Edgar Filing: HERCULES TECHNOLOGY GROWTH CAPITAL INC

Form 10-Q

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 March 31, 2008

¨	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, 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 ¨

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 May 8, 2008, there were 32,857,737 shares outstanding of the Registrant’s common stock, $0.001 par value.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION	2

Item 1.	Consolidated Financial Statements	2

	Consolidated Statement of Assets and Liabilities as of March 31, 2008 (unaudited) and December 31, 2007	2

	Consolidated Schedule of Investments as of March 31, 2008 (unaudited)	3

	Consolidated Schedule of Investments as of December 31, 2007	15

	Consolidated Statement of Operations for the three-month periods ended March 31, 2008 and 2007 (unaudited)	29

	Consolidated Statement of Changes in Net Assets for the three-month periods ended March 31, 2008 and 2007 (unaudited)	30

	Consolidated Statement of Cash Flows for the three-month periods ended March 31, 2008 and 2007 (unaudited)	31

	Notes to Consolidated Financial Statements (unaudited)	32

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54

Item 4.	Controls and Procedures	54

PART II.	OTHER INFORMATION	54

Item 1.	Legal Proceedings	55

Item 1a.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Submission of Matters to a Vote of Security Holders	55

Item 5.	Other Information	55

Item 6.	Exhibits	56

Signatures		57

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 STATEMENT OF ASSETS AND LIABILITIES

(in thousands, except per share data)


	March 31, 2008 (unaudited)			December 31, 2007
Assets
Investments:
Non-affiliate investments (cost of $514,464 and $513,106)	$	526,516		$	525,725
Affiliate investments (cost of $6,344 and $6,344)		4,247			4,247

Total investments, at value (cost of $520,808 and $519,450 respectively)		530,763			529,972

Deferred loan origination revenue		(6,969	)		(6,593	)
Cash and cash equivalents		13,804			7,856
Interest receivable		6,833			6,387
Other assets		4,513			4,321

Total assets		548,944			541,943

Liabilities
Accounts payable and accrued liabilities		3,560			6,956
Short-term credit facility		72,900			79,200
Long-term SBA Debentures		70,050			55,050

Total liabilities		146,510			141,206

Net assets	$	402,434		$	400,737

Net assets consist of:
Common stock, par value	$	33		$	33
Capital in excess of par value		396,623			393,530
Deferred stock compensation		(2,748	)		(78	)
Unrealized appreciation on investments		9,208			10,129
Accumulated realized gains on investments		3,777			819
Distributions in excess of investment income		(4,459	)		(3,696	)

Total net assets	$	402,434		$	400,737

Shares of common stock outstanding ($0.001 par value, 60,000 authorized)		32,768			32,541

Net asset value per share	$	12.28		$	12.31

See notes to consolidated financial statements (unaudited).

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(unaudited)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾		Value⁽³⁾
Acceleron Pharmaceuticals, Inc. (0.68%)*⁽⁴⁾	Drug Discovery	Senior Debt Matures June 2009 Interest rate 10.25%	$	2,935	$	2,889	$	2,889
		Preferred Stock Warrants				69		707
		Preferred Stock Warrants				35		130
Acceleron Pharmaceuticals, Inc. (0.33%)		Preferred Stock				1,243		1,805

Total Acceleron Pharmaceuticals, Inc.						4,236		5,531

Aveo Pharmaceuticals, Inc. (2.02%)⁽⁴⁾	Drug Discovery	Senior Debt Matures September 2009 Interest rate 10.75%	$	10,925		10,845		10,845
		Preferred Stock Warrants				144		193
		Preferred Stock Warrants				46		72

Total Aveo Pharmaceuticals, Inc.						11,035		11,110

Elixir Pharmaceuticals, Inc. (2.42%)⁽⁴⁾	Drug Discovery	Senior Debt Matures June 2010 Interest rate Prime + 2.45%	$	12,973		12,829		12,829
		Preferred Stock Warrants				217		453

Total Elixir Pharmaceuticals, Inc.						13,046		13,282

EpiCept Corporation (1.11%)⁽⁴⁾	Drug Discovery	Senior Debt Matures August 2009 Interest rate 11.70%	$	6,354		5,989		5,989
		Common Stock Warrants				423		128

Total EpiCept Corporation						6,412		6,117

Horizon Therapeutics, Inc. (0.22%)	Drug Discovery	Senior Debt Matures April 2011 Interest rate 8.75%	$	12,000		1,038		1,038
		Preferred Stock Warrants				179		183

Total Horizon Therapeutics, Inc.						1,217		1,221

Inotek Pharmaceuticals Corp. (0.27%)	Drug Discovery	Preferred Stock				1,500		1,500

Total Inotek Pharmaceuticals Corp.						1,500		1,500

Memory Pharmaceticals Corp. (2.52%)⁽⁴⁾	Drug Discovery	Senior Debt Matures December 2010 Interest rate 11.45%	$	15,000		13,731		13,731
		Common Stock Warrants				1,751		131

Total Memory Pharmaceticals Corp.						15,482		13,862

Merrimack Pharmaceuticals, Inc. (0.21%)⁽⁴⁾	Drug Discovery	Convertible Senior Debt Matures October 2008 Interest rate 11.15%	$	591		572		572
		Preferred Stock Warrants				155		575
Merrimack Pharmaceuticals, Inc. (0.51%)		Preferred Stock				2,000		2,787

Total Merrimack Pharmaceuticals, Inc.						2,727		3,934

Neosil, Inc. (1.08%)	Drug Discovery	Senior Debt Matures May 2010 Interest rate 10.75%	$	5,800		5,742		5,742
		Preferred Stock Warrants				83		208

Total Neosil, Inc.						5,825		5,950

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Paratek Pharmaceuticals, Inc. (0.27%)⁽⁴⁾	Drug Discovery	Senior Debt Matures June 2008 Interest rate 11.10%	$	1,498	1,490	1,490
		Preferred Stock Warrants			137	—
Paratek Pharmaceuticals, Inc. (0.18%)		Preferred Stock			1,000	1,000

Total Paratek Pharmaceuticals, Inc.					2,627	2,490

Portola Pharmaceuticals, Inc. (2.78%)⁽⁴⁾	Drug Discovery	Senior Debt Matures September 2010 Interest rate Prime + 1.75%	$	15,000	14,904	14,904
		Preferred Stock Warrants			152	339

Total Portola Pharmaceuticals, Inc.					15,056	15,243

Sirtris Pharmaceuticals, Inc. (1.66%)⁽⁴⁾	Drug Discovery	Senior Debt Matures April 2011 Interest rate 10.60%	$	8,505	8,451	8,451
		Common Stock Warrants			89	668
Sirtris Pharmaceuticals, Inc. (0.13%)		Common Stock			500	736

Total Sirtris Pharmaceuticals, Inc.					9,040	9,855

Total Drug Discovery (16.39%)					88,203	90,095


E-band Communications, Inc. (0.36%)⁽⁶⁾	Communications & Networking	Preferred Stock			2,000	2,000

Total E-Band Communications, Inc.					2,000	2,000

IKANO Communications, Inc. (3.43%)⁽⁴⁾	Communications & Networking	Senior Debt Matures March 2011 Interest rate 11.00%	$	18,384	18,384	18,384
		Preferred Stock Warrants			45	188
		Preferred Stock Warrants			72	286

Total IKANO Communications, Inc.					18,501	18,858

Neonova Holding Company (1.64%)	Communications & Networking	Senior Debt Matures September 2012 Interest rate Prime + 3.25%	$	9,000	8,906	8,906
		Preferred Stock Warrants			94	93
Neonova Holding Company (0.05%)		Preferred Stock			250	250

Total Neonova Holding Company					9,250	9,249

Ping Identity Corporation (0.25%)⁽⁴⁾	Communications & Networking	Senior Debt Matures June 2009 Interest rate 11.50%	$	1,378	1,360	1,360
		Preferred Stock Warrants			52	5

Total Ping Identity Corporation					1,412	1,365

Purcell Systems, Inc. (1.51%)	Communications & Networking	Senior Debt Matures June 2009 Interest rate Prime + 3.50%	$	2,091	2,002	2,002
		Revolving Line of Credit Matures June 2008 Interest rate Prime + 2.00%	$	6,000	6,000	6,000
		Preferred Stock Warrants			123	260

Total Purcell Systems, Inc.					8,125	8,262

Rivulet Communications, Inc. (0.54%)⁽⁴⁾	Communications & Networking	Senior Debt Matures September 2009 Interest rate 10.60%	$	2,976	2,954	2,954
		Preferred Stock Warrants			51	—
Rivulet Communications, Inc. (0.05%)		Preferred Stock			250	250

Total Rivulet Communications, Inc.					3,255	3,204

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Seven Networks, Inc. (1.97%)⁽⁴⁾	Communications & Networking	Senior Debt Matures April 2010 Interest rate Prime + 3.75%	$	8,517	8,405	8,405
		Revolving Line of Credit Matures April 2008 Interest rate Prime + 3.00%	$	2,000	2,000	2,000
		Preferred Stock Warrants			174	437

Total Seven Networks, Inc.					10,579	10,842

Simpler Networks Corp. (0.47%)⁽⁴⁾	Communications & Networking	Senior Debt Matures July 2009 Interest rate 11.75%	$	4,112	4,058	2,558
		Preferred Stock Warrants			160	—
Simpler Networks Corp. (0.00%)		Preferred Stock			500	—

Total Simpler Networks Corp.					4,718	2,558

Stoke, Inc. (0.43%)	Communications & Networking	Senior Debt Matures August 2010 Interest rate 10.55%	$	2,250	2,208	2,208
		Preferred Stock Warrants			53	127

Total Stoke, Inc.					2,261	2,335

Tectura Corporation (3.78%)⁽⁴⁾	Communications & Networking	Senior Debt Matures March 2012 Interest rate LIBOR + 6.15%	$	8,684	8,643	8,643
		Revolving Line of Credit Matures March 2008 Interest rate LIBOR + 5.15%	$	12,000	12,000	12,000
		Preferred Stock Warrants			51	104

Total Tectura Corporation					20,694	20,747

Teleflip, Inc. (0.00%)	Communications & Networking	Senior Debt Matures May 2010 Interest rate Prime + 2.75%	$	938	930	—
		Preferred Stock Warrants			11	—

Total Teleflip, Inc.					941	—

Wireless Channels, Inc. (2.20%)	Communications & Networking	Senior Debt - Second Lien Matures April 2010 Interest rate Prime + 4.25%	$	1,570	1,570	1,570
		Senior Debt - Second Lien Matures April 2010 Interest rate Prime + 4.25%	$	10,246	10,147	10,147
		Preferred Stock Warrants			155	340

Total Wireless Channels, Inc.					11,872	12,057

Zayo Bandwith, Inc. (4.55%)⁽⁴⁾	Communications & Networking	Senior Debt Matures April 2013 Interest rate Prime + 3.50%	$	25,000	25,000	25,000

Total Zayo Bandwith, Inc.					25,000	25,000

Total Communications & Networking (21.23%)					118,608	116,477


Atrenta, Inc. (0.63%)⁽⁴⁾	Software	Senior Debt Matures June 2009 Interest rate 11.50%	$	3,143	3,108	3,108
		Preferred Stock Warrants			102	250
		Preferred Stock Warrants			34	82
Atrenta, Inc. (0.05%)		Preferred Stock			250	250

Total Atrenta, Inc.					3,494	3,690

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Blurb, Inc. (0.42%)	Software	Senior Debt Matures December 2009 Interest rate 9.55%	$	2,310	2,293	2,293
		Preferred Stock Warrants			25	34

Total Blurb, Inc.					2,318	2,327

Bullhorn, Inc. (0.18%)	Software	Senior Debt Matures March 2010 Interest rate Prime + 3.75%	$	1,000	963	963
		Preferred Stock Warrants			43	53

