Hercules Capital
HERCULES TECHNOLOGY GROWTH CAPITAL INC (Form: 10-Q, Received: 11/08/2007 13:06:56)
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


FORM 10-Q

 


(Mark One)

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

For The Quarterly Period Ended September 30, 2007

OR

 

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

Commission File Number: 814-00702

 


HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

(Exact Name of Registrant as Specified in its Charter)

 


 

Maryland   743113410

(State or Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

400 Hamilton Ave., Suite 310 Palo Alto, California 94301   94301
(Address of Principal Executive Offices)   (Zip Code)

(650) 289-3060

(Registrant’s Telephone Number, Including Area Code)

 


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES   x     NO   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   ¨                 Accelerated Filer   x                 Non-Accelerated Filer   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES   ¨     NO   x

On November 7, 2007, there were 32,541,080 shares outstanding of the Registrant’s common stock, $0.001 par value.

 



Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

FORM 10-Q

TABLE OF CONTENTS

 

PART I.

   FINANCIAL INFORMATION    3

Item 1.

  

Consolidated Financial Statements

   3
  

Consolidated Statements of Assets and Liabilities as of September 30, 2007 (unaudited) and December 31, 2006

   3
  

Consolidated Schedule of Investments as of September 30, 2007 (unaudited)

   4
  

Consolidated Schedule of Investments as of December 31, 2006

   13
  

Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2007 and 2006 (unaudited)

   19
  

Consolidated Statements of Changes in Net Assets for the nine-month periods ended September 30, 2007 and 2006 (unaudited)

   20
  

Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2007 and 2006 (unaudited)

   21
  

Notes to Consolidated Financial Statements (unaudited)

   22

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   32

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

   42

Item 4.

  

Controls and Procedures

   42

PART II.

   OTHER INFORMATION    42

Item 1.

  

Legal Proceedings

   42

Item 1a.

  

Risk Factors

   43

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

   43

Item 3.

  

Defaults Upon Senior Securities

   44

Item 4.

  

Submission of Matters to a Vote of Security Holders

   44

Item 5.

  

Other Information

   44

Item 6.

  

Exhibits

   45

Signatures

   46


Table of Contents

PART I: FINANCIAL INFORMATION

In this Quarterly Report, the “Company,” “Hercules,” “we,” “us” and “our” refer to Hercules Technology Growth Capital, Inc. and its wholly owned subsidiaries and its affiliated securitization trusts unless the context otherwise requires.

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

 

     September 30,
2007
(unaudited)
    December 31,
2006
 

Assets

    

Investments, at value (cost of $412,824,423 and $279,946,465, respectively)

   $ 415,592,166     $ 283,233,751  

Deferred loan origination revenue

     (5,072,929 )     (3,450,971 )

Cash and cash equivalents

     26,185,643       16,404,214  

Interest receivable

     5,612,071       2,906,831  

Other assets

     3,767,521       2,048,384  
                

Total assets

     446,084,472       301,142,209  

Liabilities

    

Accounts payable

     291,563       540,376  

Accrued liabilities

     4,215,228       4,189,011  

Short-term loans payable

     32,200,000       41,000,000  

Long-term loans payable

     19,750,000       —    
                

Total liabilities

     56,456,791       45,729,387  
                

Net assets

   $ 389,627,681     $ 255,412,822  
                

Net assets consist of:

    

Par value

   $ 32,539     $ 21,927  

Capital in excess of par value

     393,296,070       257,234,729  

Deferred stock compensation

     (85,206 )  

Unrealized appreciation on investments

     2,127,358       2,860,654  

Accumulated realized losses on investments

     (1,968,895 )     (1,972,014 )

Distributions in excess of investment income

     (3,774,185 )     (2,732,474 )
                

Total net assets

   $ 389,627,681     $ 255,412,822  
                

Shares of common stock issued and outstanding ($0.001 par value, 60,000,000 authorized)

     32,539,413       21,927,034  
                

Net asset value per share

   $ 11.97     $ 11.65  
                

See notes to consolidated financial statements (unaudited).

 

3


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(unaudited)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

 

Principal

Amount

  Cost (2)   Value (3)

Acceleron Pharmaceuticals, Inc. (0.98%)* (4)

  Drug Discovery   Senior Debt      
   

Matures June 2009

     
   

Interest rate 10.25%

  $ 3,453,566   $ 3,392,953   $ 3,392,953
   

Preferred Stock Warrants

      69,106     401,792
   

Preferred Stock Warrants

      34,996     27,295

Acceleron Pharmaceuticals, Inc. (0.29%)

    Preferred Stock       1,000,000     1,111,112
                 

Total Acceleron Pharmaceuticals, Inc.

    4,497,055     4,933,152

Aveo Pharmaceuticals, Inc. (3.39%) (4)

  Drug Discovery   Senior Debt      
   

Matures September 2009

     
   

Interest rate 10.75%

  $ 13,200,600     13,092,139     13,092,139
   

Preferred Stock Warrants

      144,056     71,448
   

Preferred Stock Warrants

      46,288     28,399
                 

Total Aveo Pharmaceuticals, Inc.

    13,282,483     13,191,986

Elixir Pharmaceuticals, Inc. (3.85%) (4)

  Drug Discovery   Senior Debt      
   

Matures June 2010

     
   

Interest rate Prime + 2.45%

  $ 15,000,000     14,823,726     14,823,726
   

Preferred Stock Warrants

      217,167     187,521
                 

Total Elixir Pharmaceuticals, Inc.

    15,040,893     15,011,247

EpiCept Corporation (2.23%) (4)

  Drug Discovery   Senior Debt      
   

Matures August 2009

     
   

Interest rate 11.70%

  $ 8,233,370     7,739,409     7,739,409
   

Short Term Receivable

      166,747     513,824
   

Common Stock Warrants

      423,380     435,852
                 

Total EpiCept Corporation

    8,329,536     8,689,085

Inotek Pharmaceuticals Corp. (0.38%)

  Drug Discovery   Preferred Stock       1,500,000     1,500,000
                 

Total Inotek Pharmaceuticals Corp.

    1,500,000     1,500,000

Memory Pharmaceticals Corp. (2.60%) (4)

  Drug Discovery   Senior Debt      
   

Matures February 2011

     
   

Interest rate 11.45%

  $ 11,000,000     9,485,266     9,485,266
   

Common Stock Warrants

      1,750,585     660,796
                 

Total Memory Pharmaceticals Corp.

    11,235,851     10,146,062

Merrimack Pharmaceuticals, Inc. (1.13%) (4)

  Drug Discovery   Convertible Senior Debt      
   

Matures October 2008

     
   

Interest rate 11.15%

  $ 3,878,618     3,836,910     4,026,910
   

Preferred Stock Warrants

      155,456     371,265
                 

Total Merrimack Pharmaceuticals, Inc.

    3,992,366     4,398,175

Neosil, Inc. (0.51%)

  Drug Discovery   Senior Debt      
   

Matures May 2010

     
   

Interest rate 10.75%

  $ 2,000,000     1,928,716     1,928,716
   

Preferred Stock Warrants

      82,782     73,560
                 

Total Neosil, Inc.

    2,011,498     2,002,276

Paratek Pharmaceuticals, Inc. (0.93%) (4)

  Drug Discovery   Senior Debt      
   

Matures June 2008

     
   

Interest rate 11.10%

  $ 3,646,251     3,615,719     3,615,719
   

Preferred Stock Warrants

      137,396     —  
                 

Total Paratek Pharmaceuticals, Inc.

    3,753,115     3,615,719

Portola Pharmaceuticals, Inc. (3.86%) (4)

  Drug Discovery   Senior Debt      
   

Matures September 2010

     
   

Interest rate Prime + 1.75%

  $ 15,000,000     14,884,753     14,884,753
   

Preferred Stock Warrants

      151,557     187,760
                 

Total Portola Pharmaceuticals, Inc.

    15,036,310     15,072,513

 

4


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

  Principal
Amount
  Cost (2)   Value (3)

Sirtris Pharmaceuticals, Inc. (2.73%) (4)

  Drug Discovery   Senior Debt      
   

Matures April 2011

     
   

Interest rate 10.60%

  $ 9,638,950   $ 9,576,770   $ 9,576,770
   

Common Stock Warrants

      88,829     1,044,479

Sirtris Pharmaceuticals, Inc. (0.25%)

    Common Stock       500,000     968,254
                 

Total Sirtris Pharmaceuticals, Inc.

