March 31, 2008, the interest rate on the Company’s outstanding borrowings under
the Treasury Facility was 2.84875% (LIBOR rate of 2.59875% plus 25 basis points)
on $126.25 million. The obligations under the Treasury Facility are
collateralized by certain securities and are guaranteed by the Company’s
existing and future subsidiaries, other than special purpose subsidiaries and
certain other subsidiaries. The Treasury Facility contains affirmative and
reporting covenants and certain financial ratio and restrictive covenants,
including: (a) maintaining a ratio of net asset value to consolidated total
indebtedness (excluding net hedging liabilities) of the Company and its
subsidiaries, of not less than 2.25:1.0, (b) maintaining a ratio of net asset
value to consolidated total indebtedness (including net hedging liabilities) of
the Company and its subsidiaries, of not less than 2.0:1.0, (c) maintaining a
ratio of EBITDA (excluding revenue from cash collateral) to interest expense
(excluding interest on loans under the Treasury Facility) of the Company and its
subsidiaries of not less than 3.0:1.0, (d) maintaining a ratio of collateral to
the aggregate principal amount of loans under the Treasury Facility of not less
than 1.01:1.0, (e) limitations on additional indebtedness, (f) limitations on
liens, (g) limitations on mergers and other fundamental changes, (h) limitations
on dividends, (i) limitations on disposition of assets other than in the normal
course of business, (j) limitations on transactions with affiliates, (k)
limitations on agreements that prohibit liens on properties of the Company and
its subsidiary guarantors, (l) limitations on sale and leaseback transactions,
(m) limitations on speculative hedging transactions, and (n) limitations on the
aggregate amount of unfunded commitments.





Under the
terms of the Company’s Amended and Restated Revolving Credit Agreement (the
“Investment Facility”), the lenders have agreed to extend revolving credit to
the Company in an amount not to exceed $100 million, with  the ability
to increase the credit available to an amount not to exceed $175 million by
obtaining additional commitments from existing lenders or new
lenders.  The total amount committed was $100 million and $65 million
was outstanding under the Investment Facility as of March 31,
2008.  By comparison, the total amount committed as of December 31,
2007 was $100 million and $89.75 million was outstanding under the Investment
Facility.  The Investment Facility has a three-year term and bears
interest, at the Company’s option, at either (i) LIBOR plus 125 to 225 basis
points, based on the degree of leverage of the Company or (ii) the base rate
plus 0 to 75 basis points, based on the degree of leverage of the
Company.  Proceeds from the Investment Facility will be used to
supplement the Company’s equity capital to make portfolio
investments.  As of March 31, 2008, the interest rates were 5.75%
(Prime rate of 5.25% plus 50 basis points) on $10 million, and 4.6775% (LIBOR
rate of 2.6775% plus 200 basis points) on $55 million.





The
obligations under the Investment Credit Agreement are collateralized by
substantially all of the Company’s assets, except certain assets that
collateralize the Treasury Facility and are guaranteed by the Company’s existing
and future subsidiaries, other than special purpose subsidiaries and certain
other subsidiaries.  The Investment Facility contains affirmative and
reporting covenants and certain financial ratio and restrictive covenants,
including: (a) maintaining a ratio of net asset value to consolidated total
indebtedness (excluding net hedging liabilities) of the Company and its
subsidiaries, of not less than 2.25:1.0, (b) maintaining a ratio of net asset
value to consolidated total indebtedness (including net hedging liabilities) of
the Company and its subsidiaries, of not less than 2.0:1.0, (c) maintaining a
ratio of net income (excluding revenue from collateral under the Treasury
Facility) plus interest, taxes, depreciation and amortization expenses
(“EBITDA”) to interest expense (excluding interest on loans under the Treasury
Facility) of the Company and its subsidiaries of not less than 3.0:1.0, (d)
limitations on additional indebtedness, (e) limitations on liens, (f)
limitations on mergers and other fundamental changes, (g) limitations on
dividends, (h) limitations on disposition of assets other than in the normal
course of business, (i) limitations on transactions with affiliates, (j)
limitations on agreements that prohibit liens on properties of the Company and
its subsidiary guarantors, (k) limitations on sale and leaseback transactions,
(l) limitations on speculative hedging transactions and (m) limitations on the
aggregate amount of unfunded commitments.





From time
to time, certain of the lenders may provide customary commercial and investment
banking services to the Company.




21




The
Manager has agreed to waive permanently, subsequent to September 30, 2007, that
portion of the management fee attributable to U.S. Treasury securities acquired
with borrowings under the Company’s credit facilities to the extent the amount
of such securities exceeds $100 million.




In
addition to the Company’s credit facility, the Company may also fund a portion
of its investments with issuances of equity or senior debt securities. The
Company may also securitize a portion of its investments in mezzanine or senior
secured loans or other assets. The Company expects its primary use of funds to
be investments in portfolio companies, cash distributions to holders of its
common stock and payment of fees and other operating expenses.




Note
5:                      Issuance
of Common Stock




On August
6, 2004, the Company, in its initial capitalization transaction, sold 100 shares
of common stock to Natural Gas Partners, LLC for $15.00 per share. On November
9, 2004, the Company’s Registration Statement (Registration No. 333-118279) was
declared effective by the SEC in connection with the public offering of
16,000,000 shares of common stock (plus up to 2,400,000 additional shares of
common stock upon the exercise of the underwriters’ over-allotment option),
which commenced on November 10, 2004. The number of securities registered,
including the shares of common stock subject to the underwriters’ over-allotment
option, was 18,400,000, of which 17,400,000 were sold to the public at a price
of $15.00 per share.





The net
proceeds from the initial public offering of the shares of common stock, after
deducting expenses of approximately $2,308,000 and underwriting discounts and
commissions of $0.825 per share, were approximately $244,337,000.





The
Company has established a dividend reinvestment plan for the Company’s common
stockholders, which provides for reinvestment of distributions paid by the
Company, on behalf of each plan participant, by the Company’s transfer agent, in
accordance with the plan terms. The purpose of the plan is to provide
stockholdersf record of the Company’s common stock, par value $.001 per share,
with a method of investing cash dividends and distributions in additional shares
at the current market price without charges for record-keeping, custodial, and
reporting services. However, the plan is an “opt-out” plan. This means, if the
Company declares a cash dividend, a stockholder’s cash dividend will be
automatically reinvested in additional shares of its common stock unless the
stockholder specifically “opts out” of the dividend reinvestment plan in
writing, and elects to receive cash dividends. Any stockholder of record may
elect to partially participate in the plan, or begin or resume participation at
any time, by providing the plan agent with written notice. It is customary
practice for many brokers to “opt out” of dividend reinvestment plans on behalf
of their clients unless specifically instructed otherwise.





The
Company issued 22,168 and 78,064 shares of common stock, respectively, in 2006
and 2007 to participants in the dividend reinvestment plan. The Company issued
41,482 shares of common stock on April 11, 2008 to participants in the dividend
reinvestment plan with respect to the $0.40 per share dividend declared on March
6, 2008.  See Dividends in Note 2 .





Note
6:                      Investment
Management




Investment
Advisory Agreement





The
Company has entered into an investment advisory agreement with the Manager under
which the Manager, subject to the overall supervision of the Company’s Board of
Directors, manages the day-to-day operations of, and provides investment
advisory services to, the Company.




As a
result of the accounting errors that necessitated the restatement of our
financial statements for the fiscal years ended December 31, 2007 and 2008,
between 2007 and 2009, the Company overpaid the Manager’s management and
incentive fees by approximately $34,600. The Company overpaid the base
management fee to the Manager in 2008 and 2009 by approximately $33,400 as
detailed by quarter below. These errors resulted principally from the incorrect
reporting of Total Assets and Net Assets. In the quarters ended June 30, 2007
and December 31, 2007, the Company underpaid the Manager’s investment income
incentive fee by approximately $4,400 and $9,100, respectively and overpaid the
capital gains fee as of December 31, 2007 by approximately $14,700. The
approximate $34,600 net overpayment to the Manager was settled in the first
quarter of 2010.