Total Bullhorn, Inc.					1,006	1,016

Cittio, Inc. (0.18%)	Software	Senior Debt Matures April 2010 Interest rate 11.00%	$	1,000	1,000	1,000

Total Cittio, Inc.					1,000	1,000

Forescout Technologies, Inc. (0.43%)⁽⁴⁾	Software	Senior Debt Matures August 2009 Interest rate 11.15%	$	1,736	1,671	1,671
		Revolving Line of Credit Matures August 2007 Interest rate Prime + 1.49%	$	500	500	500
		Preferred Stock Warrants			99	176

Total Forescout Technologies, Inc.					2,270	2,347

GameLogic, Inc. (0.56%)⁽⁴⁾	Software	Senior Debt Matures December 2009 Interest rate Prime + 4.125%	$	3,000	2,947	2,947
		Preferred Stock Warrants			92	139

Total GameLogic, Inc.					3,039	3,086

Gomez, Inc. (0.09%)⁽⁴⁾	Software	Preferred Stock Warrants			35	491

Total Gomez, Inc.					35	491

HighRoads, Inc. (0.01%)⁽⁴⁾	Software	Preferred Stock Warrants			44	71

Total HighRoads, Inc.					44	71

Intelliden, Inc. (0.40%)	Software	Senior Debt Matures February 2010 Interest rate 13.20%	$	2,131	2,122	2,122
		Preferred Stock Warrants			18	77

Total Intelliden, Inc.					2,140	2,199

Oatsystems, Inc. (0.69%)⁽⁴⁾	Software	Senior Debt Matures September 2009 Interest rate 11.00%	$	3,800	3,768	3,768
		Preferred Stock Warrants			67	1

Total Oatsystems, Inc.					3,835	3,769

Proficiency, Inc. (0.27%)⁽⁵⁾⁽⁶⁾	Software	Senior Debt Matures July 2008 Interest rate 12.00%	$	1,500	1,497	1,497
		Preferred Stock Warrants			96	—
Proficiency, Inc. (0.14%)		Preferred Stock			2,750	750

Total Proficiency, Inc.					4,343	2,247

PSS Systems, Inc. (0.65%)⁽⁴⁾	Software	Senior Debt Matures March 2010 Interest rate 10.74%	$	3,500	3,467	3,467
		Preferred Stock Warrants			51	108

Total PSS Systems, Inc.					3,518	3,575

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Savvion, Inc. (1.14%)⁽⁴⁾	Software	Senior Debt Matures March 2009 Interest rate Prime + 3.45%	$	1,043	1,043	1,043
		Revolving Line of Credit Matures March 2008 Interest rate Prime + 3.45%	$	3,189	3,188	3,188
		Revolving Line of Credit Matures March 2008 Interest rate Prime + 2.00%	$	1,797	1,797	1,797
		Preferred Stock Warrants			52	251

Total Savvion, Inc.					6,080	6,279
Sportvision, Inc. (0.01%)	Software	Preferred Stock Warrants			39	59

Total Sportvision, Inc.					39	59
Talisma Corp. (0.08%)⁽⁴⁾	Software	Preferred Stock Warrants			49	422

Total Talisma Corp.					49	422
WildTangent, Inc. (0.39%)	Software	Senior Debt Matures March 2011 Interest rate 9.65%	$	2,000	1,788	1,788
		Preferred Stock Warrants			238	339

Total WildTangent, Inc.					2,026	2,127

Total Software (6.32%)					35,236	34,705

Agami Systems, Inc. (0.84%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures August 2009 Interest rate 11.00%	$	4,433	4,394	4,394
		Preferred Stock Warrants			86	218

Total Agami Systems, Inc.					4,480	4,612
Luminus Devices, Inc. (2.18%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures August 2009 Interest rate 12.8750%	$	11,792	11,354	11,354
		Preferred Stock Warrants			183	135
		Preferred Stock Warrants			84	74
		Preferred Stock Warrants			334	420

Total Luminus Devices, Inc.					11,955	11,983
Maxvision Holding, LLC. (2.05%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures April 2012 Interest rate Prime + 5.50%	$	5,038	4,956	4,956
		Senior Debt Matures April 2012 Interest rate Prime + 2.25%	$	5,500	5,500	5,500
		Revolving Line of Credit Matures September 2012 Interest rate Prime +2.25%	$	821	821	821
Maxvision Holding, LLC. (0.01%)⁽⁴⁾		Preferred Stock			81	81

Total Maxvision Holding, LLC					11,358	11,358
NetEffect, Inc. (0.43%)	Electronics & Computer Hardware	Senior Debt Matures May 2010 Interest rate 11.95%	$	2,282	2,244	2,244
		Preferred Stock Warrants			47	120

Total NetEffect, Inc.					2,291	2,364

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Shocking Technologies, Inc. (0.05%)	Electronics & Computer Hardware	Senior Debt Matures December 2010 Interest rate 9.75%	$	250	192	192
		Prefered Stock Warrants			63	95

Total Shocking Technologies, Inc.					255	287
SiCortex, Inc. (1.83%)	Electronics & Computer Hardware	Senior Debt Matures December 2010 Interest rate 10.95%	$	9,743	9,615	9,615
		Preferred Stock Warrants			164	446

Total SiCortex, Inc.					9,779	10,061
Spatial Photonics, Inc. (0.71%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures May 2011 Interest rate 10.75%	$	3,751	3,634	3,634
		Preferred Stock Warrants			130	274
Spatial Photonics, Inc. (0.09%)		Preferred Stock			500	500

Total Spatial Photonics Inc.					4,264	4,408
VeriWave, Inc. (0.88%)	Electronics & Computer Hardware	Senior Debt Matures May 2010 Interest rate 10.75%	$	3,747	3,710	3,710
		Revolving Line of Credit Matures May 2008 Interest rate Prime +1.00%	$	990	990	990
		Preferred Stock Warrants			54	128

Total VeriWave, Inc.					4,754	4,828
ViDeOnline Communications, Inc. (0.05%)⁽⁴⁾	Electronics & Computer Hardware	Preferred Stock Warrants			298	289

Total ViDeOnline Communications, Inc.					298	289

Total Electronics & Computer Hardware (9.12%)					49,434	50,190

Aegerion Pharmaceuticals, Inc. (1.66%)⁽⁴⁾	Specialty Pharmaceuticals	Senior Debt Matures August 2010 Interest rate Prime + 2.50%	$	8,924	8,877	8,877
		Preferred Stock Warrants			69	237
Aegerion Pharmaceuticals, Inc. (0.18%)⁽⁴⁾		Preferred Stock			1,000	1,000

Total Aegerion Pharmaceuticals, Inc.					9,946	10,114
Panacos Pharmaceuticals, Inc. (3.55%)⁽⁴⁾	Specialty Pharmaceuticals	Senior Debt Matures January 2011 Interest rate 11.20%	$	20,000	19,332	19,332
		Common Stock Warrants			876	132
Panacos Pharmaceuticals, Inc. (0.03%)		Common Stock			410	140

Total Panacos Pharmaceuticals, Inc.					20,618	19,604
Quatrx Pharmaceuticals Company (2.40%)⁽⁴⁾	Specialty Pharmaceuticals	Senior Debt Matures January 2010 Interest rate Prime + 3.00%	$	13,135	13,038	13,038
		Preferred Stock Warrants			220	144
Quatrx Pharmaceuticals Company (0.14%)		Preferred Stock			750	750

Total Quatrx Pharmaceuticals Company					14,008	13,932

Total Specialty Pharmaceuticals (7.96%)					44,572	43,650

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Annie's, Inc. (0.73%)	Consumer & Business Products	Senior Debt Matures April 2011 Interest rate LIBOR + 6.50%	$	4,000	3,679	3,679
		Preferred Stock Warrants			321	323

Total Annie's, Inc.					4,000	4,002
BabyUniverse, Inc. (0.03%)⁽⁴⁾	Consumer & Business Products	Common Stock			267	145

Total BabyUniverse, Inc.					267	145
Market Force Information, Inc. (0.01%)⁽⁴⁾	Consumer & Business Products	Preferred Stock Warrants			24	53
Market Force Information, Inc. (0.09%)		Preferred Stock			500	500

Total Market Force Information, Inc.					524	553
Wageworks, Inc. (0.10%)⁽⁴⁾	Consumer & Business Products	Preferred Stock Warrants			252	562
Wageworks, Inc. (0.04%)		Preferred Stock			250	209

Total Wageworks, Inc.					502	771

Total Consumer & Business Products (1.00%)					5,293	5,471

Custom One Design, Inc. (0.19%)	Semiconductors	Senior Debt Matures September 2010 Interest rate 11.50%	$	1,000	985	985
		Common Stock Warrants			18	53

Total Custom One Design, Inc.					1,003	1,038
iWatt Inc. (0.84%)⁽⁴⁾	Semiconductors	Senior Debt Matures September 2009 Interest rate Prime + 2.75%	$	1,264	1,130	1,130
		Revolving Line of Credit Matures September 2007 Interest rate Prime + 1.75%	$	3,235	3,235	3,235
		Preferred Stock Warrants			46	114
		Preferred Stock Warrants			51	59
		Preferred Stock Warrants			73	73

Total iWatt Inc.					4,535	4,611
NEXX Systems, Inc. (2.31%)⁽⁴⁾	Semiconductors	Senior Debt Matures February 2010 Interest rate Prime + 2.75%	$	4,098	3,992	3,992
		Revolving Line of Credit Matures December 2009 Interest rate Prime + 1.75%	$	5,000	5,000	5,000
		Revolving Line of Credit Matures December 2009 Interest rate Prime + 3.75%	$	3,000	3,000	3,000
		Preferred Stock Warrants			165	670

Total NEXX Systems, Inc.					12,157	12,662
Quartics, Inc. (0.84%)⁽⁴⁾	Semiconductors	Senior Debt Matures August 2010 Interest rate 11.05%	$	300	259	259
		Senior Debt Matures August 2010 Interest rate 8.80%	$	4,200	4,200	4,200
		Preferred Stock Warrants			53	142

Total Quartics, Inc.					4,512	4,601

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Solarflare Communications, Inc. (0.15%)	Semiconductors	Senior Debt Matures August 2010 Interest rate 11.75%	$	625	560	560
		Preferred Stock Warrants			83	241
Solarflare Communications, Inc. (0.09%)		Preferred Stock			500	500

Total Solarflare Communications, Inc.					1,143	1,301

Total Semiconductors (4.42%)					23,350	24,213

Labopharm USA, Inc. (2.91%)⁽⁵⁾	Drug Delivery	Senior Debt Matures July 2008 Interest rate 11.95%	$	15,000	14,587	14,587
		Common Stock Warrants			458	1,363

Total Labopharm USA, Inc.					15,045	15,950
Transcept Pharmaceuticals, Inc. (1.16%)⁽⁴⁾	Drug Delivery	Senior Debt Matures October 2009 Interest rate 10.69%	$	6,119	6,077	6,077
		Preferred Stock Warrants			36	116
		Preferred Stock Warrants			51	162
Transcept Pharmaceuticals, Inc. (0.09%)⁽⁴⁾		Preferred Stock			500	500

Total Transcept Pharmaceuticals, Inc.					6,664	6,855

Total Drug Delivery (4.16%)					21,709	22,805

BARRX Medical, Inc. (0.14%)	Therapeutic
		Preferred Stock			1,500	758

Total BARRX Medical, Inc.					1,500	758
EKOS Corporation (1.00%)	Therapeutic	Senior Debt Matures November 2010 Interest rate Prime + 2.00%	$	5,000	4,733	4,733
		Preferred Stock Warrants			175	495
		Preferred Stock Warrants			153	263

Total EKOS Corporation					5,061	5,491
Gynesonics, Inc. (0.09%)⁽⁴⁾	Therapeutic	Preferred Stock Warrants			18	507
Gynesonics, Inc. (0.05%)		Preferred Stock			250	250