    10,165,599     11,589,503
                 

Total Drug Discovery (23.13%)

    88,844,706     90,149,718
                 

IKANO Communications, Inc. (5.59%)

  Communications & Networking  

Senior Debt

Matures March 2011

     
         
   

Interest rate 11.00%

  $ 21,700,000     21,700,000     21,700,000
   

Preferred Stock Warrants

      45,460     21,734
   

Preferred Stock Warrants

      72,344     37,651
                 

Total IKANO Communications, Inc.

    21,817,804     21,759,385

Interwise, Inc. (0.13%) (4)

  Communications & Networking  

Preferred Stock Warrants

     
          268,401     500,000
                 

Total Interwise, Inc.

    268,401     500,000

Ping Identity Corporation (0.51%) (4)

  Communications & Networking  

Senior Debt

Matures June 2009

     
         
   

Interest rate 11.50%

      1,849,286     1,849,286
   

Preferred Stock Warrants

  $ 1,875,186     51,801     149,818
                 

Total Ping Identity Corporation

    1,901,087     1,999,104

Purcell Systems, Inc. (2.15%)

  Communications & Networking  

Senior Debt

Matures June 2009

     
         
   

Interest rate Prime + 3.50%

  $ 2,353,325     2,244,179     2,244,179
   

Revolving Line of Credit

     
   

Matures June 2008

     
   

Interest rate Prime + 2.00%

  $ 6,000,000     6,000,000     6,000,000
   

Preferred Stock Warrants

      122,789     105,758
                 

Total Purcell Systems, Inc.

    8,366,968     8,349,937

Rivulet Communications, Inc. (0.91%) (4)

  Communications & Networking  

Senior Debt

Matures September 2009

     
         
   

Interest rate 10.60%

  $ 3,500,000     3,471,976     3,471,976
   

Preferred Stock Warrants

      50,710     30,369

Rivulet Communications, Inc. (0.06%)

    Preferred Stock       250,000     250,000
                 

Total Rivulet Communications, Inc.

    3,772,686     3,752,345

Seven Networks, Inc. (3.08%)

  Communications & Networking  

Senior Debt

Matures April 2010

     
         
   

Interest rate Prime + 3.75%

  $ 10,000,000     9,856,733     9,856,733
   

Revolving Line of Credit

     
   

Matures April 2008

     
   

Interest rate Prime + 3.00%

  $ 2,000,000     2,000,000     2,000,000
   

Preferred Stock Warrants

      173,967     147,419
                 

Total Seven Networks, Inc.

    12,030,700     12,004,152

Simpler Networks Corp. (1.04%) (4)

  Communications & Networking  

Senior Debt

Matures July 2009

     
         
   

Interest rate 11.75%

  $ 4,112,474     4,034,308     4,034,308
   

Preferred Stock Warrants

      160,241     —  

Simpler Networks Corp. (0.06%)

    Preferred Stock       500,000     250,000
                 

Total Simpler Networks Corp.

          4,694,549     4,284,308

Stoke, Inc. (0.19%)

  Communications & Networking  

Senior Debt

Matures August 2010

     
         
   

Interest rate 10.55%

  $ 750,000     699,591     699,591
    Preferred Stock Warrants       53,374     51,133
                 

Total Stoke, Inc.

    752,965     750,724

 

5


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

  Principal
Amount
  Cost (2)   Value (3)

Tectura Corporation (5.49%)

  Communications & Networking  

Senior Debt

Matures March 2012

     
   

Interest rate LIBOR + 6.15%

  $ 9,405,625   $ 9,359,465   $ 9,359,465
   

Revolving Line of Credit

     
   

Matures March 2008

     
   

Interest rate LIBOR + 5.15%

  $ 12,000,000     12,000,000     12,000,000
   

Preferred Stock Warrants

      51,067     43,456
                 

Total Tectura Corporation

          21,410,532     21,402,921

Teleflip, Inc. (0.19%)

  Communications & Networking  

Senior Debt

Matures May 2010

     
   

Interest rate Prime + 2.75%

  $ 750,000     740,660     740,660
   

Preferred Stock Warrants

      10,508     8,702
                 

Total Teleflip, Inc.

          751,168     749,362

Wireless Channels, Inc. (3.16%)

  Communications & Networking  

Senior Debt -Second Lien

Matures April 2010

     
   

Interest rate 9.25%

  $ 2,193,756     2,068,783     2,068,783
   

Senior Debt -Second Lien

     
   

Matures April 2010

     
   

Interest rate Prime + 4.25%

  $ 10,117,932     10,117,932     10,117,932
   

Preferred Stock Warrants

      155,139     134,247
                 

Total Wireless Channels, Inc.

          12,341,854     12,320,962
                 

Total Communications & Networking (22.56%)

          88,108,714     87,873,200
                 

Atrenta, Inc. (1.13%) (4)

  Software  

Senior Debt

     
   

Matures June 2009

     
   

Interest rate 11.50%

  $ 4,201,468     4,152,708     4,152,708
   

Preferred Stock Warrants

      102,396     177,303
   

Preferred Stock Warrants

      33,760     58,178

Atrenta, Inc. (0.06%)

   

Preferred Stock

      250,000     250,000
                 

Total Atrenta, Inc.

          4,538,864     4,638,189

Blurb, Inc. (0.64%)

  Software  

Senior Debt

     
   

Matures December 2009

     
   

Interest rate 9.55%

  $ 2,500,000     2,479,870     2,479,870
   

Preferred Stock Warrants

      24,515     21,948
                 

Total Blurb, Inc.

          2,504,385     2,501,818

Cittio, Inc. (0.26%)

  Software  

Senior Debt

     
   

Matures April 2010

     
   

Interest rate 11.00%

  $ 1,000,000     1,000,000     1,000,000
                 

Total Cittio, Inc.

          1,000,000     1,000,000

Compete, Inc. (0.73%) (4)

  Software  

Senior Debt

     
   

Matures March 2009

Interest rate Prime + 3.50%

  $ 2,667,831     2,637,636     2,637,636
   

Preferred Stock Warrants

      62,067     189,135
                 

Total Compete, Inc.

          2,699,703     2,826,771

Forescout Technologies, Inc. (0.71%) (4)

  Software  

Senior Debt

     
   

Matures August 2009

     
   

Interest rate 11.15%

  $ 2,252,971     2,215,130     2,215,130
   

Revolving Line of Credit

     
   

Matures August 2007

     
   

Interest rate Prime + 1.49%

  $ 500,000     500,000     500,000
   

Preferred Stock Warrants

      57,915     41,717
                 

Total Forescout Technologies, Inc.

          2,773,045     2,756,847

GameLogic, Inc. (0.76%) (4)

  Software  

Senior Debt

     
   

Matures December 2009

     
   

Interest rate Prime + 4.125%

  $ 3,000,000     2,933,007     2,933,007
   

Preferred Stock Warrants

      92,483     65,126
                 

Total GameLogic, Inc.

          3,025,490     2,998,133

 

6


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

 

Principal

Amount

  Cost (2)   Value (3)

Gomez, Inc. (0.10%) (4)

  Software  

Senior Debt

     
   

Matures December 2007

     
   

Interest rate 12.25%

  $ 389,698   $ 387,754   $ 387,754
   

Preferred Stock Warrants

      35,000     4,187
                 

Total Gomez, Inc.

          422,754     391,941

HighRoads, Inc. (0.01%) (4)

  Software  

Preferred Stock Warrants

      44,466     26,081
                 

Total HighRoads, Inc.

          44,466     26,081

Intelliden, Inc. (0.68%)

  Software  

Senior Debt

     
   

Matures February 2010

     
   

Interest rate 13.20%

  $ 2,580,916     2,568,936     2,568,936
   

Preferred Stock Warrants

      17,542     70,272
                 

Total Intelliden, Inc.

          2,586,478     2,639,208

Oatsystems, Inc. (1.26%) (4)

  Software  

Senior Debt

     
   

Matures September 2009

     
   

Interest rate 11.00%

  $ 4,931,926     4,888,272     4,888,272
   

Preferred Stock Warrants

      67,484     40,386
                 

Total Oatsystems, Inc.

