N-2 1 a5890837.htm KEATING CAPITAL, INC. FORM N-2 a5890837.htm
 
As filed with the Securities and Exchange Commission on February 10, 2009
 
Securities Act File No. 333-      
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
Form N-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
 
KEATING CAPITAL, INC.
(Exact name of registrant as specified in charter)

5251 DTC Parkway, Suite 1000
Greenwood Village, CO 80111
(720) 889-0139
 (Address and telephone number,
including area code, of principal executive offices)

Timothy J. Keating
President and Chief Executive Officer
5251 DTC Parkway, Suite 1000
Greenwood Village, CO 80111
(Name and address of agent for service)

COPIES TO:
 
Cynthia M. Krus, Esq.
John J. Mahon, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2415
Tel: (202) 383-0100
Fax: (202) 637-3593
 
Approximate date of proposed public offering: As soon as practicable after the effective date of this Registration Statement.

If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as amended, other than securities offered in connection with a dividend reinvestment plan, check the following box. x

It is proposed that this filing will become effective (check appropriate box): x when declared effective pursuant to section 8(a).

 
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Being Registered
Amount to be
Registered
Proposed
Maximum
Offering Price
Per Share
Proposed
Maximum
Aggregate
Offering Price(1)
Amount of
Registration Fee
Common Stock, $0.001 par value per share
10,000,000 shares
$10.00
$100,000,000
$3,930
 
 
(1)
Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 

 
SUBJECT TO COMPLETION, DATED               , 2009
 
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS
 

Maximum Offering of 10,000,000 Shares of Common Stock
Minimum Offering of 100,000 Shares of Common Stock
 
Keating Capital, Inc.

We are a recently organized, closed-end, non-diversified investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. Our investment objective is to maximize total return. We intend to invest principally in equity securities, including convertible preferred securities and debt securities convertible into equity securities, of primarily non-public U.S.-based companies.  In accordance with our investment objective, we intend to provide capital principally to U.S.-based, private companies with an equity value of less than $250 million, which we refer to as “micro-cap companies.”  Our primary emphasis will be to attempt to generate capital gains through our equity investments in micro-cap companies, including through the conversion of the convertible debt or convertible preferred securities we will seek to acquire in such companies. However, we anticipate that a significant portion of our investments at any given time will include a component of interest or dividends, which we believe will provide us with current yield, in addition to the potential for capital appreciation.
 
As a business development company, we are required to comply with certain regulatory requirements. For example, to the extent provided by the 1940 Act, we are required to invest at least 70% of our total assets in eligible portfolio companies (“Eligible Portfolio Companies”).  Also, while we are permitted to finance investments using debt, our ability to use debt will be limited in certain significant respects, most notably that we are subject to a 200% asset coverage position. We do not anticipate financing the acquisition of investments using debt in the foreseeable future. See “Risk Factors – Risks Relating to Our Business and Structure.”
 
Through the dealer manager, we are offering up to 10,000,000 shares of common stock in this offering at an initial offering price of $10.00 per share.  The dealer manager is not required to sell any specific number or dollar amount of shares but will use its best efforts to sell the shares offered. The minimum permitted purchase is $5,000 in shares of our common stock. We will not sell any shares unless we raise gross offering proceeds of $1 million from persons who are not affiliated with us or Keating Investments, LLC (“Keating Investments”) by the time this offering concludes, which we refer to as the minimum offering amount. Once we have satisfied the minimum offering amount, we intend to conduct closings on a monthly basis thereafter until conclusion of this offering.  All subscription payments will be placed in an account held by the escrow agent, Steele Street Bank & Trust, in trust for our subscribers’ benefit, pending release to us at the next scheduled monthly closing, assuming satisfaction of the minimum offering amount.  If we do not satisfy the minimum offering amount by the time this offering concludes, we will promptly return all funds in the escrow account (including interest). We will not deduct any fees or expenses if we return funds from the escrow account.
 
After meeting the minimum offering amount, we will then sell our shares on a continuous basis at a price of $10.00; however, to the extent that our net asset value increases, we will sell at a price necessary to ensure that shares are not sold at a price, after deduction of selling commissions and dealer manager fees, that is below net asset value. Therefore, persons who tender subscriptions for shares of our common stock in this offering must submit subscriptions for a certain dollar amount, rather than a number of shares of common stock and, as a result, may receive fractional shares of our common stock.  This offering commenced as of the date of this prospectus and will conclude one year from the date of this prospectus, unless we elect to extend this offering, in our sole discretion, for an additional six months.
 
This is our initial public offering, and no public market exists for our shares. We presently intend to seek a listing of our shares of common stock on the Nasdaq Capital Market within six months after completion of this offering.  If we are unable to obtain such a listing on the Nasdaq Capital Market within our proposed timeframe, we will instead seek to have our shares of common stock quoted on the Over-the-Counter Bulletin Board, or “OTC Bulletin Board,” until such time as we are able to obtain a Nasdaq Capital Market listing for our shares.  However, we cannot provide you with any assurance that we will be successful in obtaining a listing of our shares on the Nasdaq Capital Market or the OTC Bulletin Board in the manner or within the timeframe we propose, if at all. As a result, if you purchase shares you may have limited liquidity for a substantial period of time
 
 

 
Investing in our common stock may be considered speculative and involves a high degree of risk, including the risk of a substantial loss of investment. See “Risk Factors” beginning on page 22 to read about the risks you should consider before buying shares of our common stock.
 
This prospectus contains important information about us that a prospective investor should know before investing in our common stock.  Please read this prospectus before investing and keep it for future reference.  We are also required to file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission, or SEC.  This information will be available free of charge through our website (www.keatingcapital.com) as soon as reasonably practicable after filing with the SEC.  Information contained on our website is not incorporated by reference into this prospectus and you should not consider that information to be part of this prospectus.  The SEC also maintains a website at www.sec.gov that contains such information.
 
Neither the SEC, the Attorney General of the State of New York nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.  Except as specifically required the use of forecasts is prohibited and any representation to the contrary and any predictions, written or oral, as to the amount or certainty of any present or future cash benefit or tax consequence which may flow from an investment in this program is not permitted.  
 

 
   
Per Share
   
Total Minimum
   
Total Maximum
 
Price to Public(1)
  $ 10.00     $ 1,000,000     $ 100,000,000  
Selling Commissions
  $ 0.70     $ 70,000     $ 7,000,000  
Dealer Manager Fee
  $ 0.30     $ 30,000     $ 3,000,000  
Net Proceeds (Before Expenses)(2)
  $ 9.00     $ 900,000     $ 90,000,000  
 
    (1) Assumes all shares are sold at the initial offering price per share.
    (2) 
We estimate that we will incur approximately $50,000 of expenses in connection with this offering if the minimum number of common shares is sold and approximately $200,000 of expenses if the maximum number of common shares is sold. We have also agreed to reimburse the dealer manager for its actual out-of-pocket expenses incurred in connection with this offering, which are included in the foregoing estimates.

 
The date of this prospectus is                      , 2009.

 

 

Andrews Securities, LLC
 

 
ABOUT THIS PROSPECTUS
 
This prospectus is part of a registration statement that we filed with the SEC, using a continuous offering process. Periodically, as we make material investments or have other material developments, we will provide a prospectus supplement that may add, update or change information contained in this prospectus. We will endeavor to avoid interruptions in the continuous offering of our shares of common stock, including, to the extent permitted under the rules and regulations of the SEC, filing an amendment to the registration statement with the SEC if our net asset value declines more than ten percent from our net asset value as of the effective date of this registration statement. There can be no assurance, however, that our continuous offering will not be suspended while the SEC reviews such amendment, until it is declared effective.
 
Any statement that we make in this prospectus will be modified or superseded by any inconsistent statement made by us in a subsequent prospectus supplement. The registration statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC and any prospectus supplement, together with additional information described below under “Available Information.” In this prospectus, we use the term “day” to refer to a calendar day, and we use the term “business day” to refer to any day other than Saturday, Sunday, a legal holiday or a day on which banks in New York City are authorized or required to close.
 
You should rely only on the information contained in this prospectus. Neither we, nor the dealer manager have authorized any other person to provide you with different information from that contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or sale of our common stock. If there is a material change in the affairs of our company, we will amend or supplement this prospectus.
 
For information on the suitability standards that investors must meet in order to purchase shares of our common stock in this offering, see “Suitability Standards.”
 

ii

 
TABLE OF CONTENTS
       
ABOUT THIS PROSPECTUS
  ii  
       
PROSPECTUS SUMMARY
    1  
         
FEES AND EXPENSES
    14  
         
COMPENSATION OF THE DEALER MANAGER AND THE INVESTMENT ADVISER
    16  
         
QUESTIONS ABOUT THIS OFFERING
    18  
         
RISK FACTORS
    22  
         
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
    44  
         
ESTIMATED USE OF PROCEEDS
    45  
         
DISTRIBUTIONS
    46  
         
DISCUSSION OF THE COMPANY’S EXPECTED OPERATING PLANS
    48  
         
BUSINESS
    56  
         
DETERMINATION OF NET ASSET VALUE
    77  
         
MANAGEMENT
    80  
         
PORTFOLIO MANAGEMENT
    86  
         
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENT
    87  
         
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
    93  
         
CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS
    95  
         
DIVIDEND REINVESTMENT PLAN
    97  
         
DESCRIPTION OF OUR SECURITIES
    99  
         
MATERIAL U.S. FEDERAL INCOME CONSIDERATIONS
    106  
         
REGULATION AS A BUSINESS DEVELOPMENT COMPANY
    115  
         
PLAN OF DISTRIBUTION
    119  
         
SUITABILITY STANDARDS
    124  
         
LIQUIDITY STRATEGY
    126  
         
CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR
    126  
         
BROKERAGE ALLOCATION AND OTHER PRACTICES
    126  
         
LEGAL MATTERS
    126  
         
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    126  
         
AVAILABLE INFORMATION
    127  
         
PRIVACY NOTICE
    128  
         
INDEX TO FINANCIAL STATEMENTS
    F-1  
         
APPENDIX A: FORM OF SUBSCRIPTION AGREEMENT
    A-1  
 
 
iii

 
PROSPECTUS SUMMARY
 
The following summary contains basic information about this prospectus. It may not contain all the information that is important to an investor. For a more complete understanding of this prospectus, we encourage you to read this entire prospectus and the documents that are referred to in this prospectus, together with any accompanying supplements.

 In this prospectus, unless otherwise indicated, the “Company”, “we”, “us” or “our” refer to Keating Capital, Inc., and “Keating Investments” or “our investment adviser” refer to Keating Investments, LLC.
 
Keating Capital, Inc.
 
We were incorporated on May 9, 2008 under the laws of the State of Maryland.  We have filed an election to be regulated as a business development company under the 1940 Act.  Keating Investments serves as our investment adviser and will also provide us with the administrative services necessary for us to operate.
 
Congress created business development companies in 1980 in an effort to help public capital reach smaller and growing private and public companies.   We are designed to do precisely that.  We intend to make minority, non-controlling equity investments in private businesses that are seeking growth capital and that we believe are committed to, and capable of, becoming public, which we refer to as “public ready” or “primed to become public.”
 
We intend to invest principally in equity securities, including convertible preferred securities and debt securities convertible into equity securities, of primarily non-public U.S.-based companies. Our investment objective is to maximize total return.  In accordance with our investment objective, we intend to provide capital principally to U.S.-based, private companies with an equity value of less than $250 million, which we refer to as “micro-cap companies.”  Our primary emphasis will be to attempt to generate capital gains through our equity investments in micro-cap companies, including through the conversion of the convertible debt or convertible preferred securities we will seek to acquire in such companies.  However, we anticipate that a significant portion of our investments at any given time will include a component of interest or dividends, which we believe will provide us with current yield, in addition to the potential for capital appreciation.  We may also make investments on an opportunistic basis in U.S.-based publicly-traded companies with market capitalizations of less than $250 million, as well as foreign companies that otherwise meet our investment criteria, subject to certain limitations imposed under the 1940 Act. At the present time, we do not expect our investments in foreign companies to exceed more than 10% of our total investment portfolio on a cost basis, however.
 
We intend to utilize a three-step investment process focused on:
 
 
·
an initial investment consisting of convertible debt,
 
 
·
a going public preparation process, and
 
 
·
a subsequent follow-on investment typically consisting of convertible preferred stock or other equity.
 
Any subsequent follow-on investment will be contingent upon a portfolio company satisfying pre-established milestones towards the filing of a registration statement under the Securities Act of 1933, as amended (“Securities Act”) or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Where appropriate, we may also negotiate to receive warrants, either as part of our initial or follow-on investments in our portfolio companies.
 
As an integral part of our initial investment, we intend to partner with and help prepare our portfolio companies to become public and meet the governance and eligibility requirements for a Nasdaq Capital Market listing.  Because we believe that the initial public offering (“IPO”) market is virtually non-existent for micro-cap companies, we intend that our portfolio companies will go public through the filing of a registration statement under the Securities Act or the Exchange Act.   We intend to invest in micro-cap companies that we believe will be able to file a registration statement with the U.S. Securities and Exchange Commission (“SEC”) within approximately three to twelve months after our initial investment.   These registration statements will typically take the form of a resale registration statement filed by a portfolio company under the Securities Act coupled with a concurrent registration of the portfolio company’s common stock under the Exchange Act, or alternatively a stand-alone registration statement registering the common stock of a portfolio company under the Exchange Act without a concurrent registered offering under the Securities Act.
 
1

While we expect the common stock of our portfolio companies to typically be initially quoted on the Over-the-Counter Bulletin Board (the “OTC Bulletin Board”) following the completion of the registration process, we intend to target investments in portfolio companies that we believe will be able to qualify for a Nasdaq Capital Market listing within approximately twelve to eighteen months after completion of our follow-on investment.  We can provide no assurance, however, that the micro-cap companies in which we invest will be able to successfully complete the SEC registration process, or that they will be successful in obtaining a listing on the OTC Bulletin Board or the Nasdaq Capital Market within the expected timeframe, if at all.
 
We intend to maximize our potential for capital appreciation by taking advantage of the premium we believe is generally associated with having a more liquid asset, such as a publicly traded security.  Specifically, we believe that a Nasdaq Capital Market listing, if obtained, will generally provide our portfolio companies with greater visibility, marketability, and liquidity than they would otherwise be able to achieve without such a listing.  Since we intend to be more patient investors, we believe that our portfolio companies may have an even greater potential for capital appreciation if they are able to demonstrate sustained earnings growth and are correspondingly rewarded by the public markets with a price-to-earnings (P/E) multiple appropriately linked to earnings performance.  We can provide no assurance, however, that the micro-cap companies in which we may invest will be able to achieve such sustained earnings growth necessary, or that the public markets will recognize such growth, if any, with an appropriate market premium.
 
The convertible debt instruments we expect to receive in connection with our initial investments will likely be unsecured or subordinated debt securities. The equity investments we expect to receive in connection with our follow-on investments will typically be non-controlling investments, meaning we will not be in a position to control the management, operation and strategic decision-making of the companies in which we invest.   In the near term, we expect that our total initial and follow-on investments in each portfolio company will typically range from $250,000 to $500,000, although we may invest more than this threshold in certain opportunistic situations.  We expect the size of our individual investments to increase if and to the extent our capital base increases in the future.
 
We expect that our capital will primarily be used by our portfolio companies to finance organic growth.  To a lesser extent, our capital may be used to finance acquisitions and recapitalizations. Our investment adviser’s investment decisions will be based on an analysis of potential portfolio companies’ management teams and business operations supported by industry and competitive research, an understanding of the quality of their revenues and cash flow, variability of costs and the inherent value of their assets, including proprietary intangible assets and intellectual property.  Our investment adviser will also assess each potential portfolio company as to its appeal in the public markets and its suitability for achieving and maintaining public company status.
 
During the last half of 2008, the state of the economy in the U.S. and abroad continued to deteriorate to what we believe is a recession, which could be long-term. The generally deteriorating economic situation, together with the limited availability of debt and equity capital, including through bank financing, will likely have a disproportionate impact on the micro-cap companies we intend to target for investment.  As a result, we may experience a reduction in attractive investment opportunities in prospective portfolio companies that fit our investment criteria.  In addition, micro-cap companies in which we ultimately invest may be unable to repay their debt obligations to us, and the equity into which such debt obligations are convertible may have little or no value, resulting in the loss of all or substantially all of our investment in such micro-cap companies.
 
We have no operating history.  At this time, we do not have any arrangements, agreements or commitments to make an investment in a portfolio company.  We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially.
 
2

Private Issuances of Securities
 
On May 14, 2008, our investment adviser, Keating Investments, purchased 100 shares of our common stock at a price of $10.00 per share as our initial capital.  On November 12, 2008, we completed the final closing of our initial private placement.  We sold a total of 569,800 shares of our common stock in the initial private placement at a price of $10.00 per share raising aggregate gross proceeds of $5,698,000.  After the payment of commissions and other offering costs of approximately $454,566, we received aggregate net proceeds of approximately $5,243,434 in connection with our initial private placement.  As of December 31, 2008, we had cash resources of approximately $4.78 million and no indebtedness other than accounts payable and accrued expenses incurred in the ordinary course of business of approximately $83,000, and management fees payable to Keating Investments of approximately $12,000.
 
As of January 15, 2009, our shares of common stock were owned by a total of 37 persons, including our Chief Executive Officer and Chairman of the Board of Directors, our Chief Operating Officer, and one of our independent directors, who own, in the aggregate, a total of 120,000 shares of our common stock, representing approximately 21.1% of our issued and outstanding shares of common stock as of the date of this prospectus.  See “Control Persons and Principal Stockholders.”
 
All shares of our common stock issued in the initial private placement are restricted shares and cannot be sold by the holders thereof without registration under the Securities Act or an available exemption from registration under the Securities Act.
 
Taxation
 
Effective January 1, 2009, we intend to elect to be treated for U.S. federal income tax purposes, and intend to qualify annually thereafter, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).  As a RIC, we generally will not have to pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders from our tax earnings and profits. To obtain and maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See “Material U.S. Federal Income Tax Considerations.”
 
About Keating Investments
 
Our investment activities are managed by Keating Investments.  Keating Investments was founded in 1997 and is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).  The managing member and majority owner of Keating Investments is Timothy J. Keating.  Our investment adviser’s investment committee (“Investment Committee”) must unanimously approve each new investment that we make. The members of the Investment Committee currently consist of Timothy J. Keating, Ranjit P. Mankekar and Kyle L. Rogers, who are also the senior investment professionals of Keating Investments and our executive officers.  In addition, Keating Investments’ other investment professionals consist of three portfolio company originators, one analyst and a Chief Compliance Officer. We believe the Investment Committee’s approach embraces an investment process with well-defined investment parameters, risk assessment techniques and valuation metrics that are applied consistently to all investments.
 
Advisory Fees
 
Under our investment advisory and administrative services agreement (the “Investment Advisory and Administrative Services Agreement”), Keating Investments is entitled to a fee consisting of two components—a base management fee and an incentive fee based upon our net realized capital gains. The base management fee will be payable monthly in arrears, and will be calculated at an annual rate of 2.0% of our gross assets, inclusive of any borrowings for investment purposes.
 
3

The incentive fee will be determined and payable in arrears as of the end of each calendar year, and will equal 20% of our realized capital gains, if any, on a cumulative basis from our inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees.  Although we anticipate that a significant portion of our investments at any given time will include a component of interest or dividends, unlike many externally managed business development companies, our investment adviser will not be entitled to any incentive fee based upon our net investment income received from such interest or dividend payments.  See “Investment Advisory and Administrative Services Agreement.”
 
Administration
 
Keating Investments will be reimbursed for administrative expenses it incurs on our behalf pursuant to our Investment Advisory and Administration Agreement, including the allocable portion of the compensation of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. See “Investment Advisory and Administrative Services Agreement.”
 
Market Opportunity
 
Although the current negative economic environment has severely limited access to the capital markets and is likely to have a disproportionate impact on the financial condition and results of operations of the types of micro-cap companies we intend to target, we believe the following market opportunity continues to exist to provide financing for public ready micro-cap companies.
 
Continued need for growth capital by public ready micro-cap companies looking for an equity partner.  We believe a significant opportunity exists to provide growth, expansion and other types of capital to public ready micro-cap companies that have reached a point in their development where additional equity capital is needed.
 
Absence of traditional IPO financing for micro-cap companies.  We will focus on micro-cap companies that have demonstrated revenues, not pre-revenue or start-up companies, that are at a point in their development where we believe equity capital is required, but which are unable to raise capital through a traditional IPO or are unwilling, or unable due to market conditions, to raise capital from private equity and venture capital sources.
 
Difficult market for private equity and venture capital funds. We believe that the public ready micro-cap companies in which we intend to invest are also feeling the adverse impacts from the difficulties in current private equity and venture capital markets.  Accordingly, we believe that many viable public ready micro-cap companies that fit our investment criteria will have limited, if any, access to the private equity market or venture capital financing, and we believe this trend is likely to continue for the foreseeable future.
 
IPO financing alternative.  We believe that there exists a significant market opportunity to meet the capital requirements of a growing number of these businesses as they find the U.S. public and private capital markets largely closed. We believe that we can offer public ready micro-cap companies that have solid financial qualifications and strong growth prospects with an attractive, well-structured capital markets alternative which is supported by our investment adviser’s public markets approach and expertise.
 
Benefits of being a public company.  Typically, we believe investors place a premium on liquidity, or having the ability to sell stock quickly. As a result, we believe that public companies typically trade at higher valuations than private companies with similar financial attributes. By going public, we believe that our portfolio companies may be able to receive the benefit of this liquidity premium, provided that they are successful in obtaining a listing on the Nasdaq Capital Market.
 
Total Return Objective
 
Our investment objective is to maximize total return.  In furtherance of that objective, our primary emphasis will be to attempt to generate capital gains through our equity investments in micro-cap companies, including through the conversion of the convertible debt or convertible preferred securities we will seek to acquire in such companies.  However, we anticipate that a significant portion of our investments at any given time will include a component of interest or dividends, which we believe will provide us with current yield, in addition to the potential for capital appreciation.
 
4

Investment Strategy
 
We intend to implement the following strategies to take advantage of the market opportunity for providing capital to public ready micro-cap companies that we believe have strong prospects for growth and which are at a point in their development where we believe a significant equity investment is required:
 
Visionary, industry leading management.  We plan to invest in businesses with a strong management team with industry experience, a visionary business strategy, a passionate commitment to achieve results, the proven ability to execute and lead, and a track record of being able to attract experienced industry talent.
 
Innovative and quality products.  We intend to focus our investments on companies where there is a proven demand for the products or services they offer rather than focusing on ideas that have not been proven or situations in which a completely new market must be created.
 
Large potential markets.  We intend to provide capital to established micro-cap companies with demonstrated growth that we believe is sustainable in industries where we believe there are substantial, leading edge market opportunities.
 
Consistent and predictable results.  We intend to focus on micro-cap companies that have realistic operating targets set by management that are consistently achieved, have a demonstrated ability to grow market share profitably, have growing and sustainable profits, generate or have the potential to generate recurring revenue streams, have recognized technological barriers to market entry and have a commitment to stay ahead of innovation.
 
Aligned interests.  We believe it is important that each of our portfolio companies’ management teams have a meaningful equity stake in their business and that their interests are aligned with our interests as investors in the portfolio company to create substantial stockholder value through a widely held and actively traded public stock.
 
Competitive Advantages
 
We believe that we will have the following competitive advantages over other providers of capital to public ready micro-cap companies including private equity firms, venture capital firms and reverse merger sponsors:
 
Public markets focus. We intend to invest in micro-cap companies that are committed to, and capable of, becoming public companies and have defensible valuations to support our initial investment pricing.
 
Going public expertise.  We believe that our investment adviser’s senior investment professionals and various third party consultants, with which our investment adviser has relationships, have extensive experience in taking companies public and designing capital markets and investor relations programs.
 
Possibility of obtaining a Nasdaq Capital Market exchange listing.  We believe that a Nasdaq Capital Market listing, if obtained, generally will provide our portfolio companies with visibility, marketability, liquidity and third party established valuations, all of which will aid in their future capital raising efforts.
 
Three-step equity investment structure.   We will use a three-step investment structure with:
 
 
§
an initial convertible debt investment that allows us to meet the immediate capital needs of a portfolio company in a timely manner,
 
 
§
a going public phase where we provide managerial assistance to prepare the prospective portfolio company for the eligibility and governance standards required by the Nasdaq Capital Market; and
 
5

 
 
§
a subsequent follow-on investment principally consisting of convertible preferred stock or other equity.
 
Non-controlling, minority investments.  We intend to make non-controlling, minority investments in our portfolio companies.   We believe this makes us a more attractive source of capital in comparison to private equity and venture capital funds which typically require controlling investments.
 
Liquidity premium. We intend to maximize our potential for capital appreciation by taking advantage of the premium we believe is generally associated with having a more liquid asset, such as a publicly traded security.
 
Plan of Distribution
 
This is a continuous offering of our shares as permitted by the federal securities laws. This offering commenced as of the date of this prospectus and will conclude one year from the date of this prospectus, unless we elect to extend this offering, in our sole discretion for an additional six months.  We intend to file post-effective amendments to this registration statement, which are subject to SEC review, to allow us to continue this offering until its conclusion.
 
The dealer manager is not required to sell any specific number or dollar amount of shares but will use its best efforts to sell the shares offered. The minimum permitted purchase is $5,000 in shares of our common stock. We will not sell any shares unless we raise gross offering proceeds of $1 million from persons who are not affiliated with us or Keating Investments by the time this offering concludes. After we have satisfied the minimum offering amount, additional purchases must be in increments of $1,000, except for purchases made pursuant to our dividend reinvestment plan. Once we have satisfied the minimum offering amount, we intend to conduct closings on a monthly basis thereafter until the conclusion of this offering.  All subscription payments will be placed in an account held by the escrow agent, Steele Street Bank & Trust, in trust for our subscribers’ benefit, pending release to us at the next scheduled monthly closing, assuming satisfaction of the minimum offering amount. If we do not raise gross offering proceeds of $1 million by the conclusion of this offering, we will promptly return all funds in the escrow account (including interest). We will not deduct any fees or expenses if we return funds from the escrow account. Upon raising $1 million and meeting the minimum offering amount, the funds then held in escrow will be released to us at the next scheduled monthly closing and investors with subscription funds held in the escrow will be admitted as stockholders as soon as practicable, but in no event later than 15 days after such release. The dealer manager will notify the network of selected broker-dealers once the minimum offering amount has been attained. The selected broker-dealers will, in turn, notify the registered representatives who obtain subscription documents from investors.
 
Subsequent to meeting the minimum offering amount, we will then sell our shares on a continuous basis at monthly closings at a price of $10.00 per share until this offering concludes; however, to the extent that our net asset value increases, we will sell at a price necessary to ensure that shares are not sold at a price that is below net asset value. Although we will offer shares of our common stock on a continuous basis, we expect to accept subscriptions at monthly closings in which we admit new stockholders. All subscription payments will be placed in an account held by the escrow agent, Steele Street Bank & Trust, in trust for our subscribers’ benefit, pending release to us at the next scheduled monthly closing.  We expect that our monthly closing dates for sales of shares will occur on the last business day of each month until the conclusion of this offering, provided that we may conduct a final closing subsequent to conclusion of this offering to accept any subscriptions received on or before one year from the date of this prospectus, or 18 months from the date of this prospectus if we elect to extend the offering for an additional six months. We expect shares issued pursuant to our dividend reinvestment plan will be issued one business day following the date any distribution our Board of Directors may declare is payable.
 
To purchase shares in this offering, you must complete and sign a subscription agreement (in the form attached to this prospectus as Appendix A) for a specific dollar amount equal to or greater then $5,000 and pay such amount at the time of subscription. You should make your check payable to “Keating Capital Escrow Account.” Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. Pending acceptance of your shares, proceeds will be deposited into an interest-bearing account.
 
The dealer manager is registered as a broker-dealer with the SEC and FINRA. The principal business of the dealer manager will be to sell the shares registered in this offering. For additional information about the dealer manager, including information related to its affiliation with us and our adviser, see “Certain Relationships and Related Party Transactions.”
 