Total Gynesonics, Inc.					268	757
Novasys Medical, Inc. (1.16%)⁽⁴⁾	Therapeutic	Senior Debt Matures January 2010 Interest rate 9.70%	$	6,614	6,370	6,370

Total Novasys Medical, Inc.					6,370	6,370
Power Medical Interventions, Inc. (0.00%)	Therapeutic	Common Stock Warrants			21	22

Total Power Medical Interventions, Inc.					21	22

Total Therapeutic (2.44%)					13,220	13,398

Invoke Solutions, Inc. (0.36%)⁽⁴⁾	Internet Consumer & Business Services	Senior Debt Matures December 2008 Interest rate Prime + 3.75%	$	1,902	1,862	1,862
		Preferred Stock Warrants			56	98
		Preferred Stock Warrants			26	30

Total Invoke Solutions, Inc.					1,944	1,990
Prism Education Group Inc. (0.38%)	Internet Consumer & Business Services	Senior Debt Matures December 2010 Interest rate 11.25%	$	2,000	1,967	1,967
		Preferred Stock Warrants			43	97

Total Prism Education Group Inc.					2,010	2,064

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
RazorGator Interactive Group, Inc. (0.94%)	Internet Consumer & Business Services	Revolving Line of Credit Matures January 2009 Interest rate Prime + 1.80%	$	1,000	1,000	1,000
		Preferred Stock Warrants			13	3,834
		Preferred Stock Warrants			28	319
RazorGator Interactive Group, Inc. (0.90%)		Preferred Stock			1,000	4,935

Total RazorGator Interactive Group, Inc.					2,041	10,088
Serious USA, Inc. (0.55%)	Internet Consumer & Business Services	Senior Debt Matures February 2011 Interest rate Prime + 3.00%	$	2,450	2,377	2,377
		Revolving Line of Credit Matures July 2008 Interest rate Prime + 2.00%	$	654	654	654
		Preferred Stock Warrants			93	8

Total Serious USA, Inc.					3,124	3,039

Total Internet Consumer & Business Services (3.13%)					9,119	17,181

Lilliputian Systems, Inc. (1.20%)⁽⁴⁾	Energy	Senior Debt Matures March 2010 Interest rate 9.75%	$	6,495	6,472	6,472
		Preferred Stock Warrants			48	100

Total Lilliputian Systems, Inc.					6,520	6,572

Total Energy (1.20%)					6,520	6,572

Active Response Group, Inc. (1.84%)	Information Services	Senior Debt Matures March 2012 Interest rate LIBOR + 6.55%	$	10,000	9,892	9,892
		Preferred Stock Warrants			92	119
		Common Stock Warrants			46	89

Total Active Response Group, Inc.					10,030	10,100
Buzznet, Inc. (0.15%)	Information Services	Senior Debt Matures March 2010 Interest rate 10.25%	$	827	821	821
		Preferred Stock Warrants			9	14
Buzznet, Inc. (0.05%)		Preferred Stock			250	250

Total Buzznet, Inc.					1,080	1,085
hi5 Networks, Inc. (0.93%)	Information Services	Senior Debt Matures January 2011 Interest rate Prime + 2.5%	$	3,000	3,000	3,000
		Revolving Line of Credit Matures July 2011 Interest rate 6.50%	$	987	987	987
		Revolving Line of Credit Matures June 2011 Interest rate 7.75%	$	1,000	810	810
		Preferred Stock Warrants			213	307

Total hi5 Networks, Inc.					5,010	5,104

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Jab Wireless, Inc. (1.48%)	Information Services	Senior Debt Matures January 2012 Interest rate 10.75%	$	3,097	2,856	2,856
		Senior Debt Matures January 2012 Interest rate 10.00%	$	1,903	1,903	1,903
		Senior Debt Matures January 2012 Interest rate 9.50%	$	3,000	3,000	3,000
		Preferred Stock Warrants			265	378

Total Jab Wireless, Inc.					8,024	8,137
Solutionary, Inc. (1.41%)	Information Services	Senior Debt Matures June 2010 Interest rate LIBOR + 5.50%	$	5,547	5,504	5,504
		Revolving Line of Credit Matures June 2010 Interest rate LIBOR + 5.00%	$	1,516	1,516	1,516
		Revolving Line of Credit Matures June 2010 Interest rate LIBOR + 5.50%	$	501	501	501
		Preferred Stock Warrants			94	225
		Preferred Stock Warrants			2	6
Solutionary, Inc. (0.05%)		Preferred Stock			250	250

Total Solutionary, Inc.					7,867	8,002
The Generation Networks, Inc. (2.97%)	Information Services	Senior Debt Matures March 2012 Interest rate Prime + 4.50%	$	16,500	16,316	16,316
The Generation Networks, Inc. (0.09%)		Preferred Stock			500	500

Total The Generation Networks, Inc.					16,816	16,816
Wallop Technologies, Inc. (0.04%)	Information Services	Senior Debt Matures March 2010 Interest rate 10.00%	$	202	197	197
		Preferred Stock Warrants			7	13

Total Wallop Technologies, Inc.					204	210
Zeta Interactive Corporation (2.75%) ⁽⁴⁾	Information Services	Senior Debt Matures November 2011 Interest rate Prime +2.00%	$	7,000	6,843	6,843
		Senior Debt Matures November 2011 Interest rate Prime +3.00%	$	8,000	8,000	8,000
		Preferred Stock Warrants			172	236
Zeta Interactive Corporation (0.09%)		Preferred Stock			500	500

Total Zeta Interactive Corporation					15,515	15,579

Total Information Services (11.85%)					64,546	65,033

Novadaq Technologies, Inc. (0.18%)	Diagnostic	Common Stock			1,626	979

Total Novadaq Technologies, Inc.					1,626	979
Optiscan Biomedical, Corp. (0.02%)⁽⁴⁾	Diagnostic	Senior Debt Matures March 2008 Interest rate 15.00%	$	52	52	52
		Preferred Stock Warrants			80	63
Optiscan Biomedical, Corp. (0.13%)		Preferred Stock			1,000	722

Total Optiscan Biomedical, Corp.					1,132	837

Total Diagnostic (0.33%)					2,758	1,816

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Guava Technologies, Inc. (1.00%)⁽⁴⁾	Biotechnology Tools	Senior Debt Matures July 2009 Interest rate Prime + 3.25%	$	3,725	3,393	3,393
		Convertible Debt			250	250
		Revolving Line of Credit Matures December 2007 Interest rate Prime + 2.00%	$	1,575	1,575	1,575
		Preferred Stock Warrants			105	220
		Preferred Stock Warrants			68	36

Total Guava Technologies, Inc.					5,391	5,474
Kamada, Inc. (2.03%)⁽⁵⁾	Biotechnology Tools	Senior Debt Matures November 2011 Interest rate 10.60%	$	11,000	10,572	10,572
		Common Stock Warrants			428	555

Total Kamada, Inc.					11,000	11,127
NuGEN Technologies, Inc. (0.36%)	Biotechnology Tools	Senior Debt Matures March 2010 Interest rate 11.70%	$	1,706	1,649	1,649
		Preferred Stock Warrants			45	316
		Preferred Stock Warrants			33	30
NuGEN Technologies, Inc. (0.09%)		Preferred Stock			500	500

Total NuGEN Technologies, Inc.					2,227	2,495

Total Biotechnology Tools (3.48%)					18,618	19,096

Crux Biomedical, Inc. (0.28%)	Surgical Devices	Senior Debt Matures October 2010 Interest rate Prime + 1.75%	$	1,500	1,470	1,470
		Preferred Stock Warrants			37	63
Crux Biomedical, Inc. (0.05%)		Preferred Stock			250	250

Total Crux Biomedical, Inc.					1,757	1,783
Diomed Holdings, Inc. (1.09%)⁽⁴⁾	Surgical Devices	Senior Debt Matures July 2010 Interest rate 10.95%%	$	6,000	5,966	5,966
		Common Stock Warrants			43	—

Total Diomed Holdings, Inc.					6,009	5,966
Light Science Oncology, Inc. (0.03%)	Surgical Devices	Preferred Stock Warrants			99	173

Total Light Science Oncology, Inc.					99	173

Total Surgical Devices (1.45%)					7,865	7,922

Glam Media, Inc. (0.91%)	Media/Content/ Info	Revolving Line of Credit Matures April 2009 Interest rate Prime + 1.25%	$	5,000	4,518	4,518
Total Glam Media, Inc.		Preferred Stock Warrants			482	486

					5,000	5,004
Waterfront Media Inc. (1.12%)⁽⁴⁾	Media/Content/ Info	Senior Debt Matures December 2010 Interest rate Prime + 3.00%	$	3,731	3,697	3,697
		Revolving Line of Credit Matures March 2008 Interest rate Prime + 1.25%	$	2,000	2,000	2,000
		Preferred Stock Warrants			60	438
Waterfront Media Inc. (0.18%)		Preferred Stock			1,000	1,000

Total Waterfront Media Inc.					6,757	7,135

Total Media/Content/Info (2.21%)					11,757	12,139

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(continued)

(dollars in thousands)

Portfolio Company

Industry

Type of Investment⁽¹⁾

Principal
Amount

Cost⁽²⁾

Value⁽³⁾

Total Investments (96.69%)

520,808

530,763

*	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 $20,401, $10,446 and $9,955, respectively.

(3)

Except for warrants in eight publicly traded companies and common stock in four publicly traded companies, all investments are restricted at March 31, 2008 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 $1.1 million at March 31, 2008 and is included in accrued liabilities and reduces the unrealized gain recognized by the Company at March 31, 2008.

(5)	Non-U.S. company or the company's principal place of business is outside the United States.

(6)	Affiliate investment that is defined under the Investment Company Act of 1940 as companies in which HTGC owns as least 5% but not more than 25% of the voting securities of the company. All other investments are less than 5% owned.

See notes to consolidated financial statements (unaudited).

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾		Value⁽³⁾
Acceleron Pharmaceuticals, Inc. (0.94%)*⁽⁴⁾	Drug Discovery	Senior Debt Matures June 2009 Interest rate 10.25%	$	3,237	$	3,184	$	3,184
		Preferred Stock Warrants				69		472
		Preferred Stock Warrants				35		109
Acceleron Pharmaceuticals, Inc. (0.45%)		Preferred Stock				1,243		1,805

Total Acceleron Pharmaceuticals, Inc.						4,531		5,569

Aveo Pharmaceuticals, Inc. (3.06%)⁽⁴⁾	Drug Discovery	Senior Debt Matures September 2009 Interest rate 10.75%	$	12,078		11,984		11,984
		Preferred Stock Warrants				144		204
		Preferred Stock Warrants				46		74

Total Aveo Pharmaceuticals, Inc.						12,174		12,262

Elixir Pharmaceuticals, Inc. (3.58%)⁽⁴⁾	Drug Discovery	Senior Debt Matures June 2010 Interest rate Prime + 2.45%	$	13,997		13,836		13,836
		Preferred Stock Warrants				217		510

Total Elixir Pharmaceuticals, Inc.						14,053		14,347

EpiCept Corporation (1.77%)⁽⁴⁾	Drug Discovery	Senior Debt Matures August 2009 Interest rate 11.70%	$	7,307		6,878		6,878
		Common Stock Warrants				423		215

Total EpiCept Corporation						7,301		7,092

Horizon Therapeutics, Inc. (0.30%)⁽⁴⁾	Drug Discovery	Senior Debt Matures April 2011 Interest rate 8.75%	$	12,000		1,022		1,022
		Preferred Stock Warrants				179		179

Total Horizon Therapeutics, Inc.						1,201		1,201

Inotek Pharmaceuticals Corp. (0.37%)	Drug Discovery	Preferred Stock				1,500		1,500

Total Inotek Pharmaceuticals Corp.						1,500		1,500

Memory Pharmaceticals Corp. (3.48%)⁽⁴⁾	Drug Discovery	Senior Debt Matures February 2011 Interest rate 11.45%	$	15,000		13,608		13,608
		Common Stock Warrants				1,751		341