          4,955,756     4,928,658

Proficiency, Inc. (0.51%) (5)

  Software  

Senior Debt

     
   

Matures July 2008

     
   

Interest rate 12.00%

  $ 4,000,000     3,977,325     1,977,325
   

Preferred Stock Warrants

      96,370     —  
                 

Total Proficiency, Inc.

          4,073,695     1,977,325

PSS Systems, Inc. (0.90%) (4)

  Software  

Senior Debt

     
   

Matures March 2010

     
   

Interest rate 10.74%

  $ 3,500,000     3,458,752     3,458,752
   

Preferred Stock Warrants

      51,205     44,983
                 

Total PSS Systems, Inc.

          3,509,957     3,503,735

Savvion, Inc. (1.66%) (4)

  Software  

Senior Debt

     
   

Matures March 2009

     
   

Interest rate Prime + 3.45%

  $ 1,485,669     1,485,668     1,485,668
   

Revolving Line of Credit

     
   

Matures March 2008

     
   

Interest rate Prime + 2.00%

  $ 3,000,000     3,000,000     3,000,000
   

Revolving Line of Credit

     
   

Matures March 2008

     
   

Interest rate Prime + 3.45%

  $ 1,985,000     1,985,000     1,985,000
   

Preferred Stock Warrants

      52,135     31,055
                 

Total Savvion, Inc.

          6,522,803     6,501,723

Sportvision, Inc. (0.01%)

  Software  

Preferred Stock Warrants

      39,339     19,602
                 

Total Sportvision, Inc.

          39,339     19,602

Talisma Corp. (0.00%) (4)

 

Software

 

Preferred Stock Warrants

      49,000     5,710
                 

Total Talisma Corp.

          49,000     5,710
                 

Total Software (9.42%)

          38,745,735     36,715,741
                 

Agami Systems, Inc. (1.49%) (4)

  Electronics & Computer Hardware  

Senior Debt

     
   

Matures August 2009

     
   

Interest rate 11.00%

  $ 5,753,916     5,700,185     5,700,185
   

Preferred Stock Warrants

      85,601     132,830
                 

Total Agami Systems, Inc.

          5,785,786     5,833,015

 

7


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

  Principal
Amount
  Cost (2)   Value (3 )

Luminus Devices, Inc. (3.03%) (4)

 

Electronics &

Computer Hardware

 

Senior Debt

Matures August 2009

     
         
   

Interest rate 12.50%

  $ 11,791,700   $ 11,625,291   $ 11,625,291
    Preferred Stock Warrants       183,290     114,747
    Preferred Stock Warrants       83,529     66,131
                 

Total Luminus Devices, Inc.

    11,892,110     11,806,169

NetEffect, Inc. (0.64%)

  Electronics & Computer Hardware  

Senior Debt

Matures May 2010

     
         
   

Interest rate 11.95%

  $ 2,500,000     2,462,264     2,462,264
    Preferred Stock Warrants       43,632     37,401
                 

Total NetEffect, Inc.

          2,505,896     2,499,665

NeoScale Systems, Inc. (0.72%)

 

Electronics &

 

Senior Debt

Matures October 2009

     
 

Computer Hardware

       
   

Interest rate 10.75%

  $ 2,803,049     2,787,320     2,787,320
    Preferred Stock Warrants       23,593     26,858
                 

Total NeoScale Systems, Inc.

          2,810,913     2,814,178

SiCortex, Inc. (0.51%)

 

Electronics &

Computer Hardware

 

Senior Debt

Matures December 2010

     
         
   

Interest rate 10.95%

  $ 2,000,000     1,848,253     1,848,253
  Preferred Stock Warrants       164,051     141,296
                 

Total SiCortex, Inc.

          2,012,304     1,989,549

Sling Media, Inc. (0.50%)

  Electronics & Computer Hardware   Preferred Stock Warrants       38,968     1,944,000

Sling Media, Inc. (0.24%)

    Preferred Stock       500,000     926,152
                 

Total Sling Media, Inc.

    538,968     2,870,152

VeriWave, Inc. (1.09%)

 

Electronics &

Computer Hardware

 

Senior Debt

Matures May 2010

     
         
   

Interest rate 10.75%

  $ 4,250,000     4,203,517     4,203,517
    Preferred Stock Warrants       54,230     47,032
                 

Total VeriWave, Inc.

          4,257,747     4,250,549

ViDeOnline Communications, Inc. (0.08%) (4)

  Electronics & Computer Hardware   Preferred Stock Warrants      
          —       294,255
                 

Total ViDeOnline Communications, Inc.

          —       294,255
                 

Total Electronics & Computer Hardware (8.30%)

          29,803,724     32,357,532
                 

Aegerion Pharmaceuticals, Inc. (2.57%) (4)

 

Specialty

Pharmaceuticals

 

Senior Debt

Matures August 2010

     
         
   

Interest rate Prime + 2.50%

  $ 10,000,000     9,942,609     9,942,609
  Preferred Stock Warrants       69,207     60,691
                 

Total Aegerion Pharmaceuticals, Inc.

          10,011,816     10,003,300

Quatrx Pharmaceuticals Company (3.94%) (4)

 

Specialty

Pharmaceuticals

 

Senior Debt

Matures January 2010

     
         
   

Interest rate Prime + 3.00%

  $ 15,467,406     15,343,457     15,343,457
  Preferred Stock Warrants       220,354     —  

Quatrx Pharmaceuticals Company (0.19%)

  Preferred Stock       750,001     750,001
                 

Total Quatrx Pharmaceuticals Company

          16,313,812     16,093,458

Panacos Pharmaceuticals, Inc. (2.49%)

 

Specialty

Pharmaceuticals

 

Senior Debt

Matures January 2011

     
         
   

Interest rate 11.20%

  $ 10,000,000     9,207,160     9,207,160
  Common Stock Warrants       876,297     487,817
                 

Total Panacos Pharmaceuticals, Inc.

          10,083,457     9,694,977
                 

Total Specialty Pharmaceuticals (9.19%)

          36,409,085     35,791,735
                 

 

8


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

 

Principal

Amount

  Cost (2)   Value (3)

BabyUniverse, Inc. (1.25%) (4)

  Consumer & Business Products  

Senior Debt

Matures July 2009

     
         
   

Interest rate Prime + 2.35%

  $ 4,671,182   $ 4,481,468   $ 4,481,468
   

Common Stock Warrants

      325,224     385,054
                 

Total BabyUniverse, Inc.

          4,806,692     4,866,522

Market Force Information, Inc. (0.40%) (4)

  Consumer & Business Products  

Senior Debt

Matures May 2009

     
         
   

Interest rate 10.45%

  $ 1,419,434     1,407,523     1,407,523
   

Preferred Stock Warrants

      23,823     139,324

Market Force Information, Inc. (0.13%)

   

Preferred Stock

      500,000     500,000
                 

Total Market Force Information, Inc.

          1,931,346     2,046,847

Wageworks, Inc. (0.28%) (4)

  Consumer & Business  
Products
 

Preferred Stock Warrants

      251,964     1,076,250

Wageworks, Inc. (0.05%)

   

Preferred Stock

      249,995     249,995
                 

Total Wageworks, Inc.

          501,959     1,326,245
                 

Total Consumer & Business Products (2.11%)

          7,239,997     8,239,614
                 

Ageia Technologies, Inc. (1.42%) (4)

  Semiconductors  

Senior Debt

     
   

Matures August 2008

     
   

Interest rate 10.25%

  $ 5,594,105     5,442,792     5,442,792
   

Convertible Debt

    123,760     123,760     123,760
   

Preferred Stock Warrants

      99,190     —  

Ageia Technologies, Inc. (0.00%)

   

Preferred Stock

      500,000     —  
                 

Total Ageia Technologies

          6,165,742     5,566,552

Custom One Design, Inc. (0.26%)

  Semiconductors  

Senior Debt

     
   

Matures September 2010

Interest rate 11.50%

  $ 1,000,000     982,174     982,174
   

Common Stock Warrants

      18,335     18,779
                 

Total Custom One Design, Inc.

          1,000,509     1,000,953

iWatt Inc. (1.26%) (4)

  Semiconductors  

Senior Debt

     
   

Matures September 2009

Interest rate Prime + 2.75%

  $ 1,643,976     1,615,260     1,615,260
   

Revolving Line of Credit

     
   

Matures September 2007

Interest rate Prime + 1.75%

  $ 3,235,000     3,235,000     3,235,000
   

Preferred Stock Warrants

      45,684     49,303
                 

Total iWatt Inc.