6

Suitability Standards
 
Pursuant to applicable state securities laws, shares of common stock offered through this prospectus are suitable only as a long-term investment for persons of adequate financial means who have no need for liquidity in this investment. Initially, there is not expected to be any public market for the shares, which means that it may be difficult to sell shares. As a result, we have established suitability standards which require investors to have either (i) a net worth (not including home, furnishings, and personal automobiles) of at least $70,000 and an annual gross income of at least $70,000, or (ii) a net worth (not including home, furnishings, and personal automobiles) of at least $250,000. Our suitability standards also require that a potential investor (i) can reasonably benefit from an investment in us based on such investor’s overall investment objective and portfolio structuring; (ii) is able to bear the economic risk of the investment based on the prospective stockholder’s overall financial situation; and (iii) has apparent understanding of (a) the fundamental risks of the investment, (b) the risk that such investor may lose his entire investment, (c) the lack of initial liquidity of the shares, (d) the background and qualifications of Keating Investments, and (e) the tax consequences of the investment.  For additional information, including special suitability standards for residents of Alabama, Arizona, Iowa, Kansas, Kentucky, Nebraska and Ohio, see “Suitability Standards.”
 
How to Subscribe
 
Investors who meet the suitability standards described herein may purchase shares of our common stock. Investors seeking to purchase shares of our common stock should proceed as follows:
 
 
Read this entire prospectus and any appendices and supplements accompanying this prospectus.
 
 
Complete the execution copy of the subscription agreement. A specimen copy of the subscription agreement, including instructions for completing it, is included in this prospectus as Appendix A.
 
 
Deliver a check for the full purchase price of the shares of our common stock being subscribed for along with the completed subscription agreement to the selected broker-dealer. You should make your check payable to “Keating Capital Escrow Account” After you have satisfied the applicable minimum purchase requirement, additional purchases must be in increments of $1,000, except for purchases made pursuant to our dividend reinvestment plan.
 
 
By executing the subscription agreement and paying the total purchase price for the shares of our common stock subscribed for, each investor attests that he meets the suitability standards as stated in the subscription agreement and agrees to be bound by all of its terms.
 
Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. Subscriptions will be accepted or rejected within 30 days of receipt by us and, if rejected, all funds shall be returned to subscribers with interest and without deduction for any expenses within ten business days from the date the subscription is rejected. We are not permitted to accept a subscription for shares of our common stock until at least five business days after the date you receive this prospectus.
 
An approved trustee must process and forward to us subscriptions made through IRAs, Keogh plans and 401(k) plans. In the case of investments through IRAs, Keogh plans and 401(k) plans, we will send the confirmation and notice of our acceptance to the trustee.
 
Estimated Use of Proceeds
 
We intend to use substantially all of the proceeds from this offering, net of expenses, to make portfolio investments in accordance with our investment objective and using the strategies described in this prospectus. The remainder will be used for working capital and general corporate purposes. There can be no assurance that we will be able to sell all of the shares we are presently offering.  If we sell only a portion of the shares offered hereby, we may be unable to achieve our investment objective.  It may take several months after meeting our minimum offering amount before we have raised sufficient funds to invest the initial proceeds of this offering in securities meeting our investment objective and provide some level of diversification to our portfolio.
 
7

In addition, we anticipate that it will take us up to twelve to twenty-four months after conclusion of this offering to invest substantially all of the net proceeds of the offering in accordance with our investment strategy, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions. We cannot assure you we will achieve our targeted investment pace. Pending such investments, we will invest the net proceeds of the offering primarily in cash, cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less from the date of investment, which we expect will earn yields substantially lower than the interest, dividend or other income that we anticipate receiving in respect of investments in debt and equity securities of our target portfolio companies. As a result, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.  The management fee payable to Keating Investments by us will not be reduced while our assets are invested in such securities.  See “Estimated Use of Proceeds.”
 
Liquidity Strategy
 
We presently intend to seek the listing of our shares of common stock on the Nasdaq Capital Market within six months after the conclusion of this offering.  However, we cannot provide you with any assurance that we will be successful in obtaining a listing of our shares on the Nasdaq Capital Market in the manner or within the timeframe we propose, if at all.  Specifically, we may fail to meet the applicable standards for listing on the Nasdaq Capital Market, as a result of insufficient assets, revenue, net income or record holders, among other things.  In the event we do not qualify for, or are unable to obtain, a listing on the Nasdaq Capital Market within our proposed timeframe, we will instead seek to have our shares quoted on the Over-the-Counter Bulletin Board, or “OTC Bulletin Board,” until such time as we are able to obtain a Nasdaq Capital Market listing for our shares.  Although we anticipate meeting the requirements to have our shares quoted on the OTC Bulletin Board within six months of completion of this offering, we cannot assure you that we will be successful in obtaining such a listing within that timeframe, if at all.  Securities traded on the OTC Bulletin Board also generally have a less liquid market than those traded on the Nasdaq Capital Market or other national securities exchanges.  In addition, our Board of Directors retains the discretion to postpone a listing on either the Nasdaq Capital Market or the OTC Bulletin Board if it determines such a listing is not in the best interests of Keating Capital and our stockholders, though we would expect such a postponement to occur only in the event of extraordinary market or economic turmoil.  As a result, if you purchase shares you may have limited liquidity for a substantial period of time, and we cannot provide you with any assurance regarding when or if our shares will be accepted for listing or quotation on the Nasdaq Capital Market or the OTC Bulletin Board.  In addition, we can provide you with no assurance that, even if our shares are listed on the Nasdaq Capital Market or the OTC Bulletin Board, an active trading market for our shares will develop.
 
Conflicts of Interest
 
We will experience conflicts of interest in connection with the management of our business affairs, including, but not limited to, the following:

 
·
The compensation payable to us and to Keating Investments, our investment adviser, will be approved by our Board of Directors consistent with the exercise of the requisite standard of care applicable to directors under Maryland law.  Such compensation is payable, in most cases, whether or not our stockholders receive distributions;

 
·
Regardless of the quality of the assets acquired, the services provided to us or whether we make distributions to our stockholders, Keating Investments will receive certain fees in connection with the management and sale of our portfolio companies;

 
·
Our executive officers and directors, and any that may be retained in the future, and the future members of Keating Investments, may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by Keating Investments or its affiliates that may be formed in the future. Accordingly, if this occurs, it may give rise to certain conflicts of interest in evaluating the suitability of investment opportunities of us.  Additionally, our officers, directors, and members of Keating Investments may have obligations to investors in those other entities, the fulfillment of which might not be in the best interests of us or our stockholders;

8

 
 
·
In the course of our investing activities, we will pay investment advisory and incentive fees to Keating Investments, as our investment adviser, and will reimburse Keating Investments for certain expenses it incurs. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the senior investment professionals of Keating Investments have interests that differ from those of our stockholders, giving rise to a conflict;

 
·
Keating Investments and its affiliates are not restricted from forming additional investment funds, entering into other investment advisory relationships or from engaging in other business activities, even though such activities may be in competition with us and/or may involve substantial time and resources.  Currently, Keating Investment’s investment professionals do not serve as principals of other investment funds affiliated with it. If they do in the future, persons and entities may in the future manage investment funds with investment objectives similar to ours. Accordingly, we may not be given the opportunity to participate in certain investments made by investment funds managed by advisers affiliated with Keating Investments;

 
·
From time to time, to the extent consistent with the 1940 Act and the rules and regulations promulgated thereunder, we and other future clients of Keating Investments may make additional investments at different levels of an investment entity’s capital structure or otherwise in different classes of an issuer’s securities.  These investments may inherently give rise to actual or perceived conflicts of interest between or among the various classes of securities that may be held by us and such other clients; and

 
·
In connection with our formation and the consummation of our initial private placement, we entered into a license agreement with our investment adviser, pursuant to which our investment adviser granted us a non-exclusive license to use the name “Keating.” Under the license agreement, we have the right to use the “Keating” name and logo for so long as Keating Investments or one of its affiliates remains our investment adviser. In addition, we will pay Keating Investments, our allocable portion of overhead and other expenses incurred by Keating Investments in performing its administrative obligations under the Investment Advisory and Administration Agreement, including our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. These arrangements may create conflicts of interest that our Board of Directors must monitor.

Risk Factors
 
An investment in our common stock involves a high degree of risk and may be considered speculative. You should carefully consider the information found in “Risk Factors” before deciding to invest in shares of our common stock. The following are some of the risks an investment in us involves:
 

 
·
We are  a recently-formed company with no operating history and are subject to the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective.

 
·
We will be dependent upon key management personnel of Keating Investments, our investment adviser, for our future success, particularly Timothy J. Keating, Ranjit P. Mankekar and Kyle L. Rogers. If we lose any member of Keating Investments’ senior management team, our ability to implement our business strategy could be significantly harmed.

 
·
Our investment adviser and its management have no prior experience managing a business development company.

9

 
 
·
Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital. As a business development company, the necessity of raising additional capital may expose us to risks  and may result in dilution to our current stockholders.

 
·
Any failure on our part to maintain our status as a business development company would reduce our operating flexibility.

 
·
Our ability to grow will depend on our ability to raise capital.

 
·
In the event we borrow money, which we currently do not intend to do, the potential for gain or loss on amounts invested would be magnified and may increase the risk of investing in us.

 
·
Our financial condition and results of operations will depend on our ability to manage our future growth effectively.

 
·
We will operate in a highly competitive market for investment opportunities.

 
·
A significant portion of our portfolio will be recorded at fair value as determined in good faith by our Board of Directors and, as a result, there will be uncertainty as to the value of our portfolio investments.

 
·
Even in the event the value of your investment declines, the base management fee and, in certain circumstances, the incentive fee will still be payable.

 
·
We will remain subject to corporate-level income tax if we are unable to qualify as a regulated investment company under Subchapter M of the Code.

 
·
There is a risk that you may not receive dividends or that our dividends may not grow over time.

 
·
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

 
·
Our quarterly and annual operating results will be subject to fluctuation as a result of the nature of our business, and if we fail to achieve our investment objective, the net asset value of our common stock may decline.

 
·
Although we anticipate receiving current income in the form of interest and dividends from our investments, our quarterly dividends will likely be subject to substantial fluctuation due to our focus on capital appreciation from equity investments.

 
·
There are significant potential conflicts of interest which could impact our investment returns.

 
·
Our Board of Directors may be authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.

 
·
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

 
·
Keating Investments and its affiliates, including our officers and some of our directors, will face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our stockholders.

 
·
Changes in laws or regulations governing our operations may adversely affect our business.

 
·
Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
 
 
10

 
 
·
Our investment adviser can resign on 120 days’ notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

 
·
To the extent that we do not realize income or choose not to retain after-tax realized capital gains, we will have a greater need for additional capital to fund our investments and operating expenses.

 
·
The amount of any distributions we may make is uncertain. Our distribution proceeds may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from this offering. Therefore, portions of the distributions that we make may represent a return of capital to you which will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets. We may not be able to pay you distributions, and our distributions may not grow over time.

 
·
Current market conditions have adversely affected the capital markets and have reduced the availability of debt and equity capital for the market as a whole and financial firms in particular.  These conditions make it more difficult for us to achieve our investment objective.

 
·
We are currently in a period of capital markets disruption and recession and we do not expect these conditions to improve in the near future.

 
·
We have not identified any of the portfolio companies in which we will invest the net proceeds of this offering.

 
·
The potential for Keating Investments to earn incentive fees under the Investment Advisory and Administrative Services Agreement may create incentive for it to enter into investments that are riskier or more speculative than would otherwise be the case, and Keating Investments may have an incentive to increase portfolio leverage in order to earn higher base management fees.

 
·
Keating Investments faces conflicts of interest as a result of compensation arrangements, time constraints and competition for investments, which they will attempt to resolve in a fair and equitable manner.

 
·
We are subject to financial market risks, including changes in interest rates which may have a substantial negative impact on our investments.

 
·
Our portfolio investments, especially until we raise significant capital from this offering, may be concentrated in a limited number of portfolio companies, which would magnify the effect of losses suffered by a few of these investments.

 
·
There is currently no public market for shares of our common stock, and we may be unable to obtain a listing of our shares on the Nasdaq Capital Market or the OTC Bulletin Board within our proposed timeframe. As a result, it may be difficult for you to sell your shares.

 
·
The amount of any distributions we may make is uncertain. Our distribution proceeds may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from this offering.  Therefore, portions of the distributions that we make may represent a return of capital to you.

 
·
As a result of the annual distribution  requirement to qualify as a RIC, we will likely need to continually raise cash or make borrowings to fund new investments.  At times, these sources of funding may not be available to us on acceptable terms, if at all.

 
·
After meeting the minimum offering amount, the purchase price at which you purchase shares will be determined at each monthly closing date.  As a result, your purchase price may be higher than the prior monthly closing price per share, and therefore you may receive a smaller number of shares than if you had subscribed at the prior monthly closing price.
 
11

 
 
·
This is a “best efforts” offering, and if we are unable to raise substantial funds, we will be limited in the number and type of investments we may make, and the value of your investment in us may be reduced in the event our assets under-perform.

Reports to Stockholders
 
In addition to filing reports with the SEC, until such time as our shares are listed on the Nasdaq Capital Market, within 60 days after the end of each fiscal quarter, we will distribute our quarterly report on Form 10-Q to all stockholders of record. In addition, we will distribute our annual report on Form 10-K to all stockholders within 120 days after the end of each fiscal year. These reports will also be available on our website at www.keatingcapital.com and on the SEC’s website at www.sec.gov. These reports should not be considered a part of or as incorporated by reference in the prospectus, or the registration statement of which the prospectus is a part.
 
Distributions
 
We intend to declare and pay distributions on a quarterly basis beginning no later than the first calendar quarter after the month in which we have raised at least $10 million in capital from investors not affiliated with us or Keating Investments.  We will pay these distributions to our stockholders out of assets legally available for distribution.  Although we anticipate having funds available for distributions as a result of receipt of current income in the form of interest and dividends from out investments, we cannot assure you that we will achieve investment results that will allow us to make a targeted level of cash distributions or year-to-year increases in cash distributions.  Any dividends to our stockholders will be declared out of assets legally available for distribution. See “Plan of Distribution.”
 
Dividend Reinvestment Plan
 
We have adopted a dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board of Directors authorizes, and we declare, a cash distribution, then our stockholders who have not opted out of our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving the cash distributions.  We expect to coordinate dividend payment dates so that the same price that is used for the monthly closing date immediately following such dividend payment date will be used to calculate the purchase price for purchasers under the dividend reinvestment plan until this offering concludes. Until this offering concludes, your reinvested dividends will purchase shares at a price equal to 95% of the price that shares are sold in the offering at the monthly closing immediately following the distribution payment date.
 
After conclusion of this offering and until our shares become publicly traded, the number of shares to be issued to a stockholder will be determined by dividing the total dollar amount of the distribution payable to such stockholder by the net asset value per share of our common stock as most recently determined by our Board of Directors on or prior to the valuation date for such distribution. If and when our shares become publicly traded, the number of shares to be issued to a stockholder will be determined by dividing the total dollar amount of the distribution payable to such stockholder by the market price per share of our common stock at the close of regular trading on the Nasdaq Capital Market, if our shares are listed thereon, or the OTC Bulletin Board on the valuation date for such distribution. Market price per share on that date will be the closing price for such shares on the Nasdaq Capital Market or the OTC Bulletin Board, as applicable, or, if no sale is reported for such day, at the average of their electronically-reported bid and asked prices.  See “Dividend Reinvestment Plan.”
 
No action will be required on the part of a registered stockholder to have his, her or its cash distribution reinvested in shares of our common stock. A registered stockholder will be able to elect to receive an entire distribution in cash by notifying the plan administrator and our transfer agent and registrar, in writing so that such notice is received by the plan administrator no later than the record date for distributions to stockholders. The plan administrator will set up an account for shares acquired through the plan for each stockholder who has not elected to receive distributions in cash and hold such shares in non-certificated form. Upon request by a stockholder participating in the plan, received in writing not less than 10 days prior to the record date, the plan administrator will, instead of crediting shares to the participant’s account, issue a certificate registered in the participant’s name for the number of whole shares of our common stock and a check for any fractional share.
 
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Corporate Information
 
Our principal executive offices are located at 5251 DTC Parkway, Suite 1000, Greenwood Village, Colorado 80111, and our telephone number is (720) 889-0139. We maintain a website on the Internet at www.keatingcapital.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus.

13

 
FEES AND EXPENSES
 
The following table is intended to assist you in understanding the costs and expenses that an investor in this offering will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you,” “us” or “Keating Capital, Inc.,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in us.
 
Stockholder transaction expenses (1)
     
Sales load to dealer manager (as a percentage of offering price)(2)
    10.0 %
Offering expenses borne by us (as a percentage of offering price)(3)
    0.2 %
Dividend reinvestment plan expenses(4)
    0.0 %
Total stockholder transaction expenses (as a percentage of offering price)(8)
    10.2 %
         
Annual expenses (as a percentage of net assets attributable to common stock)(1)
       
Base management fees(5)
    2.0 %
Incentive fees payable under our Investment Advisory and Administrative Services Agreement(6)
    0.0 %
Interest payments on borrowed funds(7)
    0.0 %
Other expenses (estimated)
    1.5 %
Total annual expenses
    3.5 %
 
 Total stockholder transaction expenses (as a percentage of offering price)(8)
 
Example
 
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed our annual operating expenses would remain at the percentage levels set forth in the table above and that stockholders would pay a selling commission of 7% and a dealer manager fee of 3% with respect to common stock sold by us in this offering.
 
   
1 Year
   
3 Years
   
5 Years
   
10 Years
 
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return:(1)
  $
[  ]
    $
[  ]
    $
[  ]
    $
[  ]
 

 
The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. In addition, while the example assumes reinvestment of all distributions at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the distribution payable to a participant by the greater of 95% of the most recent offering price or at such price necessary to ensure that shares are not sold at a price that is below net asset value. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan. See “Plan of Distribution” for additional information regarding stockholder transaction expenses.
_______________
 (1)
Amount assumes we sell the maximum number of shares offered hereby at a price of $10.00 per share in this offering, for gross proceeds of $100 million. Actual expenses will depend on the number of shares we sell in this offering. For example, if we were to meet the minimum offering requirement only, our expenses as a percentage of the offering price would be significantly higher. There can be no assurance that we will sell all of the shares offered hereby.
 
(2)
“Sales load” includes selling commissions of 7% and dealer manager fees of 3%.
 
(3)
Amount reflects estimated offering expenses to be paid by us of up to approximately $200,000 if we raise $100 million in gross proceeds. We have also agreed to reimburse the dealer manager for its actual out-of-pocket expenses incurred in connection with this offering, which are included in the foregoing estimates.
 
(4)
The expenses of the dividend reinvestment plan are included in other expenses.
 
 
14

 
(5)
Our base management fee under the Investment Advisory and Administrative Services Agreement will be  payable monthly in arrears, and will be calculated based on the value of our gross assets at the end of the most recently completed calendar quarter, and appropriately adjusted for any equity capital raises or repurchases during the current calendar quarter. See “Investment Advisory and Administrative Services Agreement.”
 
 (6)
Based on our current business plan, we anticipate that we will begin to make investments in portfolio companies using the net proceeds received from this offering as soon as practicable after we meet our minimum offering requirement.  However, we anticipate that it will take us up to twelve to twenty-four months to invest substantially all of the net proceeds of the offering in accordance with our investment strategy, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions.  As a result, we do not anticipate paying any incentive fees in the first year after completion of this offering. Once fully invested, we expect the incentive fees we pay to increase to the extent we realize capital gains upon the sale of our equity investments in our portfolio companies. The incentive fee will equal 20.0% of our realized capital gains, if any, on a cumulative basis from our inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees.  The incentive fee is payable, in arrears, at the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date). See “Investment Advisory and Administrative Services Agreement.”
 
 (7)
We do not currently anticipate incurring indebtedness on our portfolio or paying any interest during the twelve months following the conclusion of this offering. We also do not currently anticipate issuing any preferred stock.
 
(8)
Under the rules of FINRA, total organization and offering expenses are limited to 15% of the gross proceeds of the offering, and underwriting compensation payable to underwriters, broker-dealers or affiliates are limited to 10% of the gross offering proceeds.  The 10% limit on underwriting compensation is included as part of the overall 15% limit on organization and offering expenses.  Keating Investments will be responsible for the payment of our cumulative offering expenses to the extent they, taken together with selling commissions and dealer manager fees borne by us, exceed 15% of the aggregate gross proceeds from this offering, without recourse against or reimbursement by us.
 

15

 
 
COMPENSATION OF THE DEALER MANAGER AND THE INVESTMENT ADVISER
 
 
The dealer manager will receive compensation and reimbursement for services relating to this offering, and we will compensate Keating Investments for the investment and management of our assets. The most significant items of compensation, fees, expense reimbursements and other payments that we expect to pay to these entities and their affiliates are included in the table below. The selling commissions and dealer manager fee may vary for different categories of purchasers. See “Plan of Distribution.” This table assumes the shares are sold through distribution channels associated with the highest possible selling commissions and dealer manager fees. For illustrations of how the base management fee and the incentive fee are calculated, see “Investment Advisory and Administrative Services Agreement.”

Type of Compensation
 
Determination of Amount
 
Estimated Amount for
Maximum Offering
(10,000,000 Shares)(1)
         
Fees to the Dealer Manager
 
Sales Load
       
         
Selling commissions(2)
 
7% of gross offering proceeds from the offering; all selling commissions are expected to be reallowed to selected broker-dealers.
 
$7,000,000
         
Dealer manager fee(2)
 
Up to 3% of gross proceeds, all or a portion of which may be reallowed to selected broker- dealers.
 
$3,000,000
         
Reimbursement of Offering Costs
 
Other offering expenses(3)
 
Based on our current estimate, we estimate that these expenses would be $200,000, or 0.2% of the gross offering proceeds, if we use the maximum amount offered. Keating Investments will be responsible for the payment of our cumulative offering expenses to the extent they, taken together with selling commissions and dealer manager fees borne by us, exceed 15% of the aggregate gross proceeds from this offering, without recourse against or reimbursement by us.
 
$200,000
         
Advisory Fees
 
Base management fee
 
The base management fee will be payable monthly in arrears, and will be calculated at an annual rate of 2% of our gross assets.
 
$2,000,000
 
 
16

Type of Compensation
 
Determination of Amount
 
Estimated Amount for
Maximum Offering
(10,000,000 Shares)(1)
         
Incentive Fee
 
The incentive fee will be determined and payable in arrears as of the end of each calendar year, and will equal 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees, with respect to each of the investments in our portfolio.
 
These amounts cannot be estimated since they are based upon the performance of the assets held by the company. The company has not commenced operations and has no prior performance.
         
Reimbursement of Operating Expenses
 
Other Operating Expenses
 
We will reimburse the expenses incurred by Keating Investments in connection with its provision of administrative services to us, including the allocable portion of compensation payable by Keating Investments to our Chief Financial Officer and Chief Compliance Officer and their respective staffs. We will not reimburse for personnel costs in connection with services for which Keating Investments receives a separate fee. In addition, we will not reimburse Keating Investments for (i) rent or depreciation, capital equipment or other costs of its own administrative items, or (ii) salaries, fringe benefits, travel expenses and other administrative items incurred or allocated to any controlling person of Keating Investments.
 
We have estimated these annual expenses to be approximately $500,000. Actual amounts may be lower or higher than this.
_______________
(1)
Assumes all shares are sold at $10.00 per share with no reduction in selling commissions or dealer manager fees.
 
(2)
The selling commission and dealer manager fee may be reduced or waived in connection with certain categories of sales, such as sales for which a volume discount applies, sales through investment advisers or banks acting as trustees or fiduciaries and sales to our affiliates. No selling commission or dealer manager fee will be paid in connection with sales under our dividend reinvestment plan.
 
(3)
The offering expenses are expected to consist of costs incurred by us for legal, accounting, printing and other offering expenses, including for registering and marketing the shares of our common stock, which shall include development of marketing and marketing presentations and training and educational meetings and general coordination of the marketing process. We have also agreed to reimburse the dealer manager for its actual out-of-pocket expenses incurred in connection with this offering.
 
Certain of the advisory fees payable to Keating Investments are not based on the performance of our investments. See “Investment Advisory and Administrative Services Agreement” and “Certain Relationships and Related Party Transactions” for a more detailed description of the fees and expenses payable to Keating Investments, the dealer manager and their affiliates and the conflicts of interest related to these arrangements.  
 
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QUESTIONS AND ANSWERS ABOUT THIS OFFERING
 
Set forth below are some of the more frequently asked questions and answers relating to our structure, our management, our business and an offering of this type. See “Prospectus Summary” and the remainder of this prospectus for more detailed information about our structure, our business, and this offering.
 
Q:
What is a “BDC”?
 
A:
BDCs are closed-end funds that elect to be treated as business development companies under the 1940 Act. As such, BDCs are subject to only certain provisions of the 1940 Act, as well as the Securities Act of 1933 and the Securities Exchange Act of 1934. BDCs make investments in private or thinly-traded public companies in the form of long-term debt or equity capital, with the goal of generating current income and/or capital growth. BDCs can be internally or externally managed and qualify to elect to be taxed as “regulated investment companies” for federal tax purposes.
 
Q:
What is a “RIC”?
 
A:
A “RIC” is a regulated investment company under Subchapter M of the Code. A RIC generally does not have to pay corporate level federal income taxes on any income that it distributes to its stockholders from its tax earnings and profits. To qualify as a RIC, a company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, in order to obtain RIC tax treatment, a company must distribute to its stockholders, for each taxable year, at least 90% of its “investment company taxable income,” which is generally its net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. See “Material U.S. Federal Income Tax Considerations” for more information regarding RICs.
 
Q:
Who will choose which investments to make?
 
A:
Keating Investments will manage our day-to-day operations and will determine companies in which we will invest.  Our investment adviser’s Investment Committee  must unanimously approve each new investment that we make. The members of the Investment Committee currently consist of Timothy J. Keating, Ranjit P. Mankekar and Kyle L. Rogers, who are the senior investment professionals of Keating Investments and our executive officers. Our Board of Directors, including a majority of independent directors, oversees and monitors our investment performance and, beginning with the second anniversary of the date of the Investment Advisory and Administrative Services Agreement, will annually review the compensation we pay to Keating Investments and determine that the provisions of the Investment Advisory and Administrative Services Agreement are carried out.
 
Q:
What is the experience of Keating Investments?
 
A:
Keating Investments was formed in 1997 and has been an investment adviser registered under the Advisors Act since 2001.  Timothy J. Keating, Ranjit P. Mankekar and Kyle L. Rogers, who are also the senior investment professionals of Keating Investments, have over 44 years of collective experience in the financial sector.
 
Q:
How does a “best efforts” offering work?
 
A:
When shares of common stock are offered to the public on a “best efforts” basis, the broker-dealers participating in the offering are only required to use their best efforts to sell the shares of our common stock. Broker-dealers do not have a firm commitment or obligation to purchase any of the shares of common stock.
 
 Q:
How long will this offering last?
 
A:
This is a continuous offering of our shares as permitted by the federal securities laws. This offering commenced as of the date of this prospectus and will conclude one year from the date of this prospectus, unless we elect to extend this offering, in our sole discretion, for an additional six months.  All subscriptions must be received on or before the date this offering concludes.
 
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Q:
What happens if you do not raise a minimum of $1 million in this offering?
 
A:
We will not sell any shares unless we sell a minimum of $1 million in shares by the conclusion of this offering. Purchases by our directors, officers and any affiliates of us or Keating Investments will not count toward meeting this minimum threshold. Pending satisfaction of this minimum offering amount, all subscription payments will be placed in an account held by the escrow agent, Steele Street Bank & Trust, in trust for our subscribers’ benefit, pending release to us. If we do not raise gross offering proceeds of $1 million by the time this offering concludes, we will promptly return all funds in the escrow account (including interest). We will not deduct any fees if we return funds from the escrow account. If we meet the minimum offering amount, the proceeds held in escrow, plus interest, will be released to us. See “Plan of Distribution.”
 
Q:
Will I receive a stock certificate?
 
