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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

 
Washington D.C. 20549
     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2005

or

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

Commission File Number 000-28405

MVC Capital, Inc.

(Formerly known as meVC Draper Fisher Jurvetson Fund I, inc.)

(Exact name of the registrant as specified in its charter)

     
DELAWARE
(State or other jurisdiction of
incorporation or organization) 		  94-3346760
(I.R.S. Employer
Identification No.)
     
287 Bowman Avenue
3rd Floor
Purchase, New York
(Address of principal
executive offices) 		 

10577
(Zip Code)

Registrant’s telephone number, including area code: (914) 701-0310

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

     
Title of each class
Common Stock 		  Name of each exchange on
which registered
New York Stock Exchange
     

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

As of March 10, 2005, there were 18,938,990 shares of Registrant’s common stock, $.01 par value (the “Shares”), outstanding.

 
 

 

MVC Capital, Inc.
(A Delaware Corporation)
Index

         
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    30  
    35  
 
        
       
 
        
    36  
 
        
SIGNATURE
     37  
 
        
Exhibits
     38  
 Certification
 Certification

 

Table of Contents

Part I. Consolidated Financial Information

Item 1. Consolidated Financial Statements

CONSOLIDATED FINANCIAL STATEMENTS

MVC Capital, Inc.

Consolidated Balance Sheets
                 
    January 31,        
    2005     October 31,  
    (Unaudited)     2004  
ASSETS
                
Assets
                
Cash
   $ 4,029,546     $ 1,214,537  
Cash equivalents
     22,322,488       11,932,404  
Investments in short term securities, at market value
                
(cost $81,222,955 and $34,114,792, respectively)
     81,222,955       34,114,792  
Investments in debt instruments, at fair value
                
(cost $30,646,181 and $28,795,958, respectively) (Note 4)
     29,865,713       27,502,755  
Investments in equity, at fair value
                
(cost $107,468,918 and $122,786,256, respectively), (Note 4)
     44,196,745       51,017,530  
Interest and fees receivable
     546,835       442,322  
Prepaid expenses
     55,466       219,772  
Deferred tax
     122,111       87,278  
Other assets
     39,263       45,445  
 
            
 
                
Total assets
   $ 182,401,122     $ 126,576,835  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Liabilities
                
Revolving credit facility
   $ —     $ 10,025,000  
Payable for investment purchased
     3,000,000       —  
Professional fees
     326,416       223,069  
Directors’ fees
     30,920       17,815  
Employee compensation and benefits
     271,683       422,363  
Taxes payable
     —       166,205  
Other accrued expenses and liabilities
     562,048       155,039  
 
            
Total liabilities
     4,191,067       11,009,491  
 
                
 
            
Shareholders’ equity
                
Common stock, $0.01 par value; 150,000,000 shares authorized; 18,938,990 and 12,293,042 shares outstanding, respectively
     165,000       165,000  
Additional paid in capital
     358,384,522       298,406,395  
Accumulated deficit
     (145,873,366 )     (148,537,950 )
Treasury stock, at cost, 4,206,958 and 4,206,958 shares held, respectively
     (34,466,101 )     (34,466,101 )
 
            
Total shareholders’ equity
     178,210,055       115,567,344  
 
            
 
                
Total liabilities and shareholders’ equity
   $ 182,401,122     $ 126,576,835  
 
            
 
                
Net asset value per share
   $ 9.41     $ 9.40  
 
            

The accompanying notes are an integral part of these consolidated financial statements.

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MVC Capital, Inc.

Consolidated Statements of Operations
(Unaudited)
                 
    For the     For the  
    Quarter Ended     Quarter Ended  
    January 31, 2005     January 31, 2004  
Investment Income:
                
Interest income
   $ 1,280,047     $ 711,117  
Dividend income
     346,370       —  
Fee income
     179,683       —  
Other income
     189,326       5,059  
 
            
Total investment income
     1,995,426       716,176  
 
                
Operating Expenses:
                
Employee compensation and benefits
     433,747       267,840  
Insurance
     186,116       368,638  
Legal fees
     150,574       230,933  
Directors fees
     44,370       81,906  
Audit fees
     65,068       36,764  
Public relations fees
     33,224       41,368  
Other expenses
     107,357       189,606  
Administration
     28,585       27,632  
Facilities
     68,863       (140,033 )
Printing and postage
     18,004       41,768  
Interest expense
     12,359       —  
 
            
Total operating expenses
     1,148,267       1,146,422  
 
                
Net investment income (loss) before taxes
     847,159       (430,246 )
 
            
 
                
Tax Expense (Benefit):
                
Deferred tax expense (benefit)
     (34,833 )     —  
Current tax expense
     325       —  
 
            
 
                
Total tax expense (benefit)
     (34,508 )     —  
 
            
 
                
Net investment income (loss)
     881,667       (430,246 )
 
            
 
                
Net Realized and Unrealized Gain (Loss) on Investments:
                
 
                
Net realized loss on investments
     (7,226,371 )     (10,340,698 )
 
                
Net change in unrealized appreciation on investments
     9,009,288       13,075,576  
 
            
 
                
Net realized and unrealized gain on investments
     1,782,917       2,734,878  
 
            
 
                
Net increase in net assets resulting from operations
   $ 2,664,584     $ 2,304,632  
 
            
 
                
Net increase in net assets per share resulting from operations
   $ 0.18     $ 0.14  
 
            
 
                
Dividends declared per share
   $ —     $ —  
 
            

The accompanying notes are an integral part of these consolidated financial statements.