Summary
of (Over)/ Under Payment of Management Fee by Quarter
 AverageTotal Assets
                            
                            
                            Change from
                            
                            
                            0.45% Fee
                            
                            
                            FeeAs Reported
                            
                            
                            As Restated
                            
                            
                            Change
                            
                            
                            Prior Quarter
                            
                            
                            Correction
                            
                            
                            Quarter3Q
      2007
                            
                            $
                            413,597,732
                            
                            
                            $
                            413,597,732
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -4Q
      2007
                            
                            
                            478,232,876
                            
                            
                            
                            478,276,626
                            
                            
                            
                            43,750
                            
                            
                            
                            21,875
                            
                            
                            
                            100
                            
                            
                            1Q
      20081Q
      2008
                            
                            
                            446,563,953
                            
                            
                            
                            446,607,703
                            
                            
                            
                            43,750
                            
                            
                            
                            43,750
                            
                            
                            
                            200
                            
                            
                            2Q
      20082Q
      2008
                            
                            
                            539,759,446
                            
                            
                            
                            539,803,196
                            
                            
                            
                            43,750
                            
                            
                            
                            43,750
                            
                            
                            
                            200
                            
                            
                            3Q
      20083Q
      2008
                            
                            
                            505,800,049
                            
                            
                            
                            506,521,583
                            
                            
                            
                            721,534
                            
                            
                            
                            382,642
                            
                            
                            
                            1,700
                            
                            
                            4Q
      20084Q
      2008
                            
                            
                            400,748,657
                            
                            
                            
                            398,994,441
                            
                            
                            
                            (1,754,216
                            )
                            
                            
                            (516,341
                            )
                            
                            
                            (2,300
                            )
                            
                            1Q
      20091Q
      2009
                            
                            
                            353,330,559
                            
                            
                            
                            350,284,110
                            
                            
                            
                            (3,046,449
                            )
                            
                            
                            (2,400,333
                            )
                            
                            
                            (10,800
                            )
                            
                            2Q
      20092Q
      2009
                            
                            
                            333,449,837
                            
                            
                            
                            331,199,409
                            
                            
                            
                            (2,250,428
                            )
                            
                            
                            (2,648,439
                            )
                            
                            
                            (11,900
                            )
                            
                            3Q
      20093Q
      2009
                            
                            
                            295,823,883
                            
                            
                            
                            293,370,642
                            
                            
                            
                            (2,453,241
                            )
                            
                            
                            (2,351,835
                            )
                            
                            
                            (10,600
                            )
                            
                            4Q
      2009$
                            (7,424,931
                            )
                            
                            $
                            (33,400
                            )




For
providing these services, the Manager receives a fee from the Company,
consisting of two components — a base management fee and an incentive
fee.




Under the
investment advisory agreement, the base management fee is calculated quarterly
as 0.45% of the average of total assets of the Company as of the end of the two
previous quarters, and is payable quarterly in arrears.  The Manager
has agreed to waive permanently, subsequent to September 30, 2007, that portion
of the management fee attributable to U.S. Treasury securities acquired with
borrowings under the Company’s credit facilities to the extent the amount of
such securities exceeds $100 million.




22




Of the
$2,148,721 management and incentive fees payable to the Manager as of March 31,
2008, $1,800,206 is the base management fee for the quarter ended March 31,
2008.  The base management fee for the quarter ended December 31, 2007
was $1,683,592.




The
incentive fee under the investment advisory agreement consists of two parts. The
first part, which is calculated and payable quarterly in arrears, equals 20% of
the excess, if any, of the Company’s net investment income for the quarter that
exceeds a quarterly hurdle rate equal to 2% (8% annualized) of the Company’s net
assets.




For this
purpose, net investment income means interest income, dividend income, and any
other income (including any other fees, such as commitment, origination,
syndication, structuring, diligence, managerial assistance, monitoring, and
consulting fees or other fees that the Company receives from portfolio
companies) accrued during the fiscal quarter, minus the Company’s operating
expenses for the quarter (including the base management fee, expenses payable
under the administration agreement, any interest expense and dividends paid on
issued and outstanding preferred stock, if any, but excluding the incentive
fee).   Accordingly, the Company may pay an incentive fee based
partly on accrued interest, the collection of which is uncertain or
deferred.  Net investment income includes, in the case of investments
with a deferred interest feature (such as original issue discount, debt
instruments with payment-in-kind interest and zero coupon securities), accrued
income that the Company has not yet received in cash. Net investment income does
not include any realized capital gains, realized capital losses, or unrealized
capital appreciation or depreciation.




The
incentive fees due in any fiscal quarter will be calculated as
follows:





·
            No incentive fee in any fiscal
      quarter in which the Company’s net investment income does not exceed the
      hurdle rate.


·
            20% of the amount of the
      Company’s net investment income, if any, that exceeds the hurdle rate in
      any fiscal quarter.





There
were no investment income incentive fees earned for the first quarters of 2008
and 2007.




The second part of the incentive fee (the “Capital
Gains Fee”) is determined and payable in arrears as of the end of each fiscal
year (or upon termination of the investment advisory agreement, as of the
termination date), and equals (1) 20% of (a) the Company’s net realized capital
gain (realized capital gains less realized capital losses) on a cumulative basis
from the closing date of the Company’s initial public offering to the end of
such fiscal year, less (b) any unrealized capital depreciation at the end of
such fiscal year, less (2) the aggregate amount of all Capital Gains Fees paid
to the Manager in prior fiscal years.  There were no Capital Gains
Fees earned for the first quarters of 2008 and 2007.





Realized
capital gains on a security are calculated as the excess of the net amount
realized from the sale or other disposition of such security over the amortized
cost for the security. Realized capital losses on a security are calculated as
the amount by which the net amount realized from the sale or other disposition
of such security is less than the amortized cost of such security. Unrealized
capital depreciation on a security is calculated as the amount by which the
original cost of such security exceeds the fair value of such security at the
end of a fiscal year. All period-end valuations are determined by the Company in
accordance with GAAP and the 1940 Act.




The
Manager has agreed that, to the extent permissible under federal securities laws
and regulations, including Regulation M, it will utilize 30% of the fees it
receives from the capital gains portion of the incentive fee (up to a maximum of
$5 million of fees received in the aggregate) to purchase shares of the
Company’s common stock in open market purchases through an independent trustee
or agent. Any sales of such stock will comply with any applicable six-month
holding period under Section 16(b) of the Securities Act of 1933 and all other
restrictions contained in any law or regulation, to the fullest extent
applicable to any such sale. Any change in this voluntary agreement will not be
implemented without at least 90 days prior notice to stockholders and compliance
with all applicable laws and regulations.




The
investment advisory agreement was originally approved by the Company’s Board of
Directors on November 9, 2004. The investment advisory agreement provides that
unless terminated earlier as described below, the agreement shall remain in
effect from year-to-year after November 9, 2006, provided continuation is
approved at least annually by the Company’s Board of Directors or by the
affirmative vote of the holders of a majority of the Company’s outstanding
voting securities, including, in either case, approval by a majority of the
members of the Company’s Board of Directors who are not interested persons. On
November 1, 2007, the Company’s Board of Directors, including all of the
independent directors, approved an extension of the investment advisory
agreement through November 9, 2008.




23




The
agreement may be terminated at any time, without the payment of any penalty, by
a vote of the Company’s Board of Directors or the holders of a majority of the
Company’s shares on 60 days’ written notice to the Manager, and would
automatically terminate in the event of its “assignment” (as defined in the 1940
Act).  The agreement may be terminated by either party without penalty
upon not more than 60 days’ written notice to the other.





The
investment advisory agreement provides that, absent willful misfeasance, bad
faith or gross negligence in the performance of its duties or the reckless
disregard of its duties and obligations, the Manager and its officers, manager,
agents, employees, controlling persons, members and any other person or entity
affiliated with it are entitled to indemnification from the Company for any
damages, liabilities, costs and expenses (including reasonable attorneys’ fees
and amounts reasonably paid in settlement) arising from the rendering of the
Manager’s services under the investment advisory agreement or otherwise as the
Company’s Manager.





Pursuant
to the investment advisory agreement, the compensation and routine overhead
expenses of the investment professionals of the Company’s management team and
their respective staffs, when and to the extent engaged in providing management
and investment advisory services to the Company, will be paid for by the
Manager. The Company will bear all other costs and expenses of its operations
and transactions.





The
Manager, NGP Investment Advisor, LP, was formed in 2004 and maintains an office
at 1221 McKinney Street, Suite 2975, Houston, Texas 77010. The Manager’s sole
activity is to perform management and investment advisory services for the
Company. The Manager is a registered investment adviser under the Investment
Advisers Act of 1940.





The
foregoing description of the investment advisory agreement is qualified in its
entirety by reference to the full text of the document, a copy of which was
filed as Exhibit 10.1 to the Company’s Form 10-K for the year ended
December 31, 2004, and is incorporated herein by reference.





Administration  Agreement





The
Company has entered into an administration agreement with the Administrator,
under which the Administrator furnishes the Company with office facilities,
equipment and clerical, bookkeeping and record keeping services at such
facilities.  Under the administration agreement, the Administrator
also performs, or oversees the performance by third parties of, the Company’s
required administrative services, which include being responsible for the
financial records that the Company is required to maintain and preparing reports
to the Company’s stockholders and reports filed with the SEC.  In
addition, the Administrator assists in determining and publishing the Company’s
net asset value, oversees the preparation and filing of the Company’s tax
returns and the printing and dissemination of reports to the Company’s
stockholders and generally oversees the payment of the Company’s expenses and
the performance of administrative and professional services rendered to the
Company by others.   To the extent permitted under the 1940 Act,
the Administrator may also provide on the Company’s behalf, significant
managerial assistance to the Company’s portfolio companies.  Payments
under the agreement are equal to amounts based upon the allocable portion of the
Administrator’s costs and expenses incurred in connection with administering the
Company’s business.  The Administrator bills the Company for charges
under the administration agreement monthly in arrears.  The agreement
may be terminated by either party without penalty upon 60 days’ written notice
to the other party and will automatically terminate in the event of its
“assignment” (as defined in the 1940 Act).




Of the
$510,915 in accounts payable as of March 31, 2008, $206,265 was due to the
Administrator for expenses incurred on the Company’s behalf for the month of
March 2008.  By comparison, $225,148 was due to the Administrator for
expenses incurred on the Company’s behalf for the month of December
2007.