A:
Yes, to the extent you request one.  You may request that our transfer agent issue you a physical certificate evidencing your shares.  To the extent that you do not request a physical share certificate, your shares will instead be registered in book entry form.
 
Q:
Who can buy shares of common stock in this offering?
 
A:
In general, you may buy shares of our common stock pursuant to this prospectus if you have either (i) a net worth of at least $70,000 and an annual gross income of at least $70,000, or (ii) a net worth of at least $250,000. For this purpose, net worth does not include your home, home furnishings and personal automobiles. Our suitability standards also require that a potential investor (i) can reasonably benefit from an investment in us based on such investor’s overall investment objective and portfolio structuring; (ii) is able to bear the economic risk of the investment based on the prospective stockholder’s overall financial situation; and (iii) has apparent understanding of (a) the fundamental risks of the investment, (b) the risk that such investor may lose his entire investment, (c) the lack of initial liquidity of the shares, (d) the background and qualifications of Keating Investments, and (e) the tax consequences of the investment.
 
Generally, you must purchase at least $5,000 in shares of our common stock. Certain volume discounts may be available for large purchases. See “Plan of Distribution.” After you have satisfied the applicable minimum purchase requirement, additional purchases must be in increments of at least $1,000, except for purchases made pursuant to our dividend reinvestment plan. These minimum net worth and investment levels may be higher in certain states, so you should carefully read the more detailed description under “Suitability Standards.”
 
Our affiliates may also purchase shares of our common stock. The selling commission, the dealer manager fee and the organization and offering expense reimbursement that are payable by other investors in this offering will be reduced or waived for our affiliates. The purchase of shares of our common stock by our affiliates will not count toward satisfying our minimum offering requirement.
 
Q:
How do I subscribe for shares of common stock?
 
A:
If you meet the suitability standards and choose to purchase shares in this offering, you will need to (i) complete a subscription agreement, the form of which is attached to this prospectus as Appendix A, and (ii) pay for the shares at the time you subscribe. We reserve the right to reject any subscription in whole or in part. Subscriptions will be accepted or rejected by us within 30 days of receipt by us and, if rejected, all funds will be returned to subscribers without deduction for any expenses within ten business days from the date the subscription is rejected.
 

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Q:
Is there any minimum initial investment required?
 
A:
Yes. To purchase shares in this offering, you must make an initial purchase of at least $5,000. Once you have satisfied the minimum initial purchase requirement, any additional purchases of our shares in this offering must be in amounts of at least $1,000, except for additional purchases pursuant to our dividend reinvestment plan. See “Plan of Distribution.”
 
Q:
Can I invest through my IRA, SEP or after-tax deferred account?
 
A:
Yes, subject to the suitability standards. An approved trustee must process and forward to us subscriptions made through IRAs, Keogh plans and 401(k) plans. In the case of investments through IRAs, Keogh plans and 401(k) plans, we will send the confirmation and notice of our acceptance to the trustee. Please be aware that in purchasing shares, custodians or trustees of employee pension benefit plans or IRAs may be subject to the fiduciary duties imposed by ERISA or other applicable laws and to the prohibited transaction rules prescribed by ERISA and related provisions of the Code. In addition, prior to purchasing shares, the trustee or custodian of an employee pension benefit plan or an IRA should determine that such an investment would be permissible under the governing instruments of such plan or account and applicable law. See “Suitability Standards” for more information.
 
Q:
How will the payment of fees and expenses affect my invested capital?
 
A:
The payment of fees and expenses will reduce the funds available to us for investment in portfolio companies and the income generated by the portfolio as well as funds available for distribution to stockholders. The payment of fees and expenses will also reduce the book value of your shares of common stock.
 
Q:
Will the distributions I receive be taxable?
 
A:
Distributions by us generally are taxable to U.S. stockholders as ordinary income or capital gains. Distributions of our “investment company taxable income” (which is, generally, our net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) will be taxable as ordinary income to U.S. stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested in additional common stock. To the extent such distributions paid by us to non-corporate stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, such distributions, or Qualifying Dividends, may be eligible for a maximum tax rate of 15%. In this regard, it is anticipated that distributions paid by us generally will not be attributable to dividends and, therefore, generally will not qualify for the 15% maximum rate applicable to Qualifying Dividends. Distributions of our net capital gains (which is generally our realized net long-term capital gains in excess of realized net short-term capital losses) properly designated by us as “capital gain dividends” will be taxable to a U.S. stockholder as long-term capital gains that are currently taxable at a maximum rate of 15% in the case of individuals, trusts or estates, regardless of the U.S. stockholder’s holding period for his, her or its common stock and regardless of whether paid in cash or reinvested in additional common stock. Distributions in excess of our earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in such stockholder’s common stock and, after the adjusted basis is reduced to zero, will constitute capital gains to such U.S. stockholder.
 
Q:
Will I be notified on how my investment is doing?
 
A:
In addition to filing reports with the SEC, until such time as our shares are listed on the Nasdaq Capital Market, within 60 days after the end of each fiscal quarter, we will distribute our quarterly report on Form 10-Q to all stockholders of record. In addition, we will distribute our annual report on Form 10-K to all stockholders within 120 days after the end of each fiscal year. These reports will also be available on our website at www.keatingcapital.com and on the SEC’s website at www.sec.gov. These reports should not be considered a part of or as incorporated by reference in the prospectus, or the registration statement of which the prospectus is a part.
 
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Q:
When will I get my detailed tax information?
 
A:
We will send to each of our U.S. stockholders, as promptly as possible after the end of each calendar year, a notice detailing, on a per share and per distribution basis, the amounts includible in such U.S. stockholder’s taxable income for such year as ordinary income and as long-term capital gain.
 
Q:
Are there any restrictions on the transfer of shares?
 
A:
No. Shares of our common stock will have no preemptive, exchange, conversion or redemption rights and will be freely transferable, except where their transfer is restricted by federal and state securities laws or by contract.
 
Q:
Who can help answer my questions?
 
A:
If you have more questions about the offering or if you would like additional copies of this prospectus, you should contact your registered representative or the dealer manager at:
 

 
Andrews Securities, LLC
5251 DTC Parkway, Suite 1090
Greenwood Village, CO 80111
Attn: Jeff L. Andrews
(720) 489-4900
 
 
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RISK FACTORS
 
An investment in our securities involves certain risks relating to our structure and investment objective. The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the price of our common stock could decline, and you may lose all or part of your investment.
 
Risks Relating to Our Business and Structure
 
We are a recently-formed company with no operating history and are subject to the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective .
 
We were initially formed in May 2008. As a result, we have limited financial information on which you can evaluate an investment in our company or our prior performance. We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially or become worthless. Although we anticipate that it may take twelve to twenty-four months to invest substantially all of the net proceeds of the offering in our targeted investments, because of our relatively small size and lack of operating history, we may be unable to identify and fund investments that meet our criteria.
 
Until we are able to invest the net proceeds of the offering in suitable investments, we will invest in temporary investments, such as cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less, which we expect will earn yields substantially lower than the interest, dividend or other income that we anticipate receiving in respect of investments in debt and equity securities of our target portfolio companies. As a result, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.  Further, the management fee payable to our investment adviser, Keating Investments, will not be reduced while our assets are invested in such temporary investments.    
 
We will be dependent upon key management personnel of Keating Investments, our investment adviser, for our future success, particularly Timothy J. Keating, Ranjit P. Mankekar and Kyle L. Rogers. If we lose any member of Keating Investments’ senior management team, our ability to implement our business strategy could be significantly harmed.
 
We will depend on the experience, diligence, skill and network of business contacts of our investment adviser’s senior investment professionals. The senior investment professionals, together with other investment professionals that Keating Investments currently retains or may subsequently retain, will identify, evaluate, negotiate, structure, close, monitor and service our investments. Our future success will depend to a significant extent on the continued service and coordination of Keating Investments’ senior investment professionals, Timothy J. Keating, who is also our Chairman of the Board and Chief Executive Officer, Ranjit P. Mankekar, who is also our Chief Financial Officer, Treasurer and a member of our Board of Directors, and Kyle L. Rogers, who is also our Chief Operating Officer and Secretary.  The departure of any of these senior investment professionals could have a material adverse effect on our ability to achieve our investment objective. While our investment adviser’s senior investment professionals expect to devote a majority of their business time to our operations, none of Messrs. Keating, Mankekar and Rogers will be subject to an employment contract.
 
Our investment adviser and its management have no prior experience managing a business development company.
 
The 1940 Act imposes numerous constraints on the operations of business development companies. For example, business development companies are required to invest at least 70% of their total assets primarily in securities of eligible portfolio companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. These constraints may hinder our investment adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective. In addition, the senior investment professionals of Keating Investments have no prior experience managing a business development company, and the investment philosophy and techniques used by Keating Investments may differ from those private investments in smaller public companies with which Keating Investments’ senior investment professionals have experience. Accordingly, we can offer no assurance that we will replicate the historical performance of other companies with which Keating Investments’ senior investment professionals have been affiliated, and we caution you that our investment returns could be substantially lower than the returns achieved by such other companies.
 
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Our business model depends upon the development and maintenance of strong referral relationships with investment banking firms, professional services firms and private equity and venture capital funds.
 
If we fail to maintain our relationships with key firms, or if we fail to establish strong referral relationships with other firms or other sources of investment opportunities, we will not be able to grow our portfolio and achieve our investment objective. In addition, persons with whom we have informal relationships are not obligated to inform us of investment opportunities and therefore such relationships may not lead to the origination of portfolio company investments.
 
Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital. As a business development company, the necessity of raising additional capital may expose us to risks  and may result in dilution to our current stockholders.
 
Although we do not presently anticipate issuing debt to finance our investments, we may in the future issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a business development company, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights and might have rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring, or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.
 
We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our Board of Directors determines that such sale is in the best interests of us and our stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and you might experience dilution.
 
Any failure on our part to maintain our status as a business development company would reduce our operating flexibility.
 
Upon approval of a majority of our stockholders, we may elect to withdraw our status as a business development company. If we decide to withdraw our election, or if we otherwise fail to qualify as a business development company, we may be subject to the substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with such regulations would significantly increase our costs of doing business and correspondingly decrease our operating flexibility.
 
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Our ability to grow will depend on our ability to raise capital.
 
We will need to periodically access the capital markets to raise cash to fund new investments. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any.
 
In the event we borrow money, which we currently do not intend to do, the potential for gain or loss on amounts invested would be magnified and may increase the risk of investing in us.
 
The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increase the risks associated with investing in our securities.  Although we do not presently intend to do so, we may borrow from and issue senior debt securities to banks, insurance companies, and other lenders. Lenders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common shareholders and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock dividend payments. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to our investment adviser, Keating Investments, will be payable based on our gross assets, including those assets acquired through the use of leverage, Keating Investments will have a financial incentive to incur leverage which may not be consistent with our stockholders’ interests. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to Keating Investments.
 
As a business development company, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%. If this ratio declines below 200%, we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make distributions. The amount of leverage that we employ will depend on our investment adviser’s and our Board of Directors’ assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us.  Any borrowings by us will require the approval of our Board.
 
In addition, any debt facility into which we may enter would likely impose financial and operating covenants that restrict our business activities, including limitations that would hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.
 
Our financial condition and results of operations will depend on our ability to manage our future growth effectively.
 
Although Keating Investments has been an investment adviser registered under the Advisors Act since 2001, it has no experience in managing a business development company.  Further, as discussed above, we are a recently organized company with no operating history. As such, we and our investment adviser are subject to the business risks and uncertainties associated with any new business enterprise, including the lack of experience in managing or operating a business development company. Our ability to achieve our investment objective will depend on our ability to grow, which will depend, in turn, on our investment adviser’s ability to identify, analyze, invest in and finance companies that meet our investment criteria.
 
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Although we anticipate that it may take twelve to twenty-four months to invest substantially all of the net proceeds of the offering in our targeted investments, because of our relatively small size and lack of operating history, we may be unable to identify and fund investments that meet our criteria.  Until we are able to invest the net proceeds of the offering in suitable investments, we will invest in temporary investments, such as cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less, which we expect will earn yields substantially lower than the interest, dividend or other income that we anticipate receiving in respect of investments in debt and equity securities of our target portfolio companies.
 
Accomplishing this result on a cost-effective basis is largely a function of our investment adviser’s proper structuring and implementation of the investment process, its ability to identify and evaluate companies that meet our investment criteria, its ability to provide competent, attentive and efficient services to us, and our access to financing on acceptable terms. The senior investment professionals of Keating Investments will have substantial responsibilities under the Investment Advisory and Administrative Services Agreement. These demands on their time may distract them or slow the rate of investment. In order to grow, we and our investment adviser may need to hire, train, supervise and manage new employees. Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
 
We will operate in a highly competitive market for investment opportunities.
 
We will compete for investments with a number of business development companies and other investment funds (including private equity funds and venture capital funds), reverse merger and SPACs sponsors, investment bankers which underwrite initial public offerings, hedge funds that invest in private investments in public equity (“PIPE”), traditional financial services companies such as commercial banks, and other sources of financing.  Many of our competitors are substantially larger than us and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than we can. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company and, as a result, such companies may be more successful in completing their investments. There can be no assurance that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.
 
A significant portion of our investment portfolio will be recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
 
Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by our Board of Directors. Typically, there is not a public market for the securities of the privately held companies in which we intend to invest. As a result, we will value these securities quarterly at fair value as determined in good faith by our Board of Directors.
 
Certain factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments.
 
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Even in the event the value of your investment declines, the base management fee and, in certain circumstances, the incentive fee will still be payable.
 
The base annual management fee will be calculated as 2.0% of the value of our gross assets at a specific time. Accordingly, the management fee is payable regardless of whether the value of our gross assets and/or your investment have decreased. Moreover, the incentive fee payable to our investment adviser is calculated annually based upon our realized capital gains, computed net of realized capital losses and unrealized capital depreciation on a cumulative basis. As a result, we may owe our investment adviser an incentive fee during one year as a result of realized capital gains on certain investments, and then later incur significant realized capital losses and unrealized capital depreciation on the remaining investments in our portfolio during subsequent years.
 
We will remain subject to corporate-level income tax if we are unable to qualify as a regulated investment company under Subchapter M of the Code.
 
Although we intend to elect to be treated as a RIC under Subchapter M of the Code effective as of January 1, 2009 and succeeding tax years, no assurance can be given that we will be able to qualify for and maintain RIC status. To obtain and maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements.
 
 
 
• 
The annual distribution requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. In the event we use debt financing, we will be subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
 
 
 
• 
The income source requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from the sale of stock or securities or similar sources.
 
 
 
• 
The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. Failure to meet those requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in public companies whose securities may not trade actively in the secondary markets, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
 
If we fail to qualify for RIC tax treatment for any reason and remain or become subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution, and the amount of our distributions.
 
There is a risk that you may not receive dividends or that our dividends may not grow over time.   
 
We cannot assure you that we will achieve investment results or maintain a tax status that will allow or require any specified level of cash distributions or year-to-year increases in cash distributions.  Although we expect to be able to pay dividends from the interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof, we do not expect to generate capital gains from the sale of our portfolio investments on a level or uniform basis from quarter to quarter.  This may result in substantial fluctuations in our quarterly dividend payments to stockholders.
 
In addition, since we expect to have an average holding period for our portfolio company investments of two to three years, it is unlikely we will generate any capital gains during our initial years of operations and thus we are likely to pay dividends in our initial years of operation principally from interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof.  However, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.
 
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In addition, the micro-cap companies in which we intend to invest are generally more susceptible to economic downturns than larger operating companies, and therefore may be more likely to default on their payment obligations to us during recessionary periods, including the current economic environment.  Any such defaults could substantially reduce our net investment income available for distribution in the form of dividends to our shareholders.
 
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
 
Because in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty satisfying the annual distribution requirement applicable to RICs. For example, we will include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances, or contracted payment-in-kind (“PIK”) interest, which represents contractual interest added to the loan balance and due at the end of the loan term.   Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investments to meet these distribution requirements. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus be subject to corporate-level income tax.
 
Our quarterly and annual operating results will be subject to fluctuation as a result of the nature of our business, and if we fail to achieve our investment objective, the net asset value of our common stock may decline.
 
We could experience fluctuations in our quarterly and annual operating results due to a number of factors, some of which are beyond our control, including the interest rates and dividend rates payable on our debt securities and preferred stock investments, respectively, the default rate on any such securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.  In addition, the currently prevailing negative economic conditions may cause such default rates to be greater than they otherwise would be during a period of economic growth.
 
Our quarterly dividends are subject to substantial fluctuation due to our focus on capital appreciation from equity investments as opposed to a more steady current income stream from interest-bearing debt investments.
 
We intend to invest principally in equity securities, including convertible preferred securities and debt securities convertible into equity securities, of primarily micro-cap companies. Our primary emphasis will be to generate capital gains through our equity investments in such micro-cap companies, which we expect to become public reporting companies with their securities typically being initially quoted on the OTC Bulletin Board.  We do not expect the securities in our publicly traded portfolio companies to initially have an active secondary trading market and, as such, these securities will be illiquid until an active market develops. We believe that typically this liquidity will develop in conjunction with a Nasdaq Capital Market listing, which may not occur until twelve to eighteen months after our follow-on investment is made, if at all.  However, there can be no assurance that our portfolio companies will obtain either an OTC Bulletin Board or Nasdaq Capital Market listing or, even if a listing is obtained, that an active trading market will ever develop in the securities of our publicly traded portfolio companies.
 
Even if our portfolio companies are successful in becoming publicly traded companies, there is no assurance that they will be able to achieve their projected revenue and earnings targets or effectively maintain their status as public reporting companies.  In such case, there may be little or no demand for the securities of our portfolio companies in the public markets, we may have difficulty disposing of our investments, and the value of our investments may decline substantially.
 
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Although we expect to be able to pay dividends from the interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof, we do not expect to generate capital gains from the sale of our portfolio investments on a level or uniform basis from quarter to quarter.  This may result in substantial fluctuations in our quarterly dividend payments to stockholders.  In addition, since we expect to have an average holding period for our portfolio company investments of two to three years, it is unlikely we will generate any capital gains during our initial years of operations and thus we are likely to pay dividends in our initial years of operation principally from interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof.  However, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.
 
There are significant potential conflicts of interest which could impact our investment returns.
 
Our executive officers and directors, and any that may be retained in the future, and the future members of our investment adviser, may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by our investment adviser or its affiliates that may be formed in the future. Accordingly, if this occurs, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders.
 
In the course of our investing activities, we will pay investment advisory and incentive fees to Keating Investments, as our investment adviser, and will reimburse Keating Investments for certain expenses it incurs. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the senior investment professionals of Keating Investments have interests that differ from those of our stockholders, giving rise to a conflict.
 
Currently, our investment adviser’s senior investment professionals, Messrs. Keating, Mankekar and Rogers, and the other investment professionals currently retained by Keating Investments, do not serve as principals of other investment funds affiliated with Keating Investments; however, they may do so in the future.  If they do, persons and entities may in the future manage investment funds with investment objective similar to ours. Accordingly, we may not be given the opportunity to participate in certain investments made by investment funds managed by advisers affiliated with Keating Investments.  However, in the event such conflicts do arise in the future, Keating Investments intends to allocate investment opportunities in a fair and equitable manner consistent with our investment objective and strategies so that we are not disadvantaged in relation to any other affiliate or client of Keating Investments.
 
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In connection with the consummation of the offering, we entered into a license agreement with our investment adviser, pursuant to which our investment adviser will grant us a non-exclusive license to use the name “Keating.” Under the license agreement, we will have the right to use the “Keating” name and logo for so long as Keating Investments or one of its affiliates remains our investment adviser. In addition, we will pay Keating Investments, our allocable portion of overhead and other expenses incurred by Keating Investments in performing its obligations under the administration agreement, including our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. These arrangements may create conflicts of interest that our Board of Directors must monitor.
 
Our Board of Directors may be authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.
 
Under Maryland General Corporation Law, our Board of Directors is permitted to reclassify any authorized but unissued shares of common stock into one or more classes of preferred stock. If the Board of Directors undertakes such a reclassification, it is required to file Articles of Incorporation Supplementary, which include, among other things, a description of the stock and a statement that the stock has been reclassified by the Board of Directors under authority contained in the charter. The Board of Directors is not required to make a specific finding prior to approving a reclassification, though we would generally expect the Board of Directors to determine, at a minimum, that any reclassification was in our best interests. In the event that our Board of Directors opts to reclassify a portion of our unissued shares of common stock into a class of preferred stock, those preferred shares would have a preference over our common stock with respect to dividends and liquidation, which would reduce the amount distributable to our common stockholders. The cost of any such reclassification would be borne by our existing common stockholders. The class voting rights of any preferred shares we may issue could make it more difficult for us to take some actions that may, in the future, be proposed by the Board of Directors and/or the holders of our common stock, such as a merger, exchange of securities, liquidation, or alteration of the rights of a class of our securities, if these actions were perceived by the holders of preferred shares as not in their best interests. The issuance of preferred shares convertible into shares of common stock might also reduce the net income and net asset value per share of our common stock upon conversion. These effects, among others, could have an adverse effect on your investment in our common stock.
 
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
 
Our Board of Directors has the authority to modify or waive certain of our operating policies and strategies without prior notice (except as required by the 1940 Act) and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.
 
Keating Investments and its affiliates, including our officers and some of our directors, will face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our stockholders.

Keating Investments and its affiliates will receive substantial fees from us in return for their services, and these fees could influence the advice provided to us. Among other matters, the compensation arrangements could affect their judgment with respect to public offerings of equity by us, which allow the dealer manager to earn additional dealer manager fees and Keating Investments to earn increased asset management fees.

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Changes in laws or regulations governing our operations may adversely affect our business.

We and our portfolio companies will be subject to regulation by laws at the local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Any change in these laws or regulations could have a material adverse effect on our business.
 
Changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. If legislation is enacted, new rules are adopted, or existing rules are materially amended, we may change our investment strategy. Such changes could result in material differences to the strategies and plans set forth in this prospectus and may result in our investment focus shifting.
 
Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
 
The Maryland General Corporation Law, our charter and our bylaws contain provisions that may discourage, delay or make more difficult a change in control of us or the removal of our directors. Our Board of Directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our Board, including approval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our Board does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction.
 
We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board of Directors in three classes serving staggered three-year terms, and provisions of our charter authorizing our Board of Directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, and to amend our charter, without stockholder approval, to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.
 
Our investment adviser can resign on 120  days’ notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
 
Our investment adviser has the right, under the Investment Advisory and Administrative Services Agreement, to resign at any time upon not less than 120 days’ written notice, whether we have found a replacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 120 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.
 
To the extent that we do not realize income or choose not to retain after-tax realized capital gains, we will have a greater need for additional capital to fund our investments and operating expenses.
 
As a RIC, we must annually distribute at least 90 percent of our investment company taxable income as a dividend and may either distribute or retain our realized net capital gains from investments. As a result, these earnings may not be available to fund investments or to pay operating expenses. If we fail to generate net realized capital gains or to obtain additional funds, it would have a material adverse effect on our financial condition and results of operations as well as our ability to make follow-on and new investments. Because of the structure and objectives of our business, we may experience operating losses and expect to rely on proceeds from sales of investments, rather than on interest and dividend income, to pay our operating expenses. There is no assurance that we will be able to sell our investments and thereby fund our operating expenses.
 
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Our ability to enter into transactions with our affiliates will be restricted.
 
We will be prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of a majority of the independent members of our Board of Directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act and we will generally be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of our Board of Directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our Board of Directors and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security from or to any portfolio company of a private equity fund managed by Keating Investments without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
 
We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.
 
The net proceeds from the sale of shares will be used for our investment opportunities, operating expenses and for payment of various fees and expenses such as base management fees, incentive fees and other fees. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. Accordingly, in the event that we develop a need for additional capital in the future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to achieve portfolio diversification and our investment objective, which may negatively impact our results of operations and reduce our ability to make distributions to our stockholders.

We will incur significant costs as a result of being a public company.

As a public company, we will incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC. We believe that complying with these rules and regulations will make some activities time-consuming and costly and may divert significant attention of our investment adviser’s Senior Investment Professionals from implementing our investment objective to these and related matters.
 
The amount of any distributions we may make is uncertain. Our distribution proceeds may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from this offering. Therefore, portions of the distributions that we make may represent a return of capital to you which will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets. We may not be able to pay you distributions, and our distributions may not grow over time.

We intend to declare and pay distributions on a quarterly basis beginning no later than the first calendar quarter after the month in which we have raised at least $10 million in capital in this offering from investors not affiliated with us or Keating Investments. We will pay these distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a targeted level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described in this prospectus. In addition, the inability to satisfy the asset coverage test applicable to us as a business development company can limit our ability to pay distributions. All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable business development company regulations and such other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of this offering or from borrowings in anticipation of future cash flow, which may constitute a return of your capital and will lower your tax basis in your shares. Distributions from the proceeds of this offering or from borrowings also could reduce the amount of capital we ultimately invest in interests of portfolio companies.

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Risks Related to Our Portfolio Company Investments

The current economic recession will likely have a material adverse impact on the micro-cap companies we intend to target, which will significantly reduce the number of potential portfolio companies that fit our investment criteria.
 
During the last half of 2008, the state of the economy in the U.S. and abroad continued to deteriorate to what we believe is a recession, which could be long-term. Banks and others in the financial services industry have continued to report significant write-downs in the fair value of their assets, which has led to the failure of a number of banks and investment companies, a number of distressed mergers and acquisitions, the government take-over of the nation’s two largest government-sponsored mortgage companies, and the passage of the $700 billion Emergency Economic Stabilization of 2008 in early October 2008. In addition, the stock market has declined significantly, with both the S&P 500 and the Nasdaq Composite, declining by over 38% during 2008. These events have significantly constrained the availability of debt and equity capital for the market as a whole. Further, these and other events have also led to rising unemployment, deteriorating consumer confidence and a general reduction in spending by both consumers and businesses.
 
The generally deteriorating economic situation, together with the limited availability of debt and equity capital, including through bank financing, will likely have a disproportionate impact on the micro-cap companies we intend to target for investment.  As a result, we will likely experience a reduction in attractive investment opportunities in prospective portfolio companies that fit our investment criteria.  In addition, our debt and equity investments in portfolio companies could be impaired to the extent such portfolio companies experience financial difficulties arising out of the current economic environment.  Our inability to locate attractive investment opportunities, or the impairment of our portfolio investments as a result of economic conditions, could have a material adverse effect on our financial condition and results of operations.
 
We are currently in a period of capital markets disruption and recession and we do not expect these conditions to improve in the near future.
 
The U.S. capital markets have been experiencing extreme volatility and disruption for more than 12 months and we believe that the U.S. economy has entered into a period of recession. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. We believe these conditions may continue for a prolonged period of time or worsen in the future. A prolonged period of market illiquidity may have an adverse effect on our business, financial condition and results of operations. Unfavorable economic conditions could also increase our portfolio companies’ funding costs, limit their access to the capital markets or result in a decision by lenders not to extend credit to them. These events could limit our investment originations, limit their ability to grow and negatively impact our operating results.
 
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Our equity and debt investments in the companies that we are targeting may be extremely risky and we could lose all or part of our investments.
 
The convertible unsecured or subordinated debt that we will invest in as a part of our initial investments will not be rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s or lower than “BBB-” by Standard & Poor’s), which investments are commonly referred to as “junk.” Indebtedness of below investment grade quality is regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal and is, therefore, commonly subject to additional risks.
 
We expect our follow-on investments to consist primarily of equity securities, including preferred securities convertible into common stock.  We also expect to receive warrants as part of our initial debt and follow on equity investments.  These debt and equity investments will entail additional risks that could adversely affect our investment returns.
 
In addition, investment in the micro-cap companies that we are targeting involves a number of significant risks, including:
 
 
they may have limited financial resources and may be unable to meet their obligations, which may lead to bankruptcy or liquidation and the loss of our investment;
 
 
they typically have limited operating histories, narrower, less established product lines or offerings and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions, market conditions, operational risks and consumer sentiment in respect of their products or services, as well as general economic downturns;
 
 
at the time of our investment, since they are primarily privately owned, there is generally little publicly available information about these businesses; therefore, although Keating Investments’ investment professionals and agents will perform “due diligence” investigations on these portfolio companies, their operations and their prospects, we may not learn all of the material information we need to know regarding these businesses; 
 
 
they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; and
 
 
since part of our investment process requires that these companies become publicly traded companies, they will need resources, processes, procedures and systems to satisfy the additional regulatory burdens, they will incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC, and they may not be able to attract retail and institutional investor interest in the secondary market, all of which may have a material adverse impact on our portfolio companies and, in turn, on us.
 