Total Memory Pharmaceticals Corp.						15,359		13,949

Merrimack Pharmaceuticals, Inc. (0.37%)⁽⁴⁾	Drug Discovery	Convertible Senior Debt Matures October 2008 Interest rate 11.15%	$	1,024		994		994
		Preferred Stock Warrants				155		502
Merrimack Pharmaceuticals, Inc. (0.70%)		Preferred Stock				2,000		2,787

Total Merrimack Pharmaceuticals, Inc.						3,149		4,283

Neosil, Inc. (1.53%)	Drug Discovery	Senior Debt Matures May 2010 Interest rate 10.75%	$	6,000		5,936		5,936
		Preferred Stock Warrants				83		178

Total Neosil, Inc.						6,018		6,113

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Paratek Pharmaceuticals, Inc. (0.64%)⁽⁴⁾	Drug Discovery	Senior Debt Matures June 2008 Interest rate 11.10%	$	2,587	2,568	2,568
		Preferred Stock Warrants			137	—
Paratek Pharmaceuticals, Inc. (0.14%)		Preferred Stock			550	550

Total Paratek Pharmaceuticals, Inc.					3,255	3,118

Portola Pharmaceuticals, Inc. (3.80%)⁽⁴⁾	Drug Discovery	Senior Debt Matures September 2010 Interest rate Prime + 1.75%	$	15,000	14,894	14,894
		Preferred Stock Warrants			152	351

Total Portola Pharmaceuticals, Inc.					15,046	15,245

Sirtris Pharmaceuticals, Inc. (2.46%)⁽⁴⁾	Drug Discovery	Senior Debt Matures April 2011 Interest rate 10.60%	$	9,079	9,022	9,022
		Common Stock Warrants			89	818
Sirtris Pharmaceuticals, Inc. (0.19%)		Common Stock			500	776

Total Sirtris Pharmaceuticals, Inc.					9,610	10,616

Total Drug Discovery (23.78%)					93,198	95,294

E-band Communications, Inc. (0.50%)⁽⁶⁾	Communications & Networking	Preferred Stock			2,000	2,000

Total E-Band Communications, Inc.					2,000	2,000

IKANO Communications, Inc. (5.09%)⁽⁴⁾	Communications & Networking	Senior Debt Matures March 2011 Interest rate 11.00%	$	19,983	19,983	19,983
		Preferred Stock Warrants			45	163
		Preferred Stock Warrants			72	256

Total IKANO Communications, Inc.					20,101	20,402

Ping Identity Corporation (0.40%)⁽⁴⁾	Communications & Networking	Senior Debt Matures June 2009 Interest rate 11.50%	$	1,630	1,608	1,608
		Preferred Stock Warrants			52	10

Total Ping Identity Corporation					1,660	1,619

Purcell Systems, Inc. (2.33%)	Communications & Networking	Senior Debt Matures June 2009 Interest rate Prime + 3.50%	$	2,224	3,126	3,126
		Revolving Line of Credit Matures June 2008 Interest rate Prime + 2.00%	$	7,000	6,000	6,000
		Preferred Stock Warrants			123	198

Total Purcell Systems, Inc.					9,248	9,324

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Rivulet Communications, Inc. (0.83%)⁽⁴⁾	Communications & Networking	Senior Debt Matures September 2009 Interest rate 10.60%	$	3,500	3,272	3,272
		Preferred Stock Warrants			51	64
Rivulet Communications, Inc. (0.06%)		Preferred Stock			250	250

Total Rivulet Communications, Inc.					3,572	3,585

Seven Networks, Inc. (2.89%)⁽⁴⁾	Communications & Networking	Senior Debt Matures April 2010 Interest rate Prime + 3.75%	$	9,419	9,291	9,291
		Revolving Line of Credit Matures April 2008 Interest rate Prime + 3.00%	$	2,000	2,000	2,000
		Preferred Stock Warrants			174	296

Total Seven Networks, Inc.					11,465	11,587

Simpler Networks Corp. (1.01%)⁽⁴⁾	Communications & Networking	Senior Debt Matures July 2009 Interest rate 11.75%	$	4,112	4,046	4,046
		Preferred Stock Warrants			160	—
Simpler Networks Corp. (0.00%)		Preferred Stock			500	—

Total Simpler Networks Corp.					4,706	4,046

Stoke, Inc. (0.57%)	Communications & Networking	Senior Debt Matures August 2010 Interest rate 10.55%	$	2,250	2,204	2,204
		Preferred Stock Warrants			53	79

Total Stoke, Inc.					2,257	2,283

Tectura Corporation (5.26%)⁽⁴⁾	Communications & Networking	Senior Debt Matures March 2012 Interest rate LIBOR + 6.15%	$	9,051	9,007	9,007
		Revolving Line of Credit Matures March 2008 Interest rate LIBOR + 5.15%	$	12,000	12,000	12,000
		Preferred Stock Warrants			51	82

Total Tectura Corporation					21,059	21,090

Teleflip, Inc. (0.25%)	Communications & Networking	Senior Debt Matures May 2010 Interest rate Prime + 2.75%	$	1,000	992	992
		Preferred Stock Warrants			11	9

Total Teleflip, Inc.					1,002	1,001

Wireless Channels, Inc. (3.02%)	Communications & Networking	Senior Debt -Second Lien Matures April 2010 Interest rate 9.25%	$	11,949	1,719	1,719
		Senior Debt -Second Lien Matures April 2010 Interest rate Prime + 4.25%	$	10,118	10,118	10,118
		Preferred Stock Warrants			155	241

Total Wireless Channels, Inc.					11,992	12,078

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Zayo Bandwith, Inc. (6.24%)⁽⁴⁾	Communications & Networking	Senior Debt -Second Lien Matures April 2013 Interest rate Prime + 3.50%	$	25,000	25,000	25,000
					—	—

Total Zayo Bandwith, Inc.					25,000	25,000

Total Communications & Networking (28.45%)					114,062	114,014

Atrenta, Inc. (0.98%)⁽⁴⁾	Software	Senior Debt Matures June 2009 Interest rate 11.50%	$	3,680	3,638	3,638
		Preferred Stock Warrants			102	220
		Preferred Stock Warrants			34	72
Atrenta, Inc. (0.06%)		Preferred Stock			250	250

Total Atrenta, Inc.					4,024	4,181

Blurb, Inc. (0.63%)	Software	Senior Debt Matures December 2009 Interest rate 9.55%	$	2,500	2,482	2,482
		Preferred Stock Warrants			25	43

Total Blurb, Inc.					2,507	2,526

Bullhorn, Inc. (0.25%)⁽⁴⁾	Software	Senior Debt Matures March 2010 Interest rate Prime + 3.75%	$	1,000	959	959
		Preferred Stock Warrants			43	41

Total Bullhorn, Inc.					1,002	1,000

Cittio, Inc. (0.25%)	Software	Senior Debt Matures April 2010 Interest rate 11.00%	$	1,000	1,000	1,000

Total Cittio, Inc.					1,000	1,000

Compete, Inc. (0.63%)⁽⁴⁾	Software	Senior Debt Matures March 2009 Interest rate Prime + 3.50%	$	2,409	2,384	2,384
		Preferred Stock Warrants			62	136

Total Compete, Inc.					2,446	2,520

Forescout Technologies, Inc. (0.64%)⁽⁴⁾	Software	Senior Debt Matures August 2009 Interest rate 11.15%	$	1,998	1,970	1,970
		Revolving Line of Credit Matures August 2007 Interest rate Prime + 1.49%	$	500	500	500
		Preferred Stock Warrants			58	76

Total Forescout Technologies, Inc.					2,528	2,546

GameLogic, Inc. (0.74%)⁽⁴⁾	Software	Senior Debt Matures December 2009 Interest rate Prime + 4.125%	$	3,000	2,887	2,887
		Preferred Stock Warrants			92	91

Total GameLogic, Inc.					2,980	2,978

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Gomez, Inc. (0.15%)⁽⁴⁾	Software	Senior Debt Matures December 2007 Interest rate 12.25%	$	98	98	98
		Preferred Stock Warrants			35	512

Total Gomez, Inc.					133	611

HighRoads, Inc. (0.01%)⁽⁴⁾	Software	Preferred Stock Warrants			44	58

Total HighRoads, Inc.					44	58

Intelliden, Inc. (0.60%)	Software	Senior Debt Matures February 2010 Interest rate 13.20%	$	2,360	2,349	2,349
		Preferred Stock Warrants			18	60

Total Intelliden, Inc.					2,367	2,409

Oatsystems, Inc. (1.08%)⁽⁴⁾	Software	Senior Debt Matures September 2009 Interest rate 11.00%	$	4,374	4,336	4,336
		Preferred Stock Warrants			67	4

Total Oatsystems, Inc.					4,403	4,340

Proficiency, Inc. (0.38%)⁽⁴⁾⁽⁶⁾	Software	Senior Debt Matures July 2008 Interest rate 12.00%	$	1,500	1,497	1,497
		Preferred Stock Warrants			96	—
Proficiency, Inc. (0.19%)		Preferred Stock			2,750	750

Total Proficiency, Inc.					4,343	2,247

PSS Systems, Inc. (0.89%)⁽⁴⁾	Software	Senior Debt Matures March 2010 Interest rate 10.74%	$	3,500	3,463	3,463
		Preferred Stock Warrants			51	86

Total PSS Systems, Inc.					3,514	3,549

Savvion, Inc. (1.62%)⁽⁴⁾	Software	Senior Debt Matures March 2009 Interest rate Prime + 3.45%	$	1,268	1,268	1,268
		Revolving Line of Credit Matures March 2008 Interest rate Prime + 2.00%	$	3,000	3,000	3,000
		Revolving Line of Credit Matures March 2008 Interest rate Prime + 3.45%	$	1,985	1,985	1,985
		Preferred Stock Warrants			52	244


Total Savvion, Inc.					6,305	6,496

Sportvision, Inc. (0.01%)	Software	Preferred Stock Warrants			39	50

Total Sportvision, Inc.					39	50

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Talisma Corp. (0.11%)⁽⁴⁾	Software	Preferred Stock Warrants			49	449

Total Talisma Corp.					49	449

WildTangent, Inc. (0.50%)⁽⁴⁾	Software	Senior Debt Matures March 2011 Interest rate 9.65%	$	2,000	1,766	1,766
		Preferred Stock Warrants			238	238

Total WildTangent, Inc.					2,004	2,004

Total Software (9.72%)					39,688	38,963

Agami Systems, Inc. (1.30%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures August 2009 Interest rate 11.00%	$	5,103	5,056	5,056
		Preferred Stock Warrants			86	137

Total Agami Systems, Inc.					5,141	5,193

Luminus Devices, Inc. (2.95%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures August 2009 Interest rate 12.50%	$	15,115	11,318	11,318
		Preferred Stock Warrants			183	113
		Preferred Stock Warrants			84	61
		Preferred Stock Warrants			334	334

Total Luminus Devices, Inc.					11,919	11,826

Maxvision Holding, LLC. (2.87%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures May 2012 Interest rate Prime + 5.50%	$	5,012	5,012	5,012
		Senior Debt Matures May 2012 Interest rate Prime + 2.25%	$	5,500	5,000	5,000
		Revolving Line of Credit Matures September 2012 Interest rate Prime +2.25%	$	972	1,472	1,472

Total Maxvision Holding, LLC					11,484	11,484

NetEffect, Inc. (0.61%)	Electronics & Computer Hardware	Senior Debt Matures May 2010 Interest rate 11.95%	$	2,431	2,396	2,396
		Preferred Stock Warrants			44	50

Total NetEffect, Inc.					2,440	2,446

Shocking Technologies, Inc. (0.02%)	Electronics & Computer Hardware	Preferred Stock Warrants			63	63