The
administration agreement was originally approved by the Company’s Board of
Directors on November 9, 2004. The administration agreement provides that unless
terminated earlier the agreement will continue in effect until November 9,
2006, and from year-to-year thereafter provided such continuance is approved at
least annually by (i) the Company’s Board of Directors and (ii) a
majority of the members of the Company’s Board of Directors who are not parties
to the administration agreement or “interested persons” of any such party. On
November 1, 2007, the Company’s Board of Directors, including all of the
independent directors, approved the continuation of the administration agreement
through November 9, 2008.




The foregoing description of the administration
agreement is qualified in its entirety by reference to the full text of the
document, a copy of which was filed as Exhibit 10.2 to the Company’s
Form 10-K for the year ended December 31, 2004, and is incorporated herein
by reference.




24




Note
7:                      Federal
Income Taxes




The
Company intends to qualify for tax purposes as a RIC under Subchapter M of
Chapter 1 of the Internal Revenue Code of 1986, as amended.  As a RIC,
the Company generally will not be subject to federal income tax on the portion
of its investment company taxable income and net capital gain (i.e., realized
net long term capital gains in excess of realized net short term capital losses)
distributed to stockholders.  To qualify as a RIC, the Company is
required, among other things, to distribute to its stockholders at least 90% of
investment company taxable income, as defined by the Code, and to meet certain
asset diversification requirements.
 
 The
Company met all RIC requirements and distributed substantially all of its
investment company taxable income for the years ended December 31, 2006 and
2007.  Thus, the Company did not incur any federal income tax
liability for any of these periods.
 
 The
following Company consolidated subsidiaries are subject to federal income taxes
for the period ended March 31, 2008: NGPC Asset Holdings, LP, NGPC Asset
Holdings II, LP, NGPC Asset Holdings III, LP and NGPC Asset Holdings IV,
LP.  The difference between the effective income tax rate of (0.93%) and
the statutory federal tax rate of 34% for the three months ended March 31, 2008
is primarily attributable to RIC investment company taxable income that
generally will not be subject to federal income tax.




25




Note
8:                      Reclassifications




GAAP
requires adjustments to certain components of net assets to reflect permanent
differences between financial and tax reporting. These reclassifications have no
effect on total net assets or net asset value per share. The table below
summarizes the reclassifications from undistributed net investment income
(loss), undistributed net realized capital gain (loss), and paid-in capital in
excess of par for the year ended December 31, 2007, as
restated.  These reclassifications are primarily due to non-deductible
meal expenses, non-deductible excise taxes and income and expenses from wholly
owned subsidiaries.




Unrelated
to the restatement, the Company has also reclassified certain balance sheet,
statement of operations and statement of cash flows amounts to conform to the
current year presentation.  These reclassifications were primarily
related to the disaggregation of investments in portfolio securities, investment
income, net realized capital gain (loss) on investments and net unrealized gain
(loss) on investments into separate classifications according to level of
control.  See Note 2 for a summary of these reclassified
amounts.




Undistributed
                  
                  
                  Undistributed
                  
                  
                  Paid-in CapitalNet Investment
                  
                  
                  Net Realized
                  
                  
                  in ExcessYear
                  
                  Income (Loss)
                  
                  
                  Capital Gain (Loss)
                  
                  
                  of Par2007,
      as restated
                  
                  $
                  120,359
                  
                  
                  $
                  140,390
                  
                  
                  $
                  (260,749
                  )




Note
9:                      Commitments
and Contingencies




As of
March 31, 2008, the Company had investments in or commitments to fund loan
facilities to 15 portfolio companies totaling $306 million, on which $279
million was drawn. In addition, the Company has continuing obligations under the
investment advisory agreement with the Manager and the administration agreement
with the Administrator. The agreements provide that, absent willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
the reckless disregard of its duties and obligations, the Manager, the
Administrator and its officers, managers, agents, employees, controlling
persons, members and any other person or entity affiliated with them will be
entitled to indemnification from the Company for any damages, liabilities, costs
and expenses (including reasonable attorneys’ fees and amounts reasonably paid
in settlement) arising from the rendering of the Manager’s or Administrator’s
services under the agreements or otherwise as the Company’s investment adviser
or administrator. The agreements also provide that the Manager, the
Administrator and their affiliates will not be liable to the Company or any
stockholder for any error of judgment, mistake of law, any loss or damage with
respect to any of the Company’s investments or any action taken or omitted to be
taken by the Manager or the Administrator in connection with the performance of
any of their duties or obligations under the agreements or otherwise as
investment adviser or administrator to the Company, except to the extent
specified in Section 36(b) of the 1940 Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. In the normal course of business, the Company enters into a variety of
undertakings containing a variety of representations that may expose the Company
to some risk of loss. The amount of future loss, if any, arising from such
undertakings, while not quantifiable, is not expected to be
significant.




26




Note
10:                     Fair
Value





In
September 2006, FASB issued SFAS No. 157, which establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements.
SFAS No. 157 applies to fair value measurements already required or
permitted by existing standards. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. The changes to current
generally accepted accounting principles from the application of this Statement
relate to the definition of fair value, the methods used to measure fair value,
and the expanded disclosures about fair value measurements.





As of
January 1, 2008, the Company adopted SFAS No. 157. The Company
has performed an analysis of all existing investments and derivative instruments
to determine the significance and character of all inputs to their fair value
determination. Based on this assessment, the adoption of this standard did not
have a material effect on the Company’s net asset value. However, the adoption
of the standard does require the Company to provide additional disclosures about
the inputs used to develop the measurements and the effect of certain
measurements on changes in net assets for the reportable periods as contained in
the Company’s periodic filings.





SFAS No. 157
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into the following three broad
categories:





·
            Level 1— Quoted unadjusted prices
      for identical instruments in active markets to which the Company has
      access at the date of
measurement.





·
            Level 2— Quoted prices for similar
      instruments in active markets; quoted prices for identical or similar
      instruments in markets that are not active; and model-derived valuations
      in which all significant inputs and significant value drivers are
      observable in active markets. Level 2 inputs are those in markets for
      which there are few transactions, the prices are not current, little
      public information exists or instances where prices vary substantially
      over time or among brokered market
  makers.





·
            Level 3— Model derived valuations
      in which one or more significant inputs or significant value drivers are
      unobservable. Unobservable inputs are those inputs that reflect the
      Company’s own assumptions that market participants would use to price the
      asset or liability based on the best available
      information.





The
following table presents the Company’s assets measured at fair value on a
recurring basis at March 31, 2008:




Prices withQuoted Prices
                          
                          
                          Observablein Active
                          
                          
                          Market
                          
                          
                          UnobservableMarkets
                          
                          
                          Inputs
                          
                          
                          InputsAssets at Fair Value
                          
                          Total
                          
                          
                          (Level 1)
                          
                          
                          (Level 2)
                          
                          
                          (Level 3)Long
      Term Investments
                          
                          $
                          291,220,223
                          
                          
                          $
                          -
                          
                          
                          $
                          19,551,000
                          
                          
                          $
                          271,669,223Short
      Term Investments
                          
                          
                          143,978,220
                          
                          
                          
                          143,978,220
                          
                          
                          
                          -
                          
                          
                          
                          -Total
      Assets at Fair Value
                          
                          $
                          435,198,443
                          
                          
                          $
                          143,978,220
                          
                          
                          $
                          19,551,000
                          
                          
                          $
                          271,669,223




The
Company did not have any liabilities that were measured at fair value on a
recurring basis at March 31, 2008




The
following table presents the Company’s assets measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) at
December 31, 2007 and at March 31, 2008.





Long TermAssets at Fair Value Using Unobservable Inputs (Level 3)
                        
                        InvestmentsBalance
      as of December 31, 2007
                        
                        $
                        272,348,573Transfers
      in (out) of Level 3
                        
                        
                        -Net
      investment income (loss)
                        
                        
                        307,688Net
      realized gains (losses)
                        
                        
                        -Net
      unrealized gains (losses)
                        
                        
                        (467,996
                        )Purchases,
      sales and  redemptions
                        
                        
                        (519,042
                        )Balance
      as of March 31, 2008
                        
                        $
                        271,669,223




The
$467,996 of net unrealized losses presented in the table above relates to
investments that are still held at March 31, 2008, and the Company presents
these unrealized losses on the Consolidated Statement of Operations as net
increase (decrease) in unrealized appreciation (depreciation) on portfolio
securities and corporate notes.




27




Note
11:                      Subsequent
Events





On April
15, 2008 the Company completed an underwritten public offering of 3,700,000
shares of the Company’s common stock at a price per share of $16.00, raising
approximately $55.8 million in net proceeds after deducting underwriting
discounts and commissions and estimated offering expenses.  A shelf
registration statement relating to the sale of shares in this offering has been
filed with the SEC and has become effective.  The underwriters for the
offering were Raymond James & Associates, Inc., Stifel, Nicolaus &
Company, Incorporated and BB&T Capital Markets, a division of Scott &
Stringfellow, Inc.  The Company has granted the underwriters a 30-day
option to purchase up to an additional 555,000 shares of common stock to cover
over-allotments, if any.  On April 16, 2008, the Company used the
$56.2 million net proceeds of this offering plus an additional $8.8 million of
cash on hand to repay the outstanding balance on its $65 million investment
credit facility.