          4,895,944     4,899,563

NEXX Systems, Inc. (3.34%) (4)

  Semiconductors  

Senior Debt

     
   

Matures February 2010

Interest rate Prime + 2.75%

  $ 5,000,000     4,866,577     4,866,577
   

Revolving Line of Credit

     
   

Matures December 2009

Interest rate Prime + 1.75%

  $ 5,000,000     5,000,000     5,000,000
   

Revolving Line of Credit

     
   

Matures December 2009

Interest rate Prime + 3.75%

  $ 3,000,000     3,000,000     3,000,000
   

Preferred Stock Warrants

      164,613     135,291
                 

Total NEXX Systems, Inc.

          13,031,190     13,001,868

Quartics, Inc. (0.08%)

  Semiconductors  

Senior Debt

     
   

Matures August 2010

Interest rate 11.05%

  $ 300,000     250,050     250,050
   

Preferred Stock Warrants

      52,888     49,527
                 

Total Quartics, Inc.

          302,938     299,577

Solarflare Communications, Inc. (0.16%)

  Semiconductors  

Senior Debt

     
   

Matures August 2010

Interest rate 11.75%

  $ 625,000     546,307     546,307
   

Preferred Stock Warrants

      83,322     84,669

Solarflare Communications, Inc. (0.13%)

   

Preferred Stock

      500,000     500,000
                 

Total Solarflare Communications, Inc.

          1,129,629     1,130,976
                 

Total Semiconductors (6.65%)

          26,525,952     25,899,489
                 

 

9


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

 

Principal

Amount

  Cost (2)   Value (3)

Labopharm USA, Inc. (0.93%) (4)(5)

  Drug Delivery   Senior Debt      
   

Matures July 2008

Interest rate 11.95%

  $ 3,670,363   $ 3,634,341   $ 3,634,341
                 

Total Labopharm USA, Inc.

    3,634,341     3,634,341

Transcept Pharmaceuticals, Inc. (2.08%) (4)

  Drug Delivery   Senior Debt      
   

Matures October 2009

Interest rate 10.69%

  $ 7,842,879     7,786,800     7,786,800
    Preferred Stock Warrants       35,630     116,775
    Preferred Stock Warrants       51,067     183,584

Transcept Pharmaceuticals, Inc. (0.13%)

    Preferred Stock       500,000     500,000
                 

Total Transcept Pharmaceuticals, Inc.

    8,373,497     8,587,159
                 

Total Drug Delivery (3.14%)

    12,007,838     12,221,500
                 

BARRX Medical, Inc. (0.38%)

  Therapeutic   Preferred Stock       1,500,000     1,500,000
                 

Total BARRX Medical, Inc.

    1,500,000     1,500,000

EKOS Corporation (1.28%)

  Therapeutic   Senior Debt      
   

Matures November 2010

     
   

Interest rate Prime + 2.00%

  $ 5,000,000     4,846,249     4,846,249
    Preferred Stock Warrants       174,528     149,709
                 

Total EKOS Corporation

    5,020,777     4,995,958

Gynesonics, Inc. (0.45%) (4)

  Therapeutic   Senior Debt      
   

Matures October 2009

     
   

Interest rate 9.50%

  $ 1,699,491     1,689,461     1,689,461
    Preferred Stock Warrants       17,552     51,160

Gynesonics, Inc. (0.06%)

    Preferred Stock       250,000     250,000
                 

Total Gynesonics, Inc.

    1,957,013     1,990,621

Novasys Medical, Inc. (1.94%) (4)

  Therapeutic   Senior Debt      
   

Matures January 2010

     
   

Interest rate 9.70%

  $ 7,545,185     7,545,185     7,545,185
                 

Total Novasys Medical, Inc.

    7,545,185     7,545,185

Power Medical Interventions, Inc. (0.01%)

  Therapeutic   Common Stock Warrants       20,687     24,889
                 

Total Power Medical Interventions, Inc.

    20,687     24,889
                 

Total Therapeutic (4.12%)

    16,043,662     16,056,653
                 

Hedgestreet, Inc. (0.73%) (4)

  Internet Consumer & Business Services  

Senior Debt

Matures March 2009

     
         
   

Interest rate 11.30%

  $ 2,843,477     2,819,712     2,819,712
    Preferred Stock Warrants       54,956     —  
                 

Total Hedgestreet, Inc.

    2,874,668     2,819,712

Invoke Solutions, Inc. (0.56%) (4)

  Internet Consumer & Business Services  

Senior Debt

Matures December 2008

     
         
   

Interest rate 11.25%

  $ 2,187,234     2,160,369     2,160,369
    Preferred Stock Warrants       55,864     36,778
                 

Total Invoke Solutions, Inc.

    2,216,233     2,197,147

Prism Education Group Inc. (0.51%)

  Internet Consumer & Business Services  

Senior Debt

Matures December 2010

     
         
   

Interest rate 11.25%

  $ 2,000,000     1,961,315     1,961,315
    Preferred Stock Warrants       42,757     36,860
                 

Total Prism Education Group Inc.

    2,004,072     1,998,175

RazorGator Interactive Group, Inc. (0.57%) (4)

  Internet Consumer & Business Services  

Senior Debt

Matures January 2008

     
         
   

Interest rate 9.95%

  $ 1,651,876     1,650,789     1,650,789
    Preferred Stock Warrants       13,050     541,917
    Preferred Stock Warrants       28,478     21,930

RazorGator Interactive Group, Inc. (0.44%)

    Preferred Stock       1,000,000     1,708,178
                 

Total RazorGator Interactive Group, Inc.

    2,692,317     3,922,814

 

10


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

 

Principal

Amount

  Cost (2)   Value (3)

    Serious USA, Inc. (0.68%)

  Internet Consumer & Business Services  

Senior Debt

Matures February 2011

     
   

Interest rate Prime + 3.00%

  $ 2,000,000   $ 1,913,213   $ 1,913,213
   

Revolving Line of Credit

     
   

Matures July 2008

     
   

Interest rate Prime + 2.00%

  $ 654,253     654,253     654,253
    Preferred Stock Warrants       93,463     87,687
                 

Total Serious USA, Inc.

    2,660,929     2,655,153
                 

Total Internet Consumer & Business Services (3.49%)

    12,448,219     13,593,001
                 

Lilliputian Systems, Inc. (2.02%) (4)

  Energy   Senior Debt      
   

Matures March 2010

     
   

Interest rate 9.75%

  $ 7,850,795     7,822,688     7,822,688
    Preferred Stock Warrants       48,460     28,903
                 

Total Lilliputian Systems, Inc.

    7,871,148     7,851,591
                 

Total Energy (2.02%)

    7,871,148     7,851,591
                 

Active Response Group, Inc. (2.57%)

  Information Services   Senior Debt      
   

Matures March 2012

     
   

Interest rate LIBOR + 6.55%

  $ 10,000,000     9,877,954     9,877,954
    Preferred Stock Warrants       92,080     90,622
    Common Stock Warrants       46,084     58,408
                 

Total Active Response Group, Inc.

    10,016,118     10,026,984

Buzznet, Inc. (0.29%)

  Information Services   Senior Debt      
   

Matures March 2010

     
   

Interest rate 10.25%

  $ 1,000,000     993,062     993,062
    Preferred Stock Warrants       8,613     144,602
                 

Total Buzznet, Inc.

    1,001,675     1,137,664

Solutionary, Inc. (1.67%)

  Information Services   Senior Debt      
   

Matures June 2010

     
   

Interest rate LIBOR + 5.50%

  $ 5,500,000     5,420,988     5,420,988
    Revolving Line of Credit      
   

Matures June 2010

     
   

Interest rate LIBOR + 5.00%

  $ 1,000,000     1,000,000     1,000,000
    Preferred Stock Warrants       93,827     81,233

Solutionary, Inc. (0.07%)

    Preferred Stock       250,000     250,000
                 

Total Solutionary, Inc.

    6,764,815     6,752,221

Wallop Technologies, Inc. (0.06%)

  Information Services   Senior Debt      
   

Matures March 2010

     
   

Interest rate 10.00%

  $ 237,207     231,187     231,187
    Preferred Stock Warrants       7,473     6,449
                 

Total Wallop Technologies, Inc.