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under any debt securities that we hold and render our equity investments in that portfolio company worthless. In addition, a substantial portion of our investments will be in the form of equity, which will generally rank below any debt issued by our portfolio companies.
 
Even if our portfolio companies are successful in becoming publicly traded companies, there is no assurance that they will be able to achieve their projected revenue and earnings targets or effectively maintain their status as public reporting companies.  In such case, there may be little or no demand for the securities of our portfolio companies in the public markets, we may have difficulty disposing of our investments, and the value of our investments may decline substantially.
 
 
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Although we do not currently intend to do so, if we borrow money, the potential for gain or loss on amounts invested in us will be magnified and may increase the risk of investing in us.

The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for gain or loss on invested equity capital. Although we do not presently intend to do so, if we use leverage to partially finance our investments, through borrowing from banks and other lenders, you will experience increased risks of investing in our common stock. If the value of our assets increases, leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock distribution payments. Leverage is generally considered a speculative investment technique.

We have not identified any of the portfolio companies in which we will invest the net proceeds of this offering.
 
Our investments will be selected by our investment adviser’s investment professionals, subject to the approval of its Investment Committee, and our stockholders will not have input into our investment decisions. Both of these factors will increase the uncertainty, and thus risk, of investing in our shares.
 
Our incentive fee may induce Keating Investments, our investment adviser, to make speculative investments.
 
The incentive fee payable by us to Keating Investments may create an incentive for Keating Investments to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. As our investment strategy is based primarily on equity investing and as Keating Investments’ incentive fee is based upon the capital gains realized on our investments, the investment adviser will invest more in companies whose securities are likely to yield capital gains, as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during cyclical economic downturns.
 
Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies.
 
Our portfolio companies may have, or may be permitted to incur, other debt, or issue other equity securities, that rank equally with, or senior to, our investments. By their terms, such instruments may provide that the holders are entitled to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments will usually prohibit the portfolio companies from paying interest or dividends on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company will typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with our investments, we would have to share on an equal basis any distributions with other security holders in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
 
We may not realize any income or gains from our equity investments.
 
We intend to invest a substantial portion of our portfolio in equity securities, including convertible preferred securities and debt securities convertible into equity securities, of our portfolio companies. We also expect to receive warrants as part of our initial debt and follow-on investments. These equity interests we acquire may not appreciate in value and, in fact, may decline in value if the company fails to perform financially or achieve its growth objectives.  We will generally have little, if any, control over the timing of any gains we may realize from our equity investments since the securities of our portfolio companies may have restrictions on their transfer or may not have an active trading market.
 
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Equity investments also have experienced significantly more volatility in their returns and may under perform relative to fixed-income securities during certain periods. An adverse event, such as an unfavorable earnings report, may depress the value. Also, prices of equity investments are sensitive to general movements in the stock market and a drop in the stock market may depress the price of common stock investments to which we have exposure. Equity prices fluctuate for several reasons including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase.
 
Since we intend to invest principally in equity securities, including convertible preferred securities and debt securities convertible into equity securities, of primarily micro-cap companies, our primary emphasis will be to generate capital gains through our equity investments in portfolio companies.  Accordingly, although we expect to receive current income in the form of interest payments on our convertible debt investments and dividend payments on our convertible preferred equity investments, a substantial portion of the dividends we may pay to our stockholders will likely be from the capital gains generated from the sale of our equity investments upon conversion of our convertible securities, the timing of which we cannot predict.  We do not expect to generate capital gains from the sale of our portfolio investments on a level or uniform basis from quarter to quarter.
 
While our investments will typically be made in private companies, we expect that these companies will become public reporting companies with their common stock being typically initially quoted on the OTC Bulletin Board.  We do not expect the preferred equity of our portfolio companies to be listed or quoted on an exchange or quotation system. We also do not expect the common stock in our publicly traded portfolio companies to initially have a large number of freely tradable shares available for sale or an active secondary trading market and, as such, the common stock will be illiquid until an active market develops. We believe that typically this liquidity will develop in conjunction with a Nasdaq Capital Market listing which may not occur until twelve to eighteen months after our follow-on investment is made, if at all.  Our convertible preferred stock instruments will generally provide for conversion upon the portfolio companies’ achievement of certain milestone events, including a Nasdaq Capital Market listing for their common stock.  However, there can be no assurance that our portfolio companies will obtain either an OTC Bulletin Board or Nasdaq Capital Market listing or, even if a listing is obtained, that an active trading market will ever develop in the common stock of our publicly traded portfolio companies.
 
Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. Furthermore, due to the expected growth of our portfolio companies, we do not generally expect to receive dividend income from our common stock investments. In the case of cumulative preferred stock, there is no assurance that any dividends will ever be paid by a portfolio company.
 
Our portfolio may be focused in a limited number of portfolio companies, which will subject us to a risk of significant loss if the business or market position of these companies deteriorates.
 
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our income tax diversification requirements, we do not have fixed guidelines for diversification, and our investments could be focused in relatively few portfolio companies or market segments. As a result, a market downturn affecting one of our portfolio companies or one of these market segments could materially adversely affect us.
 
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We expect to concentrate our investments in micro-cap companies, which are subject to many risks, including periodic downturns.
 
We expect to concentrate our investments in what we believe are “public ready” micro-cap companies. Under negative economic conditions, this could cause our investment performance to be worse than business development companies with no such concentration. We may avoid purchasing certain securities in certain micro-cap companies when it is otherwise advantageous to purchase those securities or may sell certain securities of micro-cap companies when it is otherwise advantageous to hold those securities. In general, our focus on micro-cap companies may affect our exposure to certain market segments, which may affect our financial performance — positively or negatively — depending on whether these segments are in or out of favor.
 
The revenues, income (or losses) and valuations of micro-cap companies, can and often do fluctuate suddenly and dramatically. There is no assurance that decreases in market capitalizations will not occur, or that any decreases in valuations will be insubstantial or temporary in nature. Also, our portfolio companies may face considerably more risk of loss and may not have the same returns as companies in other industry sectors due to their growth nature.
 
Even if our portfolio companies are successful in becoming publicly-traded companies, there is no assurance that they will be able to achieve their projected revenue and earnings targets or effectively maintain their status as public reporting companies.  In such case, there may be little or no demand for the securities of our portfolio companies in the public markets, we may have difficulty disposing of our investments, and the value of our investments may decline substantially.
 
The value of our portfolio securities may not have a readily available market price and, in such case, we will value these securities at fair value as determined in good faith by our Board of Directors, which valuation is inherently subjective and may not reflect what we may actually realize for the sale of the investment.
 
The value of our portfolio securities may not have readily available market prices.  In such cases, we will value these securities at fair value as determined in good faith by our Board of Directors based upon the recommendation of the Board’s Valuation Committee. In connection with that determination, investment professionals from our investment adviser will prepare portfolio company valuations using the most recent portfolio company financial statements and forecasts. The Board of Directors will also utilize the services of a third-party valuation firm, which will prepare valuations for each of our portfolio investments for which no market quotations are readily available. The participation of Keating Investments in our valuation process could result in a conflict of interest as Keating Investments’ management fee is based, in part, on our gross assets. However, the Board of Directors will retain ultimate authority as to the appropriate valuation of each investment. Because such valuations are inherently subjective and may be based on estimates, assumptions and forecasts, our determinations of fair value may differ materially from the values that would be determined if a readily available market price for these securities existed.  In addition, the valuation of these types of securities may result in substantial write-downs and excessive earnings volatility.
 
Even if the equity securities of our public portfolio companies may be sold in the public markets, we expect these securities will initially be thinly traded and, as a result, the lack of liquidity in our investments may adversely affect our business, and will delay distributions of gains, if any.
 
While our investments will typically be made in private companies, we expect that, as part of our investment process, these companies will become public reporting companies with their common stock typically being initially quoted on the OTC Bulletin Board.  We do not expect the preferred equity of our portfolio companies to be listed or quoted on an exchange or quotation system. We do not expect the common stock in our public portfolio companies to initially have an active secondary trading market and, as such, these securities will be illiquid until an active market develops. We believe that typically this liquidity will develop in conjunction with a Nasdaq Capital Market listing, which we do not expect to occur until twelve to eighteen months after our investment is made, if at all.  Our convertible preferred stock instruments will generally provide for conversion upon the portfolio companies’ achievement of certain milestone events, including a Nasdaq Capital Market listing for their common stock. However, there can be no assurance that our portfolio companies will obtain either an OTC Bulletin Board or Nasdaq Capital Market listing or, even if a listing is obtained, that an active trading market will ever develop in the securities of our publicly traded portfolio companies.
 
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We expect substantially all of the common stock we purchase in a portfolio company will be “restricted securities” within the meaning of Rule 144 under the Securities Act (“Rule 144”).  As restricted securities, these shares may be resold only pursuant to an effective registration statement under the Securities Act or pursuant to the requirements of Rule 144 or other applicable exemption from registration under the Securities Act, and in accordance with any applicable state securities laws.
 
Typically, we will seek to obtain registration rights in connection with our purchase of equity investments in a portfolio company.  As such, the portfolio company will generally be required to file a resale registration statement under the Securities Act to register for resale the shares of common stock we acquire.  Notwithstanding such registration rights, we will be largely unable to control the timing of completion of any such registration process given external factors beyond our control. Even if a resale registration statement is declared effective, there can be no assurances that the occurrence of subsequent events may not preclude a portfolio company’s ability to maintain the effectiveness of such registration statement. Any of the foregoing items could have adverse effects on the liquidity of our shares of common stock.
 
In addition, the SEC has recently disclosed that it has developed internal guidelines concerning the use of a resale registration statement to register the securities issued to certain investors in PIPE transactions, where the issuer has a market capitalization of less than $75 million and, in general, does not qualify to file a registration statement on Form S-3 to register its securities. The SEC has indicated its position that these smaller issuers may not be able to rely on Rule 415 under the Securities Act (“Rule 415”), which generally permits the offer and sale of securities by selling shareholders on a continued or delayed basis over a period of time, but instead would require that the issuer offer and sell such securities in a direct or "primary" public offering, at a fixed price, if the facts and circumstances are such that the SEC believes the investors seeking to have their shares registered are underwriters and/or affiliates of the issuer. We believe that the SEC in most cases would permit a registration for resale of up to one third of the total number of shares of common stock then currently owned by persons who are not affiliates of such issuer and, in some cases, a larger percentage depending on the facts and circumstances.
 
SEC staff members also have indicated that an issuer in most cases will have to wait until the later of six months after effectiveness of the first registration or such time as substantially all securities registered in the first registration are sold before filing a subsequent registration on behalf of the same investors. Since our portfolio companies will have little or no tradable shares of common stock, it is unclear as to how many, if any, shares of common stock the SEC will permit our portfolio companies to register for resale.  The SEC may require as a condition to the declaration of effectiveness of a resale registration statement that we reduce or “cut back” the number of shares of common stock to be registered in such registration statement. The result of the foregoing is that the liquidity in the common stock of our portfolio companies may be adversely affected in the event the SEC requires a cut back of the securities as a condition to allow our portfolio company to rely on Rule 415 with respect to a resale registration statement, or, if the SEC requires our portfolio company to file a primary registration statement.
 
In the event our portfolio companies are unable to register their common stock for resale under the Securities Act, we may be able to resell our common stock investments pursuant to an exemption from the registration requirements under the Securities Act if we meet the conditions of Rule 144. Rule 144 currently provides that a non-affiliated person (and who has not been an affiliate during the prior three months) may sell all of his restricted securities in a reporting company beginning six months after purchase, provided the issuer remains current in its reporting obligations during the next six months.  However, an affiliated person may sell his restricted securities beginning six months after purchase, provided the following conditions are met: (i) the issuer is current in its reporting obligations, (ii) all sales are in brokerage transactions, (iii) a Form 144 is filed, and (iv) during every three months the number of shares sold that does not exceed 1.0% of a company's outstanding common stock.
 
In some cases, we may be deemed an affiliate of our portfolio companies based on our level of stock ownership or our ability to influence control over our portfolio company.  As such, in the absence of an effective registration statement for our shares, we may be limited in the number of shares we may be able to sell in any three months period under Rule 144.  This illiquidity may make it difficult for us to sell such investments if the need arises. Also, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments.
 
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Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received by us in exempt transactions and subsequently disposed of without registration under the Securities Act or state securities laws.
 
A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to a registration statement, may have a depressive effect upon the price of the common stock of our portfolio companies in any market that may develop.
 
Our failure to make additional investments in our portfolio companies could impair the value of our portfolio.
 
Following our initial and follow-on investments in a portfolio company, we may have opportunities to make additional subsequent investments in that portfolio company. We may elect not to make such additional subsequent investments or otherwise lack sufficient funds to make those investments. We have the discretion to make any additional subsequent investments, subject to the availability of capital resources. The failure to make additional subsequent investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our prior investments, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired additional subsequent investment, we may elect not to make that investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with business development company requirements or the desire to obtain or maintain our RIC tax status.  If our portfolio companies are not able to generate sufficient cash flow from operations, they may lack sufficient capital to continue to grow their businesses, or they may not be able to continue their operations at all.  If our portfolio companies lack sufficient capital before they are able to obtain a Nasdaq Capital Market listing, there may be few, if any, options available to them to raise additional capital.
 
Because we likely will not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over such portfolio companies or to prevent decisions by management of such portfolio companies that could decrease the value of our investments.
 
Our equity investments will typically be non-controlling investments, meaning we will not be in a position to control the management, operation and strategic decision-making of the companies we invest in.  As a result, we will be subject to the risk that a portfolio company we do not control, or in which we do not have a majority ownership position, may make business decisions with which we disagree, and the stockholders and management of such a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the debt and equity investments that we will typically hold in our portfolio companies, we may not be able to dispose of our investments in the event that we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments.
 
We may be subject to certain risks associated with foreign investments.
 
In order to seek to enhance our overall return, we may selectively invest in companies that have operations or are domiciled outside the U.S., although we presently expect such investments to constitute no more than 10% of our total investment portfolio on a cost basis. Certain risks are inherent in foreign operations, including:
 
•       difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
 
•       foreign customers may have longer payment cycles than customers in the U.S.;
 
 
tax rates in certain foreign countries may exceed those in the U.S. and foreign earnings may be subject to withholding requirements, exchange controls or other restrictions;
 
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general economic and political conditions in countries where we operate may have an adverse effect on our operations;
 
•       exposure to risks associated with changes in foreign exchange rates;
 
•       difficulties associated with managing a large organization spread throughout various countries;
 
•       difficulties in enforcing intellectual property rights; and
 
•       required compliance with a variety of foreign laws and regulations.
 
Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in foreign exchange rates, exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
 
The success of our foreign investments will depend, in part, on our ability to anticipate and effectively manage these and other risks. We cannot assure you that these and other factors will not have a material adverse effect on our operations or our business as a whole.
 
Investing in primarily micro-cap companies may present certain challenges to us, including the lack of available information about these companies.
 
In accordance with our investment strategy, we intend to make investments in primarily micro-cap private companies. Generally, very little public information exists about these companies, and we are required to rely on the ability of the senior investment professionals and our investment adviser to obtain adequate information to evaluate the merits of investing in these companies. If we are unable to uncover all material information about these companies, then we may not make a fully informed investment decision, and we may lose money on our investments.
 
Resources could be expended in researching and negotiating investments that may never be consummated, even if non-binding letters of intent or definitive agreements are reached, which could materially adversely affect subsequent attempts to make other investments.
 
It is anticipated that the investigation of each specific target company and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial time and attention and substantial costs for accountants, attorneys, and others. If a decision is made not to complete a specific investment, the costs incurred up to that point for the proposed portfolio investment likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific portfolio investment, up to and including the execution of a definitive agreement, we may fail to consummate the portfolio investment for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred.
 
Risks Related to this Offering and Our Common Stock
 
There is currently no public market for shares of our common stock, and we may be unable to obtain a listing of our shares on the Nasdaq Capital Market or the OTC Bulletin Board within our proposed timeframe. As a result, it may be difficult for you to sell your shares.

This is our initial public offering, and no public market exists for our shares.  While we presently intend to seek the listing of our shares of common stock on the Nasdaq Capital Market within six months after the conclusion of this offering, we cannot provide you with any assurance that we will be successful in obtaining a listing of our shares on the Nasdaq Capital Market in the manner or within the timeframe we propose, if at all.  Specifically, we may fail to meet the applicable standards for listing on the Nasdaq Capital Market, as a result of insufficient assets, revenue, net income or record holders, among other things.  In the event we do not qualify for, or are unable to obtain, a listing on the Nasdaq Capital Market within our proposed timeframe, we will instead seek to have our shares quoted on the OTC Bulletin Board until such time as we are able to obtain a Nasdaq Capital Market listing for our shares.  Although we anticipate meeting the requirements to have our shares quoted on the OTC Bulletin Board within six months of completion of this offering, we cannot assure you that we will be successful in obtaining such a listing within that timeframe, if at all.  Securities traded on the OTC Bulletin Board also generally have a less liquid market than those traded on the Nasdaq Capital Market or other national securities exchanges.  In addition, our Board of Directors retains the discretion to postpone a listing on either the Nasdaq Capital Market or the OTC Bulletin Board if it determines such a listing is not in the best interests of Keating Capital and our stockholders, though we would expect such a postponement to occur only in the event of extraordinary market or economic turmoil.  As a result, if you purchase shares you may have limited liquidity for a substantial period of time, and we cannot provide you with any assurance regarding when or if our shares will be accepted for listing or quotation on the Nasdaq Capital Market or the OTC Bulletin Board.  In addition, we can provide you with no assurance that, even if our shares are listed on the Nasdaq Capital Market or the OTC Bulletin Board, an active trading market for our shares will develop.

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The price of the common stock in the offering may not be indicative of future market prices, and our common stock price, if we become listed or quoted on a national securities exchange, may be volatile and may decrease substantially.
 
The ultimate trading price of our common stock, if we become listed or quoted on the Nasdaq Capital Market or the OTC Bulletin Board, may be substantially lower than the price that a purchaser of our common stock paid in the offering. We cannot predict the prices at which our common stock will trade. The offering price for our common stock in the offering was determined through our negotiations with our dealer manager and may not bear any relationship to the market price at which it may trade in the future or to any other established criteria for our value. Shares of closed-end management investment companies often trade at a discount to the initial offering price due to sales loads, including placement agent commissions, and related offering expenses. In addition, shares of closed-end management investment companies have in the past frequently traded at discounts to their net asset values and our stock may also be discounted in the market. This characteristic of closed-end management investment companies is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether shares of our common stock will trade above, at or below our net asset value. The risk of loss associated with this characteristic of closed-end management investment companies may be greater for investors expecting to sell shares of common stock purchased in the offering soon after the offering. In addition, if our common stock trades below its net asset value, we will generally not be able to sell additional shares of our common stock to the public at its market price without first obtaining the approval of our stockholders (including our unaffiliated stockholders) and our independent directors for such issuance.
 
The trading price of our common stock, if we become listed on the Nasdaq Capital Market or the OTC Bulletin Board, may fluctuate substantially. The price of our common stock that will prevail in the market in the future will depend on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:
 
 
price and volume fluctuations in the overall stock market from time to time;
 
 
investor demand for our shares;
 
 
significant volatility in the market price and trading volume of securities of business development companies or other companies in our sector, which are not necessarily related to the operating performance of these companies;
 
 
changes in regulatory policies or tax guidelines with respect to regulated investment companies or business development companies;
 
 
failure to qualify as a RIC, or the loss of RIC status;
 
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any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
 
 
increases or decreases, or expectations about increases or decreases, in our quarterly dividends;
 
 
changes, or perceived changes, in the value of our portfolio investments;
 
 
departures of Keating Investments’ key personnel;
 
 
operating performance of companies comparable to us; or
 
 
general economic conditions and trends and other external factors.
 
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price once a market for our stock is established, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
 
Investor confidence and the value of our shares may be adversely impacted if we or our independent registered public accountants are unable to attest to the adequacy of the internal controls over our financial reporting as of December 31, 2009, as required by Section 404 of the Sarbanes-Oxley Act.
 
The SEC, as directed by Section 404 of Sarbanes-Oxley Act, adopted rules requiring public companies, including us following our becoming a reporting company, to include a report of management of their internal control structure and procedures for financial reporting in their annual reports on Form 10-K that contains an assessment by management of the effectiveness of their internal controls over financial reporting. In addition, independent registered public accountants of these public companies must provide an attestation report on the effectiveness of our internal controls over financial reporting. These requirements will first apply to our annual report on Form 10-K for the fiscal year ending December 31, 2009. Our management may conclude that our internal controls over financial reporting are not effective. Moreover, even if our management concludes otherwise, if our independent registered public accountants are not satisfied with our internal control structure and procedures, the level at which our internal controls are documented, designed, operated or reviewed, or if the independent registered public accountants interpret the requirements, rules or regulations differently from us, they may decline to attest to our management’s assessment or may issue a report that is qualified. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which could negatively impact the value of our shares.
 
We cannot assure you that we will be able to successfully deploy the proceeds of the offering within the time frame we have contemplated.
 
We currently anticipate that substantially all of the net proceeds of the offering will be invested in accordance with our investment objective within twelve to twenty-four months after the completion of the offering. There can be no assurance that we will be able to locate a sufficient number of suitable investment opportunities to allow us to successfully deploy substantially all of the net proceeds of the offering in that timeframe. To the extent we are unable to invest substantially all of the net proceeds of the offering within our contemplated timeframe after the completion of the offering, our investment income, and in turn our results of operations, will likely be materially adversely affected.
 
There is a risk that our stockholders may not receive consistent distributions or that our distributions may not grow over time.
 
Although our primary emphasis will be to generate capital gains through the common stock we expect to receive upon conversion of the convertible debt and convertible preferred securities issued to us in the initial and follow-on investments in our portfolio companies, we also expect to generate current income from the interest and preferred dividends on the debt and convertible preferred securities, respectively, prior to their conversion.  The timing of any capital gains generated from the appreciation and sale of common stock we expect to receive in our portfolio companies upon conversion of the convertible debt and convertible preferred equity securities cannot be predicted.  Although we expect to be able to pay dividends from the interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof, we do not expect to generate capital gains from the sale of our portfolio investments on a level or uniform basis from quarter to quarter.  This may result in substantial fluctuations in our quarterly dividend payments to stockholders.  In addition, since we expect to have an average holding period for our portfolio company investments of two to three years, it is unlikely we will generate any capital gains during our initial years of operations and thus we are likely to pay dividends in our initial years of operation principally from interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof.  However, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.
 
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We will have broad discretion over the use of proceeds of the funds we raise from investors and will use proceeds in part to satisfy operating expenses.
 
We will have significant flexibility in applying the proceeds of the funds we raise from investors and may use the net proceeds in ways with which stockholders may not agree, or for purposes other than those contemplated at the time of the capital raising. We will also pay operating expenses, and may pay other expenses such as due diligence expenses of potential new investments, from net proceeds. Our ability to achieve our investment objective may be limited to the extent that net proceeds of the funds we raise from investors, pending full investment by us in portfolio companies, are used to pay operating expenses.
 
We may be unable to invest a significant portion of the net proceeds of this offering on acceptable terms in the timeframe contemplated by this prospectus.

Delays in investing the net proceeds of this offering may impair our performance. We cannot assure you that we will be able to identify any investments that meet our investment objective or that any investment that we make will produce a positive return. We may be unable to invest the net proceeds of this offering on acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating results.

We anticipate that, depending on market conditions, it may take us several months before we have raised sufficient funds to make any investments or to invest the proceeds of this offering in securities meeting our investment objective and providing sufficient diversification of our portfolio. During this period, we will invest the net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, which may produce returns that are significantly lower than the returns which we expect to achieve when our portfolio is fully invested in securities meeting our investment objective. As a result, any distributions that we pay during this period may be substantially lower than the distributions that we may be able to pay when our portfolio is fully invested in securities meeting our investment objective.

Investors will not know the purchase price per share at the time they submit their subscription agreements and could receive fewer shares of common stock than anticipated if our Board of Directors determines to increase the offering price to comply with the requirement that we avoid selling shares below net asset value.

After meeting the minimum offering requirement, the purchase price at which you purchase shares will be determined at each monthly closing date to ensure that the sales price is equal to or greater than the net asset value of our shares, after deducting selling commissions and dealer manager fees. As a result, your purchase price may be higher than the prior monthly closing price per share, and therefore you may receive a smaller number of shares than if you had subscribed at the prior monthly closing price.
 
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This is a “best efforts” offering, and if we are unable to raise substantial funds, we will be limited in the number and type of investments we may make, and the value of your investment in us may be reduced in the event our assets under-perform.
 
This offering is being made on a best efforts basis, whereby the dealer manager and broker-dealers participating in the offering are only required to use their best efforts to sell our shares and have no firm commitment or obligation to purchase any of the shares. Even though we have established a minimum size of our offering necessary for us to release funds from the escrow account and utilize subscription funds, such amount will not, by itself, be sufficient for us to purchase a diversified portfolio of investments. To the extent that less than the maximum number of shares is subscribed for, the opportunity for diversification of our investments may be decreased and the returns achieved on those investments may be reduced as a result of allocating all of our expenses among a smaller capital base.
 
Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.

Potential investors in this offering do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 200,000,000 shares of common stock. Pursuant to our charter, a majority of our entire Board of Directors may amend our charter to increase the number of authorized shares of stock without stockholder approval. After your purchase in this offering, our board may elect to sell additional shares in this or future public offerings or issue equity interests in private offerings. To the extent we issue additional equity interests after your purchase in this offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.

Our ability to successfully conduct this offering is dependent, in part, on the ability of the dealer manager to successfully establish, operate and maintain a network of broker-dealers.
 
The dealer manager for this offering is Andrews Securities, LLC, or our “dealer manager.” The success of this offering, and correspondingly our ability to implement our business strategy, is dependent upon the ability of the dealer manager to establish and maintain a network of licensed securities brokers-dealers and other agents. If the dealer manager fails to perform, we may not be able to raise adequate proceeds through this offering to implement our investment strategy. If we are unsuccessful in implementing our investment strategy, you could lose all or a part of your investment.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Some of the statements in this prospectus constitute forward-looking statements because they relate to future events or our future performance or financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our prospective portfolio investments, our industry, our beliefs, and our assumptions.  The forward-looking statements contained in this prospectus may include statements as to:
 
 
our future operating results;
 
 
our business prospects and the prospects of our portfolio companies;
 
 
the impact of the investments that we expect to make;
 
 
the ability of our portfolio companies to achieve their objectives;
 
 
our expected financings and investments;
 
 
the adequacy of our cash resources and working capital; and
 
 
the timing of cash flows, if any, from the operations of our portfolio companies.
 
In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this prospectus involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in this prospectus. Other factors that could cause actual results to differ materially include:
 
      
·
an economic downturn, such as the one we are currently experiencing, could likely impair our portfolio   companies’ abilities to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

      
·
an economic downturn, such as the one we are currently experiencing, could disproportionately impact the public ready growth companies which we intend to target for investment, potentially causing us to suffer losses in our portfolio and experience diminished demand for capital from these companies;
     
 
·
an inability to access the equity markets could impair our investment activities.
 
We have based the forward-looking statements included in this prospectus on information available to us on the date of this prospectus, and we assume no obligation to update any such forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933.
 
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ESTIMATED USE OF PROCEEDS
 
The following table sets forth our estimates of how we intend to use the gross proceeds from this offering. Information is provided assuming that we sell: (i) the minimum number of shares required to meet our minimum offering amount, or 100,000 shares (assuming a purchase price of $10.00 per share) and (ii) the maximum number of shares registered in this offering, or 10,000,000 shares (assuming a purchase price of $10.00 per share). The amount of net proceeds may be more or less than the amount depicted in the table below depending on the public offering price of the common stock and the actual number of shares of common stock we sell in the offering.
 