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MVC Capital, Inc.

Consolidated Statements of Cash Flows
(Unaudited)
                 
    For the     For the  
    Quarter Ended     Quarter Ended  
    January 31, 2005     January 31, 2004  
Cash Flows from Operating Activities:
                
Net increase in net assets resulting from operations
   $ 2,664,584     $ 2,304,632  
Adjustments to reconcile net assets resulting from operations to net cash provided (used) by operating activities:
                
Realized loss
     7,226,371       10,340,698  
Net change in unrealized (appreciation)
     (9,009,288 )     (13,075,576 )
Changes in assets and liabilities:
                
Interest and fees receivable
     (104,513 )     56,127  
Prepaid expenses
     164,306       329,244  
Receivable for investment deposit
     —       (1,000,000 )
Deferred tax
     (34,833 )     —  
Other assets
     6,182       —  
Liabilities
     3,206,576       (335,991 )
Purchases of equity investments
     —       —  
Purchases of debt instruments
     (4,250,000 )     —  
Purchases of short-term investments
     (84,795,388 )     (80,807,409 )
Purchases of cash equivalents
     (22,340,571 )     (46,907,725 )
Proceeds from equity investments
     8,295,018       136,272  
Proceeds from debt instruments
     2,473,890       5,617,223  
Sales/maturities of short-term investments
     37,935,975       113,389,123  
Sales/maturities of cash equivalents
     21,313,657       46,635,706  
 
            
Net cash provided (used) by operating activities
     (37,248,034 )     36,682,324  
 
            
 
                
Cash Flows from Financing Activities:
                
Repurchases of capital stock
     —       (31,571,184 )
Revolving credit facility
     (10,025,000 )     —  
 
            
 
                
Net cash used for financing activities
     (10,025,000 )     (31,571,184 )
 
            
 
                
Cash Flows from Investing Activities:
                
Issuance of capital stock
     60,478,127       —  
 
            
 
                
Net cash provided by investing activities
     60,478,127       —  
 
            
 
                
Net change in cash and cash equivalents for the period
     13,205,093       5,111,140  
 
            
 
                
Cash and cash equivalents, beginning of period
     13,146,941       6,850  
 
            
 
                
Cash and cash equivalents, end of period
   $ 26,352,034     $ 5,117,990  
 
            
 
                

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

MVC Capital, Inc.

Consolidated Statements of Shareholders’ Equity
(Unaudited)
                                                 
    Fund             Additional                     Total  
    Shares     Common     Paid in     Treasury     Accumulated     Shareholders’  
    Issued     Stock     Capital     Stock     Deficit     Equity  
Balance at November 1, 2003
     16,152,600     $ 165,000     $ 311,485,000     $ (2,894,917 )     (171,746,921 )     137,008,162  
Return of Capital Statement of Position reclass
     —       —       (11,613,512 )     —       11,613,512       —  
Treasury Shares repurchased
     (3,859,558 )     —       —       (31,571,184 )     —       (31,571,184 )
Net increase in net assets from operations
     —       —       —       —       2,304,632       2,304,632  
 
                                    
Balance at January 31, 2004
     12,293,042     $ 165,000     $ 299,871,488     $ (34,466,101 )   $ (157,828,777 )   $ 107,741,610  
 
                                    
 
                                                
Balance at November 1, 2004
     12,293,042     $ 165,000     $ 298,406,395     $ (34,466,101 )     (148,537,950 )     115,567,344  
Issuance of capital stock
     6,645,948       —       60,478,127       —       —       60,478,127  
Offering expenses
     —       —       (500,000 )     —       —       (500,000 )
Net increase in net assets from operations
     —       —       —       —       2,664,584       2,664,584  
 
                                    
Balance at January 31, 2005
     18,938,990     $ 165,000     $ 358,384,522     $ (34,466,101 )   $ (145,873,366 )   $ 178,210,055  
 
                                    

The accompanying notes are an integral part of these consolidated financial statements.