Total Shocking Technologies, Inc.					63	63

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
SiCortex, Inc. (2.52%)	Electronics & Computer Hardware	Senior Debt Matures December 2010 Interest rate 10.95%	$	10,000	9,861	9,861
		Preferred Stock Warrants			164	230

Total SiCortex, Inc.					10,025	10,091

Spatial Photonics, Inc. (0.93%)⁽⁴⁾	Electronics & Computer Hardware	Senior Debt Matures May 2011 Interest rate 10.75%	$	3,751	3,623	3,623
		Preferred Stock Warrants			130	126
Spatial Photonics, Inc. (0.12%)		Preferred Stock			500	500

Total Spatial Photonics Inc.					4,253	4,249

VeriWave, Inc. (1.35%)	Electronics & Computer Hardware	Senior Debt Matures May 2010 Interest rate 10.75%	$	4,250	5,340	5,340
		Preferred Stock Warrants			54	85

Total VeriWave, Inc.					5,394	5,425

ViDeOnline Communications, Inc. (0.04%)⁽⁴⁾	Electronics & Computer Hardware	Preferred Stock Warrants			298	176

Total ViDeOnline Communications, Inc.					298	176

Total Electronics & Computer Hardware (12.71%)					51,017	50,953

Aegerion Pharmaceuticals, Inc. (2.48%)⁽⁴⁾	Specialty Pharmaceuticals	Senior Debt Matures August 2010 Interest rate Prime + 2.50%	$	9,735	9,682	9,682
		Preferred Stock Warrants			69	243
Aegerion Pharmaceuticals, Inc. (0.25%)		Preferred Stock			1,000	1,000

Total Aegerion Pharmaceuticals, Inc.					10,752	10,925

Panacos Pharmaceuticals, Inc. (4.84%)⁽⁴⁾	Specialty Pharmaceuticals	Senior Debt Matures January 2011 Interest rate 11.20%	$	20,000	19,270	19,270
		Common Stock Warrants			876	137
Panacos Pharmaceuticals, Inc. (0.04%)		Common Stock			410	158

Total Panacos Pharmaceuticals, Inc.					20,556	19,564

Quatrx Pharmaceuticals Company (3.60%)⁽⁴⁾	Specialty Pharmaceuticals	Senior Debt Matures January 2010 Interest rate Prime + 3.00%	$	14,324	14,214	14,214
		Preferred Stock Warrants			220	193
Quatrx Pharmaceuticals Company (0.19%)		Preferred Stock			750	750

Total Quatrx Pharmaceuticals Company					15,184	15,157

Total Specialty Pharmaceuticals (11.40%)					46,492	45,646

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
BabyUniverse, Inc. (0.05%)⁽⁴⁾	Consumer & Business Products	Common Stock			267	219

Total BabyUniverse, Inc.					267	219

Market Force Information, Inc. (0.34%)⁽⁴⁾	Consumer & Business Products	Senior Debt Matures May 2009 Interest rate 10.45%	$	1,294	1,284	1,284
		Preferred Stock Warrants			24	92
Market Force Information, Inc. (0.12%)		Preferred Stock			500	500

Total Market Force Information, Inc.					1,807	1,875

Wageworks, Inc. (0.12%)⁽⁴⁾	Consumer & Business Products	Preferred Stock Warrants			252	513
Wageworks, Inc. (0.05%)		Preferred Stock			250	209

Total Wageworks, Inc.					502	722

Total Consumer & Business Products (0.70%)					2,576	2,817


Ageia Technologies, Inc. (1.25%)⁽⁴⁾	Semiconductors	Senior Debt Matures August 2008 Interest rate 10.25%	$	5,047	4,904	4,904
		Convertible Debt			124	124
		Preferred Stock Warrants			99	—
Ageia Technologies, Inc. (0.00%)		Preferred Stock			500	—

Total Ageia Technologies					5,627	5,028

Custom One Design, Inc. (0.26%)	Semiconductors	Senior Debt Matures September 2010 Interest rate 11.50%	$	1,000	984	984
		Common Stock Warrants			18	43

Total Custom One Design, Inc.					1,002	1,027

iWatt Inc. (1.19%)⁽⁴⁾	Semiconductors	Senior Debt Matures September 2009 Interest rate Prime + 2.75%	$	1,457	1,382	1,382
		Revolving Line of Credit Matures September 2007 Interest rate Prime + 1.75%	$	3,235	3,235	3,235
		Preferred Stock Warrants			46	100
		Preferred Stock Warrants			51	51

Total iWatt Inc.					4,714	4,769

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
NEXX Systems, Inc. (3.26%)⁽⁴⁾	Semiconductors	Senior Debt Matures February 2010 Interest rate Prime + 2.75%	$	4,557	4,438	4,438
		Revolving Line of Credit Matures December 2009 Interest rate Prime + 1.75%	$	5,000	5,000	5,000
		Revolving Line of Credit Matures December 2009 Interest rate Prime + 3.75%	$	3,000	3,000	3,000
		Preferred Stock Warrants			165	623

Total NEXX Systems, Inc.					12,602	13,061

Quartics, Inc. (0.09%)⁽⁴⁾	Semiconductors	Senior Debt Matures August 2010 Interest rate 11.05%	$	300	254	254
		Preferred Stock Warrants			53	114

Total Quartics, Inc.					307	369

Solarflare Communications, Inc. (0.19%)	Semiconductors	Senior Debt Matures August 2010 Interest rate 11.75%	$	625	553	553
		Preferred Stock Warrants			83	194
Solarflare Communications, Inc. (0.12%)		Preferred Stock			500	500

Total Solarflare Communications, Inc.					1,137	1,247

Total Semiconductors (6.36%)					25,390	25,501


Labopharm USA, Inc. (3.74%)⁽⁴⁾⁽⁵⁾	Drug Delivery	Senior Debt Matures July 2008 Interest rate 11.95%	$	15,000	14,547	14,547
		Preferred Stock Warrants			458	454

Total Labopharm USA, Inc.					15,006	15,001

Transcept Pharmaceuticals, Inc. (1.80%)⁽⁴⁾	Drug Delivery	Senior Debt Matures October 2009 Interest rate 10.69%	$	6,993	6,944	6,944
		Preferred Stock Warrants			36	107
		Preferred Stock Warrants			51	173
Transcept Pharmaceuticals, Inc. (0.13%)		Preferred Stock			500	500

Total Transcept Pharmaceuticals, Inc.					7,530	7,724

Total Drug Delivery (5.67%)					22,536	22,725


BARRX Medical, Inc. (0.19%)	Therapeutic	Preferred Stock			1,500	758

Total BARRX Medical, Inc.					1,500	758

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
EKOS Corporation (1.28%)	Therapeutic	Senior Debt Matures November 2010 Interest rate Prime + 2.00%	$	5,000	4,707	4,707
		Preferred Stock Warrants			175	282
		Preferred Stock Warrants			153	150

Total EKOS Corporation					5,035	5,139

Gynesonics, Inc. (0.01%)⁽⁴⁾	Therapeutic	Preferred Stock Warrants			18	40
Gynesonics, Inc. (0.06%)		Preferred Stock			250	250

Total Gynesonics, Inc.					268	290

Novasys Medical, Inc. (1.65%)⁽⁴⁾	Therapeutic	Senior Debt Matures January 2010 Interest rate 9.70%	$	6,609	6,609	6,609

Total Novasys Medical, Inc.					6,609	6,609

Power Medical Interventions, Inc. (0.02%)	Therapeutic	Common Stock Warrants			21	58

Total Power Medical Interventions, Inc.					21	58

Total Therapeutic (3.21%)					13,432	12,853


Invoke Solutions, Inc. (0.56%)⁽⁴⁾	Internet Consumer & Business	Senior Debt Matures December 2008 Interest rate 11.25%	$	2,187	2,155	2,155
	Services	Preferred Stock Warrants			56	73
		Preferred Stock Warrants			11	10

Total Invoke Solutions, Inc.					2,222	2,239

Prism Education Group Inc. (0.51%)	Internet Consumer & Business	Senior Debt Matures December 2010 Interest rate 11.25%	$	2,000	1,964	1,964
	Services	Preferred Stock Warrants			43	66

Total Prism Education Group Inc.					2,007	2,030

RazorGator Interactive Group, Inc. (1.17%)⁽⁴⁾	Internet Consumer & Business	Senior Debt Matures January 2008 Interest rate 9.95%	$	1,134	1,119	1,119
	Services	Preferred Stock Warrants			13	3,203
		Preferred Stock Warrants			28	362
RazorGator Interactive Group, Inc. (1.23%)		Preferred Stock			1,000	4,935

Total RazorGator Interactive Group, Inc.					2,160	9,619

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Serious USA, Inc. (0.75%)	Internet Consumer & Business Services	Senior Debt Matures February 2011 Interest rate Prime + 3.00%	$	2,450	2,370	2,370
		Revolving Line of Credit Matures July 2008 Interest rate Prime + 2.00%	$	654	654	654
		Preferred Stock Warrants			93	5

Total Serious USA, Inc.					3,118	3,029

Total Internet Consumer & Business Services (4.22%)					9,507	16,918


Lilliputian Systems, Inc. (1.75%)⁽⁴⁾	Energy	Senior Debt Matures March 2010 Interest rate 9.75%	$	6,956	6,931	6,931
		Preferred Stock Warrants			48	85

Total Lilliputian Systems, Inc.					6,979	7,016

Total Energy (1.75%)					6,979	7,016


Active Response Group, Inc. (2.50%)	Information Services	Senior Debt Matures March 2012 Interest rate LIBOR + 6.55%	$	10,000	9,885	9,885
		Preferred Stock Warrants			92	83
		Common Stock Warrants			46	60

Total Active Response Group, Inc.					10,023	10,028

Buzznet, Inc. (0.25%)	Information Services	Senior Debt Matures March 2010 Interest rate 10.25%	$	914	908	908
		Preferred Stock Warrants			9	86
Buzznet, Inc. (0.06%)		Preferred Stock			250	250

Total Buzznet, Inc.					1,167	1,244

hi5 Networks, Inc. (1.00%)	Information Services	Senior Debt Matures March 2011 Interest rate Prime + 2.5%	$	3,000	2,789	2,789
		Revolving Line of Credit Matures June 2011 Interest rate 7.75%			1,000	1,000
		Preferred Stock Warrants			213	214

Total hi5 Networks, Inc.					4,002	4,003

Jab Wireless, Inc. (0.78%)	Information Services	Senior Debt Matures March 2012
		Interest rate 10.75%	$	3,097	2,834	2,834
		Preferred Stock Warrants			265	266

Total Jab Wireless, Inc.					3,098	3,099

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Solutionary, Inc. (1.78%)	Information Services	Senior Debt Matures June 2010 Interest rate LIBOR + 5.50%	$	5,528	5,454	5,454
		Revolving Line of Credit Matures June 2010 Interest rate LIBOR + 5.00%	$	1,505	1,505	1,505
		Preferred Stock Warrants			94	150
		Preferred Stock Warrants			2	4
Solutionary, Inc. (0.06%)		Preferred Stock			250	250

Total Solutionary, Inc.					7,305	7,364

The Generation Networks, Inc. (4.12%)	Information Services	Senior Debt Matures March 2012 Interest rate Prime + 4.50%	$	16,500	16,500	16,500
The Generation Networks, Inc. (0.12%)		Preferred Stock			500	500

Total The Generation Networks, Inc.					17,000	17,000

Wallop Technologies, Inc. (0.06%)	Information Services	Senior Debt Matures March 2010 Interest rate 10.00%	$	223	218	218
		Preferred Stock Warrants			7	9

Total Wallop Technologies, Inc.					225	226

Zeta Interactive Corporation (3.74%)⁽⁴⁾	Information Services	Senior Debt Matures November 2011 Interest rate Prime +2.00%	$	15,000	6,828	6,828
		Senior Debt Matures November 2011 Interest rate Prime +3.00%			8,000	8,000
		Preferred Stock Warrants			172	171
Zeta Interactive Corporation (0.12%)		Preferred Stock			500	500