We intend to use substantially all of the proceeds from this offering, net of expenses, to make portfolio investments in accordance with our investment objective and using the strategies described in this prospectus. The remainder will be used for working capital and general corporate purposes. There can be no assurance that we will be able to sell all of the shares we are presently offering.  If we sell only a portion of the shares offered hereby, we may be unable to achieve our investment objective.  It may take several months after meeting our minimum offering requirement before we have raised sufficient funds to invest the initial proceeds of this offering in securities meeting our investment objective and provide some level of diversification to our portfolio.
 
In addition, we anticipate that it will take us up to twelve to twenty-four months after conclusion of this offering to invest substantially all of the net proceeds of the offering in accordance with our investment strategy, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions. We cannot assure you we will achieve our targeted investment pace. Pending such investments, we will invest the net proceeds of the offering primarily in cash, cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less from the date of investment, which we expect will earn yields substantially lower than the interest, dividend or other income that we anticipate receiving in respect of investments in debt and equity securities of our target portfolio companies. As a result, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.  The management fee payable to Keating Investments by us will not be reduced while our assets are invested in such securities.
 
The amounts in this table assume that the full fees and commissions are paid on all shares of our common stock offered to the public on a best efforts basis. All or a portion of the selling commission and dealer manager fee may be reduced or eliminated in connection with certain categories of sales such as sales for which a volume discount applies, sales through investment advisers or banks acting as trustees or fiduciaries and sales to our affiliates.  The reduction in these fees will be accompanied by a corresponding reduction in the per share purchase price but will not affect the amounts available to us for investments. Because amounts in the following table are estimates, they may not accurately reflect the actual receipt or use of the offering proceeds.
 
   
Minimum Offering
   
Maximum Offering
 
   
Amount
   
%
   
Amount
   
%
 
Gross Proceeds
  $ 1,000,000       100.0 %   $ 100,000,000       100.0 %
Less:
                               
Selling Commission
  $ 70,000       7.0 %   $ 7,000,000       7.0 %
Dealer Manager Fee
  $ 30,000       3.0 %   $ 3,000,000       3.0 %
Offering Expenses
  $ 50,000       5.0 %   $ 200,000       0.2 %
Net Proceeds/Amount Available for Investments
  $ 850,000       15.0 %   $ 89,800,000       10.2 %
                                 

 
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DISTRIBUTIONS
 
Our Board of Directors will determine the payment of any dividends.  We intend to declare and pay distributions on a quarterly basis beginning no later than the first calendar quarter after the month in which we have raised at least $10,000,000 in capital from investors not affiliated with us or Keating Investments.  We will pay these distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a targeted level of cash distributions or year-to-year increases in cash distributions.  Any dividends to our stockholders will be declared out of assets legally available for distribution.
 
Although our primary emphasis will be to generate capital gains through the common stock we expect to receive upon conversion of the convertible debt and convertible preferred securities issued to us in the initial and follow-on investments in our portfolio companies, we also expect to generate current income from the interest and preferred dividends on the debt and convertible preferred securities, respectively, prior to their conversion.
 
The timing of any capital gains generated from the appreciation and sale of common stock we expect to receive in our portfolio companies upon conversion of the convertible debt and convertible preferred equity securities cannot be predicted.  Although we expect to be able to pay dividends from the interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof, we do not expect to generate capital gains from the sale of our portfolio investments on a level or uniform basis from quarter to quarter.  This may result in substantial fluctuations in our quarterly dividend payments to stockholders.  In addition, since we expect to have an average holding period for our portfolio company investments of two to three years, it is unlikely we will generate any capital gains during our initial years of operations and thus we are likely to pay dividends in our initial years of operation principally from interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof.  However, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.
 
In addition, although we currently intend to distribute realized net capital gains (net long-term capital gains in excess of short-term capital losses), if any, at least annually, we may in the future decide to retain such capital gains for investment and elect to treat such gains as deemed distributions to you. If this happens, you will be treated as if you had received an actual distribution of the capital gains we retain and reinvested the net after-tax proceeds in us. In this situation, you would be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to your allocable share of the tax we paid on the capital gains deemed distributed to you. See “Material U.S. Federal Income Tax Considerations.” We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, to the extent that we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
 
Beginning with our 2009 taxable year, we intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. To obtain and maintain RIC tax treatment, we must, among other things, distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. In order to avoid certain excise taxes imposed on RICs, we currently intend to distribute during each calendar year an amount at least equal to the sum of: (i) 98% of our ordinary income for the calendar year, (ii) 98% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year, and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years.
 
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Our current intention is to make any distributions in the form of additional shares of our common stock under a dividend reinvestment plan we expect to adopt, unless you elect to receive your dividends and/or long-term capital gains distributions in cash. See “Dividend Reinvestment Plan.” If you hold shares in the name of a broker or financial intermediary, you should contact the broker or financial intermediary regarding your election to receive distributions in cash if we adopt a dividend reinvestment plan. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
 
All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable business development company regulations and such other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of the sales of our common stock in anticipation of future cash flow, which may constitute a return of our stockholders’ capital. Distributions from the proceeds of the sales of our common stock also could reduce the amount of capital we ultimately invest in interests of portfolio companies.  Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from the sale of our common stock.
 
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DISCUSSION OF THE COMPANY’S EXPECTED OPERATING PLANS
 
The information in this section contains forward-looking statements that involve risks and uncertainties. Please see “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the financial statements and related notes and other financial information appearing elsewhere in this prospectus.

Overview
 
We were incorporated on May 9, 2008 under the laws of the State of Maryland.  We have filed an election to be regulated as a business development company under the 1940 Act.
 
We intend to invest principally in equity securities, including convertible preferred securities and other debt securities convertible into equity securities, of primarily micro-cap companies. Our investment objective is to maximize total return.  In accordance with our investment objective, we intend to provide capital principally to U.S.-based private companies with an equity value of less than $250 million, which we refer to as “micro-cap” companies.  Our primary emphasis will be to generate capital gains through our equity investments in private micro-cap companies which we expect to become public reporting companies with their securities being initially quoted on the OTC Bulletin Board.  However, we anticipate that a significant portion of our investments at any given time will include a component of interest or dividends, which we believe will provide us with current yield, in addition to the potential for capital appreciation.  We do not expect the securities in our publicly traded portfolio companies to initially have an active secondary trading market and, as such, these securities will be illiquid until an active trading market develops.
 
We intend to utilize a three-step investment process focused on an initial investment, consisting of convertible debt, going public preparation and a subsequent follow-on investment, consisting of common or convertible preferred stock or other equity, that will be contingent upon a portfolio company satisfying pre-established milestones towards the filing of a registration under the Securities Act or the Exchange Act.  Where appropriate, we may also negotiate to receive warrants, either as part of our initial or follow-on investments in our portfolio companies.
 
In accordance with our three-step investment process, we expect our investments will generally include common stock, convertible preferred stock and convertible debt, as well as warrants issued to us in connection with our investments.  Convertible debt instruments will likely be unsecured or subordinated debt securities. Our equity investments will typically be non-controlling investments, meaning we will not be in a position to control the management, operation and strategic decision-making of the companies we invest in.
 
We are externally managed by Keating Investments, an investment adviser registered under the Advisers Act.  As our investment adviser, Keating Investments will be responsible for managing our day-to-day operations including, without limitation, identifying, evaluating, negotiating, closing, monitoring and servicing our investments.  Keating Investments will also provide us with the administrative services necessary for us to operate.
 
As a business development company, we will be required to comply with certain regulatory requirements. For example, to the extent provided by the 1940 Act, we are required to invest at least 70% of our total assets in Eligible Portfolio Companies.
 
Operating and Regulatory Structure
 
Our investment activities are managed by Keating Investments.  Keating Investments was founded in 1997 and is an investment adviser registered under the Investment Advisers Act of 1940, as amended.  The managing member and majority owner of Keating Investments is Timothy J. Keating.  Our investment adviser’s senior investment professionals are Timothy J. Keating, our Chairman of the Board and Chief Executive Officer, Ranjit P. Mankekar, our Chief Financial Officer, Treasurer and a member of our Board of Directors, and Kyle L. Rogers, our Chief Operating Officer and Secretary.  In addition, Keating Investments’ other investment professionals consist of three portfolio company originators, one analyst and a Chief Compliance Officer.  Under our Investment Advisory and Administrative Services Agreement with Keating Investments, we have agreed to pay Keating Investments, for its investment advisory services, an annual base management fee based on our gross assets as well as an incentive fee based on our performance. See “Investment Advisory and Administrative Services Agreement.”
 
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Revenues
 
We currently have limited revenue from operations and in all likelihood will be required to make future expenditures in connection with our marketing efforts along with general and administrative expenses before we will earn any material revenue.
 
We previously raised a total of $5,698,000 in gross proceeds in a private placement that began on June 16 and ended on November 12, 2008.  Management of Keating Investments, LLC contributed 16.7% of that total.  Net of formation, private placement offering, legal and other operating expenses of approximately $920,000, we have approximately $4.78 million of capital currently available as of the date of this prospectus.  We intend to generate limited revenue from interest earned from the temporary investment of net proceeds from the private placement offering and this offering in U.S. government securities and other high-quality debt investments that mature in one year or less. For the period from May 9, 2008 (inception) through December 31, 2008, we earned interest and dividend income from money market investments of approximately $14,000.
 
We intend to invest principally in equity securities, including convertible preferred securities, and debt securities convertible into common stock, of primarily non-public U.S.-based public ready growth companies. Specifically, we intend to invest principally in convertible debt securities for our initial investment and equity securities, principally preferred securities convertible into common stock, for our follow-on investment.  We expect that the convertible debt securities will generally carry a market rate of interest, which interest will be payable monthly in cash.  We may, in certain instances, also require that all or a portion of the interest on the convertible debt securities be paid in advance from the proceeds thereof.  In the event that we do not receive advance payments of interest out of the proceeds of the convertible debt securities, there is no assurance that we will receive interest from our portfolio companies on a monthly basis.
 
We may also generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing significant managerial assistance and possibly consulting fees. Any such fees will be generated in connection with our investments and recognized as earned.
 
Expenses
 
Our primary operating expenses will include the payment of: (i) investment advisory fees to our investment adviser, Keating Investments; (ii) the allocable portion of overhead and other expenses incurred by Keating Investments, as our administrator, in performing its administrative obligations under the Investment Advisory and Administrative Services Agreement; and (iii) other operating expenses as detailed below. Our investment advisory fee will compensate our investment adviser for its work in identifying, evaluating, negotiating, closing, monitoring and servicing our investments. See “Investment Advisory and Administrative Services Agreement.” We will bear all other expenses of our operations and transactions, including, without limitation:
 
•      costs of calculating our net asset value, including the cost of any third-party valuation services;
 
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•       costs of effecting sales and repurchases of shares of our common stock and other securities;
 
 
fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments;
 
•      costs related to organization and offerings;
 
•      transfer agent and custodial fees;
 
•      fees and expenses associated with marketing efforts;
 
•      federal and state registration fees;
 
•      any stock exchange listing fees;
 
•      applicable federal, state and local taxes;
 
•      independent directors’ fees and expenses;
 
•      excess brokerage commissions;
 
•      costs of proxy statements, stockholders’ reports and notices;
 
 
fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums;
 
•      direct costs such as printing, mailing, long distance telephone, and staff;
 
•      fees and expenses associated with independent audits and outside legal costs;
 
 
costs associated with our reporting and compliance obligations under the 1940 Act, Sarbanes-Oxley Act, and applicable federal and state securities laws; and
 
 
all other expenses incurred by either Keating Investments or us in connection with administering our business, including payments under the Investment Advisory and Administrative Services Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Keating Investments in performing its obligations under the Investment Advisory and Administrative Services Agreement, including the compensation of our Chief Financial Officer and Chief Compliance Officer, and their respective staffs.
 
For the period from May 9, 2008 (inception) through December 31, 2008, we had operating expenses of $542,965, comprised of: (i) legal and other professional fees of $360,420 incurred in connection with our organization and the registration of our shares of common stock under the Exchange Act; (ii) directors’ fees of $53,189, (iii) base management fees of $11,990, and (iv) other general and administrative expenses of $117,366.
 
Financial Condition, Liquidity and Capital Resources
 
We generated cash of $5,243,434 from the net proceeds of the initial private placement which was completed on November 12, 2008.  We plan to invest the net proceeds of the initial private placement as well as the net proceeds received from this offering in portfolio companies in accordance with our investment objective and strategies described in this prospectus. We anticipate that it will take us up to twelve to twenty-four months to invest substantially all of the proceeds of this offering in accordance with our investment strategy, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions. We cannot assure you we will achieve our targeted investment pace.
 
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Pending such investments, we will invest the net proceeds primarily in cash, cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less from the date of investment, which we expect will earn yields substantially lower than the interest, dividend or other income that we anticipate receiving in respect of investments in debt and equity securities of our target portfolio companies. As a result, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.
 
We may also fund a portion of our investments through borrowings from banks and the issuance of senior securities, including before we have fully invested the proceeds of the offering.  In the event we incur borrowings, we will incur interest costs.  However, we do not presently intend to borrow monies to fund our investments.
 
Our primary use of funds will be investments in portfolio companies, cash distributions to holders of our common stock, and the payment of operating expenses, including debt service if we borrow to fund our investments. As of the date of this prospectus, we have made no investments in portfolio companies.
 
As of December 31, 2008, we had cash resources of approximately $4.78 million and no indebtedness other than accounts payable and accrued expenses incurred in the ordinary course of business of approximately $83,000, and management fees payable to Keating Investments of approximately $12,000.
 
As of December 31, 2008, our cash resources included approximately $4.41million invested in a Goldman Sachs Financial Square Treasury Instruments Fund (“GS Fund”), a money market mutual fund holding primarily short-term U.S. Treasury securities, which have been valued by us at the GS Fund’s net asset value as of December 31, 2008.  The remainder of our cash resources of approximately $368,000 is held in depository accounts at Steele Street Bank & Trust, which serves as our custodian.   We currently have no investments in debt or equity securities of private or public companies.
 
As of December 31, 2008, we had net assets of $4,715,474 and, based on 569,900 shares of common stock outstanding, a net asset value per common share of approximately $8.27.
 
Distribution Policy
 
Our Board of Directors will determine the payment of any dividends.  We intend to declare and pay distributions on a quarterly basis beginning no later than the first calendar quarter after the month in which we have raised at least $10,000,000 in capital from investors not affiliated with us or Keating Investments.  We will pay these distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a targeted level of cash distributions or year-to-year increases in cash distributions.  Any dividends to our stockholders will be declared out of assets legally available for distribution.
 
Although our primary emphasis will be to generate capital gains through the common stock we expect to receive upon conversion of the convertible debt and convertible preferred securities issued to us in the initial and follow-on investments in our portfolio companies, we also expect to generate current income from the interest and preferred dividends on the debt and convertible preferred securities, respectively, prior to their conversion.
 
The timing of any capital gains generated from the appreciation and sale of common stock we expect to receive in our portfolio companies upon conversion of the convertible debt and convertible preferred equity securities cannot be predicted.  Although we expect to be able to pay dividends from the interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof, we do not expect to generate capital gains from the sale of our portfolio investments on a level or uniform basis from quarter to quarter.  This may result in substantial fluctuations in our quarterly dividend payments to stockholders.  In addition, since we expect to have an average holding period for our portfolio company investments of two to three years, it is unlikely we will generate any capital gains during our initial years of operations and thus we are likely to pay dividends in our initial years of operation principally from interest and preferred dividends we receive from our initial and follow-on investments prior to our conversion thereof.  However, our ability to pay dividends in our initial years of operation will be based on our ability to invest our capital in suitable portfolio companies in a timely manner.
 
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In addition, although we currently intend to distribute realized net capital gains, if any, at least annually, we may in the future decide to retain such capital gains for investment and elect to treat such gains as deemed distributions to you. If this happens, you will be treated as if you had received an actual distribution of the capital gains we retain and reinvested the net after-tax proceeds in us. In this situation, you would be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to your allocable share of the tax we paid on the capital gains deemed distributed to you. See “Material U.S. Federal Income Tax Considerations.” We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, to the extent that we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
 
Beginning with our 2009 taxable year, we intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. To obtain and maintain RIC tax treatment, we must, among other things, distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. In order to avoid certain excise taxes imposed on RICs, we currently intend to distribute during each calendar year an amount at least equal to the sum of: (i) 98% of our ordinary income for the calendar year, (ii) 98% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year, and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years.
 
If and to the extent our shares become listed or quoted on an exchange, our current intention is to make any distributions in the form of additional shares of our common stock under a dividend reinvestment plan we expect to adopt at such time, unless you elect to receive your dividends and/or long-term capital gains distributions in cash. See “Dividend Reinvestment Plan.” If you hold shares in the name of a broker or financial intermediary, you should contact the broker or financial intermediary regarding your election to receive distributions in cash if we adopt a dividend reinvestment plan. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
 
All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable business development company regulations and such other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of the sales of our common stock in anticipation of future cash flow, which may constitute a return of our stockholders’ capital. Distributions from the proceeds of the sales of our common stock also could reduce the amount of capital we ultimately invest in interests of portfolio companies.  Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from the sale of our common stock.
 
Contractual Obligations
 
We have entered into a contract under which we have material future commitments, the Investment Advisory and Administrative Services Agreement, pursuant to which Keating Investments agrees to serve as our investment adviser and to furnish us with certain administrative services necessary to conduct our day-to-day operations. This agreement is terminable by either party upon proper notice. We will pay Keating Investments a fee for its investment advisory services under the Investment Advisory and Administrative Services Agreement consisting of two components - a base management fee and an incentive fee. We will also reimburse Keating Investments for the allocable portion of overhead and other expenses incurred by it in performing its administrative obligations under the Investment Advisory and Administrative Services Agreement, including the compensation of our Chief Financial Officer and Chief Compliance Officer, and their respective staffs.  See “Investment Advisory and Administrative Services Agreement.”
 
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Our Investment Advisory and Administrative Services Agreement may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. If this agreement is terminated, our costs under a new agreement that we may enter into may increase. In addition, we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under the Investment Advisory and Administrative Services Agreement. Any new Investment Advisory and Administrative Services Agreement would also be subject to approval by our stockholders.
 
Current Economic Environment
 
During the last half of 2008, the state of the economy in the U.S. and abroad continued to deteriorate to what we believe is a recession, which could be long-term. The generally deteriorating economic situation, together with the limited availability of debt and equity capital, including through bank financing, will likely have a disproportionate impact on the micro-cap companies we intend to target for investment.  As a result, we may experience a reduction in attractive investment opportunities in prospective portfolio companies that fit our investment criteria.  In addition, micro-cap companies in which we ultimately invest may be unable to pay us the interest or dividends on their convertible securities or repay their debt obligations to us, and the common stock which we may receive upon conversion of the convertible securities may have little or no value, resulting in the loss of all or substantially all of our investment in such micro-cap companies.
 
Off-Balance Sheet Arrangements
 
As of the date of this prospectus, we have no off-balance sheet arrangements.
 
Critical Accounting Policies
 
The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.
 
Valuation of Portfolio Investments. We will determine the net asset value per share of our common stock quarterly. The net asset value per share is equal to the value of our total assets minus liabilities and any preferred stock outstanding divided by the total number of shares of common stock outstanding. At present, we do not have any preferred stock outstanding.
 
Value, as defined in Section 2(a)(41) of the 1940 Act, is (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 our Board of Directors.
 
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. 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. SFAS 157 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
 
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Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. We are required to specifically value each individual investment on a quarterly basis.
 
We will determine the fair value of our debt investments by reference to the market in which we source and execute these debt investments. Market participants generally have a strategic premise for these investments, and anticipate the sale of the company, recapitalization or initial public offering as the realization/liquidity event. The fair value, or exit price, for a debt instrument would be the hypothetical price that a market participant would pay for the instrument, using a set of assumptions that are aligned with the criteria that we would use in originating a debt investment in this market, including credit quality, interest rate, maturity date, conversion ratio and overall yield, and considering the prevailing returns available in this market. In general, we consider enterprise value an important element in the determination of fair value, because it represents a metric that may support the recorded value, or which, conversely, would indicate if a credit-related markdown is appropriate. We also consider the specific covenants and provisions of each investment which may enable us to preserve or improve the value of the investment. In addition, the trends of the portfolio company’s basic financial metrics from the time of the original investment until the measurement date are also analyzed; material deterioration of these metrics may indicate that a discount should be applied to the debt investment, or a premium may be warranted in the event that metrics improve substantially and the return is higher than required for such a profile under current market conditions.
 
The fair value of our equity investments for which market quotations are not readily available will be determined based on various factors, including the enterprise value remaining for equity holders after the repayment of the portfolio company’s debt and other preference capital, and other pertinent factors such as recent offers to purchase a portfolio company, recent transactions involving the purchase or sale of the portfolio company’s equity securities, or other liquidity events. The determined equity values will generally be discounted when we have a minority position, restrictions on resale, specific concerns about the receptivity of the capital markets to a specific company at a certain time, or other factors.  Equity investments for which market quotations are readily available will generally be valued at the most recently available closing market price.
 
Enterprise value means the entire value of the company to a potential buyer, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. There is no one methodology to determine enterprise value and, in fact, for any one portfolio company, enterprise value is best expressed as a range of fair values, from which we derive a single estimate of enterprise value. To determine the enterprise value of a portfolio company, we will analyze its historical and projected financial results, as well as the nature and value of collateral, if any. We will also use industry valuation benchmarks and public market comparables.  We will also consider other events, including private mergers and acquisitions, a purchase transaction, public offering or subsequent debt or equity sale or restructuring, and include these events in the enterprise valuation process. We will generally require portfolio companies to provide annual audited and quarterly unaudited financial statements, as well as annual projections for the upcoming fiscal year.
 
The following is a description of the steps we will take each quarter to determine the value of our portfolio investments. Investments for which market quotations are readily available will be recorded in our financial statements at such market quotations. With respect to investments for which market quotations are not readily available, our Board of Directors will undertake a multi-step valuation process each quarter, as described below:
 
 
our quarterly valuation process begins with each portfolio company or investment being initially valued by Keating Investments’ senior investment professionals responsible for the portfolio investment;
 
 
preliminary valuation conclusions will then be documented and discussed with Keating Investments’ senior investment professionals;
 
 
a nationally recognized third-party valuation firm engaged by our Board of Directors will review these preliminary valuations;
 
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our Valuation Committee will review the preliminary valuations and our investment adviser and nationally recognized third-party valuation firm will respond and supplement the preliminary valuation to reflect any comments provided by the Valuation Committee; and
 
 
our Board of Directors will discuss valuations and will determine, in good faith, the fair value of each investment in our portfolio for which market quotations are not readily available based on the input of our investment adviser, a nationally recognized third-party valuation firm, and our Valuation Committee.
 
Determination of fair values involves subjective judgments and estimates. Accordingly, this critical accounting policy expresses the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
 
Revenue Recognition. We calculate gains or losses on the sale of investments by using the specific identification method. We record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis to the extent such amounts are expected to be collected.
 
Origination, closing and/or commitment fees associated with debt investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans.  Upon the prepayment of a loan or debt security, we record any prepayment penalties and unamortized loan origination, closing and commitment fees part of interest income.
 
We may enter into forward exchange contracts in order to economically hedge against foreign currency risk. These contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. Realized gains or losses are recognized when contracts are settled.
 
We place loans on non-accrual status when principal or interest payments are past due 60 days or more or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. We may recognize as income or apply to principal, interest payments received on non-accrual loans, depending upon management’s judgment. We restore non-accrual loans to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current.
 
Other Accounting Policies
 
Other Income. Other income includes closing fees, or origination fees, associated with equity investments in portfolio companies. Such fees are normally paid at closing of our investments, are fully earned and non-refundable, and are generally non-recurring.
 
The 1940 Act requires that a business development company offer managerial assistance to its portfolio companies. We offer and provide managerial assistance to our portfolio companies in connection with our investments and may receive fees for our services. These fees are typically included in other income.
 
Federal Income Taxes. Beginning with our 2009 taxable year, we intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code.  We intend to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, to not be subject to federal income tax on the portion of our taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, we are required to distribute at least 90% of our investment company taxable income, as defined by the Code.
 
Because federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statement to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
 
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BUSINESS
 
Background
 
We were incorporated on May 9, 2008 under the laws of the State of Maryland.  We have filed an election to be regulated as a business development company under the 1940 Act.  Keating Investments serves as our investment adviser and will also provide us with the administrative services necessary for us to operate. Keating Investments may also retain additional investment professionals in the future, based upon its needs.

Congress created business development companies in 1980 in an effort to help public capital reach smaller and growing private and public companies.   We are designed to do precisely that.  We intend to make minority, non-controlling equity investments in private businesses that are seeking growth capital and that we believe are committed to, and capable of, becoming public, which we refer to as “public ready” or “primed to become public.”

We intend to invest principally in equity securities, including convertible preferred securities and other debt securities convertible into equity securities, of primarily non-public U.S.-based companies. Our investment objective is to maximize total return.  In accordance with our investment objective, we intend to provide capital principally to U.S.-based, private companies with an equity value of less than $250 million, which we refer to as “micro-cap companies.”  Our primary emphasis will be to attempt to generate capital gains through our equity investments in micro-cap companies, including through the conversion of the convertible debt or convertible preferred securities we will seek to acquire in such companies.  However, we anticipate that a significant portion of our investments at any given time will include a component of interest or dividends, which we believe will provide us with current yield, in addition to the potential for capital appreciation. We may also make investments on an opportunistic basis in U.S.-based publicly-traded companies with market capitalizations of less than $250 million, as well as foreign companies that otherwise meet our investment criteria, subject to certain limitations imposed under the 1940 Act. However, at the present time, we do not expect our investments in foreign companies to exceed more than 10% of our total investment portfolio on a cost basis.

We intend to utilize a three-step investment process focused on:

 
·
an initial investment consisting of convertible debt,

 
·
a going public preparation process, and

 
·
a subsequent follow-on investment principally consisting of convertible preferred stock or other equity.
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Any subsequent follow-on investment will be contingent upon a portfolio company satisfying pre-established milestones towards the filing of a registration statement under the Securities Act or the Exchange Act.  Where appropriate, we may also negotiate to receive warrants, either as part of our initial or follow-on investments in our portfolio companies.

As an integral part of our initial investment, we intend to partner with and help prepare our portfolio companies to become public and meet the governance and eligibility requirements of a Nasdaq Capital Market listing.  Because we believe that the IPO market is virtually non-existent for micro-cap companies, we intend that our portfolio companies will go public through the filing of a registration statement under the Securities Act or the Exchange Act.   We intend to invest in micro-cap companies that we believe will be able to file a registration statement with the SEC within approximately three to twelve months after our initial investment.  These registration statements will typically take the form of a resale registration statement filed by a portfolio company under the Securities Act coupled with a concurrent registration of the portfolio company’s common stock under the Exchange Act, or alternatively a stand-alone registration statement registering the common stock of a portfolio company under the Exchange Act without a concurrent registered offering under the Securities Act.

While we expect the common stock of our portfolio companies to typically be initially quoted on the OTC Bulletin Board following the completion of the registration process, depending upon satisfaction of listing requirements, we intend to target investments in portfolio companies that we believe will be able to qualify for a Nasdaq Capital Market listing within approximately twelve to eighteen months after completion of our follow-on investment.  However, for those portfolio companies that meet the initial listing requirements of the Nasdaq Capital Market following the completion of the registration process, such companies may seek an initial listing on the Nasdaq Capital Market.  We can provide no assurance, however, that the micro-cap companies in which we invest will be able to successfully complete the SEC registration process, or that they will be successful in obtaining a listing on the OTC Bulletin Board or the Nasdaq Capital Market within the expected timeframe, if at all.