    238,660     237,636
                 

Total Information Services (4.66%)

    18,021,268     18,154,505
                 

Novadaq Technologies, Inc. (0.35%)

  Diagnostic   Common Stock       1,735,157     1,378,533
                 

Total Novadaq Technologies, Inc.

    1,735,157     1,378,533

Optiscan Biomedical, Corp. (0.11%) (4)

  Diagnostic   Senior Debt      
   

Matures March 2008

     
   

Interest rate 15.00%

  $ 412,161     396,583     396,583
    Preferred Stock Warrants       80,486     44,850

Optiscan Biomedical, Corp. (0.26%)

    Preferred Stock       1,000,000     1,000,000
                 

Total Optiscan Biomedical, Corp.

    1,477,069     1,441,433
                 

Total Diagnostic (0.72%)

    3,212,226     2,819,966
                 

 

11


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2007

(continued)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(6)

 

Principal

Amount

  Cost (2)   Value (3)

Guava Technologies, Inc. (1.57%) (4)

  Biotechnology Tools   Senior Debt      
   

Matures July 2009

     
   

Interest rate Prime + 3.25%

  $ 4,075,930   $ 4,010,549   $ 4,010,549
    Convertible Debt       250,000     250,000
    Revolving Line of Credit      
   

Matures December 2007

     
   

Interest rate Prime + 2.00%

  $ 1,778,000     1,778,000     1,778,000
    Preferred Stock Warrants       122,109     77,970
                 

Total Guava Technologies, Inc.

    6,160,658     6,116,519

NuGEN Technologies, Inc. (0.51%)

  Biotechnology Tools   Senior Debt      
   

Matures March 2010

     
   

Interest rate 11.70%

  $ 2,000,000     1,962,637     1,962,637
    Preferred Stock Warrants       44,837     38,819
                 

Total NuGEN Technologies, Inc.

    2,007,474     2,001,456
                 

Total Biotechnology Tools (2.08%)

    8,168,132     8,117,975
                 

Rubicon Technology Inc. (1.57%) (4)

  Advanced Specialty Materials & Chemicals  

Senior Debt

Matures December 2010

     
         
   

Interest rate Prime + 3.375%

  $ 5,100,000     5,029,435     5,029,435
    Revolving Line of Credit      
   

Matures April 2008

     
   

Interest rate Prime + 0.25%

  $ 1,000,000     1,000,000     1,000,000
   

Preferred Stock Warrants

      81,708     69,530
                 

Total Rubicon Technology Inc.

    6,111,143     6,098,965
                 

Total Advanced Specialty Materials & Chemicals (1.57%)

    6,111,143     6,098,965
                 

Crux Biomedical, Inc. (0.06%)

  Surgical Devices   Preferred Stock       250,000     250,000
                 

Total Crux Biomedical, Inc.

    250,000     250,000

Diomed Holdings, Inc. (1.54%)

  Surgical Devices   Senior Debt      
   

Matures July 2010

     
   

Interest rate Prime + 3.00%

  $ 6,000,000     5,957,955     5,957,955
    Preferred Stock Warrants       43,319     43,932
                 

Total Diomed Holdings, Inc.

    6,001,274     6,001,887
                 

Total Surgical Devices (1.60%)

    6,251,274     6,251,887
                 

Waterfront Media Inc. (1.64%) (4)

  Media/Content/Info   Senior Debt      
   

Matures December 2010

     
   

Interest rate Prime + 3.00%

  $ 4,000,000     3,951,938     3,951,938
    Revolving Line of Credit      
   

Matures March 2008

     
   

Interest rate Prime + 1.25%

  $ 2,000,000     2,000,000     2,000,000
    Preferred Stock Warrants       59,663     447,157

Waterfront Media Inc. (0.26%)

    Preferred Stock       999,999     999,999
                 

Total Waterfront Media Inc.

    7,011,600     7,399,094
                 

Total Media/Content/Info (1.90%)

    7,011,600     7,399,094
                 

Total Investments (106.66%)

  $ 412,824,423   $ 415,592,166
                 

* Value as a percent of net assets
(1) Preferred and common stock, warrants, and equity interests are generally non-income producing.
(2) Gross unrealized appreciation, gross unrealized depreciation, and net appreciation for federal income tax purposes totaled $6,791,040, $5,906,194 and $884,846, respectively.
(3) Except for warrants in six publicly traded companies and common stock in two publicly traded companies, all investments are restricted at September 30, 2007 and were valued at fair value as determined in good faith by the Board of Directors. No unrestricted securities of the same issuer are outstanding. The Company uses the Standard Industrial Code for classifying the industry grouping of its portfolio companies.
(4) Debt and warrant investments of this portfolio company have been pledged as collateral under the Credit Facility. Citigroup has an equity participation right on loans collateralized under the Credit Facility. The value of their participation right on unrealized gains in the related equity investments was approximately $590,000 at September 30, 2007 and is included in accrued liabilities and reduces the unrealized gain recognized by the Company at September 30, 2007. See Note 3—“Borrowings.”
(5) Non-U.S. company or the company's principal place of business is outside the United States.
(6) All investments are less than 5% owned.

See notes to consolidated financial statements (unaudited).

 

12


Table of Contents

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2006

(unaudited)

 

Portfolio Company

 

Industry

 

Type of Investment (1)(7)

  

Principal

Amount

   Cost (2)    Value (3)

Acceleron Pharmaceuticals, Inc. (1.74%)* (4)

  Biopharmaceuticals  

Senior Debt

        
   

Matures June 2009

        
   

Interest rate 10.25%

   $ 4,069,607    $ 3,987,624    $ 3,987,624
   

Preferred Stock Warrants

        69,106      417,115
   

Preferred Stock Warrants

        34,996      34,393

Acceleron Pharmaceuticals, Inc. (0.44%)

   

Preferred Stock

        1,000,000      1,111,112
                    

Total Acceleron Pharmaceuticals, Inc

            5,091,726      5,550,244

Aveo Pharmaceuticals, Inc. (5.88%) (4)

  Biopharmaceuticals  

Senior Debt

        
   

Matures September 2009

        
   

Interest rate 10.75%

   $ 15,000,000      14,849,099      14,849,099
   

Preferred Stock Warrants

        144,056      115,212
   

Preferred Stock Warrants

        46,288      43,771
                    

Total Aveo Pharmaceuticals, Inc

            15,039,443      15,008,082

Elixir Pharmaceuticals, Inc. (3.92%)

  Biopharmaceuticals  

Senior Debt

        
   

Matures June 2010

        
   

Interest rate Prime + 2.45%

   $ 10,000,000      9,857,610      9,857,610
   

Preferred Stock Warrants

        74,755      73,334
   

Preferred Stock Warrants

        74,755      73,334
                    

Total Elixir Pharmaceuticals, Inc.

            10,007,120      10,004,278

EpiCept Corporation (3.84%)

  Biopharmaceuticals  

Senior Debt

        
   

Matures August 2009

        
   

Interest rate 11.70%

   $ 10,000,000      9,312,750      9,312,750
   

Common Stock Warrants

        794,633      507,592
                    

Total EpiCept Corporation

            10,107,383      9,820,342

Guava Technologies, Inc. (2.26%) (4)

  Biopharmaceuticals  

Senior Debt

        
   

Matures July 2009

        
   

Interest rate Prime + 3.25%

   $ 5,266,485      5,193,710      5,193,710
   

Revolving Line of Credit

        
   

Matures December 2007

        
   

Interest rate Prime + 2.00%

   $ 500,000      500,000      500,000
   

Preferred Stock Warrants

        105,399      83,940
                    

Total Guava Technologies, Inc

            5,799,109      5,777,650

Labopharm USA, Inc. (2.58%) (4)(5)

  Biopharmaceuticals  

Senior Debt

        
   

Matures July 2008

        
   

Interest rate 11.95%

   $ 6,675,417      6,598,870      6,598,870
                    

Total Labopharm USA, Inc.

            6,598,870      6,598,870

Merrimack Pharmaceuticals, Inc. (2.61%) (4)

  Biopharmaceuticals  

Convertible Senior Debt

        
   

Matures October 2008

        
   

Interest rate 11.15%

   $ 6,043,382      5,967,550      6,254,550
   

Preferred Stock Warrants

        155,456      409,159
                    

Total Merrimack Pharmaceuticals, Inc.