Total Zeta Interactive Corporation					15,500	15,499

Total Information Services (14.59%)					58,320	58,464


Novadaq Technologies, Inc. (0.32%)	Diagnostic	Common Stock			1,626	1,284

Total Novadaq Technologies, Inc.					1,626	1,284

Optiscan Biomedical, Corp. (0.08%)⁽⁴⁾	Diagnostic	Senior Debt Matures March 2008 Interest rate 15.00%	$	271	263	263
		Preferred Stock Warrants			80	47
Optiscan Biomedical, Corp. (0.18%)		Preferred Stock			1,000	722

Total Optiscan Biomedical, Corp.					1,344	1,032

Total Diagnostic (0.58%)					2,969	2,316

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾	Value⁽³⁾
Guava Technologies, Inc. (1.77%)⁽⁴⁾	Biotechnology Tools	Senior Debt Matures July 2009 Interest rate Prime + 3.25%	$	4,076	4,790	4,790
		Convertible Debt			250	250
		Revolving Line of Credit Matures December 2007 Interest rate Prime + 2.00%	$	2,598	1,778	1,778
		Preferred Stock Warrants			105	200
		Preferred Stock Warrants			68	93

Total Guava Technologies, Inc.					6,992	7,111

NuGEN Technologies, Inc. (0.53%)	Biotechnology Tools	Senior Debt Matures March 2010 Interest rate 11.70%	$	1,884	1,819	1,819
		Preferred Stock Warrants			45	253
		Preferred Stock Warrants			33	32
NuGEN Technologies, Inc. (0.12%)		Preferred Stock			500	500

Total NuGEN Technologies, Inc.					2,396	2,603

Total Biotechnology Tools (2.42%)					9,388	9,714


Rubicon Technology Inc. (0.69%)⁽⁴⁾	Advanced Specialty Materials & Chemicals	Preferred Stock Warrants			82	2,764

Total Rubicon Technology Inc.					82	2,764

Total Advanced Specialty Materials & Chemicals (0.69%)					82	2,764


Crux Biomedical, Inc. (0.15%)	Surgical Devices	Senior Debt Matures December 2010 Interest rate Prime + 3.375%	$	600	565	565
		Preferred Stock Warrants			37	36
Crux Biomedical, Inc. (0.06%)		Preferred Stock			250	250

Total Crux Biomedical, Inc.					851	851

Diomed Holdings, Inc. (1.49%)⁽⁴⁾	Surgical Devices	Senior Debt Matures July 2010 Interest rate Prime + 3.00%	$	6,000	5,962	5,962
		Common Stock Warrants			43	8

Total Diomed Holdings, Inc.					6,005	5,970

Light Science Oncology, Inc. (2.50%)	Surgical Devices	Senior Debt Matures July 2011 Interest rate 11.20%	$	10,000	9,605	9,605
		Preferred Stock Warrants			395	394

Total Light Science Oncology, Inc.					10,000	10,000

Total Surgical Devices (4.20%)					16,857	16,820

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2007

(dollars in thousands)


Portfolio Company	Industry	Type of Investment⁽¹⁾	Principal Amount		Cost⁽²⁾		Value⁽³⁾
Waterfront Media Inc. (1.54%)⁽⁴⁾	Media/Content/ Info	Senior Debt Matures December 2010 Interest rate Prime + 3.00%	$	3,941		3,898		3,898
		Revolving Line of Credit Matures March 2008 Interest rate Prime + 1.25%	$	2,000		2,000		2,000
		Preferred Stock Warrants				60		294
Waterfront Media Inc. (0.25%)		Preferred Stock				1,000		1,000

Total Waterfront Media Inc.						6,958		7,193

Total Media/Content/Info (1.79%)						6,958		7,193

Total Investments (132.24%)					$	519,450	$	529,972

*	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 $18,555, $8,033 and $10,522, respectively.

(3)

Except for warrants in ten publicly traded companies and common stock in four publicly traded companies, all investments are restricted at December 31, 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 $690,000 at December 31, 2007 and is included in accrued liabilities and reduces the unrealized gain recognized by the Company at December 31, 2007.

(5)	Non-U.S. company or the company’s principal place of business is outside the United States.

(6)	Affiliate investment that is defined under the Investment Company Act of 1940 as companies in which HTGC owns as least 5% but not more than 25% of the voting securities of the company. All other investments are less than 5% owned.

See notes to consolidated financial statements.

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

(in thousands, except per share data)


	Three Months Ended March 31,
	2008			2007
Investment income:
Interest	$	14,239		$	9,036
Fees		1,361			643

Total investment income		15,600			9,679
Operating expenses:
Interest		1,851			686
Loan fees		382			266
General and administrative		1,241			1,308
Employee Compensation:
Compensation and benefits		2,799			1,940
Stock-based compensation		327			254

Total employee compensation		3,126			2,194

Total operating expenses		6,600			4,454
Net investment income		9,000			5,225
Net realized gain on investments		2,958			290
Net (decrease) increase in unrealized appreciation on investments		(921	)		816

Net realized and unrealized gain		2,037			1,106

Net increase in net assets resulting from operations	$	11,037		$	6,331

Net investment income before investment gains and losses per common share:
Basic	$	0.28		$	0.23

Diluted	$	0.28		$	0.23

Change in net assets per common share:
Basic	$	0.34		$	0.28

Diluted	$	0.34		$	0.27

Weighted average shares outstanding
Basic		32,629			22,871

Diluted		32,639			23,120

See notes to consolidated financial statements (unaudited).

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

(unaudited)

(in thousands)


	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			Provision for Income Taxes on Investment Gains			Net Assets
	Shares	Par Value		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			Provision for Income Taxes on Investment Gains			Net Assets
Balance at December 31, 2006	21,927	$	22	$	257,235	$	—		$	2,861		($	1,972	)	($	2,733	)	$	—		$	255,413
Net increase net assets resulting from operations	—		—		—		—			816			290			5,225			—			6,331
Issuance of common stock	12		—		166		—			—			—			—			—			166
Issuance of common stock in public offering overallotment exercise	840		1		10,851		—			—			—			—			—			10,852
Issuance of common stock from warrant exercises	256		—		2,707		—			—			—			—			—			2,707
Issuance of common stock under dividend reinvestment plan	56		—		783		—			—			—			—			—			783
Dividends declared	—		—		—		—			—			—			(6,895	)		—			(6,895	)
Conversion to a regulated investment company and other tax items	—		—		—		—			—			—			—			—			—
Stock-based compensation	—		—		254		—			—			—			—			—			254

Balance at March 31, 2007	23,091	$	23	$	271,996	$	—		$	3,677		($	1682	)	($	4403	)	$	—		$	269,611

Balance at December 31, 2007	32,541	$	33	$	393,530	($	78	)	$	10,129		$	819		($	3,557	)	($	139	)	$	400,737
Net increase in net assets resulting from operations	—		—		—		—			(921	)		2,958			9,000			—			11,037
Issuance of common stock	2		—		21		—			—			—			—			—			21
Issuance of common stock under dividend reinvestment plan	—		—		—		—			—			—			—			—			—
Issuance of common stock under restricted stock plan	225		—		2,745		(2,745	)		—			—			—			—			—
Dividends declared	—		—		—		—			—			—			(9,763	)		—			(9,763	)
Stock-based compensation	—		—		327		75			—			—			—			—			402

Balance at March 31, 2008	32,768	$	33	$	396,623	($	2748	)	$	9,208		$	3,777		($	4320	)	($	139	)	$	402,434

See notes to consolidated financial statements (unaudited).

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2008			2007
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	11,037		$	6,331
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchase of investments		(49,791	)		(80,231	)
Principal payments received on investments		48,875			21,898
Proceeds from sale of investments		3,757			873
Net unrealized appreciation (depreciation) on investments		578			(871	)
Net unrealized appreciation on investments due to lender		343			55
Net realized gain on investments		(2,958	)		(290	)
Warrant values for loans not funded		—			(139	)
Accretion of paid-in-kind principal		(184	)		—
Accretion of loan discounts		(1,012	)		(474	)
Accretion of loan exit fees		(3	)		(283	)
Depreciation		60			47
Stock-based compensation		327			254
Amortization of restricted stock		74			—
Common stock issued in lieu of director compensation		21			166
Amortization of deferred loan origination revenue		(1,042	)		(662	)
Change in operating assets and liabilities:
Interest receivable		(443	)		(786	)
Prepaid expenses and other assets		117			(751	)
Income tax receivable		—			29
Accounts payable		(174	)		575
Income tax payable		(132	)		—
Accrued liabilities		(3,489	)		(1,714	)
Deferred loan origination revenue		1,418			1,524

Net cash provided by (used in) operating activities		7,379			(54,449	)
Cash flows from investing activities:
Purchases of capital equipment		(247	)		(87	)
Other long-term assets		—			173

Net cash provided by (used in) investing activities		(247	)		86
Cash flows from financing activities:
Proceeds from issuance of common stock, net		—			13,560
Dividends paid		(9,763	)		(6,113	)
Borrowings of credit facilities		33,700			87,000
Repayments of credit facilities		(25,000	)		(15,000	)
Fees paid for credit facilities and debentures		(121	)		—

Net cash provided by (used in) financing activities		(1,184	)		79,447
Net increase in cash		5,948			25,084
Cash and cash equivalents at beginning of period		7,856			16,404

Cash and cash equivalents at end of period	$	13,804		$	41,488

See notes to consolidated financial statements (unaudited).

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Description of Business and Unaudited Interim Consolidated Financial Statements Basis of Presentation

Hercules Technology Growth Capital, Inc. (the “Company”) is a specialty finance company that provides debt and equity growth capital to technology-related and life-science companies at all stages of development from seed and emerging growth to expansion and established stages of development, including expanding into select publicly listed companies and lower middle market companies. The Company sources its investments through its principal office located in Silicon Valley, as well as through its additional offices in the Boston, Massachusetts, Boulder, Colorado, Chicago, Illinois, San Diego, California and Columbus, Ohio areas. The Company was incorporated under the General Corporation Law of the State of Maryland in December 2003. The Company commenced operations on February 2, 2004 and commenced investment activities in September 2004.

The Company is an internally managed, non-diversified closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). From incorporation through December 31, 2005, the Company was taxed as a corporation under Subchapter C of the Internal Revenue Code of 1986, (the “Code”). Effective January 1, 2006, the Company has elected to be treated for tax purposes as a regulated investment company, or RIC, under the Code (see Note 4).

The Company formed Hercules Technology II, L.P. (“HT II”), which was licensed on September 27, 2006, to operate as a Small Business Investment Company (“SBIC”) under the authority of the Small Business Administration (“SBA”). As an SBIC, the Fund is subject to a variety of regulations concerning, among other things, the size and nature of the companies in which it may invest and the structure of those investments. The Company also formed Hercules Technology SBIC Management, LLC (“HTM”), a limited liability company. HTM is a wholly-owned subsidiary of the Company. The Company is the sole limited partner of HT II and HTM is the general partner (see Note 3).

In December 2006, the Company established Hydra Management LLC and Hydra Management Co. Inc., a general partner and investment management group, respectively, should it determine in the future to pursue a relationship with an externally managed fund. These entities are currently inactive.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The accompanying consolidated interim financial statements are presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X under the Securities Act of 1933 and the Securities Exchange Act of 1934. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments consisting solely of normal recurring accruals considered necessary for the fair presentation of consolidated financial statements for the interim period, have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the interim unaudited consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto for the period ended December 31, 2007. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

2. Investments

All investments are recorded at fair value with any changes in fair value recognized in the statement of consolidated operations as net increase (decrease) in unrealized appreciation. Value is defined in Section 2(a)(41) of the 1940 Act, as (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by the Board of Directors. Because the Company invests primarily in structured mezzanine debt investments (“debt”) and equity growth capital (“equity”) of privately-held technology-related and life-science companies backed by leading venture capital and private equity firms, the Company values substantially all of its investments at fair value, as determined in good faith by the Board of Directors in accordance with established valuation policies and consistently applied procedures and the recommendations of the Valuation Committee of the Board of Directors. At March 31, 2008, approximately 97% of the Company’s total assets represented investments in portfolio companies of which greater than 99% are valued at fair value by the Board of Directors.