On April
25, 2008, the Company announced that the underwriters had exercised a portion of
the over-allotment granted in connection with the Company’s recent public
offering of common stock and had purchased an additional 386,388 shares of
common stock at a price per share of $16.00, bringing total net proceeds of the
offering to approximately $61.7 million after deducting underwriting discounts
and commissions and estimated offering expenses. A total of 168,612 shares
remain available for purchase under the underwriters’ over-allotment option
during the remainder of its 30-day term.  The Company will use
proceeds from the exercise of the over-allotment to fund additional
investments.





On April
30, 2008, the Company closed a $30 million Senior Secured Credit Facility (the
“Facility”) with Greenleaf Investments LLC, a private company based in Victoria,
Texas (“Greenleaf”).  The Company acted as agent and sole lender for
the Facility.  Initial availability under the Facility is $12.5
million with approximately $10.5 million funded at closing.  The
Facility is secured by first liens on substantially all of Greenleaf’s
assets.  As partial consideration for providing the Facility, the
Company received an overriding royalty interest in Greenleaf’s
properties.  Proceeds from the Facility will be used by Greenleaf to
acquire certain properties in Victoria County, Texas, to develop additional oil
and gas properties and to fund capital expenditures.  Greenleaf is an
oil and gas producer with interests in production located along the Texas Gulf
Coast.





Also on
April 30, 2008, the Company made a follow-on investment in Tammany Oil &
Gas, LLC, an existing portfolio company.  Availability under this
facility was increased from $30.0 million to $34.0 million.  The
Company funded an additional $6.2 million, which was used to acquire certain
producing properties in the federal waters of the Gulf of
Mexico.  Following the investment, there is approximately $29.5
million outstanding under this facility.




28





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





The
following analysis of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and the notes
thereto contained elsewhere in this report.




As
discussed in the Explanatory Note to this Amended Filing, the Company is
amending and restating its Original Filing of its Quarterly Report on Form 10−Q
for the three month period ended March 31, 2008, including comparative prior
year financial results.  For a discussion of the significant
restatement adjustments and the background leading to the adjustments, see Note
2, Restatement of Consolidated Financial Statements, in Notes to Consolidated
Financial Statements.  All amounts in this Amended Filing affected by
the restatement adjustments reflect such amounts as restated.




Forward-Looking
Statements




The safe
harbor for forward-looking statements under the Private Securities Litigation
Reform Act of 1995 does not apply to business development companies and
statements made in this report.  Nonetheless, certain statements in
this report that relate to estimates or expectations of our future performance
or financial condition may be forward-looking. These forward-looking statements
are not historical facts, but rather are based on current expectations,
estimates and projections in our industry, our beliefs and our
assumptions.  These statements are not guarantees of future
performance and are subject to various risks and uncertainties, which could
cause actual results and conditions to differ materially from those projected,
including, but not limited to,





·
            uncertainties associated with the
      timing of transaction
closings;


·
            changes in the prospects of our
      portfolio companies;


·
            changes in interest
      rates;


·
            changes in regional, national or
      international economic conditions and their impact on the industries in
      which we invest;


·
            the future operating results of
      our portfolio companies and their ability to achieve their
      objectives;


·
            changes in the conditions of the
      industries in which we
invest;


·
            the adequacy of our cash
      resources and working
capital;


·
            the timing of cash flows, if any,
      from the operations of our portfolio
  companies;


·
            the ability of our external
      manager, NGP Investment Advisor, LP, which we refer to as our Manager, to
      locate suitable investments for us and to monitor and administer the
      investments; and


·
            other factors enumerated in our
      filings with the Securities and Exchange Commission, or the
      SEC.





We may
use words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,”
“will,” “should,” “may” and similar expressions to identify forward-looking
statements. Such statements are based on currently available operating,
financial and competitive information and are subject to various risks and
uncertainties that could cause actual results to differ materially from our
historical experience and present expectations. Although we believe that the
assumptions on which these forward-looking statements are based are reasonable,
any of those assumptions could prove to be inaccurate, and as a result, the
forward-looking statements based on those assumptions also could be
inaccurate.  Undue reliance should not be placed on such
forward-looking statements, as such statements speak only as of the date on
which they are made. Additional information regarding these and other risks and
uncertainties is contained in our periodic filings with the SEC.




Overview




We are a
financial services company created to invest primarily in debt securities of
small and mid-size private energy companies, which we generally define as
companies that have net asset values or annual revenues of less than $500
million and are not issuers of publicly traded securities. We have elected to be
regulated as a business development company, or a BDC, under the Investment
Company Act of 1940, as amended, or the 1940 Act, and, as such, we are required
to comply with certain regulatory requirements. For instance, we generally have
to invest at least 70% of our total assets in “qualifying assets,” which are
securities of private or thinly traded public U.S. companies, cash, cash
equivalents, U.S. government securities and high-quality debt investments that
mature in one year or less. In addition, for federal income tax purposes we
operate so as to be treated as a regulated investment company, or RIC, under the
Internal Revenue Code of 1986, as amended, or the Code. Pursuant to these
elections, we generally will not have to pay corporate-level taxes on any income
and capital gains we distribute to our stockholders.





Our
investment objective is to generate both current income and capital appreciation
primarily through debt and equity investments with certain equity
components.  A key focus area for our targeted investments in the
energy industry is domestic exploration and production businesses and midstream
businesses that gather, process and transport oil and natural gas. We also
evaluate investment opportunities in such businesses as coal, power,
electricity, energy services and alternative energy. Our investments will
generally range in size from $10 million to $50 million; however, we may invest
more or less depending on market conditions and our Manager’s view of a
particular investment opportunity.  Our targeted investments primarily
consist of debt instruments, including senior and subordinated loans combined in
one facility, sometimes with an equity component, and subordinated loans with
equity components.  We may also invest in preferred stock and other
equity securities on a stand-alone basis.




29





Our level
of investment activity can and does vary substantially from period to period
depending on many factors, including the amount of debt and equity capital
available to energy companies, the level of acquisition and divestiture activity
for such companies, the level and volatility of energy commodity prices, the
general economic environment and the competitive environment for the types of
investments we make. We believe that, for energy companies, the availability of
debt capital from banks, mezzanine providers and alternative investment vehicles
such as hedge funds has remained strong over the last 12 months and has
continued to put downward pressure on spreads. However, we do not expect this
availability of capital to impair our ability to make attractive long-term
investment decisions with our capital.   We remain committed to
our underwriting and investment disciplines in selectively investing in
appropriate risk-reward opportunities within the energy sector.




We
generate revenue in the form of interest income on the debt securities that we
own, dividend income on any common or preferred stock that we own and capital
gains or losses on any debt or equity securities that we acquire in portfolio
companies and subsequently sell. Our investments, if in the form of debt
securities, typically have a term of three to seven years and bear interest at a
fixed or floating rate. To the extent achievable, we seek to collateralize our
investments by obtaining security interests in our portfolio companies' assets.
We also may acquire minority or majority equity interests in our portfolio
companies, which may pay cash or in-kind dividends on a recurring or otherwise
negotiated basis. In addition, we may generate revenue in other forms including
commitment, origination, structuring, administration or due diligence fees; fees
for providing managerial assistance; and possibly consultation
fees.  Any such fees generated in connection with our investments are
recognized as earned.





Portfolio
and Investment Activity




During
the quarter ended March 31, 2008, we added one new company to our portfolio and
one company repaid its facility. In January 2008, BSR Alto’s Term Loan was fully
repaid at par from proceeds from the sale of its assets to a third party. As of
September 30, 2007, we had written down the value of our investment in the BSR
Alto Term Loan by $0.5 million. Upon repayment, this impairment was recovered in
full.





In March
2008, we closed a $15 million investment in BioEnergy International, LLC, or
BioEnergy, a private, alternative fuels and specialty chemicals company based in
Quincy, Massachusetts. The investment consists of a $5 million participation in
a $30 million Senior Secured Tranche Construction Loan and a $10 million
participation in a $62 million Senior Secured Notes issue. As partial
consideration for providing the investment, we received limited liability
company units in a subsidiary of BioEnergy and warrants in BioEnergy. Proceeds
from the investment will be used by BioEnergy to construct a fully contracted
108 million gallons per year ethanol plant in Clearfield County, Pennsylvania
and to fund development of bio-refinery technologies .





Also
during the quarter, we sold a $20 million senior NPI participation in the
Anadarko Petroleum Company 2007-III Drilling Fund to another financial
institution.





Following
these transactions, as of March 31, 2008, our investment portfolio consisted of
15 portfolio companies invested as follows: 38.1% in senior secured term loans,
6.9% in senior subordinated secured notes, 0.4% in participating convertible
preferred stock, 1.9% in corporate notes, 6.5% in member and partnership units
and 11.8% in net profits interests.  The balance of our investment
portfolio (as a percentage of the whole portfolio) was comprised 32.4% of U.S.
Treasury Bills, and 2.0% of cash and cash equivalents.





At March
31, 2008, the weighted average yield on targeted portfolio investments,
exclusive of capital gains, was 10.7%.  The weighted average yield of
our corporate notes was 5.8%. The weighted average yield of our U.S. Treasury
Bills and cash equivalents was 2.72%.  The weighted average yield on
our total capital invested at March 31, 2008 was 7.82%.