We intend to maximize our potential for capital appreciation by taking advantage of the premium we believe is generally associated with having a more liquid asset, such as a publicly traded security.  Specifically, we believe that a Nasdaq Capital Market listing, if obtained, will generally provide our portfolio companies with greater visibility, marketability, and liquidity than they would otherwise be able to achieve without such a listing.  Since we intend to be more patient investors, we believe that our portfolio companies may have an even greater potential for capital appreciation if they are able to demonstrate sustained earnings growth and are correspondingly rewarded by the public markets with a price-to-earnings (P/E) multiple appropriately linked to earnings performance.  We can provide no assurance, however, that the micro-cap companies in which we may invest will be able to achieve such sustained earnings growth necessary, or that the public markets will recognize such growth, if any, with an appropriate market premium.

The convertible debt instruments we expect to receive in connection with our initial investments will likely be unsecured or subordinated debt securities. The convertible preferred stock we principally expect to receive in connection with our follow-on investments will typically be non-controlling investments, meaning we will not be in a position to control the management, operation and strategic decision-making of the companies in which we invest.   In the near term, we expect that our total initial and follow-on investments in each portfolio company will typically range from $250,000 to $500,000, although we may invest more than this threshold in certain opportunistic situations.  We expect the size of our individual investments to increase if and to the extent our capital base increases in the future.

We expect that our capital will primarily be used by our portfolio companies to finance organic growth.  To a lesser extent, our capital may be used to finance acquisitions and recapitalizations. Our investment adviser’s investment decisions will be based on an analysis of potential portfolio companies’ management teams and business operations supported by industry and competitive research, an understanding of the quality of their revenues and cash flow, variability of costs and the inherent value of their assets, including proprietary intangible assets and intellectual property.  Our investment adviser will also assess each potential portfolio company as to its appeal in the public markets and its suitability for achieving and maintaining public company status.

During the last half of 2008, the state of the economy in the U.S. and abroad continued to deteriorate to what we believe is a recession, which could be long-term. The generally deteriorating economic situation, together with the limited availability of debt and equity capital, including through bank financing, will likely have a disproportionate impact on the micro-cap companies we intend to target for investment.  As a result, we may experience a reduction in attractive investment opportunities in prospective portfolio companies that fit our investment criteria.  In addition, micro-cap companies in which we ultimately invest may be unable to pay us the interest or dividends on their convertible securities or repay their debt obligations to us, and the common stock which we may receive upon conversion of the convertible securities may have little or no value, resulting in the loss of all or substantially all of our investment in such micro-cap companies.

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We have no operating history.  At this time, we do not have any arrangements, agreements or commitments to make an investment in a portfolio company.  We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially.

Our principal executive offices are located at 5251 DTC Parkway, Suite 1000, Greenwood Village, Colorado 80111, and our telephone number is (720) 889-0139. We maintain a website on the Internet at www.keatingcapital.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus.

Private Issuances of Securities

On May 14, 2008, our investment adviser, Keating Investments, purchased 100 shares of our common stock at a price of $10.00 per share as our initial capital.  On November 12, 2008, we completed the final closing of our initial private placement.  We sold a total of 569,800 shares of our common stock in the initial private placement at a price of $10.00 per share raising aggregate gross proceeds of $5,698,000.  After the payment of commissions and other offering costs of approximately $454,566, we received aggregate net proceeds of approximately $5,243,434 in connection with our initial private placement.  As of December 31, 2008, we had cash resources of approximately $4.78 million and no indebtedness other than accounts payable and accrued expenses incurred in the ordinary course of business of approximately $83,000, and management fees payable to Keating Investments of approximately $12,000.
 
As of January 15, 2009, our shares of common stock were owned by a total of 37 persons, including our Chief Executive Officer and Chairman of the Board of Directors, our Chief Operating Officer, and one of our independent directors, who own, in the aggregate, a total of 120,000 shares of our common stock, representing approximately 21.1% of our issued and outstanding shares of common stock following our initial private placement.  See “Control Persons and Principal Stockholders” below.

All shares of our common stock issued in our initial private placement are restricted shares and cannot be sold by the holders thereof without registration under the Securities Act or an available exemption from registration under the Securities Act.

Targeted Investments
 
We intend to provide capital primarily to micro-cap companies with an equity value of less than $250 million.  With micro-cap companies historically having difficulty accessing the traditional capital markets and having less analyst coverage, less institutional ownership and lower trading volume, we believe an opportunity exists to become a preferred source of capital to such micro-cap companies, particularly given our public markets strategy and the expertise of our investment adviser.  Our investment activities will generally be focused on micro-cap companies that have demonstrated attractive revenue and earnings growth relative to their peers, and whose management teams are committed to becoming public reporting companies.  We expect these public ready companies will also have some or all of the following characteristics:

 
·
Operates in an attractive growth industry. We intend to focus on micro-cap companies across a broad range of attractive growth industries that we believe are being transformed or created anew by technological, economic and social forces and are capable of attracting interest from both retail and institutional investors.
 
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·
Immediate need for external capital. We intend to target micro-cap companies whose organic growth is currently constrained by limited capital, and which have reached a point in their development where we believe external capital is required.  As part of our investment, we intend to offer a more stable form of equity capital for our portfolio companies, while requiring that their ownership structure align the economic interests of their management team with the success of the enterprise.

 
·
Demonstrated revenue stream. We intend to invest in micro-cap companies that have a demonstrated revenue stream that we believe will make them attractive as publicly traded companies.  As such, we do not intend to invest in developmental stage, pre-revenue stage and, with some exceptions, early revenue stage companies.

 
·
Demonstrated profitability. We intend to focus on micro-cap companies that are at or near profitability on an earnings before interest, taxes, depreciation and amortization (“EBITDA”) basis. With the capital we provide, together with the projected EBITDA of our portfolio companies, we expect each of our portfolio companies to be able to finance their development over the next twelve to eighteen months without requiring additional outside capital subsequent to completion of our follow-on investment.  Once our portfolio companies become listed on the Nasdaq Capital Market, which we generally expect to occur within twelve to eighteen months after completion of our follow-on investment, we would expect our portfolio companies to be positioned to conduct, if appropriate, a public follow-on offering.

In addition to the foregoing, we currently intend to concentrate our investments in micro-cap companies having annual revenues between $10 million and $100 million that we believe have a strong prospect of revenue and earnings growth.  We also expect our portfolio companies to generally have an equity valuation, before our investment, of between $25 and $200 million.  These criteria provide general guidelines for our investment decisions; however, we may not require each prospective portfolio company in which we choose to invest to meet all of these criteria.

The success of our strategy depends largely on our ability to identify micro-cap companies that are committed to becoming, and that we believe we can assist in becoming, public companies.  With over ten years experience sponsoring going public transactions, we believe that our investment adviser has the experience and expertise to assess which micro-cap companies are public ready and to assist such companies in achieving public status in a timely and cost-effective manner.   Our three-step investment structure is designed to ensure that there is a shared commitment to going public between us and the management teams of each of our portfolio companies.  As part of our initial debt investment, we will require that our portfolio companies agree to undertake the necessary steps to become a public reporting company through the filing of a registration statement under the Securities Act or the Exchange Act.   In the event a portfolio company fails to complete the going public process in a satisfactory manner, our debt instruments will impose certain penalties, which we expect will generally include a right to put the debt investment back to the portfolio company at a premium to our initial investment.

While we believe that the use of economic disincentives will provide us with some downside protection on our initial investments, we believe the real incentive for our portfolio companies to become public is our more substantial follow-on investment that is tied to achieving certain pre-established milestones associated with the going public process, as well as what we believe are the advantages of becoming a public company.  An important part of our investment adviser’s due diligence process will focus on assessing the appeal that a prospective portfolio company may have in the public markets, as well as its suitability for achieving and maintaining public company status.  In addition, while we expect to make passive, non-controlling investments where we have little power to control the management, operation and strategic decision-making of our portfolio companies, we expect to provide managerial assistance to our portfolio companies throughout the investment process, especially as it pertains to the engagement of third party consultants with which our investment adviser has relationships, the completion of the going public process through the filing of a registration statement, and the design of an overall public markets strategy.

In the near term, we expect that our total initial and follow-on investment in each portfolio company will typically range from $250,000 to $500,000, although we may invest more than this threshold in certain opportunistic situations.  We expect the size of our individual investments to increase if and to the extent our capital base increases in the future.

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We intend to limit our investments in any one portfolio company to not more than 5% of our net assets; however, we may invest more than this threshold in certain opportunistic situations.  With an initial capital base of approximately $5 million, we intend to limit our investments in any one portfolio company to $500,000, or 10% of our net assets.  While this amount exceeds our target limit of 5% of net assets, we intend to be more selective during our initial investment period and take advantage of opportunistic situations at this higher level.

We will also generally limit our investments in any one portfolio company so that our total outstanding equity interest in the portfolio company is not more than 9.9% of a portfolio company’s outstanding equity, although we may exceed this threshold in certain opportunistic situations.  We also intend to include certain “blocker” language in our warrant instruments which would prevent us from exercising warrants we are issued by our portfolio companies, if by doing so we would exceed the 9.9% level.  We intend to be the lead investor in our portfolio investments and, to the extent our portfolio companies require more financing than we desire to invest, we anticipate seeking non-affiliated co-investors to participate in the financing of our portfolio companies.  In addition, we expect our portfolio companies may engage one or more placement agents with whom our investment adviser has relationships to assist in capital raising from non-affiliated co-investors.

Keating Investments

 Our investment activities are managed by Keating Investments.  Keating Investments was founded in 1997 and is an investment adviser registered under the Investment Advisers Act of 1940, as amended.  The managing member and majority owner of Keating Investments is Timothy J. Keating.  Our investment adviser’s senior investment professionals are Timothy J. Keating, our Chairman of the Board and Chief Executive Officer, Ranjit P. Mankekar, our Chief Financial Officer, Treasurer and a member of our Board of Directors, and Kyle L. Rogers, our Chief Operating Officer and Secretary.  In addition, Keating Investments’ other investment professionals consist of three portfolio company originators, one analyst and a Chief Compliance Officer.  Under our Investment Advisory and Administrative Services Agreement with Keating Investments, we have agreed to pay Keating Investments, for its investment advisory services, an annual base management fee based on our gross assets as well as an incentive fee based on our performance. See “Investment Advisory and Administrative Services Agreement.”

Market Opportunity

Although the current negative economic environment has severely limited access to the capital markets and is likely to have a disproportionate impact on the financial condition and results of operations of the types of micro-cap companies we intend to target, we believe the following market opportunity continues to exist to provide financing for public ready micro-cap companies.

Continued need for growth capital by public ready micro-cap companies looking for an equity partner.  We believe a significant opportunity exists to provide growth, expansion and other types of capital to public ready micro-cap companies that have reached a point in their development where additional equity capital is needed.  We believe our investment model offering non-controlling equity investments will provide an attractive vehicle for our portfolio companies to meet their capital needs.  While we will require our portfolio companies to become public reporting companies, we believe that we will be viewed by prospective portfolio companies as a provider of “patient capital, given our focus on longer-term growth versus short-term gains, which we believe will serve as a key differentiator for us.  We believe there are a significant number of companies that are looking for the type of “patient” capital we will be able to provide.  We also expect to bring enhanced value to our portfolio companies through our investment adviser’s going public and public markets expertise, rather than through financial engineering or as a strategic business adviser to our portfolio companies.

Absence of traditional IPO financing for micro-cap companies.  We will focus on micro-cap companies that have demonstrated revenues, not pre-revenue or start-up companies, that are at a point in their development where we believe equity capital is required, but which are unable to raise capital through a traditional IPO or are unwilling, or unable due to market conditions, to raise capital from private equity and venture capital sources.

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Since 2000, we believe the traditional IPO market has been virtually non-existent for micro-cap companies seeking to raise less than $25 million.  In fact, from 2001 through 2008, there has been an average of only nine IPOs raising less than $25 million each year.

Number of IPOs Raising Less Than $25 Million
 
 
In response to this void, alternatives to the traditional IPO for micro-cap companies began to flourish in 2005.  One of these alternatives was a PIPE offering which typically involved a reverse merger into a public shell company with a simultaneous PIPE investment – an industry in which our investment adviser was an active participant.  In a reverse merger, shareholders of a private company purchase control of a public company with no or nominal assets (other than cash) and no or nominal operations and then merge it with the private company.  While the PIPE offering temporarily filled the void that exists for micro-cap companies seeking to raise less than $25 million, we believe that recent regulatory actions by the SEC which unfavorably impacted reverse mergers, coupled with the recent deterioration of the PIPE market as part of the broader difficulties within the U.S. credit markets generally, have largely limited recent PIPE offerings to more established, highly liquid, large-cap public companies. As a result, we believe there are many public ready micro-cap companies that meet our investment criteria, but simply do not have access to the U.S. public capital markets.

Difficult market for private equity and venture capital funds. We believe that the public ready micro-cap companies in which we intend to invest are also feeling the adverse impacts from the difficulties in current private equity and venture capital markets.  Recently, private equity funds that typically relied on commercial banks or a syndicate of lenders to provide the debt capital necessary to produce their “leveraged” returns have seen these traditional sources of capital become largely closed.  We believe that the impact of these substantially tightened credit markets will be even more pronounced on the micro-cap companies we intend to target, as they tend to be unable to support large debt burdens.  As a result, we believe private equity firms will be less interested in providing growth capital to public ready micro cap companies where leverage is limited.

We believe that venture capital funds are typically the least desired financing for our targeted growth companies due to pricing and control issues.  While many venture capital firms have cash to invest, they typically insist on a controlling interest in their portfolio companies.  Recent market trends, including the weak traditional IPO market in general, have put significant liquidity pressures on venture capital funds that are now faced with fewer attractive exit alternatives, extended holding periods and possible “mark to market” valuation write-downs.

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Accordingly, we believe that many viable public ready micro-cap companies that fit our investment criteria will have limited, if any, access to the private equity market or venture capital financing, and we believe this trend is likely to continue for the foreseeable future.

Further, since our typical equity investment will be a non-controlling interest, we believe there is a significant opportunity for us to become a capital provider of choice for entrepreneurial businesses that are unwilling to give up a controlling interest typically mandated by both private equity and venture capital funds.  While we will generally have no direct control over the management and strategic direction of our portfolio companies, we intend to ensure that our portfolio companies’ management teams have a meaningful equity stake and that their interests are aligned with our interests as an investor – mainly, to create stockholder value through a widely held and actively traded public stock. As part of the going public process, we also intend to provide our portfolio companies with recommendations on the composition of their Board of Directors, which we will require to be comprised of a majority of independent directors so as to satisfy the Nasdaq Capital Market initial listing requirements.   

IPO financing alternative.  We believe that there exist significant and continuing opportunities to originate and lead investments in public ready micro-cap companies.  We believe that the market for the companies that we are targeting has historically been characterized by continual change, which creates an ongoing need for capital within that marketplace. We believe that there exists a significant market opportunity to meet the capital requirements of a growing number of these businesses as they find the U.S. public and private capital markets largely closed.  In addition, we believe that the capital markets have tended in recent years to be focused on larger funds and larger deals – deals which are magnitudes larger than what is required by the public ready micro-cap companies we intend to target.

We believe that we can offer public ready micro-cap companies that have solid financial qualifications and strong growth prospects with an attractive, well-structured capital markets alternative which is supported by our investment adviser’s public markets approach and expertise.  Our focus will be to identify these companies and provide a three-step investment program that provides them a level of immediate capital followed by a more substantial equity financing component once they have proven they are ready to become a public company.  We believe our three-step investment process and going public through the filing of a registration statement under the Securities Act or the Exchange Act may prove more time-effective and less costly than a traditional IPO for the micro-cap companies we intend to target.  In addition, our investment in each portfolio company, unlike an IPO, will not generally depend on general market conditions or prevailing investor sentiment. We also believe that our investment adviser’s going public expertise and access to third-party consultants, that we expect will be retained by our portfolio companies, will allow our portfolio companies’ management teams to concentrate on maximizing their business potential and marketplace influence as we proceed through our disciplined and systematic going public process.

Benefits of being a public company.  Typically, we believe investors place a premium on liquidity, or having the ability to sell stock quickly. As a result, we believe that public companies typically trade at higher valuations than private companies with similar financial attributes. By going public, we believe that our portfolio companies may be able to receive the benefit of this liquidity premium, provided that they are successful in obtaining a listing on the Nasdaq Capital Market.
 
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Source: Pratt’s Stats® at BVMarketData.com, Public Stats™ at BVMarketData.com as of June 5, 2008 for transactions between January 1, 2003 and December 31, 2007. Used with permission from Business Valuation Resources, LLC.
*Valuation data based on a combined total of 4,900+ U.S. based private and public company transactions under $100 million.
**Keating Investments, LLC calculation based on those companies having positive net income, valuation data based on a combined total of 3,600+ U.S. based private and public company transactions under $100 million.

In addition to higher valuations, we believe that public companies also enjoy other benefits, including:

 
·
lower cost of capital, superior access to the capital markets, and less stock dilution to founders when raising additional capital;

 
·
creation of a stock currency to fund acquisitions;

 
·
equity-based compensation to retain and attract management and employees;

 
·
more liquidity for founders, minority shareholders, and investors; and

 
·
added corporate prestige and visibility with customers, suppliers, employees and the financial community.

Of course, public companies also incur significant obligations, such as the cost of periodic financial reporting, compliance with the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), required disclosure of sensitive company information and restrictions on stock sales by major or controlling shareholders. But for the type of micro-cap companies we intend to target, we believe that the capital-raising opportunities and other benefits of being public may substantially outweigh these disadvantages.

However, we can provide no assurance that the portfolio companies in which we may invest will be successful in completing the SEC registration process to become a public company, or if they do so, that they will be able to obtain a subsequent listing on either the OTC Bulletin Board or the Nasdaq Capital Market.  Any failure to do so could substantially reduce or eliminate the market premium associated with being a publicly traded company.

Total Return Objective
 
Our investment objective is to maximize total return.  In furtherance of that objective, our primary emphasis will be to attempt to generate capital gains through our equity investments in micro-cap companies, including through the conversion of the convertible debt or convertible preferred securities we will seek to acquire in such companies.  However, we anticipate that a significant portion of our investments at any given time will include a component of interest or dividends, which we believe will provide us with current yield, in addition to the potential for capital appreciation.
 
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Investment Strategy

We intend to implement the following strategies to take advantage of the market opportunity for providing capital to public ready micro-cap companies that we believe have strong prospects for growth and which are at a point in their development where we believe a significant equity investment is required:

Visionary, industry leading management.  We plan to invest in businesses with a strong management team with industry experience, a visionary business strategy, a passionate commitment to achieve results, the proven ability to execute and lead, and a track record of being able to attract experienced industry talent.  Our portfolio companies must have in place, or have a commitment from, a qualified chief financial officer with a strong background in SEC reporting and compliance with proven experience in managing a micro-cap public company’s financial reporting, internal controls, accounting and finance functions, and investor relations.

Innovative and quality products.  We intend to focus our investments on companies where there is a proven demand for the products or services they offer rather than focusing on ideas that have not been proven or situations in which a completely new market must be created.  We look for businesses that are innovators, have technologies or products that extend, accelerate, or disrupt identified markets, have premium niche products capable of higher and more sustainable margins, and are able to attract top sales and engineering talent.  We intend to target companies whose business will benefit from exposure as a public company and have appeal to retail and institutional investors alike.

Large potential markets.  We intend to provide capital to established micro-cap companies with demonstrated growth that we believe is sustainable in industries where we believe there are substantial, leading edge market opportunities.  We intend to focus on micro-cap companies across a broad range of industries and markets that we believe will be capable of attracting interest from retail and institutional investors.  We intend to focus on industries that we believe are being transformed or created anew by technological, economic and social forces – such as globalization, demographics, environment, energy, the knowledge economy and the Internet.  We will look for businesses whose products or services are capable of moving into the mass market and disrupt existing, more mature markets.  We will tend to limit our exposure to companies where long-term growth is dependent on favorable economic factors – such as a strong economy, rising consumer and business sentiment, lowering interest rates, falling inflation and stable financial markets.

Consistent and predictable results.   We intend to focus on micro-cap companies that have realistic operating targets set by management that are consistently achieved, have a demonstrated ability to grow market share profitably, have growing and sustainable profits, generate or have the potential to generate recurring revenue streams, have recognized technological barriers to market entry and have a commitment to stay ahead of innovation.  We intend to invest in micro-cap companies that we believe will be rewarded in the public markets for consistent and predictable financial results.

Aligned interests.  We intend to target micro-cap companies that we believe offer growth opportunities and proactively approach them regarding investment possibilities. We believe that the experience of our investment adviser’s senior investment professionals and their understanding of public ready micro-cap companies, our three-step financing structure, our public markets strategy and our investment adviser’s going public expertise, and the opportunity to capture a potential liquidity premium as a publicly traded company will be attractive to prospective portfolio companies.  We believe it is important that each of our portfolio companies’ management teams have a meaningful equity stake in their business and that their interests are aligned with our interests as investors in the portfolio company to create substantial stockholder value through a widely held and actively traded public stock.

Competitive Advantages

We believe that we will have the following competitive advantages over other providers of capital to public ready micro-cap companies including private equity firms, venture capital firms and reverse merger sponsors:

Public markets focus. We intend to invest in micro-cap companies that are committed to, and capable of, becoming public companies and have defensible valuations to support our initial investment pricing.  We believe we have expertise in evaluating whether a portfolio company is capable of becoming a successful public company – both management commitment and skills and public market appeal. By providing capital to micro-cap companies that are at a point in their development where we believe an equity investment is required, we hope to accelerate their growth with a properly timed going public strategy.  The going public process is a critical step in our overall investment process for each portfolio company that we expect will take between three and twelve months following our initial investment and be substantially completed before we make our more substantial follow-on investment.

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Going public expertise.  We believe that our investment adviser’s senior investment professionals and various third party consultants, with which our investment adviser has relationships, have extensive experience in taking companies public and designing capital markets and investor relations programs.  Our investment adviser had been a reverse merger sponsor for nearly a decade and has completed 19 going public transactions over the last five years.  Our investment adviser’s senior investment professionals and various third party consultants will assist our portfolio companies in this going public process.  Through the terms of our initial investment, we will generally require that one of our recommended third party consultants be retained by our portfolio companies to actively participate and lead the going public process.  The third party consultants will assist our portfolio companies by organizing and coordinating the due diligence process for the portfolio companies, providing information to the portfolio companies’ senior management on the regulatory framework and compliance requirements of public companies under the Securities Act and the Exchange Act,  reviewing and analyzing the portfolio companies’ existing corporate governance, financial documents and structure, material contracts and business and financial plans, and assisting in the preparation of the portfolios companies’ registration statements and any other documents related to the going public process.  We believe that these third party consultants are highly experienced in the going public process, SEC compliance matters, public company reporting, and legal and financial matters associated with micro-cap companies.  We believe the involvement of a third party consultant will result in a more coordinated, timely and cost-effective going public process – allowing each portfolio company’s management team to remain focused on growing their business.

Possibility of obtaining a Nasdaq Capital Market listing.  We believe that a Nasdaq Capital Market listing, if obtained, generally will provide our portfolio companies with visibility, marketability, liquidity and third party established valuations, all of which will aid in their future capital raising efforts.  More specifically, the advantages that a Nasdaq Capital Market listing would be expected to have for our portfolio companies include:

 
·
Visibility – greater access to investment analyst coverage to disseminate our portfolio companies’ stories, and added corporate prestige and visibility with exchange listing;

 
·
Valuation and liquidity – potential for more stock liquidity as retail brokers become more interested in making a market in the stock and soliciting their clients to purchase the stock and as institutional investors who typically do not invest in OTC Bulletin Board stocks consider investments; and

 
·
Access to capital – greater interest from top- and mid-tier investment banking firms to conduct a public follow-on offering for our portfolio companies.

We intend to utilize our investment adviser’s expertise in public markets strategies to assist our portfolio companies in the design of a comprehensive aftermarket support program aimed at achieving a Nasdaq Capital Market listing.  We also intend to leverage our investment adviser’s expertise and access to their  contacts and third party consultants to develop and execute a disciplined plan to upgrade our portfolio companies from the OTC Bulletin Board to the Nasdaq Capital Market, which we anticipate will take twelve to eighteen months after completion of our follow-on investment in each portfolio company.

The following table summarizes the initial listing requirements for companies that want to list their securities on the Nasdaq Capital Market.  A company must meet all of the requirements under at least one of the three standards below.

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Requirements
Standard 1
Standard 21
Standard 3
Stockholders’ equity
$5 million
$4 million
$4 million
Market value of publicly held shares
$15 million
$15 million
$5 million
Operating history
2 years
N/A
N/A
Market value of listed securities2
N/A
$50 million
N/A
Net income from continuing operations (in latest fiscal year or in two of last three fiscal years)
N/A
N/A
$750,000
Publicly held shares3
1 million
1 million
1 million
Bid price
$4
$4
$4
Shareholders (round lot holders)4
300
300
300
Market makers
3
3
3
Corporate governance
Yes
Yes
Yes

1Seasoned companies (those companies already listed or quoted on another marketplace) qualifying only under the market value of listed securities requirement must meet the market value of listed securities and the bid price requirements for 90 consecutive trading days prior to applying for listing.

2Listed securities are defined as “securities listed on the Nasdaq Capital Market or another national securities exchange.”

3Publicly held shares is defined as total shares outstanding, less any shares held by officers, directors or beneficial owners of 10% or more.

4Round lot holders are shareholders of 100 shares or more.

We believe our public markets strategy, if successfully implemented and coupled with a successful listing on the Nasdaq Capital Market, will give us an expected portfolio company investment horizon of two to three years via an orderly public market exit, which we believe represents a substantially shorter investment horizon when compared to traditional private equity and venture capital investments which have investment periods of five to seven years.

However, we can provide no assurance that the portfolio companies in which we may invest will be successful in completing the SEC registration process to become a public company, or if they do so, that they will be able to obtain a subsequent listing on either the OTC Bulletin Board or the Nasdaq Capital Market.  Any failure to do so could substantially reduce or eliminate the market premium associated with being a publicly traded company.

Three-step equity investment structure.   We will use a three-step investment structure with:

 
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an initial convertible debt investment that allows us to meet the immediate capital needs of a portfolio company in a timely manner,

 
·
a going public phase where we provide managerial assistance to prepare the prospective portfolio company for the eligibility and governance standards required by the Nasdaq Capital Market; and

 
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a subsequent follow-on investment principally consisting of convertible preferred stock or other equity.

Our more substantial follow-on investments, which we expect will typically occur within three to twelve months after our initial investment, will be tied to pre-established milestone achievements including continued business performance, new management hires and substantial completion of a going public process through the filing of a registration statement.  Although our initial investments will typically be structured as convertible debt, our primary focus will be on equity investments, including preferred securities convertible into common stock.  We believe our non-controlling, equity investment structure will provide an attractive vehicle for our portfolio companies to meet their immediate and short-term capital needs.  We also believe that our flexible approach to structuring investments will facilitate positive, long-term relationships with our portfolio companies and better position them to conduct a subsequent registered public follow-on offering, if necessary, if and to the extent they are successful in obtaining a Nasdaq Capital Market listing.

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Non-controlling, minority investments.  We intend to make non-controlling, minority investments in our portfolio companies.   We believe this makes us a more attractive source of capital in comparison to private equity and venture capital funds which typically require controlling investments.  Although we will not generally have the power to control the management, operations and strategic decision-making of the companies in which we invest, we expect to provide managerial assistance to our portfolio companies throughout the investment process, especially as it pertains to the engagement of our investment adviser’s recommended third party consultants, the completion of the going public process, and the design of an overall public markets strategy.  We believe that we will bring enhanced value to the process through our investment adviser’s public markets expertise, rather than through financial engineering or by serving as a strategic adviser to our portfolio companies.

Liquidity premium. We intend to maximize our potential for capital appreciation by taking advantage of the premium we believe is generally associated with having a more liquid asset, such as a publicly traded security.  Specifically, we believe that a Nasdaq Capital Market listing, if obtained, will generally provide our portfolio companies with greater visibility, marketability, and liquidity than they would otherwise be able to achieve without such a listing.  Since we intend to be more patient investors, we believe that our portfolio companies may have an even greater potential for capital appreciation if they are able to demonstrate sustained earnings growth and are correspondingly rewarded by the public markets with a price-to-earnings (P/E) multiple appropriately linked to earnings performance.  We can provide no assurance, however, that the micro-cap companies in which we may invest will be able to achieve such sustained earnings growth necessary, or that the public markets will recognize such growth, if any, with an appropriate market premium.