            6,123,006      6,663,709

Paratek Pharmaceuticals, Inc. (2.62%) (4)

  Biopharmaceuticals  

Senior Debt

        
   

Matures June 2008

        
   

Interest rate 11.10%

   $ 6,651,586      6,586,705      6,586,705
   

Preferred Stock Warrants

        137,396      110,553
                    

Total Paratek Pharmaceuticals, Inc.

            6,724,101      6,697,258

Portola Pharmaceuticals, Inc. (4.41%) .

  Biopharmaceuticals  

Senior Debt

        
   

Matures September 2010

        
   

Interest rate Prime + 1.75%

   $ 11,250,000    $ 11,145,804    $ 11,145,804
   

Preferred Stock Warrants

        113,668      107,489
                    

Total Portola Pharmaceuticals, Inc

            11,259,472      11,253,293

Quatrx Pharmaceuticals Company (7.05%) (4)

  Biopharmaceuticals  

Senior Debt

        
   

Matures January 2010

        
   

Interest rate Prime + 3.00%

   $ 18,000,000      17,834,735      17,834,735
   

Preferred Stock Warrants

        220,354      179,708
                    

Total Quatrx Pharmaceuticals Company

            18,055,089      18,014,443

Sirtris Pharmaceuticals, Inc. (3.91%) (4)

  Biopharmaceuticals  

Senior Debt

        
   

Matures April 2011

        
   

Interest rate 10.60%

   $ 10,000,000      9,924,495      9,924,495
   

Preferred Stock Warrants

        88,829      70,986
                    

Total Sirtris Pharmaceuticals, Inc.

            10,013,324      9,995,481

 

13


Table of Contents

Portfolio Company

 

Industry

 

Type of Investment (1)(7)

 

Principal

Amount

  Cost (2)   Value (3)

TransOral Pharmaceuticals, Inc. (3.92%) (4)

  Biopharmaceuticals  

Senior Debt

     
   

Matures October 2009

     
   

Interest rate 10.69%

  $ 10,000,000     9,921,976     9,921,976
   

Preferred Stock Warrants

      35,630     28,265
   

Preferred Stock Warrants

      51,067     50,548
                 

Total TransOral Pharmaceuticals, Inc.

          10,008,673     10,000,789
                 

Total Biopharmaceuticals (45.18%)

          114,827,316     115,384,439
                 

Atrenta, Inc. (2.03%) (4)

  Software  

Senior Debt

     
   

Matures June 2009

     
   

Interest rate 11.50%

  $ 5,000,000     4,929,298     4,929,298
   

Preferred Stock Warrants

      102,396     200,285
   

Preferred Stock Warrants

      33,760     65,719

Atrenta, Inc. (0.10%)

   

Preferred Stock

      250,000     250,000
                 

Total Atrenta, Inc

          5,315,454     5,445,302

Blurb, Inc. (0.10%)

  Software  

Senior Debt

     
   

Matures December 2009

     
   

Interest rate 9.55%

  $ 250,000     237,454     237,454
   

Preferred Stock Warrants

      12,904     12,653
                 

Total Blurb, Inc

          250,358     250,107

Compete, Inc. (1.52%) (4)

  Software  

Senior Debt

     
   

Matures March 2009

     
   

Interest rate Prime + 3.50%

  $ 3,884,338     3,839,045     3,839,045
   

Preferred Stock Warrants

      62,067     49,247
                 

Total Compete, Inc.

          3,901,112     3,888,292

Forescout Technologies, Inc. (0.78%)

  Software  

Senior Debt

     
   

Matures August 2009

     
   

Interest rate 11.15%

  $ 2,000,000     1,950,584     1,950,584
   

Preferred Stock Warrants

      55,593     50,800
                 

Total Forescout Technologies, Inc.

          2,006,177     2,001,384

GameLogic, Inc. (1.17%) (4)

  Software  

Senior Debt

     
   

Matures December 2009

     
   

Interest rate Prime + 4.125%

  $ 3,000,000   $ 2,957,416   $ 2,957,416
   

Preferred Stock Warrants

      52,604     41,860
                 

Total GameLogic, Inc

          3,010,020     2,999,276

Gomez, Inc. (0.48%) (4)

  Software  

Senior Debt

     
   

Matures December 2007

     
   

Interest rate 12.25%

  $ 1,212,506     1,201,811     1,201,811
   

Preferred Stock Warrants

      35,000     18,832
                 

Total Gomez, Inc.

          1,236,811     1,220,643

HighRoads, Inc. (0.77%) (4)

  Software  

Senior Debt

     
   

Matures February 2009

     
   

Interest rate 11.65%

  $ 1,954,723     1,923,844     1,923,844
   

Preferred Stock Warrants

      44,466     35,484
                 

Total HighRoads, Inc

          1,968,310     1,959,328

Intelliden, Inc. (1.17%)

  Software  

Senior Debt

     
   

Matures February 2010

     
   

Interest rate 13.20%

  $ 3,000,000     2,984,169     2,984,169
   

Preferred Stock Warrants

      17,542     16,688
                 

Total Intelliden, Inc.

          3,001,711     3,000,857

Inxight Software, Inc. (1.60%) (4)

  Software  

Senior Debt

     
   

Matures February 2008

     
   

Interest rate 10.00%

  $ 4,073,794     4,051,059     4,051,059
   

Preferred Stock Warrants

      55,963     29,800
                 

Total Inxight Software, Inc.

          4,107,022     4,080,859

Oatsystems, Inc. (2.36%) (4)

  Software  

Senior Debt

     
   

Matures September 2009

     
   

Interest rate 11.00%

  $ 6,000,000     5,973,007     5,973,007
   

Preferred Stock Warrants

      33,742     26,881
                 

Total Oatsystems, Inc.

          6,006,749     5,999,888

Proficiency, Inc. (1.43%) (5)

  Software  

Senior Debt

     
   

Matures July 2008

     
   

Interest rate 12.00%

  $ 4,000,000     3,951,815     3,548,185
   

Preferred Stock Warrants

      96,370     115,977
                 

Total Proficiency, Inc.

          4,048,185     3,664,162

 

14


Table of Contents

Portfolio Company

 

Industry

 

Type of Investment (1)(7)

 

Principal

Amount

  Cost (2)   Value (3)

Savvion, Inc. (1.58%) (4)

  Software  

Senior Debt

     
   

Matures March 2009

Interest rate Prime + 3.45%

  $ 1,000,000     1,000,000     1,000,000
   

Revolving Line of Credit

     
   

Matures March 2007

Interest rate Prime + 2.00%

  $ 3,000,000     2,991,311     2,991,311
   

Preferred Stock Warrants

      52,135     41,743
                 

Total Savvion, Inc

          4,043,446     4,033,054

Sportvision, Inc. (0.01%)

  Software  

Preferred Stock Warrants

      39,339     29,667
                 

Total Sportvision, Inc.

          39,339     29,667

Talisma Corp. (0.74%) (4)

  Software  

Subordinated Debt

     
   

Matures December 2007

Interest rate 11.25%

  $ 1,873,774   $ 1,858,802   $ 1,858,802
   

Preferred Stock Warrants

      49,000     25,259
                 

Total Talisma Corp

          1,907,802     1,884,061
                 

Total Software (15.84%)

          40,842,496     40,456,880
                 

BabyUniverse, Inc. (1.90%) (4)

  Consumer & Business Products  

Senior Debt

     
   

Matures July 2009

Interest rate Prime + 2.35%

  $ 5,000,000     4,728,980     4,728,980
   

Common Stock Warrants

      325,224     146,299
                 

Total BabyUniverse, Inc

          5,054,204     4,875,279

Market Force Information, Inc. (0.70%) (4)

  Consumer & Business Products  

Senior Debt

     
   

Matures May 2009

Interest rate 10.45%

  $ 1,777,064     1,759,510     1,759,510
   

Preferred Stock Warrants

      23,823     19,197
                 

Total Market Force Information, Inc

          1,783,333     1,778,707

Wageworks, Inc. (5.89%) (4)

  Consumer & Business Products  

Senior Debt

     
   

Matures November 2008

Interest rate Prime + 4.00%

  $ 14,036,422     13,904,441     13,904,441
   

Preferred Stock Warrants

      251,964     1,140,998

Wageworks, Inc. (0.10%)

   

Preferred Stock

      249,995     249,995
                 

Total Wageworks, Inc

          14,406,400     15,295,434
                 

Total Consumer & Business Products (8.59%)

          21,243,937     21,949,420
                 

IKANO Communications, Inc. (0.03%)

 

Communications

& Networking

 

Preferred Stock Warrants

      45,460     33,391
   

Preferred Stock Warrants

      72,344     55,530
                 

Total IKANO Communications, Inc.