By
comparison, at March 31, 2007, the weighted average yield on targeted portfolio
investments, exclusive of capital gains, was 12.5%.  The weighted
average yield of our corporate notes was 5.5%. The weighted average yield of our
U.S. Treasury Bills and cash equivalents was 5.0%.  The weighted
average yield on our total capital invested at March 31, 2007 was
9.9%.




30


Yields
are computed using interest rates as of the balance sheet date and include
amortization of loan discount points, original issue discount and market premium
or discount, royalty interest income, net profits income and other similar
investment income, weighted by their respective costs when
averaged.





Critical
Accounting Policies




The
preparation of financial statements and related disclosures in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and income and expenses during the periods
reported. Actual results could materially differ from those estimates. We have
identified the following as critical accounting policies.




Basis
of Presentation




The
accompanying consolidated financial statements have been prepared on the accrual
basis of accounting in conformity with accounting principles generally accepted
in the United States, and include the accounts of the company and its wholly
owned subsidiaries. The consolidated financial statements reflect all
adjustments and reclassifications which, in the opinion of management, are
necessary for the fair presentation of the results of the operations and
financial condition for the periods presented. All significant intercompany
balances and transactions have been eliminated.




Cash
and Cash Equivalents




Cash and
cash equivalents include short-term, liquid investments in a money market fund.
Cash and cash equivalents are carried at cost which approximates fair
value.




Prepaid
Assets




Prepaid
assets consist of premiums paid for directors’ and officers’ insurance and
fidelity bonds with policy terms of one year, fees associated with the
establishment of the credit facility, and registration expenses related to our
shelf filing. Such premiums and fees are amortized monthly on a straight line
basis over the term of the policy or credit facility. Registration expenses are
deferred and will be charged as a reduction of capital upon the sale of
shares.




Concentration
of Credit Risk




We place
our cash and cash equivalents with financial institutions and, at times, cash
held in checking accounts may exceed the Federal Deposit Insurance Corporation
insured limit.




Valuation
of Investments




Investments
are carried at fair value, as determined in good faith by our Board of
Directors. On a quarterly basis, the investment team of our Manager prepares
valuations for all of the assets in our portfolio and presents the valuations to
our valuation committee and Board of Directors. The valuations are determined
and recommended by the valuation committee to our Board of Directors, which
reviews and ratifies the final portfolio valuations.




Investments
in securities for which market quotations are readily available are recorded in
the financial statements at such market quotations as of the valuation date
adjusted for appropriate liquidity discounts, if applicable. For investments in
securities for which market quotations are unavailable, or which have various
degrees of trading restrictions, the investment team of our Manager prepares
valuation analyses, as generally described below.




Using the
most recently available financial statements, forecasts and, when applicable,
comparable transaction data, the investment team of our Manager prepares
valuation analyses for the various securities in our investment portfolio. These
valuation analyses are prepared using traditional valuation methodologies, which
rely on estimates of the asset values and enterprise values of portfolio
companies issuing securities.




31





The
methodologies for determining asset valuations include estimates based on: the
liquidation or sale value of a portfolio company’s assets, the discounted value
of expected future net cash flows from the assets and third party valuations of
a portfolio company’s assets, such as engineering reserve reports of oil and
natural gas properties. Our Manager considers some or all of the above valuation
methods to determine the estimated asset value of a portfolio
company.




The
methodologies for determining enterprise valuations include estimates based on:
valuations of comparable public companies, recent sales of comparable companies,
the value of recent investments in the equity securities of a portfolio company
and also on the methodologies used for asset valuations. The investment team of
our Manager considers some or all of the above valuation methods to determine
the estimated enterprise value of a portfolio company.




Debt Securities: We record
our investments in non-convertible debt securities at fair value which generally
approximates cost plus amortized original issue discount, or OID, to the extent
that the estimated asset or enterprise value of the portfolio company exceeds
the outstanding debt of the portfolio company. We record our investment in
convertible debt securities at fair value which generally approximates the
higher of: 1) cost plus amortized OID, to the extent that the estimated asset or
enterprise value of the portfolio company equals or exceeds the outstanding debt
of the portfolio company; and 2) our pro rata share, upon conversion, of the
residual equity value of the portfolio company available after deducting all
outstanding debt from its estimated enterprise value. If the estimated asset or
enterprise value is less than the sum of the value of our debt investment and
all other debt securities of the portfolio company pari passu or senior to our
debt investment, we reduce the value of our debt investment beginning with our
junior-most debt investment such that the asset or enterprise value less the
value of the outstanding pari
passu or senior debt is zero.




Equity Securities: We record
our investments in preferred and common equity securities (including warrants or
options to acquire equity securities) at fair value based on our pro rata share
of the residual equity value available after deducting all outstanding debt from
the estimated enterprise value.




Property-Based Equity Participation
Rights: We record our investments in overriding royalty and net profits
interests at fair value based on a multiple of cash flows generated by such
investments, multiples from transactions involving the sale of comparable assets
and/or the discounted value of expected future net cash flows from such
investments. Appropriate cash flow multiples are derived from the review of
comparable transactions involving similar assets. The discounted value of future
net cash flows is derived, when appropriate, from third party valuations of a
portfolio company’s assets, such as engineering reserve reports of oil and gas
properties.




Due to
the uncertainty inherent in the valuation process, such estimates of fair value
may differ significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be material.
Additionally, changes in the market environment and other events that may occur
over the life of the investments may cause the gains or losses ultimately
realized on these investments to be different from the valuations currently
assigned.




In
September 2006, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 157, Fair Value Measurements
(“SFAS No. 157”). This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157
applies to fair value measurements already required or permitted by existing
standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The changes to current generally accepted accounting
principles from the application of SFAS No. 157 relate to the definition of fair
value, the methods used to measure fair value and the expanded disclosures about
fair value measurements.





As of
January 1, 2008, we adopted SFAS No. 157. We performed an analysis of
all existing investments to determine the significance and character of all
inputs to their fair value determination. Based on this assessment, the adoption
of this standard did not have a material effect on our net asset
value.


32




Securities
Transactions, Interest and Dividend Income Recognition




All
securities transactions are accounted for on a trade-date basis. Interest income
is recorded on the accrual basis to the extent that such amounts are expected to
be collected. Premiums and discounts are accreted into interest income using the
effective interest method. Detachable warrants, other equity securities or
property interests such as overriding royalty interests obtained in conjunction
with the acquisition of debt securities are recorded separately from the debt
securities at their initial fair value, with a corresponding amount recorded as
a discount to the associated debt security. Income from overriding royalty
interests is recognized as received and the recorded assets are charged
depletion using the unit of production depletion method. The portion of the loan
origination fees paid that represent additional yield or discount on a loan are
deferred and accreted into interest income over the life of the loan using the
effective interest method. Upon the prepayment of a loan or debt security, any
unamortized loan origination fees are recorded as interest income and any
unamortized premium or discount is recorded as a realized gain or loss. Market
premiums or discounts on acquired loans or fixed income investments are accreted
into interest income using the effective interest method. Dividend income is
recognized on the ex-dividend date. Accruing interest or dividends on
investments is deferred when it is determined that the interest or dividend is
not collectible. Collectability of the interest and dividends is assessed, based
on many factors including the portfolio company’s ability to service its loan
based on current and projected cash flows as well as the current valuation of
the portfolio company’s assets.




Payment-in-Kind
Interest




We may
have investments in our portfolio that contain payment-in-kind, or PIK,
provisions. PIK interest or dividends, computed at the contractual rate
specified in each investment agreement, are added to the principal balance of
the investment and recorded as interest or dividend income. For investments with
PIK interest or dividends, we base income accruals on the principal balance
including any PIK. If the portfolio company’s asset valuation is not sufficient
to cover the contractual interest, we will not accrue interest or dividend
income on the investment. To maintain our RIC status, this non-cash source of
income must be paid out to stockholders in the form of dividends, even though we
have not yet collected the cash.




Fee
Income Recognition




Fees
primarily include financial advisory, transaction structuring, loan
administration, commitment and prepayment fees. Financial advisory fees
represent amounts received for providing advice and analysis to companies and
are recognized as earned when such services are performed provided collection is
probable. Transaction structuring fees represent amounts received for
structuring, financing, and executing transactions and are generally payable
only if the transaction closes. Such fees are deferred and accreted into
interest income over the life of the loan using the effective interest method.
Commitment fees represent amounts received for committed funding and are
generally payable whether or not the transaction closes. On transactions that
close within the commitment period, commitment fees are deferred and accreted
into interest income over the life of the loan using the effective interest
method. Commitment fees on transactions that do not close are generally
recognized over the time period the commitment is outstanding. Prepayment and
loan administration fees are recognized as they are received.




Net
Realized Gains or Losses and Net Change in Unrealized Appreciation or
Depreciation




Realized
capital gains or losses on portfolio securities and corporate notes are measured
by the difference between the net proceeds from the repayment or sale and the
amortized cost basis of the investment, considering unamortized fees and
prepayment premiums and without regard to unrealized appreciation or
depreciation previously recognized, and include investments charged off during
the year, net of recoveries. Net unrealized appreciation or depreciation
reflects the change in portfolio investment values during the reporting period,
including the reversal of previously recorded unrealized appreciation or
depreciation, when capital gains or losses are realized.