Estimating fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment. The Company determines fair value to be the amount for which an investment could be exchanged in a current sale, which assumes an orderly disposition over a reasonable period of time between willing parties other than in a forced or liquidation sale. The Company’s valuation policy considers the fact that no ready market exists for substantially all of the securities in which it invests. Fair value established in good faith by the Board of Directors 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. In addition, 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 than the valuations currently assigned.

When originating a debt instrument, the Company generally receives warrants or other equity-related securities from the borrower. The Company determines the cost basis of the warrants or other equity-related securities received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants or other equity-related securities received. Any resulting discount on the loan from recordation of the warrant or other equity instruments is accreted into interest income over the life of the loan.

At each reporting date, privately held debt and equity securities are valued based on an analysis of various factors including, but not limited to, the portfolio company’s operating performance and financial condition and general market conditions that could impact the valuation. When an external event occurs, such as a purchase transaction, public offering, or subsequent equity sale, the pricing indicated by that external event is utilized to corroborate the Company’s valuation of the debt and equity securities. The Company periodically reviews the valuation of its portfolio companies that have not been involved in a qualifying external event to determine if the enterprise value of the portfolio company may have increased or decreased since the last valuation measurement date. The Company may consider, but is not limited to, industry valuation methods such as price to enterprise value or price to equity ratios, discounted cash flow, valuation comparisons to comparable public companies or other industry benchmarks in its evaluation of the fair value of its investment.

An unrealized loss is recorded when an investment has decreased in value, including: where collection of a loan is doubtful, there is an adverse change in the underlying collateral or operational performance, there is a change in the borrower’s ability to pay, or there are other factors that lead to a determination of a lower valuation for the debt or equity security. Conversely, unrealized appreciation is recorded when the investment has appreciated in value. Securities that are traded in the over the counter markets or on a stock exchange will be valued at the prevailing bid price at period end. The Board of Directors estimates the fair value of warrants and other equity-related securities in good faith using a Black-Scholes pricing model and consideration of the issuer’s earnings, sales to third parties of similar securities, the comparison to publicly traded securities, and other factors.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, outlines a fair value hierarchy based on inputs used to measure fair value and enhances disclosure requirements for fair value measurements. SFAS 157 does not change existing guidance as to whether an instrument is carried at fair value. The Company adopted SFAS 157 for the quarter ending March 31, 2008. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company has categorized all investments recorded at fair value in accordance with SFAS 157 based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by SFAS 157 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets at the measurement date. The types of assets carried at Level 1 fair value generally are equities listed in active markets.

Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset in connection with market data at the measurement date and for the extent of the instrument’s anticipated life. Fair valued assets that are generally included in this category are warrants held in a public company.

Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset at the measurement date. It includes prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Generally, assets carried at fair value and included in this category are the debt investments and warrants held in a private company. For loan and debt securities, the Company has performed a yield analysis assuming a hypothetical current sale of the security. The yield analysis considers changes in interest rates and changes in leverage levels of the portfolio company as compared to the market interest rates and leverage levels. Assuming the credit quality of the portfolio company remains stable, the Company will use the value determined by the yield analysis as the fair value for that security.

The Company will record unrealized depreciation on investments when it determines that the fair value of a security is less than its cost basis, and will record unrealized appreciation when it determines that the fair value is greater than its cost basis.

Investments measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations:


	Assets at Fair Value as of March 31, 2008
(in thousands) Description	3/31/2008		Quoted Prices In Active Markets For Idendtial Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Senior secured debt	$	468,140	$	—	$	—	$	468,140
Senior debt-second lien		11,717		—		—		11,717
Preferred stock		24,546		—		—		24,546
Common stock		2,000		2,000		—		—
Warrants		24,360		—		2,999		21,361

	$	530,763	$	2,000	$	2,999	$	525,764

As required by the 1940 Act, the Company classifies its investments by level of control. “Control Investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “Control”. Generally, under 1940 Act, the Company is deemed to “Control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, which are not Control Investments. The Company is deemed to be an “Affiliate” of a company in which it has invested if it owns 5% or more but less than 25% of the voting securities of such company. “Non-Control/Non-Affiliate Investments” are those investments that are neither Control Investments nor Affiliate Investments.

At March 31, 2008 and December 31, 2007, the Company had investments in two portfolio companies deemed to be Affiliates. One investment is a non income producing equity investment and one portfolio company became an Affiliate on December 17, 2007 upon a restructure of the company. Income derived from these investments was less than $38,000 since these investments became Affiliates.

Security transactions are recorded on the trade-date basis.

A summary of the composition of the Company’s investment portfolio as of March 31, 2008 and December 31, 2007 at fair value is shown as follows:


	March 31, 2008				December 31, 2007
(in thousands)	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
Senior debt with warrants	$	432,038	81.4	%	$	429,760	81.1	%
Senior debt		59,700	11.2	%		61,483	11.6	%
Preferred stock		24,546	4.6	%		23,265	4.4	%
Senior debt-second lien with warrants		12,057	2.3	%		12,078	2.3	%
Common Stock		2,000	0.4	%		2,938	0.5	%
Subordinated debt with warrants		422	0.1	%		448	0.1	%

	$	530,763	100.0	%	$	529,972	100.0	%

A Summary of the Company’s investment portfolio, at value, by geographic location is as follows:


	March 31, 2008				December 31, 2007
(in thousands)	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
United States	$	501,439	94.5.	%	$	512,724	96.8	%
Canada		15,950	3.0	%		15,001	2.8	%
Israel		13,374	2.5	%		2,247	0.4	%

	$	530,763	100.0	%	$	529,972	100.0	%

The following table shows the fair value of our portfolio by industry sector at March 31, 2008 and December 31, 2007 (excluding unearned income):


	March 31, 2008				December 31, 2007
(in thousands)	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
Communications & networking	$	116,477	21.9	%	$	114,014	21.5	%
Drug discovery		90,092	17.0	%		95,294	18.0	%
Information services		65,038	12.3	%		58,464	11.0	%
Electronics & computer hardware		50,192	9.5	%		50,953	9.6	%
Specialty pharmaceuticals		43,651	8.2	%		45,646	8.6	%
Software		34,705	6.5	%		38,963	7.4	%
Semiconductors		24,214	4.6	%		25,501	4.8	%
Drug delivery		22,806	4.3	%		22,725	4.3	%
Biotechnology tools		19,095	3.6	%		9,714	1.8	%
Internet consumer & business services		17,181	3.2	%		16,918	3.2	%
Therapeutic		13,572	2.6	%		12,853	2.4	%
Media/Content/Info		12,132	2.3	%		7,193	1.4	%
Surgical Devices		7,748	1.5	%		16,821	3.2	%
Energy		6,573	1.2	%		7,016	1.3	%
Consumer & business products		5,471	1.0	%		2,817	0.5	%
Diagnostic		1,816	0.3	%		2,316	0.5	%
Advanced Specialty Materials & Chemicals		—	0.0	%		2,764	0.5	%

	$	530,763	100.0	%	$	529,972	100.0	%

During the three-month period ended March 31, 2008, the Company made investments in debt securities totaling approximately $49.1 million and made investments in equity securities of approximately $700,000.

During the three-month period ended March 31, 2008, the Company realized gains of approximately $3.1 million from the sale of common stock of one advanced specialty materials and chemicals company and approximately $400,000 from the acquisition of one software company and one medical device and equipment company. The Company recognized realized losses in the first quarter of 2008 of approximately $566,000 on the acquisition of one semiconductor company.

During the quarter ended March 31, 2008, the Company revised the marketability discount it applies to its private company warrants. As a result of the revision to the discounts applied to the warrants, it recognized an unrealized gain of approximately $5.3 million during the quarter representing an increase to net assets from operations of approximately $0.16 per share.

Loan origination and commitment fees received in full at the inception of a loan are deferred and amortized into fee income as an enhancement to the related loan’s yield over the contractual life of the loan. Loan exit fees to be paid at the termination of the loan are accreted into fee income over the contractual life of the loan. These fees are reflected as adjustments to the loan yield in accordance with Statement of Financial Standards No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring loans and Initial Direct Costs of Leases (“FAS 91”). The Company had approximately $7.0 million and $6.6 million of unamortized fees at March 31, 2008 and December 31, 2007, respectively, and approximately $2.0 million and $2.0 million in exit fees receivable at March 31, 2008 and December 31, 2007, respectively.

While not significant to the total debt investment portfolio, the Company has loans in its portfolio that contain a payment-in-kind (“PIK”) provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To maintain the Company’s status as a RIC, 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. Amounts necessary to pay these dividends may come from available cash or the liquidation of certain investments. The Company recorded approximately $186,000 and $381,000 in PIK income at March 31, 2008 and December 31, 2007, respectively.

In some cases, the Company collateralizes its investments by obtaining a first priority security interest in a portfolio companies’ assets, which may include their intellectual property. In other cases, the Company may obtain a negative pledge covering a company’s intellectual property. At March 31, 2008, approximately 33 portfolio company loans were secured by a first priority security in all of the assets of the portfolio company, 43 portfolio company loans were prohibited from pledging or encumbering their intellectual property and one portfolio company with a second lien facility. See “Part II—Item 1A—Risk Factors.”

3. Borrowings

The Company, through Hercules Funding Trust I, an affiliated statutory trust, has a securitized credit facility (the “Credit Facility”) with Citigroup Global Markets Realty Corp. and Deutsche Bank Securities Inc. The Credit Facility is a one year facility and is renewable on May 1, 2008 with an interest rate of LIBOR plus a spread of 1.20% and a borrowing capacity of $250 million. The Company paid a structuring fee of $375,000 which will be expensed ratably through maturity. At March 31, 2008, the Company had $72.9 million outstanding under the Credit Facility.

The Credit Facility is collateralized by loans from the Company’s portfolio companies, and includes an advance rate of approximately 55% of eligible loans. The Credit Facility contains covenants that, among other things, require the Company to maintain a minimum net worth and to restrict the loans securing the Credit Facility to certain dollar amounts, to concentrations in certain geographic regions and industries, to certain loan grade classifications, to certain security interests, and to certain interest payment terms. Citigroup has an equity participation right through a warrant participation agreement on the pool of loans and warrants collateralized under the Credit Facility. Pursuant to the warrant participation agreement, the Company granted to Citigroup a 10% participation in all warrants held as collateral. However, no additional warrants are included in collateral subsequent to the facility amendment on May 2, 2007. As a result, Citigroup is entitled to 10% of the realized gains on the warrants until the realized gains paid to Citigroup pursuant to the agreement equals $3,750,000 (the “Maximum Participation Limit”). The Obligations under the warrant participation agreement continue even after the Credit Facility is terminated until the Maximum Participation Limit has been reached. During the three-month period ended March 31, 2008, the Company recorded an additional liability and reduced its unrealized gains by approximately $399,000 to account for Citigroup’s participation in unrealized gains in the warrant portfolio. The value of their participation right on unrealized gains in the related equity investments since inception of the agreement was approximately $1.1 million at March 31, 2008 and is included in accrued liabilities and reduces the unrealized appreciation recognized by the Company at March 31, 2008. Since inception of the agreement, the Company has paid Citigroup approximately $680,000 under the warrant participation agreement, thereby reducing its realized gains by that amount.