          117,804     88,921

Interwise, Inc. (0.83%) (4)

 

Communications

& Networking

 

Senior Debt

     
   

Matures August 2008

Interest rate 17.50%

  $ 2,094,999     1,869,542     1,869,542
   

Preferred Stock Warrants

      268,401     244,653
                 

Total Interwise, Inc

          2,137,943     2,114,195

Pathfire, Inc. (1.84%) (4)

 

Communications

& Networking

 

Senior Debt

     
   

Matures December 2008

Interest rate Prime + 3.65%

  $ 4,713,221     4,672,795     4,672,795
   

Preferred Stock Warrants

      63,276     16,918
                 

Total Pathfire, Inc

          4,736,071     4,689,713

Ping Identity Corporation (1.05%) (4)

 

Communications

& Networking

 

Senior Debt

     
   

Matures June 2009

Interest rate 11.50%

  $ 2,569,123     2,530,953     2,530,953
   

Preferred Stock Warrants

      51,801     160,500
                 

Total Ping Identity Corporation

          2,582,754     2,691,453

Rivulet Communications, Inc. (1.37%) (4)

 

Communications

& Networking

 

Senior Debt

     
   

Matures September 2009

Interest rate 10.60%

  $ 3,500,000   $ 3,459,966   $ 3,459,966
   

Preferred Stock Warrants

      50,710     40,352

Rivulet Communications, Inc. (0.10%)

   

Preferred Stock

      250,000     250,000
                 

Total Rivulet Communications, Inc.

          3,760,676     3,750,318

Simpler Networks Corp. (2.20%) (4)

  Communications & Networking  

Senior Debt

     
   

Matures July 2009

Interest rate 11.75%

  $ 5,000,000     4,886,659     4,886,659
   

Preferred Stock Warrants

      160,241     742,688

Simpler Networks Corp. (0.20%)

   

Preferred Stock

      500,000     500,000
                 

Total Simpler Networks Corp.

          5,546,900     6,129,347
                 

Total Communications & Networking (7.62%)

          18,882,148     19,463,947

 

15


Table of Contents

Portfolio Company

 

Industry

 

Type of Investment (1)(7)

 

Principal

Amount

  Cost (2)   Value (3)

Adiana, Inc. (0.53%) (4)

  Medical Devices & Equipment   Senior Debt      
         
   

Matures June 2008

     
   

Interest rate Prime + 6.00%

  $ 1,346,551     1,312,938     1,312,938
    Preferred Stock Warrants       67,225     52,427

Adiana, Inc. (0.20%)

    Preferred Stock       500,000     500,000
                 

Total Adiana, Inc.

    1,880,163     1,865,365

BARRX Medical, Inc. (0.59%)

  Medical Devices & Equipment  

Preferred Stock

      1,500,000     1,500,000
                 

Total BARRX Medical, Inc.

    1,500,000     1,500,000

Gynesonics, Inc. (0.80%)

  Medical Devices & Equipment   Senior Debt      
         
   

Matures October 2009

     
   

Interest rate 9.50%

  $ 2,000,000     1,986,209     1,986,209
    Preferred Stock Warrants       17,552     54,735
                 

Total Gynesonics, Inc.

          2,003,761     2,040,944

Novasys Medical, Inc. (3.13%) (4)

  Medical Devices & Equipment   Senior Debt      
         
   

Matures January 2010

     
   

Interest rate 9.70%

  $ 8,000,000     8,000,000     8,000,000
                 

Total Novasys Medical, Inc.

          8,000,000     8,000,000

Optiscan Biomedical, Corp. (0.40%) (4)

  Medical Devices & Equipment   Senior Debt      
         
   

Matures March 2008

     
   

Interest rate 15.00%

  $ 1,006,259     967,314     967,314
   

Preferred Stock Warrants

      80,486     64,478

Optiscan Biomedical, Corp. (0.39%)

   

Preferred Stock

      1,000,000     1,000,000
                 

Total Optiscan Biomedical, Corp

          2,047,800     2,031,792

Power Medical Interventions, Inc. (0.01%)

  Medical Devices & Equipment  

Common Stock Warrants

      20,687     30,200
                 

Total Power Medical Interventions, Inc.

          20,687     30,200

Xillix Technologies Corp. (1.53%) (4)(5)(6)

  Medical Devices & Equipment   Senior Debt      
         
   

Matures December 2008

     
   

Interest rate 12.40%

  $ 3,975,834   $ 3,775,493   $ 3,775,493
   

Common Stock Warrants

      313,108     122,206
                 

Total Xillix Technologies Corp

          4,088,601     3,897,699
                 

Total Medical Devices & Equipment (7.58%)

          19,541,012     19,366,000
                 

Hedgestreet, Inc. (1.67%) (4)

  Internet Consumer & Business Services   Senior Debt      
         
   

Matures March 2009

     
   

Interest rate 11.30%

  $ 4,263,806     4,226,674     4,226,674
   

Preferred Stock Warrants

      54,956     44,836
                 

Total Hedgestreet, Inc.

          4,281,630     4,271,510

Invoke Solutions, Inc. (0.97%) (4)

  Internet Consumer & Business Services   Senior Debt      
         
   

Matures December 2008

     
   

Interest rate 11.25%

  $ 2,466,574     2,438,574     2,438,574
   

Preferred Stock Warrants

      43,826     35,741
                 

Total Invoke Solutions, Inc.

          2,482,400     2,474,315

RazorGator Interactive Group, Inc. (1.25%) (4)

  Internet Consumer & Business Services   Senior Debt      
         
   

Matures January 2008

     
   

Interest rate 9.95%

  $ 2,637,626     2,633,276     2,633,276
   

Preferred Stock Warrants

      13,050     570,026

RazorGator Interactive Group, Inc. (0.67%)

   

Preferred Stock

      1,000,000     1,708,178
                 

Total RazorGator Interactive Group, Inc.

          3,646,326     4,911,480
                 

Total Internet Consumer & Business Services (4.56%)

          10,410,356     11,657,305
                 

Agami Systems, Inc. (2.75%) (4)

  Electronics & Computer Hardware   Senior Debt      
         
   

Matures August 2009

     
   

Interest rate 11.00%

  $ 7,000,000     6,924,288     6,924,288
   

Preferred Stock Warrants

      85,601     79,040
                 

Total Agami Systems, Inc.

          7,009,889     7,003,328

 

16


Table of Contents

Portfolio Company

 

Industry

 

Type of Investment (1)(7)

  Principal Amount   Cost (2)   Value (3)

Cornice, Inc. (1.44%) (4)

  Electronics & Computer Hardware  

Senior Debt

     
         
   

Matures November 2008

     
   

Interest rate Prime + 4.50%

  $ 3,524,664     3,459,755     3,459,755
   

Preferred Stock Warrants

      101,597     80,181
   

Preferred Stock Warrants

      35,353     27,571
   

Preferred Stock Warrants

      135,403     106,862
                 

Total Cornice, Inc.

    3,732,108     3,674,369

Luminus Devices, Inc. (5.88%) (4)

  Electronics & Computer Hardware   Senior Debt      
         
   

Matures August 2009

     
   

Interest rate 12.50%

  $ 15,000,000     14,765,514     14,765,514
    Preferred Stock Warrants       183,290     161,106
    Preferred Stock Warrants       83,529     83,466
                 

Total Luminus Devices, Inc.

          15,032,333     15,010,086

NeoScale Systems, Inc. (1.17%) (4)

  Electronics & Computer Hardware  

Senior Debt

     
   

Matures October 2009

     
   

Interest rate 10.75%

  $ 3,000,000   $ 2,978,373   $ 2,978,373
   

Preferred Stock Warrants

      23,593     22,525
                 

Total NeoScale Systems, Inc

          3,001,966     3,000,898

Sling Media, Inc. (0.56%)

  Electronics & Computer Hardware  

Preferred Stock Warrants

      38,968     936,565
   

Preferred Stock

      500,000     500,000
                 

Total Sling Media, Inc.