Dividends




Dividends
to stockholders are recorded on the ex-dividend date. We currently intend that
our distributions each year will be sufficient to maintain our status as a RIC
for federal income tax purposes and to eliminate our liability for federal
excise taxes. We intend to make distributions to stockholders on a quarterly
basis of substantially all net taxable income. We also intend to make
distributions of net realized capital gains, if any, at least annually. However,
we may in the future decide to retain capital gains for investment and designate
such retained dividends as a deemed distribution. The amount to be paid out as a
dividend is determined by our Board of Directors each quarter and is based on
the annual taxable earnings estimated by our Manager. Based on that estimate, a
dividend is declared each quarter and paid shortly thereafter.




33





Results
of Operations




Investment
Income




Investment
income for the quarter ended March 31, 2008 was $9.5 million with $8.2 million
attributable to targeted investments in 13 portfolio companies, $0.2 million
from corporate notes and $1.1 million attributable to investments in cash
equivalents. This compares to investment income for the quarter ended March 31,
2007 of $8.5 million with $6.7 million attributable to targeted investments in
16 portfolio companies, $0.2 million from corporate notes, $0.1 million in fee
income from third parties and affiliates, and $1.5 million attributable to
investments in cash equivalents, agency notes and auction rate
securities.





Operating
Expenses





For the
quarter ended March 31, 2008, as restated, operating expenses were $5.4
million compared to $4.1 million for the quarter ended March 31, 2007, as
restated. The 2008 amount consisted of investment advisory and management fees
of $1.8 million, insurance expenses, administrative services fees, professional
fees, directors’ fees and other general and administrative expenses of $1.2
million and credit facility interest and fees of $2.4 million.  In
comparison, for the quarter ended March 31, 2007, investment advisory and
management fees were $1.6 million, insurance expenses, administrative services
fees, professional fees, directors’ fees and other general and administrative
expenses were $0.9 million and credit facility interest and fees were $1.6
million. See Note 6 for discussion on the effects of the restatement on
management fees.





Operating
expenses for the three month periods include our allocable portion of the total
organizational and operating expenses incurred by us, our Manager, and NGP
Administration, LLC, which we refer to as our administrator, as determined by
our Board of Directors and representatives of our Manager and our
Administrator.  According to the terms of the investment advisory
agreement, the base management fee is calculated quarterly as 0.45% of the
average of our total assets as of the end of the two previous
quarters.





Net
Investment Income Before Income Taxes




For the
quarter ended March 31, 2008, net investment income before income taxes was $4.1
million compared to $4.4 million for the quarter ended March 31, 2007, primarily
due to increased interest income on the higher portfolio balances offset by
higher management fees, general and administrative expenses and interest and
credit facility fees.




Unrealized
Appreciation or Depreciation on Investments




For the
quarter ended March 31, 2008, as restated, the increase in net unrealized
depreciation before income taxes was $1.7 million, comprised of a $1.4
million decrease in portfolio fair value and a $0.3 million decrease in the fair
value of corporate notes.  This compares to an increase of $3.7
million net unrealized appreciation before income taxes for the quarter ended
March 31, 2007, as restated, consisting of a $3.6 million increase in
portfolio fair value and a $0.1 million increase in the fair value of corporate
notes.





Net
Realized Gains





There
were no realized capital gains or losses for the quarters ended March 31, 2008
or 2007.





Net
Increase in Stockholders’ Equity from Operations





For the
quarter ended March 31, 2008, as restated, we had a net increase in
stockholders’ equity (net assets) resulting from operations of $2.4 million, or
$0.14 per share, compared to $7.4 million, or $0.42 per share for the quarter
ended March 31, 2007, as restated.  The $5.0 million, or $0.28 per
share net decrease is attributable to the $5.4 million decrease in unrealized
appreciation (depreciation) on our investments during the first quarter of 2008
less tax provision of $0.7 million.




Financial
Condition, Liquidity and Capital Resources




During
the quarter ended March 31, 2008, we generated cash from operations, including
interest earned on our portfolio securities, as well as our investments in
corporate notes, U.S. government securities and other high quality debt
securities that mature in one year or less.  At March 31, 2008, we had
cash and cash equivalents of $8.7 million, investments in U.S. Treasury Bills of
$144.0 million and investments in corporate notes of $8.7
million.


34





As
of March 31, 2008, we had investments in or commitments to fund loan facilities
to 15 portfolio companies totaling $306 million, of which $279 million was
drawn.  We expect to fund our investments in 2008 from income earned
on our portfolio and temporary investments and from borrowings under our Credit
Facilities.  (See description under “Note 3: Credit Facility”
above.)  In the future, we may also fund a portion of our investments
with issuances of equity or senior debt securities. We may also securitize a
portion of our investments.  We expect our primary use of funds to be
investments in portfolio companies, cash distributions to holders of our common
stock and payment of fees and other operating expenses.





Contractual
Obligations




A summary
of our contractual payment obligations at March 31, 2008 is as
follows:





Less than
                      
                      
                      
                      
                      
                      
                      
                      
                      More thanContractual Obligations
                      
                      Total
                      
                      
                      1 Year
                      
                      
                      1-3 Years
                      
                      
                      3-5 Years
                      
                      
                      5 YearsMarch
      31, 2008:Long-term
      debt obligations—revolving
      credit facilities (1)
                      
                      $
                      191,250,000
                      
                      
                      $
                      -
                      
                      
                      $
                      191,250,000
                      
                      
                      $
                      -
                      
                      
                      $
                      -Total
                      
                      $
                      191,250,000
                      
                      
                      $
                      -
                      
                      
                      $
                      191,250,000
                      
                      
                      $
                      -
                      
                      
                      $
                      -





(1)  Excludes
accrued interest amounts.





Off-Balance
Sheet Arrangements




Currently,
we do not engage in any off-balance sheet arrangements, including any risk
management of commodity pricing or other hedging practices.





Dividends




We have
elected to operate our business so as to be taxed as a RIC under Subchapter M of
the Code.  To maintain our RIC status, we must distribute at least 90%
of our “investment company taxable income” (which generally consists of ordinary
income and realized net short-term gains in excess of realized net long-term
capital losses, if any, reduced by deductible expenses) and net tax-exempt
interest.  In order to avoid certain excise taxes imposed on RICs, we
will be required to distribute at least 98% of our ordinary income and net
capital gains, and 100% of any income realized, but not distributed or deemed
distributed, in preceding years.  We currently intend to make
sufficient distributions to satisfy the annual distribution requirement and to
avoid the excise taxes.




We may
not be able to achieve operating results that will allow us to make
distributions at a specific level or to increase the amount of these
distributions from time to time. In addition, we may be limited in our ability
to make distributions due to the asset coverage test for borrowings when
applicable to us as a BDC under the 1940 Act and due to provisions in our credit
facilities. If we do not distribute a certain percentage of our income annually,
we will suffer adverse tax consequences, including possible loss of our status
as a RIC. We cannot assure stockholders that they will receive any distributions
or distributions at a particular level.




Portfolio
Credit Quality




We
maintain a system to evaluate the credit quality of our investments. While
incorporating quantitative analysis, this system is a qualitative
assessment.  This system is intended to reflect the overall
performance of a portfolio company’s business, the collateral coverage of an
investment, and other relevant factors. Based on this system, the overall credit
quality of our targeted investment portfolio remained satisfactory in the
quarter ended March 31, 2008.  Of the 20 rated investments as of March
31, 2008, 2 investments declined in rating, 16 retained the same rating, and 2
new investments were previously unrated, when compared to the investments as of
December 31, 2007.  Investments approximating $36 million, or
approximately 13% of the $277.7 million cost basis of targeted investments, are
carried on our watch list due to slower than expected development of the assets
supporting the investments or deterioration in asset coverage.




During
the quarter ended March 31, 2008, we recorded additional unrealized depreciation
of $1.5 million in the fair value of targeted investments to reflect the
potential for loss of capital inherent in those investments.  We
placed one of these investments on non-accrual status effective January 1,
2008.




35


Item
3.       Quantitative and Qualitative Disclosures About
Market Risk.





There
have been no material changes from the information provided in Item 7A of our
Annual Report on Form 10-K for the year ended December 31, 2007.





Item
4.       Controls and Procedures.




Disclosure
Controls and Procedures




We
maintain disclosure controls and procedures (as defined in 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended, which we refer to
as the Exchange Act), designed to ensure that information required to be
disclosed in our reports under the Exchange Act is recorded, processed,
summarized and reported on a timely basis and accumulated and made known to
management, including our Chief Executive Officer and our Chief Financial
Officer, to allow timely decisions regarding required disclosures.
 
 In
connection with the preparation of this Quarterly Report on Form 10-Q, as of the
end of the fiscal period covered by this Quarterly Report on Form 10-Q (March
31, 2008), the Company performed an evaluation, under the supervision and with
the participation of the Company’s management, including our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures pursuant to Rules
13a-15(b) and 15d-15(b) under the Exchange Act.
 
 After
giving effect to the restatement referred to below and based on an evaluation of
our disclosure controls and procedures as of the end of the period covered by
this Form 10-Q/A conducted by our management, with the participation of our
Chief Executive Officer and our Chief Financial Officer, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures were ineffective in providing reasonable assurance that
information required to be disclosed in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported when required and
that such information is accumulated and communicated to management in a manner
that allows timely decisions regarding required disclosure.  In light
of this material weakness, the Company performed additional analysis and
post-closing procedures to ensure the Company’s financial statements were
prepared in accordance with generally accepted accounting
principles.  After giving effect to the restatements referred to
below, and subject to the statements below regarding our inability to maintain
effective controls over the determination and reporting of the provision for
income taxes, the Company’s management has concluded that the financial
statements included in this Form 10-Q/A present fairly in all material respects
the Company’s financial condition, results of operations and cash flows for the
periods presented.
 