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MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios
                 
    For the     For the  
    Quarter Ended     Year Ended  
    January 31, 2005     October 31, 2004  
    (Unaudited)        
Net asset value, beginning of period
   $ 9.40     $ 8.48  
 
                
Gain (loss) from investment operations:
                
 
                
Net investment income
     0.06       —  
 
                
Net realized and unrealized gain on investments
     0.12       0.91  
 
            
 
                
Total gain from investment operations
     0.18       0.91  
 
            
 
                
Less distributions from:
                
 
                
Income
     —       —  
 
                
Return of Capital
     —       (0.12 )
 
            
 
                
Total distributions
     —       (0.12 )
 
            
 
                
Capital share transactions
               
Anti-dilutive effect of share repurchase program
     —       0.13  
Dilutive effect of issuance of capital stock
     (0.17 )     —  
 
            
 
                
Net asset value, end of period
   $ 9.41     $ 9.40  
 
            
 
                
Market value, end of period
   $ 9.30     $ 9.24  
 
            
 
                
Market discount
     (1.17 %)     (1.70 %)
 
                
Total Return - At NAV (a)
     0.11 %     12.26 %
 
                
Total Return - At Market (a)
     0.65 %     15.56 %
 
                
Ratios and Supplemental Data:
                
 
                
Net assets, end of period (in thousands)
   $ 178,210     $ 115,567  
 
                
Ratios to average net assets:
                
 
                
Expenses excluding tax expense (benefit)
     3.40 %  (b)     3.36 %
 
                
Net investment income before tax expense (benefit)
     2.51 %  (b)     0.08 %
 
                
Expenses including tax expense (benefit)
     3.30 %  (b)     3.43 %
 
                
Net investment income after tax expense (benefit)
     2.61 %  (b)     0.02 %

(a)     Total return is historical and assumes changes in share price, reinvestments of all dividends and distributions, and no sales charge for the year.
 
(b)   Annualized.

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

MVC Capital, Inc.

Consolidated Schedule of Investments
January 31, 2005
(Unaudited)
                                 
                Date of        
                Initial        
Description     Shares/Principal   Investment   Cost   Fair Value
 
Equity Investments - 24.80% (b, d) (Note 3, 4, 5)                        
 
       
Automotive Dealerships - 3.37% (a, f)
                        
 
    *  
Baltic Motors Corporation, Common Stock (c)
   54,947   June 2004   $ 6,000,000   $ 6,000,000
 
       
Confections Manufacturing and Distribution - 1.51% (a, f)
                        
 
    *  
Impact Confections, Inc., Common Stock
   252   July 2004     2,700,000     2,700,000
 
       
Distributor - Landscaping and Irrigation Equipment - 2.53% (a, f)
                        
 
    *  
Timberland Machines & Irrigation, Inc., Common Stock (c)
   450   Aug. 2004     4,500,000     4,500,000
 
    *  
Timberland Machines & Irrigation, Inc., Warrants (c)
   150   Aug. 2004     —     —
       
 
                    
 
       
Total Distributor - Landscaping and Irrigation Equipment
                 4,500,000     4,500,000
 
       
Financial Services - 0.66% (a, f)
                        
 
       
Octagon Credit Investors, LLC, Membership Interest
   5   June 2004     629,525     629,525
 
       
Octagon Credit Investors, LLC, Warrants
   1   May 2004     550,000     550,000
       
 
                    
 
       
Total Financial Services
                 1,179,525     1,179,525
 
       
Iron Foundries - 0.25% (a, f)
                        
 
    *  
Vestal Manufacturing Enterprises, Inc., Common Stock (c)
   40,500   Apr. 2004     450,000     450,000
 
       
Manufacturer of Packaged Foods - 2.81% (a, f)
                        
 
    *  
Dakota Growers Pasta Company, Inc., Common Stock
   909,091   July 2004     5,000,000     5,000,000
 
       
Non-Alcoholic Beverages - 8.49% (a)
                        
 
    *  
Vitality Foodservice, Inc., Common Stock (f)
   500,000   Sept. 2004     5,000,000     5,000,000
 
    *  
Vitality Foodservice, Inc., Series A (i)
   1,013,322   Sept. 2004     10,133,219     10,133,219
 
    *  
Vitality Foodservice, Inc., Warrants (f)
   1,000,000   Sept. 2004     —     —
       
 
                    
 
       
Total Non-Alcoholic Beverages
                 15,133,219     15,133,219
 
       
Technology Investments - 5.18% (f)
                        
 
       
Actelis Networks, Inc. Series C (a)
   150,602   May 2001     5,000,003     —
 
       
DPHI, Inc., Series A (a)
   602,131   May 2002     4,520,350     —
 
    *  
Endymion Systems, Inc., Series A (a)
   7,156,760   June 2000     7,000,000     —
 
       
FOLIOfn, Inc., Series C (a)
   5,802,259   June 2000     15,000,000     —
 
       
Lumeta Corporation, Series A (a)
   384,615   Oct. 2000     250,000     43,511