As of March 31, 2008, the Company, through its special purpose entity (SPE), had transferred pools of loans and warrants with a fair value of approximately $273.5 million to Hercules Funding Trust I and had drawn $72.9 million under the Credit Facility. Transfers of loans have not met the requirements of Statement of Financial Accounting Standards (“SFAS”) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, for sales treatment and are, therefore, treated as secured borrowings, with the transferred loans remaining in investments and the related liability recorded in borrowings. The average debt outstanding under the Credit Facility for the quarter ended March 31, 2008 was approximately $77.3 million and the average interest rate was approximately 4.5%, excluding facility fees.

The Company plans to aggregate pools of funded loans using the Credit Facility or other conduits that it may seek until a sufficiently large pool of unfunded loans is created which can then be securitized at a later date. The Company expects that any loans included in a securitization facility will be securitized on a non-recourse basis with respect to the credit losses on the loans. There can be no assurance that the Company will be able to complete this securitization strategy, or that it will be successful.

In January 2005, the Company formed HT II and HTM. HT II is licensed as a SBIC. HT II borrows funds from the SBA against eligible investments and additional deposits to regulatory capital. Under the Small Business Investment Act and current SBA policy applicable to SBICs, an SBIC can have outstanding at any time SBA guaranteed debentures up to twice the amount of its regulatory capital. As of March 31, 2008, the maximum statutory limit on the dollar amount of outstanding SBA guaranteed debentures issued by a single SBIC is $127.2 million, subject to periodic adjustments by the SBA. With $63.6 million of regulatory capital as of March 31, 2008, HT II has the current capacity to issue up to a total of $127.2 million of SBA guaranteed debentures, subject to the payment of a 1% commitment fee to the SBA on the amount of the commitment. Currently, HT II has paid commitment fees of approximately $1.3 million and has a commitment from the SBA to issue a total of $127.2 million of SBA guaranteed debentures, of which approximately $70.1 million was outstanding as of March 31, 2008. There is no assurance that HT II will draw up to the maximum limit available under the SBIC program.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $18 million and have average annual fully taxed net income not exceeding $6.0 million for the two most recent fiscal years. In addition, SBICs must devote 20.0% of its investment activity to “smaller” concerns as defined by the SBA. A smaller concern is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

Through its wholly-owned subsidiary HT II, the Company plans to provide long-term loans to qualifying small businesses, and in connection therewith, make equity investments. HT II is periodically examined and audited by the SBA’s staff to determine its compliance with SBIC regulations. As of March 31, 2008, HT II could draw up to $127.2 million of leverage from the SBA as noted above. Borrowings under the program are charged interest based on ten year treasury rates plus a spread and the rates are generally set for a pool of debentures issued by the SBA in six month periods. The rate for the $12 million of borrowings originated from March 13, 2007 to September 10, 2007 was set by the SBA as announced on September 26, 2007 at 5.528%. The rate for the $58.1 million borrowings made after September 10, 2007 through March 13, 2008 was set by the SBA as announced on March 26, 2008 at 5.471%. In addition, the SBA charges an annual fee that is set annually, depending on the Federal fiscal year the leverage commitment was delegated by the SBA, regardless of the date that the leverage was drawn by the SBIC. The 2008 and 2007 annual fee has been set at 0.906%. Interest payments are payable semi-annually and there are no principal payments required on these issues prior to maturity. Debentures under the SBA generally mature ten years after being borrowed.

At March 31, 2008 and December 31, 2007, the Company had the following borrowing capacity and outstandings:


	March 31, 2008				December 31, 2007
(in thousands)	Facility Amount		Amount Outstanding		Facility Amount		Amount Outstanding
Credit Facility	$	250,000	$	72,900	$	250,000	$	79,200
SBA Debenture		127,200		70,050		127,200		55,050

Total	$	377,200	$	142,950	$	377,200	$	134,250

4. Income taxes

The Company intends to continue to operate so as to qualify to be taxed as a RIC under the Code and, as such, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify as a RIC, the Company is required, among other requirements, to distribute at least 90% of its annual investment company taxable income, as defined by the Code. The amount to be paid out as a dividend is determined by the Board of Directors each quarter and is based upon the annual earnings estimated by the management of the Company. To the extent that the Company’s earnings fall below the amount of dividends declared, however, a portion of the total amount of the Company’s dividends for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.

Taxable income includes the Company’s taxable interest, dividend and fee income, as well as taxable net capital gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as gains or losses are not included in taxable income until they are realized. In addition, gains realized for financial reporting purposes may differ from gains included in taxable income as a result of the Company’s election to recognize gains using installment sale treatment, which generally results in the deferment of gains for tax purposes until notes or other amounts, including amounts held in escrow, received as consideration from the sale of investments are collected in cash. Taxable income includes non-cash income, such as changes in accrued and reinvested interest and dividends, which includes contractual payment-in-kind interest, and the amortization of discounts and fees. Cash collections of income resulting from contractual PIK interest or the amortization of discounts and fees generally occur upon the repayment of the loans or debt securities that include such items. Non-cash taxable income is reduced by non-cash expenses, such as realized losses and depreciation and amortization expense.

For the quarter ended March 31, 2008, the Company declared a distribution of $0.34 per share. The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon its taxable income for the full year and distributions paid for the full year, therefore a determination made on a quarterly basis may not be representative of the actual tax attributes of its distributions for a full year. If the Company had determined the tax attributes of its distributions year-to-date as of March 31, 2008, approximately $0.30 or 100.0% would be from ordinary income and split over earnings from 2007, however there can be no certainty to shareholders that this determination is representative of what the tax attributes of its 2008 distributions to shareholders will actually be.

If the Company does not distribute at least 98% of its annual taxable income in the year earned, the Company will generally be required to pay an excise tax equal to 4% of the amount by which 98% of the Company’s annual taxable income exceeds the distributions from such taxable income during the year earned. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, the Company accrues excise taxes on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.

At December 31, 2007, the Company had excess taxable income of approximately $4.2 million available for distribution to shareholders in 2008. Excess taxable income for 2007 represents ordinary income and capital gains.

In accordance with regulated investment company distribution rules, the Company is required to declare current year dividends to be paid from carried over excess taxable income from 2007 before the Company files its 2007 tax return in September, 2008, and the Company must pay such dividends by December 31, 2008.

5. Shareholders’ Equity

The Company is authorized to issue 60,000,000 shares of common stock with a par value of $0.001. Each share of common stock entitles the holder to one vote.

In January 2005 the Company notified its shareholders of its intent to elect to be regulated as a BDC. In conjunction with the Company’s decision to elect to be regulated as a BDC, approximately 55% of the 5 Year Warrants were subject to mandatory cancellation under the terms of the Warrant Agreement with the warrant holder receiving one share of common stock for every two warrants cancelled and the exercise price of all warrants was adjusted to the then current net asset value of the common stock, subject to certain adjustments described in the Warrant Agreement. In addition, the 1 Year Warrants became subject to expiration immediately prior to the Company’s election to become a BDC, unless exercised. Concurrent with the announcement of the BDC election, the Company reduced the exercise price of all remaining 1 and 5 Year Warrants from $15.00 to $10.57. On February 22, 2005, the Company cancelled 47% of all outstanding 5 Year Warrants and issued 298,598 shares of common stock to holders of warrants upon exercise. In addition, the majority of shareholders owning 1 Year Warrants exercised them, and purchased 1,175,963 of common shares at $10.57 per share, for total consideration to the Company of $12,429,920. All unexercised 1 Year Warrants were then cancelled. The outstanding 5 Year Warrants will expire in June 2009.

A summary of activity in the 5 Year Warrants initially attached to units issued for the three months ended March 31, 2008 is as follows:


		Five-Year Warrants
Outstanding at December 31, 2007		371,937
Warrants issued		—
Warrants cancelled		—
Warrants exercised		—

Outstanding at March 31, 2008		371,937

The Company received net proceeds of approximately $2.7 million from the exercise of the 5-Year Warrants in the period ended March 31, 2007.

On January 3, 2007, in connection with the December 12, 2006 common stock issuance, the underwriters exercised their over-allotment option and purchased an additional 840,000 shares of common stock for additional net proceeds of approximately $10.9 million.

On June 4, 2007, the Company raised approximately $102.2 million, net of issuance costs, in a public offering of 8.0 million shares of its common stock. On June 19, 2007, in connection with the same common stock issuance, the underwriters exercised their over-allotment option and purchased an additional 1.2 million shares of common stock for additional net proceeds of approximately $15.4 million.

6. Equity Incentive Plan

The Company and its stockholders have authorized and adopted an equity incentive plan (the “2004 Plan”) for purposes of attracting and retaining the services of its executive officers and key employees. Under the 2004 Plan, the Company is authorized to issue 7,000,000 shares of common stock. Unless terminated earlier by the Company’s Board of Directors, the 2004 Plan will terminate on June 9, 2014, and no additional awards may be made under the 2004 Plan after that date.

The Company and its stockholders have authorized and adopted the 2006 Non-Employee Director Plan (the “2006 Plan”) for purposes of attracting and retaining the services of its Board of Directors. Under the 2006 Plan, the Company is authorized to issue 1,000,000 shares of common stock. Unless terminated earlier by the Company’s Board of Directors, the 2006 Plan will terminate on May 29, 2016 and no additional awards may be made under the 2006 Plan after that date. The Company filed an exemptive relief request with the Securities and Exchange Commission (“SEC”) to allow options to be issued under the 2006 Plan which was approved on October 10, 2007.

On June 21, 2007, the shareholders approved amendments to the 2004 Plan and the 2006 Plan allowing for the grant of restricted stock. The amended Plans limit the combined maximum amount of restricted stock that may be issued under both Plans to 10% of the outstanding shares of the Company’s stock on the effective date of the Plans plus 10% of the number of shares of stock issued or delivered by Hercules during the terms of the Plans. The proposed amendments further specify that no one person shall be granted awards of restricted stock relating to more than 25% of the shares available for issuance under the 2004 Plan. Further, the amount of voting securities that would result from the exercise of all of the Company’s outstanding warrants, options and rights, together with any restricted stock issued pursuant to the Plans, at the time of issuance shall not exceed 25% of its outstanding voting securities, except that if the amount of voting securities that would result from such exercise of all of the Company’s outstanding warrants, options and rights issued to Hercules directors, officers and employees, together with any restricted stock issued pursuant to the Plans, would exceed 15% of the Company’s outstanding voting securities, then the total amount of voting securities that would result from the exercise of all outstanding warrants, options and rights, together with any restricted stock issued pursuant to the Plans, at the time of issuance shall not exceed 20% of our outstanding voting securities.

In conjunction with the amendment and in accordance with the exemptive order, on June 21, 2007 the Company made an automatic grant of shares of restricted common stock to Messrs. Badavas, Chow and Woodward, its independent Board of Directors, in the amounts of 1,667, 1,667 and 3,334 shares, respectively. The shares were issued pursuant to the 2006 Plan on July 31, 2007 and vest 33% on an annual basis from the date of grant. Deferred compensation cost of approximately $91,000 will be recognized ratably over the three year vesting period.

During the three months ended March 31, 2008, the Company granted approximately 225,000 restricted shares pursuant to the 2004 Plan and vest 25% on an annual basis from the date of grant. Deferred compensation cost of approximately $2.7 million will be recognized ratably over the four year vesting period. During the three months ended March 31, 2008 the Company recognized compensation expense related to restricted stock of approximately $75,000. There was no compensation expense related to restricted stock during the three months ended March 31, 2007.

In 2004, each employee stock option to purchase two shares of common stock was accompanied by a warrant to purchase one share of common stock within one year and a warrant to purchase one share of common stock within five years. Both options and warrants had an exercise price of $15.00 per share on date of grant. On January 14, 2005, the Company notified all shareholders of its intent to elect to be regulated as a BDC and reduced the exercise price of all remaining 1 and 5 Year Warrants from $15.00 to $10.57 but did not reduce the strike price of the options (see Note 5). The unexercised one-year warrants expired and 5

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