 The
certifications of our Chief Executive Officer and our Chief Financial Officer
required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 are
attached as exhibits to this Form 10-Q/A. The disclosures set forth in this Item
4 contain information concerning (i) the evaluation of our disclosure controls
and procedures referred to in paragraph 4 of the certifications, and (ii)
material weaknesses in the design or operation of our internal control over
financial reporting referred to in paragraph 5 of those certifications. Those
certifications should be read in conjunction with this Item 4 for a more
complete understanding of the matters covered by the
certifications.
 
 Discussion
of Material Weakness
 
 Management’s
assessment identified a material weakness in the Company’s internal control over
financial reporting.  As of March 31, 2008, the Company did not
maintain effective controls over the determination and reporting of the
provision for income taxes. This material weakness was initially disclosed in
Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2008.
As of December 31, 2009, our management concluded that we had not yet remediated
this previously disclosed material weakness in our internal control over
financial reporting. Specifically, management did not perform a sufficiently
precise review of the 2007, 2008 and 2009 financial statements to ensure the
completeness and accuracy of the Company’s calculation of its income tax
provision and deferred income tax assets and liabilities. This deficiency
resulted in the restatement of the Company’s consolidated financial statements
for the years ended December 31, 2007 and 2008 (and the unaudited selected
quarterly data for each of the quarters in 2007 and 2008 and the first three
quarters in 2009), and results in a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements would not
be prevented or detected on a timely basis.
  36
  Remediation
Efforts
 
 The
remediation efforts, as outlined below, are designed to address the material
weakness identified by management and to strengthen the Company’s internal
control over financial reporting.
 
 Beginning
in the first quarter of 2009, the Company implemented the following remediation
steps to address this material weakness discussed above and to improve its
internal controls over financial reporting:
 
 ·
              improved
      procedures for the calculation and reconciliation process of our deferred
      income tax assets and liabilities, including validation of underlying
      supporting data;
 ·
              engaged
      external tax experts to support the Company’s financial closing and
      reporting process; and
 ·
              enhanced
      quarterly management review of the calculation of the deferred income tax
      assets and liabilities and underlying supporting
  data.
 
 We
believe that these remediation actions will represent ongoing improvement
measures. While we have taken steps to remediate the material weakness,
additional measures may be required. The Company anticipates that it will
complete its testing of the additional internal control processes designed to
remediate the previously disclosed material weakness in 2010.  We will
continue to assess the effectiveness of our remediation efforts in connection
with our management’s tests of internal control over financial reporting in
conjunction with our annual and quarterly reports.
 
 Changes
in Internal Control Over Financial Reporting
 
 There
were no changes in internal control over financial reporting during the quarter
ended March 31, 2008 that have materially affected or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.




PART II – OTHER
INFORMATION




Item
1.       Legal Proceedings.




We are
not currently a defendant in any material legal proceeding, nor to our
knowledge, is any material legal proceeding threatened against us.





Item
1A.      Risk Factors.




Except as
provided below, there have been no material changes to the risk factors
disclosed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form
10-K for the fiscal year ended December 31, 2007.
  Additional Risk
Factors
  We
reported a material weakness in our internal control over financial reporting,
which resulted in material misstatements in our financial statements for the
years ended December 31, 2007 and December 31, 2008 and each of the quarters in
2007 and 2008 and the first three quarters of 2009  that required us
to restate certain of our historical financial statements. If we fail to improve
our internal control over financial reporting, we may not be able to accurately
report our financial results, which could have a material adverse effect on our
operations, investor confidence in our reported financial information and the
trading price of our securities.
 
 Our Board
of Directors, and the members of our Audit Committee, upon management’s
recommendation, determined to restate certain of our historical financial
statements, including the financial statements for the period of this report.
Our management concluded that the accounting errors that necessitated the
restatement resulted from a control deficiency in our internal control over
financial reporting constituting a material weakness. Specifically, our
management concluded that we did not maintain effective controls over the
determination and provision for income taxes. See Note 2, Restatement of
Consolidated Financial Statements in “Part I – Item 1. Consolidated Financial
Statements” and “Part I – Item 4. Controls and Procedures.”
 
 Management’s
assessment of our internal control over financial reporting as of December 31,
2008 identified a material weakness in our internal control over financial
reporting. As described in “Part I – Item 4. Controls and Procedures,” while the
Company has taken steps to remediate the previously disclosed material weakness,
the material weakness existed throughout the quarterly periods of 2009, and at
December 31, 2009, the Company had not yet completed its assessment as to
whether the material weakness had been fully remediated. The Company anticipates
that it will complete its testing of the additional internal control processes
designed to remediate the previously disclosed material weakness in 2010. Until
it is fully remediated, this material weakness could lead to errors in our
reported financial results and could have a material adverse effect on our
operations, investor confidence in our reported financial information and the
trading price of our securities.
 
 Further,
we cannot assure you that additional significant deficiencies or material
weaknesses in our internal control over financial reporting will not be
identified in the future. Any failure to maintain or implement required new or
improved controls, or any difficulties we encounter in their implementation,
could result in additional significant deficiencies or material weaknesses, and
cause us to fail to meet our periodic reporting obligations or result in
material misstatements in our financial statements. Any such failure could also
adversely affect the results of periodic management evaluations and annual
auditor attestation reports regarding the effectiveness of our internal control
over financial reporting required under Section 404 of the Sarbanes-Oxley Act of
2002 and the rules promulgated thereunder. The existence of a material weakness
could result in errors in our financial statements that could result in a
restatement of financial statements, cause us to fail to meet our reporting
obligations and cause investors to lose confidence in our reported financial
information, leading to a decline in our stock price.


We
may be subject to the risks associated with the ethanol industry.




The
ethanol industry is subject to many risks which may adversely affect the market
price of ethanol. For example, overcapacity in the ethanol industry may result
in a decrease in the market price of ethanol if the demand for ethanol does not
grow at the same pace as increases in supply. In addition, the ethanol industry
is highly competitive, and other companies presently in the market, or that are
about to enter the market, could adversely affect the market price of ethanol.
Moreover, because corn is the principal raw material used to produce ethanol,
ethanol companies in general are directly affected by the cost and supply of
corn. Changes in the price and supply of corn are subject to and determined by
market forces over which we have no or little control, including overall supply
and demand, government programs and policies, weather, and other factors.
Furthermore, because growth and demand for ethanol may be driven
primarily by federal and state government policies, a change in government
policies favorable to ethanol may cause demand for ethanol to decline. These
favorable government policies include the national renewable fuels standard, and
various federal ethanol tax incentives that assist the ethanol industry. The
continuation of these policies is uncertain, which means that demand for ethanol
may decline if these policies change or are discontinued. A decline in the
demand of ethanol is likely to cause lower ethanol prices. In addition, tariffs
on imported ethanol, which currently effectively limit imported ethanol into the
United States, could be reduced or eliminated, which may in turn negatively
affect the demand for domestic ethanol and the price at which domestic ethanol
is sold.




37





Revised
Risk Factors




We
may be exposed to risks associated with changes in interest rates.




General
interest rate fluctuations may have a negative impact on our investments and
investment opportunities and, accordingly, may have a material adverse effect on
investment objectives and our rate of return on invested capital. Because we may
borrow money to make investments, our net investment income is dependent upon
the difference between the rate at which we borrow funds and the rate at which
we invest these funds. As a result, there can be no assurance that a significant
change in market interest rates will not have a material adverse effect on our
net investment income. As of March 31, 2008, approximately 19% of the
investments at fair value in our portfolio were at fixed rates, while
approximately 81% were at variable rates.  Trading prices for debt
that pays a fixed rate of return tend to fall as interest rates rise. Trading
prices tend to fluctuate more for fixed-rate securities that have longer
maturities. Although we have no policy governing the maturities of our
investments, under current market conditions we expect that we will invest in a
portfolio of debt generally having maturities of three to seven years, but may
have longer maturities. This means that, to the extent we fund longer term fixed
rate investments with shorter term floating rate borrowings, we will be subject
to greater risk (other things being equal) than a fund invested solely in
shorter term securities. A decline in the prices of the debt we own could
adversely affect the trading price of our shares.




If
we issue senior securities, such as debt or preferred stock, we will be exposed
to additional risks.




We may
issue debt securities or preferred stock, and/or borrow money from banks or
other financial institutions, which we refer to collectively as senior
securities, up to the maximum amount permitted by the 1940 Act. We may issue
senior securities to make new or follow-on investments, to maintain our RIC
status or to pay contingencies and expenses. We will be permitted under the 1940
Act to issue senior securities if, immediately after the borrowing or issuance,
we will have an asset coverage of at least 200%. That is, we may borrow funds in
an amount up to 50% of the value of our assets (including investments made with
borrowed funds).  As of March 31, 2008, our asset coverage for senior
securities was 233%.