Investment Selection

Investment criteria.  We have identified criteria that we believe are important in meeting our investment objective. These criteria provide general guidelines for our investment decisions; however, we may not require each prospective portfolio company in which we choose to invest to meet all of these criteria.

 
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Revenue growth. We will seek to invest primarily in micro-cap companies that are already generating revenue and which we believe have significant growth potential. We intend to invest in companies with annual revenues of $10 to $100 million.  We intend to examine the market segment in which each prospective portfolio company is operating, including its size, geographic focus and competition, to determine whether that company is likely to continue its current growth rate prior to investing.

 
·
Large addressable markets. We will seek to invest in businesses where we believe there is a proven demand for the company’s products or services that address large market opportunities.  We believe that large markets not only provide for more attractive growth prospects, but also have the ability to support a healthy competitive environment with more than one successful competitor.

 
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Strong industry position. We will seek to invest in companies that have developed defendable market positions within their respective markets and are well positioned to capitalize on growth opportunities. We will seek to invest in companies that demonstrate competitive advantages versus their competitors, which should help to protect their market position and profitability and permit them to adapt to changes in their respective business environments.

 
·
Strong, experienced management team. We will generally require that our portfolio companies have an experienced management team. We will also require our portfolio companies to have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests.

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·
Profitable on EBITDA basis. We will focus on companies that are at or near profitability on an EBITDA basis.  We will seek to invest in companies that we believe will provide a predictable and growing EBITDA. We expect that projected EBITDA, together with the proceeds from our investments, will be a key means by which our portfolio companies will financially support their future growth plans until they are listed on the Nasdaq Capital Market and ready for a registered public follow-on offering.

 
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Attractive public markets company. We intend to invest in public ready micro-cap companies whose management is committed to, and capable of, becoming a public company, whose business we believe will benefit from exposure as a public company and will have appeal to retail and institutional investors, and that we believe is capable of obtaining a Nasdaq Capital Market listing typically within twelve to eighteen months after we complete our follow-on investment.

 
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Regulatory compliance. We will generally require that our portfolio companies have in place, or ready for hire, a qualified chief financial officer with a strong background in SEC reporting, Sarbanes-Oxley Act compliance, Generally Accepted Accounting Principles (“GAAP”), accounting and internal controls management, and investors relations.  Before we complete our more substantial follow-on investment, our portfolio companies will be required to have GAAP compliant financial statements for at least the past two years which have been audited by a Public Company Accounting Oversight Board (“PCAOB”) registered auditor acceptable to us.

Due diligence.  If a potential portfolio company meets all, or most, of the characteristics described above, our investment adviser’s investment professionals will perform a preliminary due diligence review including company assessments, market and competitive analysis, evaluation of management team, financial models and business risks, and assessments of transaction size, pricing and structure. The process outlined below provides general parameters for our investment adviser’s investment decisions, although not all will be followed in evaluating each opportunity. Upon successful completion of this preliminary evaluation process, our investment adviser’s Investment Committee will decide whether to enter into a non-binding letter of intent, continue the due diligence process and move forward towards the completion of an investment transaction.

Our due diligence process will typically encompass the following steps:

 
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Assessment of management. Our investment adviser will typically perform an assessment including a review of experience, passion, proven leadership ability, vision, ability to attract key employees, dispute resolution skills, and reputation in the market.  Our investment adviser will generally corroborate and verify management’s track record, industry accomplishments and leadership capabilities through extensive background checks, interviews with management, employees, references and other industry leaders, and on-site visits.  Our investment adviser will also assess the qualifications and experience of the chief financial officer to manage micro-cap public companies.

 
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Market and competitive analysis. Our investment adviser will utilize its investment analysts and engage, on an as-needed basis, outside experts to perform market and competitive analysis and due diligence. This analysis and due diligence typically will provide our investment adviser with a detailed understanding of the prospective portfolio company’s business, market opportunities and operations. This analysis may include:

 
o
industry and competitive analysis, including verification of market potential, the relative position of the prospective portfolio company within its market, the existence of significant barriers to entry for potential competitors, and pricing elasticity;

 
o
customer and vendor interviews to assess reputation within its market;

 
o
assessment of technology and intellectual capital; and

 
o
examination of potential regulatory and legal issues.
 
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·
Business model and financial assessment. Prior to making an investment decision, our investment adviser will typically review a prospective portfolio company’s business model and financial reporting. This will include a thorough review of historical and prospective financial information, accounting practices and financial models, and investment and loan documents.  Our investment adviser intends to challenge management’s financial assumptions, make an independent assessment of revenue and earnings quality, and conduct interviews with attorneys and auditors.

 
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Strategic and public company analysis. Our investment adviser will also generally perform a strategic analysis of each prospective portfolio company, during which it will evaluate operating and market risks, public company attractiveness, comparable public company valuations, potential to become a public company in a cost-effective and timely manner, management commitment to being a public company, and potential appeal to retail and institutional investors in the aftermarket.
 
Deal sourcing.  We believe that the combined experience of our investment adviser’s investment professionals will provide us with access to a investment opportunities. Our investment adviser’s reputation in the reverse merger industry has exposed us to a network of contacts and sources from which we intend to generate investment opportunities in public ready micro-cap companies that are seeking alternatives to traditional IPO financing.  Our investment adviser’s network includes relationships with prior deal participants, prospective management teams, entrepreneurs, industry organizations, corporate development professionals, financial institutions, high net worth and institutional investors and service professionals.

We also expect to receive deal referrals from strategic advisers, industry consultants, industry analysts, portfolio company managers, finders, lawyers, accountants and investment bankers. In addition, we expect that our investment adviser’s investment professionals will also serve as the direct source of proprietary deal referrals from their own business networks.

In many transactions, we expect that our investment adviser’s investment professionals will have prior knowledge of a prospective portfolio company and will have developed a relationship with its management or investors over a period of time resulting in an investment opportunity. We believe that such relationship building will serve us in several ways with respect to our investments, including: (i) generating investments on a timely, non-auction basis; (ii) assuring an alignment of interests between us and our portfolio companies’ management teams; and (iii) providing comfort that our portfolio companies’ management teams are committed to, and capable of, becoming public and achieving a Nasdaq Capital Market listing.  We intend to make investments in negotiated transactions as opposed to auction situations.

We also intend to implement a proactive marketing program to communicate with our investment adviser’s established referral network and with companies that meet our investment criteria.

Investment decisions. Keating Investments is registered as an investment adviser under the Advisers Act, and will serve as our investment adviser.  Keating Investments will manage our day-to-day operations and will determine companies in which we will invest.  Our investment adviser’s Investment Committee must unanimously approve each new investment that we make. The members of the Investment Committee currently consist of Timothy J. Keating, Ranjit P. Mankekar and Kyle L. Rogers, who are the senior investment professionals of Keating Investments and our executive officers.  We believe the Investment Committee’s approach embraces an investment process with well-defined investment parameters, risk assessment techniques and valuation metrics that are applied consistently to all investments.
  
Investment Structure
 
Once our investment adviser has determined that a prospective portfolio company is suitable for investment, it will work with the management team of that company and, if necessary, its other capital providers, including senior and junior lenders, and equity capital providers, to structure an investment.   We intend to utilize a three-step investment process focused on an initial convertible debt investment, going public preparation and a subsequent follow-on investment, typically consisting of convertible preferred stock or other equity investments, that will be contingent upon a portfolio company satisfying pre-established milestones towards the filing of a registration statement under the Securities Act or the Exchange Act.  Where appropriate, we may also negotiate to receive warrants, either as part of our initial or follow-on investments in our portfolio companies.

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We believe that our three-step investment structure is an attractive approach for prospective portfolio companies that complements the going public process and strategy we intend to implement with each of our portfolio companies. We also believe our non-controlling, equity investment structure provides an attractive vehicle for our portfolio companies to meet their immediate and short-term capital needs.  While we believe there are many micro-cap businesses that are both interested in, and capable of, becoming public companies, many of these companies lack the personnel, organization, expertise and control systems to properly become a public company and manage the SEC compliance and filing requirements and general business aspects of being public.  We believe that the founders of many existing micro-cap companies realize the potential benefits of being public, but also recognize the effort it takes to become a public company and maintain the public company status.  Our three-step investment structure is designed to ensure our portfolio companies are public ready before we make our follow-on investments.  We believe that our portfolio company management teams will benefit from this approach because our portfolio companies can focus on growing their business and increasing their earnings after having hired the right personnel to operate as a public company, including an experienced chief financial officer.

The investment structure discussed below is intended to provide general guidelines for the terms and conditions which we intend to negotiate for our investments; however, we may not require each investment to contain all of these terms and conditions.
 
Seed investments in the form of convertible debt. In the near term, we expect that our initial investments in a portfolio company will typically range from $100,000 to $250,000 each.  However, we may increase this investment size to take advantage of opportunistic situations.  In addition, we expect this investment size to increase as the size of our capital base increases.  We anticipate structuring our investments primarily as unsecured and subordinated loans that provide for a fixed interest rate that will provide us with current interest income. We will set interest rates based on prevailing market rates at the time of our investment for comparable types of investments.  Typically, these loans will have maturities not to exceed one year, which coincides with the maximum period we believe is required to complete the going public process.

In the case of our unsecured and subordinated debt investments, we intend to tailor the terms of our initial investments to the facts and circumstances of the transaction and prospective portfolio company, negotiating a structure that seeks to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its business plan and complete the going public process in a timely manner.  For example, when structuring a debt investment, we will seek to limit the downside potential of our investments by:

 
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requiring a total return on our investments (including both interest and potential equity appreciation) that compensates us for credit risk;

 
·
incorporating a “put” right into the investment structure; and

 
·
negotiating covenants and other contractual provisions in connection with our investments. Such provisions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and possibly board rights.
 
Our initial investments may include an additional equity component, such as warrants to buy common stock in our portfolio companies.   Any warrants we receive with our initial debt securities will require us to pay an additional cost to exercise, and thus, if our portfolio companies appreciate in value, we may be able to realize additional investment return in the form of capital gains from the exercise of these warrants.  Any warrants associated with our initial investments will typically be detachable, which will allow us to receive repayment of our principal while retaining our equity interests in the portfolio companies.

We also intend to structure our initial debt investments to give us the option to convert our debt into common stock at a pre-determined conversion price, subject to adjustment for certain events including performance events.  Our conversion prices will generally be determined by reference to an agreed upon discount from the common stock price in our follow-on investment.  If we complete the follow-on investment, the convertible debt instrument will be automatically converted into common stock upon the filing of the registration statement.  Since our convertible debt investments will have elements of both debt and equity instruments, we believe that we will be able to realize fixed returns in the form of interest payments associated with debt until the follow-on investment is completed, while maintaining an opportunity to participate in the capital appreciation of the portfolio company, if any, through the conversion of debt to equity at the time of the follow-on investment.  In the event we do not complete a follow-on investment with a portfolio company, or if a portfolio company abandons the going public process, we will likely take steps to exit the investment.

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In many cases, we will also obtain registration rights in connection with the common stock underlying the warrants and convertible debt investments associated with our initial investment.  We may also include exercise and conversion price adjustments based on certain events.  We will seek to achieve additional investment return in the form of capital gains from the appreciation and sale of the common stock underlying the warrants and convertible debt associated with our initial investment.

Our initial investments will also typically contain a “put” option which will allow us to require the company, at any time prior to maturity, to redeem the loan at a price of 120% of the outstanding principal amount plus accrued and unpaid interest. We may exercise this “put” option in the event the portfolio company either: (i) completes a debt or equity financing with a third party, or (ii) fails to complete, or elects to abandon, the going public process.  We believe that this “put” option will allow us to attempt to manage our risk.  However, we can provide no assurance that the micro-cap companies in which we intend to invest will have sufficient resources to satisfy their payment obligation to us in the event we exercise our “put” option, and we may still lose a substantial portion or all of our initial investment notwithstanding our “put” option.

As a condition of our initial investment, we will generally require the portfolio company to engage a third party consultant recommended by our investment adviser and experienced in the going public process to actively participate in and lead the process.

We intend to act as the lead investor in all of our follow-on investments. To the extent our portfolio companies require more financing than we desire to invest, we may seek non-affiliated co-investors to participate in the financing of our portfolio companies.  In addition, we expect our portfolio companies may engage one or more non-affiliated placement agents with whom our investment adviser has had prior experience to assist in capital raising from such non-affiliated co-investors.

Going public process.  The going public process for our portfolio companies – though the filing of a registration statement under the Securities Act or the Exchange Act – is a critical step in our overall investment process.  We expect that this going public process will be implemented during the three to twelve month period following our initial investment, and we will require that it be completed, and the registration statement be ready for filing with the SEC, at the time we make our follow-on investment.  Our investment adviser’s senior investment professionals and certain third party consultants, who we will require be retained by our portfolio companies, will assist our portfolio companies in this going public process, which will generally commence after our initial investment.  We will require that one of our investment adviser’s recommended third party consultants be engaged by the portfolio company to actively participate and lead the going public process.  The third party consultants will assist our portfolio companies by organizing and coordinating the due diligence process for the portfolio companies, providing information to the portfolio companies’ senior management on the regulatory framework and compliance requirements of public companies under the Securities Act and the Exchange Act,  reviewing and analyzing the portfolio companies’ existing corporate governance, financial documents and structure, material contracts and business and financial plans, and assisting in the preparation of the portfolios companies’ registration statements and any other documents related to the going public process.  We believe that these third party consultants are experienced in the going public process, SEC compliance matters, public company reporting, and legal and financial matters associated with micro-cap companies.

We do not intend to close on a follow-on investment in a portfolio company unless and until the portfolio company satisfactorily completes the going public process and the registration statement is in final form acceptable to us and ready for filing with the SEC.  The registration statement may take the form of a primary offering or resale registration statement filed by the portfolio company under the Securities Act coupled with a concurrent registration of the portfolio company’s common stock under the Exchange Act, or alternatively a stand-alone registration statement registering the common stock of a portfolio company under the Exchange Act without a concurrent registered offering under the Securities Act.  We believe that there may be situations where a portfolio company in which we made an initial investment will not be capable of completing the going public process to our satisfaction.  In these cases, we will not provide any follow-on investment and will attempt to take steps to promptly obtain repayment of our investments in accordance with the terms of our convertible debt instruments.

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For portfolio companies who receive follow-on investment financing from us, we believe the going public process we have required as condition thereto will help prepare the portfolio company to comply with the public company regulatory environment and, at the same time, better position it to best create value from its growth initiatives.

Our going public process through the filing of a registration statement under the Securities Act or the Exchange Act will generally include the following steps which will be coordinated and led by the third party consultant:

 
·
Verify business and financial disclosures. Assure accuracy of public disclosures regarding the portfolio company’s business, operations, management, products and services, markets, finances, major contracts, tangible and intangible properties, business strategies, related party transactions, compensation arrangements and stock ownership.  Organize all supporting documentation, diligence materials and corporate information.

 
·
Review and preparation of business plans and financial models. Thorough review of historical and prospective financial information, accounting practices and financial models, review investment and loan documents, challenge management’s financial assumptions, and review revenue and earnings quality.  Assist in preparation of business history and plans, and management discussion and analysis.

 
·
Coordinate audit and legal processes. Work directly with the portfolio company’s internal staff and their audit and legal teams to prepare, present, review and complete audited financial statements, footnote disclosures and supporting analysis and documentation.  Assist in internal control compliance matters.

 
·
Assess and make recommendations on financial management team. Continue assessment of chief financial officer’s capabilities to lead and manage financial reporting and accounting functions for a public company.  Make recommendations for additional hires, if necessary.  Before our follow-on investment is made, a portfolio company must have in place, or ready for hire, a qualified chief financial officer with a strong background in SEC reporting, Sarbanes-Oxley Act compliance, GAAP accounting and internal controls management, and investor relations.

 
·
Composition of Board of Directors. Work directly with the portfolio company’s management to identify the ideal composition of the Board of Directors and to assess the skills and experience they should be seeking from new Board members including the financial expert.  The majority of the Board must consist of independent directors and the proper Board committee charters must be adopted and the committees selected, all in compliance with the initial quotation requirements of the Nasdaq Capital Market.

 
·
Preparation and filing of registration statements. Work directly with the portfolio company’s internal staff and their audit and legal teams to prepare and complete appropriate documentation for filing with the SEC under the Exchange Act, as applicable.  Before our follow-on investment is made, the registration statement must be in final form ready for filing with the SEC at the closing of the follow-on investment.

 
·
Obtain trading symbol. Assist selected market maker in the preparation of documents to be filed with the Financial Industry Regulatory Authority (“FINRA”) to allow for submission of initial price quotation on the OTC Bulletin Board, or assist the portfolio company, if it so qualifies, with its initial application for listing on the Nasdaq Capital Market. Obtain and organize required supporting documentation.

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Follow-on investments in the form of convertible preferred stock.  We do not intend to make a follow-on investment in a portfolio company unless and until the portfolio company satisfactorily completes the going public process and the registration statement is in final form acceptable to us and ready for filing with the SEC. We will generally make follow-on investments in a portfolio company through equity securities, principally convertible preferred stock.

Our convertible preferred stock investments will represent an equity ownership interest in a portfolio company.  Although we believe that such equity investments have historically generated higher average total returns than fixed-income securities over the long term, such equity investments also have experienced significantly more volatility in those returns and may under perform relative to fixed-income securities during certain periods. An adverse event, such as an unfavorable earnings report, may depress the value. Also, prices of equity securities are sensitive to general movements in the stock market and a drop in the stock market may depress the price of equity securities to which we have exposure. Equity prices fluctuate for several reasons including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting the issuer occur. In addition, equity prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase.

Our convertible preferred equity investments may pay fixed or adjustable rate dividends to us and will generally have a “preference” over common equity in the payment of dividends and the liquidation of a portfolio company's assets. This means that a portfolio company must pay dividends on preferred equity before paying any dividends on its common equity. In order to be payable, distributions on such preferred equity must be declared by the portfolio company's Board of Directors. Dividend payments on typical preferred equity is cumulative, meaning dividends will accumulate even if not declared by the Board of Directors or otherwise made payable. In such a case, all accumulated dividends must be paid before any dividend on the common equity can be paid. However, there is no assurance that any dividends will be paid by a portfolio company even in the case of cumulative preferred equity.

We intend to tailor the terms of our follow-on investments to the facts and circumstances of each transaction and prospective portfolio company, negotiating a structure that seeks to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its revenue and earnings growth.  We intend to include a cumulative preferred dividend feature in our convertible preferred stock instruments which will allow us to realize fixed returns in the form of a preferred dividend until conversion thereof.  The convertible preferred stock instrument also allows us to maintain an opportunity to participate in the capital appreciation of the portfolio company.  We intend to tailor the pricing of our follow-on investments, including the conversion price, such that we receive a reasonable discount to the risk-adjusted, public company comparable valuations.

In the near term, we expect that our follow-on investments in a portfolio company will typically range from $250,000 to $500,000 each.  However, we may increase this investment size to take advantage of opportunistic situations.  In addition, we expect this investment size to increase as the size of our capital base increases.

We intend to limit our investments in any one portfolio company to not more than 5% of our net assets; however, we may invest more than this threshold in certain opportunistic situations.  With an initial capital base of approximately $5 million, we intend to limit our investments in any one portfolio company to $500,000, or 10% of our net assets.  While this amount exceeds our target limit of 5% of net assets, we intend to be more selective during our initial investment period and take advantage of opportunistic situations at this higher level.

We also intend to limit our investments in any one portfolio company so that our equity interest in the portfolio company is not more than 9.9%, although we may exceed this threshold in certain opportunistic situations.

Our follow-on investments will typically be non-control investments (even in cases where we elect to convert our initial investment into common stock).  In some circumstances, we may take a control position in a portfolio company where we believe a unique opportunity exists for such an investment.  Our non-control equity investments will typically not provide us with Board seats or Board observation rights.

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We may also receive warrants in connection with our follow-on investments.  We will also generally seek performance features for any warrants that we may receive. We will seek to structure these performance features to allow our relative equity position in a portfolio company to increase in the event the portfolio company fails to meet certain specified performance targets.

We may  also seek to obtain registration rights in connection with all of our equity investments, which may include demand and “piggyback” registration rights.

We intend to act as the lead investor in all of our follow-on investments. To the extent our portfolio companies require more financing than we desire to invest, we may seek non-affiliated co-investors to participate in the financing of our portfolio companies.  In certain cases, our co-investors will be required to agree to certain resale conditions in order to mitigate the risk of any competing aftermarket sales among the holders of follow-on investment securities.

Co-investments.  We believe that our investment adviser’s network of high net worth investors, institutional investors and investment bankers, both from prior transactions and who are known to be focused on the type of micro-cap companies we intend to target, will provide a source of capital for portfolio companies where we will seek co-investors to complement our investment.  In all cases, we intend to act as lead investor in all of our follow-on investments. We expect our portfolio companies may engage one or more placement agents with whom our investment adviser has had prior experience to assist in capital raising from non-affiliated co-investors.

Total return objective with focus on capital appreciation. While we expect to generate interest and dividend income through our investments in convertible securities, our primary emphasis will be to attempt to generate capital gains through the sale of the common stock we receive upon conversion of the convertible securities of micro-cap companies which are expected to become public reporting companies through the filing of a registration statement at the time we make our follow-on investment.  Once this registration statement becomes effective and all comments from the SEC are cleared, we expect our portfolio companies’ common stock to typically be initially quoted on the OTC Bulletin Board, depending upon satisfaction of listing requirements.  However, for those portfolio companies that meet the initial listing requirements of the Nasdaq Capital Market following the completion of the registration process, such companies may seek an initial listing on the Nasdaq Capital Market.  We do not expect the securities in our publicly traded portfolio companies to initially have an active secondary trading market and, as such, these securities will be illiquid until an active market develops. We believe that typically this liquidity will develop in conjunction with a Nasdaq Capital Market listing, which may not occur until twelve to eighteen months after our follow-on investment is made, if at all.  However, there can be no assurance that our portfolio companies will obtain a Nasdaq Capital Market listing or, even if a listing is obtained, that an active trading market will ever develop in the securities of our publicly traded portfolio companies. The lack of such liquidity could impair the market price of such portfolio companies, and ultimately the return we may receive from our equity investment.

Other Investments

Currently, we do not intend to make investments, even to the extent permitted by the 1940 Act, in the following types of securities: (i) asset-backed securities, (ii) collateralized debt obligations, (iii) high yield bonds, or (iv) distressed debt.

However, we may invest, consistent with the requirements of the 1940 Act, in securities of public companies that are already traded on the OTC Bulletin Board or an exchange, in securities of private companies that may not be based in the United States, or in securities we acquire in the secondary market and, in analyzing such investments, we will employ the same analytical process as we use for our primary investments in micro-cap companies.

Changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities.  If legislation is enacted, new rules are adopted, or existing rules are materially amended, we may change our investment strategy. Such changes could result in material differences to the strategies and plans set forth in this prospectus and may result in our investment focus shifting.

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For example, effective July 21, 2008, the SEC changed the criteria used to determine if a company is an Eligible Portfolio Company under the 1940 Act by permitting qualifying investments to be made by business development companies in publicly-traded companies, whether or not they are listed on an exchange, as long as their market capitalizations are no greater than $250 million.  Due to our public markets approach, we believe this change may be beneficial to us and provide us greater latitude to implement our investment strategy.

Until the net proceeds of this offering are invested in accordance with our investment strategy, and (i) during periods in which we determine that we are temporarily unable to follow our investment strategy or that it is impractical to do so, or (ii) pending investment of proceeds received in connection with the sale of a portfolio security or the issuance of additional securities or borrowing money by us, all or any portion of our assets may be invested in cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less from the date of our investment.  Our determination that we are temporarily unable to follow our investment strategy or that it is impractical to do so will generally occur only in situations in which a market disruption event has occurred and where trading in the securities selected through application of our investment strategy is extremely limited or absent. In such a case, our shares may be adversely affected and we may be unable to pursue or achieve our investment objective.

Ongoing Relationships with Portfolio Companies
 
Strategic value added model.  As an integral part of our initial investment, we intend to partner with and help prepare our portfolio companies to become public and meet the governance and eligibility requirements of a Nasdaq Capital Market listing.  We intend for our interests to be aligned with our portfolio companies’ management teams to maximize stockholder value through an eventual listing on the Nasdaq Capital Market, if possible.

We expect to offer and provide managerial assistance to our portfolio companies, in particular, in the completion of the going public process and the design of an overall public markets strategy.  We intend to fully utilize our investment adviser’s expertise in public markets strategies including the design of comprehensive aftermarket support programs for our portfolio companies.  We also intend to leverage our investment adviser’s expertise and access third party professionals and consultants to develop and execute a disciplined “migration plan” to upgrade our portfolio companies from the OTC Bulletin Board to the Nasdaq Capital Market, which we believe will typically occur twelve to eighteen months after our follow-on investment is made.

We believe this public markets strategy will provide us with an expected portfolio company investment horizon of two to three years via an orderly public market exit, which we believe represents a substantially shorter investment horizon when compared to traditional private equity and venture capital investments.  However, we can provide no assurance that the portfolio companies in which we may invest will be successful in completing the SEC registration process to become a public company, or if they do so, that they will be able to obtain a subsequent listing on either the OTC Bulletin Board or the Nasdaq Capital Market.  Any failure to do so could substantially reduce or eliminate the market premium associated with being a publicly traded company.

Monitoring.  We intend to monitor the financial trends of each portfolio company to assess the appropriate course of action for each company and to evaluate overall portfolio quality. In certain limited cases, we may also control one or more of our portfolio companies.
 
We intend to utilize several methods for evaluating and monitoring the performance of our investments, including but not limited to, the following:

 
·
assessment of business development success, including product development, profitability and the portfolio company’s overall adherence to its business plan;

 
·
periodic and regular contact with portfolio company management to discuss financial position, requirements and accomplishments;
 
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·
periodic formal update interviews with portfolio company management; and

 
·
review of monthly and quarterly financial statements and financial projections for portfolio companies.
 
As a result of active monitoring and communication, we believe that our portfolio management process will emphasize value creation throughout the life cycle of a given investment. Paramount to these efforts will be the ongoing emphasis on our public markets strategy.  By doing so, we believe that our value to the portfolio company will go beyond the capital we have invested, and will extend to the overall goals of each portfolio company, which we believe will benefit the return on investment we realize in our portfolio companies.

Competition
 
We compete for investments with a number of business development companies and other investment funds (including private equity funds and venture capital funds), reverse merger and special purpose acquisition company (“SPACs”) sponsors, investment bankers that underwrite initial public offerings, hedge funds that invest in PIPEs, traditional financial services companies such as commercial banks, and other sources of financing.  Many of these entities have greater financial and managerial resources than we do. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act will impose on us as a business development company. We believe we compete with these entities primarily on the basis of our willingness to make smaller, non-controlling investments, our public markets approach, the experience and contacts of our investment professionals within our targeted industries, our responsive and efficient investment analysis and decision-making processes, and the investment terms that we offer. We do not seek to compete primarily on the deal terms we offer to potential portfolio companies. For additional information concerning the competitive risks we face, see “Risk Factors — Risks Relating to Our Business and Structure — We will operate in a highly competitive market for investment opportunities.”
 
Employees
 
Currently, we do not have any employees.  The management of our investment portfolio will be the responsibility of our investment adviser, Keating Investments, and its Investment Committee, which currently consists of Timothy J. Keating, our Chairman of the Board and Chief Executive Officer, Ranjit P. Mankekar, our Chief Financial Officer, Treasurer and a member of our Board of Directors, and Kyle L. Rogers, our Chief Operating Officer and Secretary.  Keating Investments’ Investment Committee must unanimously approve each new investment that we make. The members of Investment Committee will not be employed by us, and will receive no compensation from us in connection with their portfolio management activities. However, Messrs. Keating, Mankekar and Rogers, through their financial interests in, or management positions with, Keating Investments, will be entitled to a portion of any investment advisory fees paid by us to Keating Investments pursuant to the Investment Advisory and Administrative Services Agreement.