          538,968     1,436,565

ViDeOnline Communications, Inc. (0.18%) (4)

  Electronics & Computer Hardware  

Senior Debt

     
   

Matures May 2009

     
   

Interest rate 15.00%

  $ 461,158     461,158     461,158
   

Preferred Stock Warrants

      —       —  
                 

Total ViDeOnline Communications, Inc.

          461,158     461,158
                 

Total Electronics & Computer Hardware (11.98%)

          29,776,422     30,586,404
                 

Ageia Technologies, Inc. (2.76%) (4)

  Semiconductors  

Senior Debt

     
   

Matures August 2008

     
   

Interest rate 10.25%

  $ 7,027,806     6,975,456     6,975,456
   

Preferred Stock Warrants

      99,190     73,604

Ageia Technologies, Inc. (0.20%)

   

Preferred Stock

      500,000     500,000
                 

Total Ageia Technologies

          7,574,646     7,549,060

Cradle Technologies (0.02%)

  Semiconductors  

Preferred Stock Warrants

      79,150     63,647
                 

Total Cradle Technologies

          79,150     63,647

iWatt Inc. (1.27%) (4)

  Semiconductors  

Senior Debt

     
   

Matures September 2009

     
   

Interest rate Prime + 2.75%

  $ 2,000,000     1,959,537     1,959,537
   

Revolving Line of Credit

     
   

Matures September 2007

     
   

Interest rate Prime + 1.75%

  $ 1,250,000     1,250,000     1,250,000
   

Preferred Stock Warrants

      45,684     41,417
                 

Total iWatt Inc.

          3,255,221     3,250,954

NEXX Systems, Inc. (1.96%) (4)

  Semiconductors  

Senior Debt

     
   

Matures February 2010

     
   

Interest rate Prime + 2.75%

  $ 4,000,000     3,919,015     3,919,015
   

Revolving Line of Credit

     
   

Matures December 2009

     
   

Interest rate Prime + 1.75%

  $ 1,000,000     1,000,000     1,000,000
   

Preferred Stock Warrants

      83,116     83,938
                 

Total NEXX Systems, Inc.

          5,002,131     5,002,953
                 

Total Semiconductors (6.21%)

          15,911,148     15,866,614
                 

Lilliputian Systems, Inc. (3.33%) (4)

  Energy  

Senior Debt

     
   

Matures March 2010

     
   

Interest rate 9.75%

  $ 8,500,000   $ 8,463,170   $ 8,463,170
   

Preferred Stock Warrants

      48,460     39,572
                 

Total Lilliputian Systems, Inc.

          8,511,630     8,502,742
                 

Total Energy (3.33%)

          8,511,630     8,502,742
                 

Total Investments (110.89%)

        $ 279,946,465   $ 283,233,751
                 

* Value as a percent of net assets.
(1) Preferred and common stock, warrants, and equity interests are generally non-income producing.

 

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(2) Gross unrealized appreciation, gross unrealized depreciation, and net appreciation for federal income tax purposes totaled $3,036,621, $1,632,232 and $1,404,389, respectively.
(3) Except for warrants in three publicly traded companies, all investments are restricted at December 31, 2006 and were valued at fair value as determined in good faith by the Board of Directors. No unrestricted securities of the same issuer are outstanding. The Company uses the Standard Industrial Code for classifying the industry grouping of its portfolio companies.
(4) Debt and warrant investments of this portfolio company have been pledged as collateral under the Credit Facility. Citigroup has an equity participation right on loans collateralized under the Credit Facility. The value of their participation right on unrealized gains in the related equity investments was approximately $377,000 at December 31, 2006 and is included in accrued liabilities and reduces the unrealized gain recognized by the Company at December 31, 2006.
(5) Non-U.S. company or the company’s principal place of business is outside the United States.
(6) Debt is on non-accrual status at December 31, 2006, and is therefore considered non-income producing.
(7) All investments are less than 5% owned.

See notes to consolidated financial statements.

 

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HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2007     2006     2007     2006  

Investment income:

        

Interest

   $ 13,568,843     $ 6,697,291     $ 34,396,381     $ 18,507,661  

Fees

     1,571,826       846,741       3,697,996       2,311,415  
                                

Total investment income

     15,140,669       7,544,032       38,094,377       20,819,076  

Operating expenses:

        

Interest

     553,466       1,420,140       3,002,716       4,455,015  

Loan fees

     418,660       149,677       935,080       687,158  

General and administrative

     1,420,055       1,436,467       4,442,223       4,040,445  

Employee Compensation:

        

Compensation and benefits

     2,404,072       1,244,993       6,358,397       3,577,313  

Stock-based compensation

     295,349       175,600       841,804       428,600  

Amortization of restricted stock awards

     5,012       —         5,012       —    
                                

Total employee compensation

     2,704,433       1,420,593       7,205,213       4,005,913  
                                

Total operating expenses

     5,096,614       4,426,877       15,585,232       13,188,531  

Net investment income before provision for income taxes and investment gains and losses

     10,044,055       3,117,155       22,509,145       7,630,545  

Provision (benefit) for income taxes

     —         (345,089 )     —         643,088  
                                

Net investment income

     10,044,055       3,462,244       22,509,145       6,987,457  

Net realized gain (loss) on investments

     49,046       (2,482,465 )     3,119       (2,570,705 )

Net increase (decrease) in unrealized appreciation on investments

     (2,914,983 )     592,860       (733,296 )     3,027,251  
                                

Net realized and unrealized gain (loss)

     (2,865,937 )     (1,889,605 )     (730,177 )     456,546  
                                

Net increase in net assets resulting from operations

   $ 7,178,118     $ 1,572,639     $ 21,778,968     $ 7,444,003  
                                

Net investment income before provision for income taxes and investment gains and losses per common share:

        

Basic

   $ 0.31     $ 0.23     $ 0.84     $ 0.63  
                                

Diluted

   $ 0.31     $ 0.23     $ 0.83     $ 0.62  
                                

Change in net assets per common share:

        

Basic

   $ 0.22     $ 0.12     $ 0.81     $ 0.61  
                                

Diluted

   $ 0.22     $ 0.11     $ 0.81     $ 0.61  
                                

Weighted average shares outstanding

        

Basic

     32,427,000       13,661,000       26,864,000       12,158,000  
                                

Diluted

     32,526,000       13,779,000       26,992,000       12,277,000  
                                

See notes to consolidated financial statements (unaudited).

 

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HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

 

    Common Stock  

Capital in

excess of

par value

 

Deferred Stock

Compensation

   

Unrealized

Appreciation

on Investments

   

Accumulated

Realized Gains

(Losses)

on Investments

   

Distributions

in Excess of

Investment Income

    Net Assets  
    Shares   Par Value            

Balance at December 31, 2005.

    9,801,965   $ 9,802   $ 114,524,833   $ —       $ 353,093     $ 481,694     $ (1,017,092 )     114,352,330  

Net increase in stockholders’ equity resulting from operations

    —       —       —       —         3,027,251       (2,570,705 )     6,987,457       7,444,003  

Issuance of common shares

    444,150     444     5,133,431     —         —         —         —         5,133,875  

Issuance of common shares in Rights Offering, net of offering costs

    3,411,992     3,412     33,825,908     —         —         —         —         33,829,320  

Issuance of common stock under dividend reinvestment plan

    18,211     18     211,777     —         —         —         —         211,795  

Dividends declared

    —       —       —       —         —         —         (10,105,104 )     (10,105,104 )

Stock-based compensation

    —       —       428,600     —         —         —         —         428,600  
                                                         

Balance at September 30, 2006

    13,676,318   $ 13,676   $ 154,124,549   $ —       $ 3,380,344     $ (2,089,011 )   $ (4,134,739 )   $ 151,294,819  
                                                         

Balance at December 31, 2006

    21,927,034   $ 21,927   $ 257,234,729   $ —       $ 2,860,654     $ (1,972,014 )   $ (2,732,474 )   $ 255,412,822  

Net increase in net assets resulting from operations

    —       —       —       —         (733,296 )     3,119       22,509,145       21,778,968  

Issuance of common stock

    25,001     25     348,576     —         —         —         —         348,601