The
amount and nature of any borrowings will depend on a number of factors over
which we have no control, including general economic conditions and conditions
in the financial markets. We may also need to borrow funds to make qualifying
investments to maintain our RIC status. Therefore, we may need to raise
additional capital, which we may elect to finance in part through a credit
facility. We may not be able to obtain a credit facility on terms that we find
acceptable, if at all. The unavailability of funds from commercial banks or
other sources on favorable terms could inhibit the growth of our business and
have a material adverse effect on our performance.




Item
2.                Unregistered
Sales of Equity Securities and Use of Proceeds.




Not
applicable.




Item
3.                Defaults
Upon Senior Securities.




Not
applicable.





Item
4.                Submission
of Matters to a Vote of Security Holders.




Not
applicable.





Item
5.                Other
Information.




Not
applicable.




38





Item
6.     Exhibits.





No.
                
                Exhibit3.1
                
                -
                Articles
      of Incorporation of NGP Capital Resources Company dated as of July 15,
      2004 (filed as Exhibit (a)(1) to the Company’s Registration Statement on
      Form N-2 dated November 9, 2004 (Registration No. 333-118279) and
      incorporated herein by reference)3.2
                
                -
                Articles
      of Amendment and Restatement of NGP Capital Resources Company dated as of
      October 29, 2004 (filed as Exhibit 3.2 to the Company’s Annual Report on
      Form 10-K for the year ended December 31, 2004, and incorporated herein by
      reference)3.3
                
                -
                Bylaws
      of NGP Capital Resources Company (filed as Exhibit (b) to the Company’s
      Registration Statement on Form N-2 dated August 16, 2004 (Registration No.
      333-118279) and incorporated herein by reference)10.1
                
                -
                Investment
      Advisory Agreement dated as of November 9, 2004, between NGP Capital
      Resources Company and NGP Investment Advisor, LP (filed as Exhibit 10.1 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.2
                
                -
                Administration
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and NGP Administration, LLC (filed as Exhibit 10.2 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.3
                
                -
                License
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and Natural Gas Partners, LLC (filed as Exhibit 10.3 to
      the Company’s Annual Report on Form 10-K  for the year ended
      December 31, 2004, and incorporated herein by
reference)10.4
                
                -
                Joint
      Code of Ethics (filed as Exhibit (r) to the Company’s Registration
      Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279)
      and incorporated herein by reference)10.5
                
                -
                Form
      of Indemnity Agreement (filed as Exhibit 10.5 to the Company’s Annual
      Report on Form 10-K for the year ended December 31, 2004, and incorporated
      herein by reference)10.6
                
                -
                Amended
      and Restated Revolving Credit Agreement dated as of August 31, 2006, by
      and between NGP Capital Resources Company, the lenders from time to time
      party thereto and SunTrust Bank (filed as Exhibit 10.6 to the Company’s
      Quarterly Report on Form 10-Q for the quarterly period ended September 30,
      2006, and incorporated herein by reference)10.7
                
                -
                First
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of August 31, 2006, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank (filed as
      Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the
      quarterly period ended September 30, 2006, and incorporated herein by
      reference)10.8
                
                -
                Treasury
      Secured Revolving Credit Agreement dated as of August 31, 2006, by and
      between NGP Capital Resources Company, the lenders from time to time party
      thereto and SunTrust Bank (filed as Exhibit 10.7 to the Company’s
      Quarterly Report on Form 10-Q for the quarterly period ended September 30,
      2006, and incorporated herein by reference)10.9
                
                -
                First
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      August 31, 2006, by and between NGP Capital Resources Company, the lenders
      from time to time party thereto and SunTrust Bank (filed as Exhibit 10.9
      to the Company’s Quarterly Report on Form 10-Q for the quarterly period
      ended September 30, 2006, and incorporated herein by
      reference)10.10
                
                -
                Second
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      September 28, 2007, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank (filed as
      Exhibit 10.1 to the Company’s Current Report on Form 8-K on October 24,
      2007, and incorporated herein by reference)10.11
                
                -
                Second
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of March 13, 2008, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank (filed as
      Exhibit 10.11 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended March 31, 2008, and
      incorporated herein by reference)10.12
                
                -
                Third
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      March 13, 2008, by and between NGP Capital Resources Company, the lenders
      from time to time party thereto and SunTrust Bank (filed as Exhibit 10.12
      to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended March 31, 2008, and
      incorporated herein by reference)31.1
                
                -
                Certification
      required by Rule 13a-14(a)/15d-14(a) by the Chief Executive
      Officer31.2
                
                -
                Certification
      required by Rule 13a-14(a)/15d-14(a) by the Chief Financial
      Officer32.1
                
                -
                Section
      1350 Certification by the Chief Executive Officer32.2
                
                -
                Section
      1350 Certification by the Chief Financial
  Officer





39




SIGNATURES




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




NGP
      CAPITAL RESOURCES COMPANYDate:
      May 10, 2010
                            By:
                            /s/
      John H. HomierJohn
      H. HomierPresident
      and Chief Executive Officer


Date:
      May 10, 2010
                                By:
                                /s/
      Stephen K. GardnerStephen
      K. GardnerChief
      Financial Officer, Treasurer and Secretary








Index
to Exhibits


No.
                
                Exhibit3.1
                
                -
                Articles
      of Incorporation of NGP Capital Resources Company dated as of July 15,
      2004 (filed as Exhibit (a)(1) to the Company’s Registration Statement on
      Form N-2 dated November 9, 2004 (Registration No. 333-118279) and
      incorporated herein by reference)3.2
                
                -
                Articles
      of Amendment and Restatement of NGP Capital Resources Company dated as of
      October 29, 2004 (filed as Exhibit 3.2 to the Company’s Annual Report on
      Form 10-K for the year ended December 31, 2004, and incorporated herein by
      reference)3.3
                
                -
                Bylaws
      of NGP Capital Resources Company (filed as Exhibit (b) to the Company’s
      Registration Statement on Form N-2 dated August 16, 2004 (Registration No.
      333-118279) and incorporated herein by reference)10.1
                
                -
                Investment
      Advisory Agreement dated as of November 9, 2004, between NGP Capital
      Resources Company and NGP Investment Advisor, LP (filed as Exhibit 10.1 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.2
                
                -
                Administration
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and NGP Administration, LLC (filed as Exhibit 10.2 to
      the Company’s Annual Report on Form 10-K for the year ended December 31,
      2004, and incorporated herein by reference)10.3
                
                -
                License
      Agreement dated as of November 9, 2004, by and between NGP Capital
      Resources Company and Natural Gas Partners, LLC (filed as Exhibit 10.3 to
      the Company’s Annual Report on Form 10-K  for the year ended
      December 31, 2004, and incorporated herein by
reference)10.4
                
                -
                Joint
      Code of Ethics (filed as Exhibit (r) to the Company’s Registration
      Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279)
      and incorporated herein by reference)10.5
                
                -
                Form
      of Indemnity Agreement (filed as Exhibit 10.5 to the Company’s Annual
      Report on Form 10-K for the year ended December 31, 2004, and incorporated
      herein by reference)10.6
                
                -
                Amended
      and Restated Revolving Credit Agreement dated as of August 31, 2006, by
      and between NGP Capital Resources Company, the lenders from time to time
      party thereto and SunTrust Bank (filed as Exhibit 10.6 to the Company’s
      Quarterly Report on Form 10-Q for the quarterly period ended September 30,
      2006, and incorporated herein by reference)10.7
                
                -
                First
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of August 31, 2006, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank (filed as
      Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the
      quarterly period ended September 30, 2006, and incorporated herein by
      reference)10.8
                
                -
                Treasury
      Secured Revolving Credit Agreement dated as of August 31, 2006, by and
      between NGP Capital Resources Company, the lenders from time to time party
      thereto and SunTrust Bank (filed as Exhibit 10.7 to the Company’s
      Quarterly Report on Form 10-Q for the quarterly period ended September 30,
      2006, and incorporated herein by reference)10.9
                
                -
                First
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      August 31, 2006, by and between NGP Capital Resources Company, the lenders
      from time to time party thereto and SunTrust Bank (filed as Exhibit 10.9
      to the Company’s Quarterly Report on Form 10-Q for the quarterly period
      ended September 30, 2006, and incorporated herein by
      reference)10.10
                
                -
                Second
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      September 28, 2007, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank (filed as
      Exhibit 10.1 to the Company’s Current Report on Form 8-K on October 24,
      2007, and incorporated herein by reference)10.11
                
                -
                Second
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of March 13, 2008, by and between NGP Capital Resources Company, the
      lenders from time to time party thereto and SunTrust Bank (filed as
      Exhibit 10.11 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended March 31, 2008, and
      incorporated herein by reference)10.12
                
                -
                Third
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      March 13, 2008, by and between NGP Capital Resources Company, the lenders
      from time to time party thereto and SunTrust Bank (filed as Exhibit 10.12
      to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended March 31, 2008, and
      incorporated herein by reference)31.1
                
                -
                Certification
      required by Rule 13a-14(a)/15d-14(a) by the Chief Executive
      Officer31.2
                
                -
                Certification
      required by Rule 13a-14(a)/15d-14(a) by the Chief Financial
      Officer32.1
                
                -
                Section
      1350 Certification by the Chief Executive Officer32.2
                
                -
                Section
      1350 Certification by the Chief Financial
  Officer