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DETERMINATION OF NET ASSET VALUE
 
We will determine the net asset value per share of our common stock quarterly. The net asset value per share is equal to the value of our total assets minus liabilities and any preferred stock outstanding divided by the total number of shares of common stock outstanding. At present, we do not have any preferred stock outstanding.
 
Value, as defined in Section 2(a)(41) of the 1940 Act, is (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 our Board of Directors.
 
In September 2006, the Financial Accounting Standards Board issued SFAS 157, “Fair Value Measurements,” which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. 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. SFAS 157 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
 
In addition, on October 10, 2008, FASB Staff Position No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,” or FSP 157-3, was issued. FSP 157-3 provides an illustrative example of how to determine the fair value of a financial asset in an inactive market, but does not change the fair value measurement principles set forth in SFAS 157.
 
Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. We are required to specifically value each individual investment on a quarterly basis.
 
We will determine the fair value of our debt investments by reference to the market in which we source and execute these debt investments. Market participants generally have a strategic premise for these investments, and anticipate the sale of the company, recapitalization or initial public offering as the realization/liquidity event. The fair value, or exit price, for a debt instrument would be the hypothetical price that a market participant would pay for the instrument, using a set of assumptions that are aligned with the criteria that we would use in originating a debt investment in this market, including credit quality, interest rate, maturity date, conversion ratio and overall yield, and considering the prevailing returns available in this market. In general, we consider enterprise value an important element in the determination of fair value, because it represents a metric that may support the recorded value, or which, conversely, would indicate if a credit-related markdown is appropriate. We also consider the specific covenants and provisions of each investment which may enable us to preserve or improve the value of the investment. In addition, the trends of the portfolio company’s basic financial metrics from the time of the original investment until the measurement date are also analyzed; material deterioration of these metrics may indicate that a discount should be applied to the debt investment, or a premium may be warranted in the event that metrics improve substantially and the return is higher than required for such a profile under current market conditions.
 
The fair value of our equity investments for which market quotations are not readily available will be determined based on various factors, including the enterprise value remaining for equity holders after the repayment of the portfolio company’s debt and other preference capital, and other pertinent factors such as recent offers to purchase a portfolio company, recent transactions involving the purchase or sale of the portfolio company’s equity securities, or other liquidity events. The determined equity values will generally be discounted when we have a minority position, restrictions on resale, specific concerns about the receptivity of the capital markets to a specific company at a certain time, or other factors.  Equity investments for which market quotations are readily available will generally be valued at the most recently available closing market price.
 
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Enterprise value means the entire value of the company to a potential buyer, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. There is no one methodology to determine enterprise value and, in fact, for any one portfolio company, enterprise value is best expressed as a range of fair values, from which we derive a single estimate of enterprise value. To determine the enterprise value of a portfolio company, we will analyze its historical and projected financial results, as well as the nature and value of collateral, if any. We will also use industry valuation benchmarks and public market comparables.  We will also consider other events, including private mergers and acquisitions, a purchase transaction, public offering or subsequent debt or equity sale or restructuring, and include these events in the enterprise valuation process. We will generally require portfolio companies to provide annual audited and quarterly unaudited financial statements, as well as annual projections for the upcoming fiscal year.
 
Our Board of Directors determines the value of our investment portfolio each quarter. In connection with that determination, our investment adviser’s senior investment professionals will prepare portfolio company valuations using the most recent portfolio company financial statements and forecasts, as well as relevant market quotations, where applicable.  We expect to engage third-party valuation firms to provide assistance in valuing our equity investments for which no market quotations are readily available, although the Board of Directors ultimately determines the appropriate valuation of each such investment.
 
Valuation Process

 The following is a description of the steps we will take each quarter to determine the value of our portfolio investments. Investments for which market quotations are readily available will be recorded in our financial statements at such market quotations. With respect to investments for which market quotations are not readily available, our Board of Directors will undertake a multi-step valuation process each quarter, as described below:
 
 
• 
Our quarterly valuation process begins with each portfolio company or investment being initially valued by Keating Investments’ senior investment professionals;
     
 
• 
A nationally recognized third-party valuation firm engaged by our Board of Directors will review these preliminary valuations;
     
 
• 
Our Valuation Committee will review the preliminary valuations and our investment adviser and nationally recognized third-party valuation firm will respond and supplement the preliminary valuation to reflect any comments provided by the Valuation Committee; and
     
 
• 
Our Board of Directors will discuss valuations and will determine, in good faith, the fair value of each investment in our portfolio for which market quotations are not readily available based on the input of our investment adviser, a nationally recognized third-party valuation firm, and our Valuation Committee.
 
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Determinations in Connection With Offerings
 
After meeting the minimum offering requirement, we will then sell our shares on a continuous basis at a price of $10.00; however, to the extent that our net asset value increases, we will sell at a price necessary to ensure that shares are not sold at a price, after deduction of selling commissions and dealer manager fees, that is below net asset value. To the extent that the net asset value per share increases subsequent to the last monthly closing, the price per share may increase. Therefore, persons who tender subscriptions for shares of our common stock in this offering must submit subscriptions for a certain dollar amount, rather than a number of shares of common stock and, as a result, may receive fractional shares of our common stock. In connection with each monthly closing on the sale of shares of our common stock offered pursuant to this prospectus on a continuous basis, the Board of Directors or a committee thereof is required within 48 hours of the time that each closing and sale is made to make the determination that we are not selling shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, is below our then current net asset value. The Board of Directors will consider the following factors, among others, in making such determination:
 
 
the net asset value of our common stock disclosed in the most recent periodic report we filed with the SEC;
 
 
our management’s assessment of whether any material change in the net asset value has occurred (including through the realization of net gains on the sale of our portfolio investments) from the period beginning on the date of the most recently disclosed net asset value to the period ending two days prior to the date of the closing on and sale of our common stock; and
 
 
the magnitude of the difference between the net asset value disclosed in the most recent periodic report we filed with the SEC and our management’s assessment of any material change in the net asset value since the date of the most recently disclosed net asset value, and the offering price of the shares of our common stock at the date of closing.
 
Importantly, this determination does not require that we calculate net asset value in connection with each closing and sale of shares of our common stock, but instead it involves the determination by the Board of Directors or a committee thereof that we are not selling shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, is below the then current net asset value at the time at which the closing and sale is made.
 
Moreover, to the extent that there is even a remote possibility that we may (i) issue shares of our common stock at a price which, after deducting selling commissions and dealer manager fees, is below the then current net asset value of our common stock at the time at which the closing and sale is made or (ii) trigger the undertaking (which we provided to the SEC in the registration statement to which this prospectus is a part) to suspend the offering of shares of our common stock pursuant to this prospectus if the net asset value fluctuates by certain amounts in certain circumstances until the prospectus is amended, the Board of Directors or a committee thereof will elect, in the case of clause (i) above, either to postpone the closing until such time that there is no longer the possibility of the occurrence of such event or to undertake to determine net asset value within two days prior to any such sale to ensure that such sale will not be at a price which, after deducting selling commissions and dealer manager fees, is below our then current net asset value, and, in the case of clause (ii) above, to comply with such undertaking or to undertake to determine net asset value to ensure that such undertaking has not been triggered.
 
These processes and procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this section and these records will be maintained with other records we are required to maintain under the 1940 Act. Promptly following any adjustment to the offering price per share of our common stock offered pursuant to this prospectus, we will update this prospectus by filing a prospectus supplement with the SEC. We will also make updated information available via our website.

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MANAGEMENT
 
Our Board of Directors will oversee our management. The Board of Directors currently consists of five members, three of whom are not “interested persons” of Keating Capital as defined in Section 2(a)(19) of the 1940 Act. We refer to these individuals as our independent directors. Our Board of Directors elects our officers, who will serve at the discretion of the Board of Directors. The responsibilities of each director will include, among other things, the oversight of our investment activity, the quarterly valuation of our assets, and oversight of our financing arrangements. The Board of Directors will maintain an Audit Committee and a Valuation Committee, and may establish additional committees in the future. Unless approved by our Board of Directors, we will not permit our executive officers or directors to serve as officers, directors or principals of entities that operate in the same or related line of business as we do, other than investment funds, if any,  managed by our investment adviser and its affiliates.
 
Board of Directors and Executive Officers
 
Under our charter, our directors are divided into three classes. Each class of directors will hold office for a three-year term. However, the initial members of the three classes have initial terms of one, two and three years, respectively. At each annual meeting of our stockholders, the successors to the class of directors whose terms expire at such meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Each director will hold office for the term to which he is elected and until his successor is duly elected and qualifies.
 
Directors
 
Information regarding the Board of Directors is as follows:
 
 
 
Name
 
Age
 
Positions Held
 
Director Since
 
Expiration of Term
 
Independent Directors:
               
 
J. Taylor Simonton (1)(2)
 
64
 
Director
 
2008
 
2010
 
Anthony K. McDonald (1)(2)
 
50
 
Director
 
2008
 
2010
 
Andrew S. Miller (1)
 
52
 
Director
 
2008
 
2009
                   
 
Interested Directors:
 
               
 
Timothy J. Keating
 
45
 
President, Chief Executive Officer and Chairman of the Board of  Directors
 
2008
 
2011
 
Ranjit P. Mankekar (2)
 
32
 
Chief Financial Officer, Treasurer and Director
 
2008
 
2011

(1)        Member of the Audit Committee

(2)        Member of the Valuation Committee

The address for each director is c/o Keating Capital, Inc., 5251 DTC Parkway, Suite 1000, Greenwood Village, Colorado 80111.

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Executive Officers who are not Directors

Information regarding our executive officers who are not directors is as follows:

 
Name
 
Age
 
Positions Held
 
Kyle L. Rogers
 
32
 
Chief Operating Officer and Secretary
           
 
Brett W. Green
 
33
 
Chief Compliance Officer
 
The address for each executive officer who is not a director is c/o Keating Capital, Inc., 5251 DTC Parkway, Suite 1000, Greenwood Village, Colorado 80111.
 
Biographical Information
 
Independent Directors
 
J. Taylor Simonton.   Mr. Simonton spent 35 years at PricewaterhouseCoopers LLP, including 23 years as an audit partner in the firm’s Accounting and Business Advisory Services practice group, before retiring in 2001.  Mr. Simonton was a partner for seven years in PricewaterhouseCoopers’ National Office Risk & Quality Group that handles the firm’s auditing and accounting standards, SEC, corporate governance, risk management and quality matters.   He has extensive experience in business consulting, auditing services, initial public offerings and SEC filings.  Mr. Simonton is currently a director and the chair of the Audit Committee of Red Robin Gourmet Burgers, Inc., a Nasdaq Global Select market company that operates a casual dining restaurant chain serving high quality gourmet burgers, having been appointed to these positions in September 2005 and October 2005, respectively.    In October 2008, he was elected an independent director and chair of the Audit Committee of Zynex, Inc., an OTC Bulletin Board traded company that engineers, manufactures, markets and sells medical devices for the electrotherapy and stroke and spinal cord injury rehabilitation markets.  From January 2003 to February 2007, he also served a director and the chair of the Audit Committee of Fischer Imaging Corporation, a public company that designed, manufactured and marketed medical imaging systems.  Mr. Simonton received a B.S. in Accounting from the University of Tennessee, is a Certified Public Accountant and serves as the President of the Colorado Chapter of the National Association of Corporate Directors.  
 
Anthony K. McDonald.  Mr. McDonald is the President of Marz Capital Corporation, a specialty finance firm that invests and advises in lower middle market corporate acquisitions.  Since September 2008, Mr. McDonald also has served as the Vice President of Sales for Coolerado Corporation, a clean technology company that developed and produces an efficient air conditioning system.  From 2002 to 2007 Mr. McDonald was Vice-President of Corporate Acquisitions for Private Capital Resource Group, Inc. and its predecessor firms, a private investment firm that acquired corporations across the United States. From 1998 to 2001 he was Managing Director at Republic Financial Corporation, a merchant banking and private investment firm in Denver, Colorado, where he managed the firm’s one billion dollar portfolio of operating businesses and assets in manufacturing, power generation and distressed assets industries.  Mr. McDonald also was a Senior Consultant with KPMG Consulting where he advised national and international banks and financial services firms in KPMG’s Financial Services Consulting Practice.  Mr. McDonald earned a B.S. degree in Engineering and Economics from the U.S. Military Academy at West Point, New York (1982) and an M.B.A. degree from the Harvard Business School (1989). His military service with the U.S. Army includes serving as an analyst with Military Intelligence and as an officer in the 10th U.S. Cavalry.
 
Andrew S. Miller.  Mr. Miller is the founder and currently the Manager of Rapid Funding, LLC, a commercial and residential hard money lender, which began business in 1998.  Since its inception Rapid Funding has loaned to projects including land developments for single family homes, shopping centers, office buildings and construction loans on condominium buildings.  Mr. Miller also is the co-founder and currently the Managing Member of Realty Funding Group, a mortgage and finance company which has provided financing for commercial real estate projects across the United States, which began business in 1994.  Mr. Miller is co-founder and currently the President and Chief Operating Officer of SevoMiller, Inc., a full service real estate company specializing in purchasing and developing commercial real estate, which began business in March 1990.  To date, SevoMiller, Inc. has purchased apartment units, retail space and office projects across the United States.  From 1980 to 1989, Mr. Miller co-founded and served as Vice President of Loup-Miller Development Company, a real estate company which designed and developed numerous shopping centers, apartment communities, office buildings and warehouses.  Mr. Miller is a 1978 graduate of the University of Denver with a B.S. in Accounting.
 
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           Interested Directors
 
Timothy J. Keating.  Mr. Keating is the founder, President, managing member and majority owner of Keating Investments, LLC, an investment adviser registered under the Advisers Act, since it was founded in 1997.  Mr. Keating has also served as the President of Andrews Securities, LLC, formerly known as Keating Securities, LLC, from August 1999 to August 2008.  Andrews Securities, LLC was formerly a wholly owned subsidiary of Keating Investments and is a FINRA registered broker-dealer.  Prior to founding Keating Investments, Mr. Keating was a proprietary arbitrage trader and also head of the European Equity Trading Department at Bear Stearns International Limited (London) from 1994 to 1997.  From 1990 to 1994, Mr. Keating founded and ran the European Equity Derivative Products Department for Nomura International PLC in London.  Mr. Keating began his career at Kidder, Peabody & Co., Inc. where he was active in the Financial Futures Department in both New York and London.  Mr. Keating is a 1985 cum laude graduate of Harvard College with an A.B. in economics. Mr. Keating is a registered investment adviser representative of Keating Investments.
 
Ranjit P. Mankekar.  Mr. Mankekar has been the Chief Financial Officer of Keating Investments, LLC since July 2006.  In January 2009, Mr. Mankekar became a member of Keating Investments.  Mr. Mankekar has also served as the Controller of Andrews Securities, LLC, formerly a wholly owned subsidiary of Keating Investments and a FINRA registered broker-dealer, from January 2007 to August 2008.  Prior to joining Keating Investments, Mr. Mankekar worked with PricewaterhouseCoopers LLP from September 1999 to June 2006, where had attained the position of audit and assurance services manager.  Mr. Mankekar was a recipient of the Gold Medal for earning the highest score in the State of Colorado on the May 1999 Certified Public Accounting examination.  Mr. Mankekar is a 1999 summa cum laude graduate of the University of Colorado with an M.S. in Accounting and a B.S. in Business Administration. Mr. Mankekar is a registered investment adviser representative of Keating Investments.
 
Executive Officers who are not Directors
 
Kyle L. Rogers.  Mr. Rogers has been the Chief Operating Officer of Keating Investments, LLC since October 2001. In January 2006, Mr. Rogers became a member of Keating Investments.  Mr. Rogers also served as the Chief Compliance Officer of Keating Investments and Andrews Securities, LLC, formerly a wholly owned subsidiary of Keating Investments and a FINRA registered broker-dealer, from January 2004 until January 2007.  Prior to joining Keating Investments, Mr. Rogers was a financial analyst in the Private Wealth Management and Fixed Income Currency & Commodities divisions at Goldman Sachs from July 1999 to September 2001.  Mr. Rogers is a CFA Charter holder.  Mr. Rogers is a 1999 graduate of Dartmouth College with a B.A. degree.  Mr. Rogers is currently a registered investment adviser representative of Keating Investments.
 
Brett W. Green.  Mr. Green has been the Chief Compliance Officer of Keating Investments, LLC since November 2006.  Mr. Green also served as the Chief Compliance Officer of Andrews Securities, LLC, formerly a wholly owned subsidiary of Keating Investments and a FINRA registered broker-dealer, from March 2007 to October 2008.  Prior to joining Keating Investments, Mr. Green worked for Janus Mutual Funds where he managed and trained registered representatives in evaluating investors’ financial goals and trading their funds.  Mr. Green is a 1998 graduate of Vanderbilt University with a B.A. degree and a 2006 graduate of the University of Denver Sturm College of Law.  He was admitted to the Colorado State Bar in 2006.
 
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Committees of the Board of Directors
 
Our Board of Directors currently has the following committees:
 
Audit Committee
 
The Audit Committee will operate pursuant to a charter approved by our Board of Directors.  The charter sets forth the responsibilities of the Audit Committee. The Audit Committee’s responsibilities will include selecting the independent registered public accounting firm for Keating Capital, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of Keating Capital’s financial statements, pre-approving the fees for services performed, reviewing with the independent registered public accounting firm the adequacy of internal control systems, reviewing Keating Capital’s annual and quarterly financial statements and periodic filings, and receiving Keating Capital’s audit reports and financial statements. Mr. Simonton serves as Chairman of the Audit Committee. Our Board of Directors has determined that Mr. Simonton is an “Audit Committee financial expert” as that term is defined under Item 407 of Regulation S-K, as promulgated under the Exchange Act.  Mr. Simonton meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act and, in addition, is not an “interested person” of Keating Capital as that term is defined in Section 2(a)(19) of the 1940 Act.  The Audit Committee met two times during the 2008 fiscal year.
 
Valuation Committee
 
The Valuation Committee will operate pursuant to a charter approved by our Board of Directors. The Valuation Committee will establish guidelines and make recommendations to our Board of Directors regarding the valuation of our investments. The Valuation Committee will be responsible for aiding our Board of Directors in determining the fair value of debt and equity securities that are not publicly traded or for which current market quotations are not readily available. The Board of Directors and Valuation Committee will utilize the services of a third-party valuation firm to help determine the fair value of these securities. Mr. Simonton serves as Chairman of the Valuation Committee.  The Valuation Committee did not meet during the 2008 fiscal year.
 
Code of Ethics
 
A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:
 
 
• 
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
 
 
full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by us;
 
 
compliance with applicable governmental laws, rules and regulations;
 
 
the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
 
 
accountability for adherence to the code.
 
Our Board of Directors has adopted a corporate code of ethics that applies to our executive officers.
 
Indemnification
 
Under the Maryland General Corporation Law and pursuant to our certificate of incorporation and bylaws, we may indemnify our officers and directors for various expenses and damages resulting from their acting in these capacities.  Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our officers and directors pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
 
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We have entered into indemnification agreements with our directors.  The indemnification agreements are intended to provide our directors the maximum indemnification permitted under the Maryland General Corporation Law and the 1940 Act. Each indemnification agreement is expected to provide that we shall indemnify the director who is a party to the agreement (an “Indemnitee”), including the advancement of legal expenses, if, by reason of his corporate status, the Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed proceeding.  The indemnification agreements also require us to procure liability insurance coverage for our officers and directors.
 
Compensation of Executive Officers
 
None of our executive officers will receive direct compensation from us.  Messrs. Keating, Mankekar and Rogers, through their ownership interest in, or management positions with, Keating Investments, are entitled to a portion of any profits earned by Keating Investments, which includes any fees payable to Keating Investments under the terms of our Investment Advisory and Administrative Services Agreement, less expenses incurred by Keating Investments in performing its services under our Investment Advisory and Administrative Services Agreement. Keating Investments may pay additional salaries, bonuses, and individual performance awards and/or individual performance bonuses to Messrs. Keating, Mankekar and Rogers in addition to their ownership interest, which may be reduced proportionately to reflect such payments.
 
Mr. Mankekar will serve as our Chief Financial Officer and Mr. Green will serve as our Chief Compliance Officer.  The compensation of our Chief Financial Officer and our Chief Compliance Officer will be paid by Keating Investments, subject to reimbursement by us of an allocable portion of such compensation for services rendered by such persons to us.
 
Compensation of Independent Directors
 
We plan to pay our independent directors an annual fee of $18,000, payable quarterly in advance. Our independent directors also receive a fee of $2,000 for any regular or special meeting attended in person in excess of four meetings in any year.  The meeting fees for the first four meetings of a year are included within the annual retainer fee paid to the directors. Each independent director will also receive $500 for each telephonic meeting in which the director participated.  We also pay our lead independent director, as designated from time to time by our Board of Directors, an additional annual fee of $5,000, payable quarterly in advance.
 
Each independent member of the Audit Committee (including the chair) will receive an annual committee fee of $8,000 for serving on the committee, payable quarterly in advance.  Each independent director will also receive a fee of $500 for any regular or special meeting of the Audit Committee attended in person, for any meeting in excess of four meetings in any year. The meeting fees for the first four meetings of a year are included within the annual committee fee paid to the directors. Each independent director will also receive $250 for each telephonic meeting of the Audit Committee in which the director participated.  We pay our independent director who serves as the chair of the Audit Committee an additional annual fee of $10,000, payable quarterly in advance.
 
Each independent member of the Valuation Committee (including the chair) will receive an annual committee fee of $4,000 for serving on the committee, payable quarterly in advance.  Each independent director will also receive a fee of $1,000 for any regular or special meeting of the Valuation Committee attended in person, for any meeting in excess of four meetings in any year. The meeting fees for the first four meetings of a year are included within the annual committee fee paid to the directors. Each independent director will also receive $250 for each telephonic meeting of the Valuation Committee in which the director participated.
 
We reimburse directors for out-of-pocket expenses incurred in attending Board and committee meetings and undertaking certain matters on our behalf.
 
Interested directors do not receive separate fees for their services as directors.
 
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We may secure insurance on behalf of any person who is or was or has agreed to become a director or officer of the Company or is or was serving at our request as a director or officer of another enterprise for any liability arising out of his actions, regardless of whether the Maryland General Corporation Law would permit indemnification. We intend to obtain liability insurance for our officers and directors.
 
Employment Agreements
 
None of our executive officers or directors has employment agreements with us.  However, we have entered into the Investment Advisory and Administrative Services Agreement with Keating Investments, our external investment adviser.  Under the terms of the Investment Advisory and Administrative Services Agreement, Keating Investments will manage our day-to-day operations and provide us with investment advisory services. Keating Investments’ services under the Investment Advisory and Administrative Services Agreement may not be exclusive and it is free to furnish similar services to other entities so long as its services to us are not impaired.  We will pay Keating Investments a fee for its investment advisory services under the Investment Advisory and Administrative Services Agreement consisting of two components — a base management fee and an incentive fee. The cost of both the base management fee payable to Keating Investments and any incentive fees earned by Keating Investments will be paid by us and ultimately be borne by our common stockholders.
 
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PORTFOLIO MANAGEMENT
 
The management of our investment portfolio will be the responsibility of our investment adviser, Keating Investments, and its Investment Committee, which currently consists of Timothy J. Keating, our Chairman of the Board and Chief Executive Officer, Ranjit P. Mankekar, our Chief Financial Officer, Treasurer and a member of our Board of Directors, and Kyle L. Rogers, our Chief Operating Officer and Secretary.  For more information regarding the business experience of Messrs. Keating, Mankekar and Rogers, see “Management”
 
Keating Investments’ Investment Committee must unanimously approve each new investment that we make. The members of Keating Investments’ Investment Committee will not be employed by us, and will receive no compensation from us in connection with their portfolio management activities. However, Messrs. Keating, Mankekar and Rogers, through their ownership interest in, or management positions with, Keating Investments, will be entitled to a portion of any investment advisory fees paid by us to Keating Investments.
 
Investment personnel.  We expect Keating Investments’ investment personnel to initially consist of its senior investment professionals, including Messrs. Keating, Mankekar and Rogers.  In addition, Keating Investments’ investment professionals will initially include three portfolio company originators, one analyst and a compliance officer.  Keating Investments may also retain additional investment professionals in the future, based upon its needs.
 
Compensation. None of Keating Investments’ investment personnel receive any direct compensation from us in connection with the management of our portfolio. Messrs. Keating, Mankekar and Rogers, through their ownership interest in, or management positions with, Keating Investments, are entitled to a portion of any profits earned by Keating Investments, which includes any fees payable to Keating Investments under the terms of the Investment Advisory and Administrative Services Agreement, less expenses incurred by Keating Investments in performing its services under our Investment Advisory and Administrative Services Agreement. Keating Investments may pay additional salaries, bonuses, and individual performance awards and/or individual performance bonuses to Messrs. Keating, Mankekar and Rogers in addition to any ownership interests each of them may have, which may be reduced proportionately to reflect such payments. The compensation paid by Keating Investments to its other investment personnel may include: (i) annual base salary; (ii) annual cash bonus; (iii) portfolio-based performance award; and (iv) individual performance award and/or individual performance bonus.
 
The table below shows the dollar range of shares of common stock beneficially owned as of the date of this prospectus by each member of Keating Investments’ Investment Committee, whom we consider to be our portfolio managers.
 
Name of Portfolio Manager
 
Dollar Range of
Equity Securities
Beneficially
Owned(1)(2)(3)
 
Timothy J. Keating
  $ 500,001-$1,000,000  
Ranjit P. Mankekar
 
None
 
Kyle L. Rogers
  $ 10,001-$50,000  
              
_____________________
(1)
Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act.
   
(2)
The dollar range of equity securities beneficially owned by our directors is based on an assumed initial public offering price of $10.00 per share.
 
(3)
The dollar range of equity securities beneficially owned are: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000, or over $1,000,000.

 
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Management services.  Keating Investments is registered as an investment adviser under the Advisers Act, and will serve as our investment adviser. Subject to the overall supervision of our Board of Directors, Keating Investments will manage our day-to-day operations and provide us with investment advisory services. Under the terms of the Investment Advisory and Administrative Services Agreement, Keating Investments will:
 
     
 
• 
determine the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;
     
 
• 
determine which securities we will purchase, retain or sell;
     
 
• 
identify, evaluate and negotiate the structure of the investments we make; and
     
 
• 
close, monitor and service the investments we make.
 
Keating Investments’ services under the Investment Advisory and Administrative Services Agreement may not be exclusive and it is free to furnish similar services to other entities so long as its services to us are not impaired.
 
Management fees.  We will pay Keating Investments a fee for its investment advisory services under the Investment Advisory and Administrative Services Agreement consisting of two components - a base management fee and an incentive fee. The cost of both the base management fee payable to Keating Investments and any incentive fees earned by Keating Investments will ultimately be borne by our common stockholders.
 
The base management fee (the “Base Fee”) will be calculated at an annual rate of 2% of our gross assets, which includes any borrowings for investment purposes. We do not presently expect to use borrowed funds for the purpose of making portfolio investments.  For the period commencing from the final closing of the initial private placement, the Base Fee will be payable monthly in arrears, and will be calculated based on the value of our gross assets at the end of the most recently completed calendar quarter, and appropriately adjusted for any equity capital raises or repurchases during the current calendar quarter. The Base Fee for any partial month or quarter will be appropriately pro rated.
 
The incentive fee will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory and Administrative Services Agreement, as of the termination date) and will equal 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees.
 
The following table sets forth various examples of the calculation of our annual incentive fee based on different levels of realized and unrealized gains and losses over a period of years.  These calculations are based on the different assumptions set forth in the table:
 
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Examples of Annual Incentive Fee for Capital Gains* (all dollar amounts in millions)
 
Example 1
       
Year
Investment Description
Incentive Fee
Explanatory comments
       
1
Invested $5 in Company A stock and $10 in Company B stock.
$0
No incentive fee as there are no realized gains.
       
2
Sold Company A stock for $15 ($10 realized gain).  Fair value of Company B stock at $20 ($10 unrealized gain)
$2.0
Incentive fee equals 20% of $10 realized gains.  Unrealized gains do not affect calculation.
       
3
Fair value of Company B stock at $8 ($2 unrealized loss).