FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
Commission file number 814-00640
Venture Lending & Leasing IV, Inc.
(Exact Name of Registrant as specified in its charter)
Maryland | 20-0372373 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2010 North First Street, Suite 310 | San Jose, CA 95131 |
(Address of principal executive offices) | (Zip Code) |
(408) 436-8577
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has (i) 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 (ii) has been subject to such filing requirements for the past 90 days.
Yes Ö No __
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes __ No Ö
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Class
Outstanding as of May 2, 2005
Common Stock, $.001 par value
100,000
VENTURE LENDING & LEASING IV, INC.
INDEX
PART I -- FINANCIAL INFORMATION
Item 1.
Financial Statements
Condensed Statements of Financial Position (Unaudited)
As of March 31, 2005 and December 31, 2004
Condensed Statements of Operations (Unaudited)
For the three months ended March 31, 2005 and 2004
Condensed Statements of Changes in Shareholder's Equity (Unaudited)
For the year ended December 31, 2004 and the three months ended March 31, 2005
Condensed Statements of Cash Flows (Unaudited)
For the three months ended March 31, 2005 and 2004
Notes to Condensed Financial Statements (Unaudited)
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative & Qualitative Disclosures About Market Risk
Item 4.
Disclosure Controls and Procedures
PART II -- OTHER INFORMATION
Item 1.
Legal Proceedings
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults upon Senior Securities
Item 4.
Submission of Matters to a Vote of Security Holders
Item 5.
Other Information
Item 6.
Exhibits
SIGNATURES
2
VENTURE LENDING & LEASING IV, INC.
CONDENSED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
AS OF MARCH 31, 2005 AND DECEMBER 31, 2004
March 31, 2005 | December 31, 2004 | |||
ASSETS | ||||
Loans at estimated fair value | ||||
(Cost of $115,290,625 and $85,358,153) | $115,290,625 | $85,358,153 | ||
Cash and cash equivalents | 14,738,794 | 25,031,477 | ||
Other assets | 2,746,379 | 2,109,855 | ||
Total assets | $132,775,798 | $112,499,485 | ||
LIABILITIES AND SHAREHOLDER'S EQUITY | ||||
Liabilities: | ||||
Borrowings under debt facility | $50,450,194 | $31,450,194 | ||
Accrued management fees | 1,562,500 | 1,562,500 | ||
Accounts payable and other accrued liabilities | 1,043,062 | 637,185 | ||
Total liabilities | 53,055,756 | 33,649,879 | ||
Shareholder's equity: | ||||
Common stock: $0.001 par value, 10,000,000 shares authorized; | ||||
Issued and outstanding - 100,000 shares | 100 | 100 | ||
Capital in excess of par value | 82,524,900 | 82,524,900 | ||
Accumulated distributions | (1,952,748) | (1,629,686) | ||
Accumulated deficit | (852,210) | (2,045,708) | ||
Total shareholder's equity | 79,720,042 | 78,849,606 | ||
Total liabilities and shareholder's equity | $132,775,798 | $112,499,485 | ||
See Notes to Condensed Financial Statements
VENTURE LENDING & LEASING IV, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended | For the Three Months Ended | ||||||
March 31, 2005 | March 31, 2004 | ||||||
INVESTMENT INCOME: | |||||||
Interest on loans | $3,347,862 | $- | |||||
Interest on short-term investments | |||||||
and other income | 64,915 | - | |||||
Total investment income | 3,412,777 | - | |||||
EXPENSES: | |||||||
Management fees | 1,562,500 | - | |||||
Interest expense | 330,993 | - | |||||
Other operating expenses | 494,730 | - | |||||
Total expenses | 2,388,223 | - | |||||
Net investment income | 1,024,554 | - | |||||
Net change in unrealized gain from hedging activities | 168,944 | - | |||||
Net income | $1,193,498 | $- | |||||
Net income per share | $11.93 | $- | |||||
Weighted average shares outstanding | 100,000 | 100,000 | |||||
See Notes to Condensed Financial Statements
VENTURE LENDING & LEASING IV, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2004 AND THE THREE MONTHS ENDED MARCH 31, 2005
Capital in | ||||||
Common Stock | Excess of | Accumulated | ||||
Shares | Par Value | Par Value | Distributions | Deficit | Total | |
BALANCE, December 31, 2003 | 100,000 | $100 | $24,900 | $- | $- | $25,000 |
Contributions | 82,500,000 | 82,500,000 | ||||
Distributions | (1,629,686) | (1,629,686) | ||||
Net loss | (2,045,708) | (2,045,708) | ||||
BALANCE, December 31, 2004 | 100,000 | $100 | $82,524,900 | $(1,629,686) | $(2,045,708) | $78,849,606 |
Distributions | (323,062) | (323,062) | ||||
Net income | 1,193,498 | 1,193,498 | ||||
BALANCE, March 31, 2005 | 100,000 | $100 | $82,524,900 | $(1,952,748) | $(852,210) | $79,720,042 |
See Notes to Condensed Financial Statements
VENTURE LENDING & LEASING IV, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
For the Three Months Ended March 31, 2005 | For the Three Months Ended March 31, 2004 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $1,193,498 | $- | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Net change in unrealized gain from hedging activity | (168,944) | - | ||||
Amortization of deferred costs | 55,188 | - | ||||
Increase in other assets | (505,768) | - | ||||
Net increase in accounts payable, accrued liabilities, and accrued management fees | 405,877 | - | ||||
Acquisition of loans | (33,909,973) | - | ||||
Principal payments on loans | 3,977,501 | - | ||||
Acquisition of equity securities | (310,500) | - | ||||
Net cash used in operating activities | (29,263,121) | - | - | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Deemed distribution to shareholder | (12,562) | - | ||||
Borrowings under debt facility | 19,000,000 | - | ||||
Payment of bank facility fees and costs | (17,000) | - | ||||
Cash contributions from shareholder | - | 25,000 | ||||
Net cash provided by financing activities | 18,970,438 | 25,000 | ||||
Net increase (decrease) in cash and cash equivalents | (10,292,683) | 25,000 | ||||
CASH AND CASH EQUIVALENTS: | ||||||
Beginning of period | 25,031,477 | - | ||||
End of period | $14,738,794 | $25,000 | ||||
CASH PAID DURING THE PERIOD FOR: | ||||||
Interest | $302,916 | $- | ||||
NON-CASH ACTIVITIES: |
|
| ||||
Distributions of investment securities to shareholder | $310,500 | $- | ||||
See Notes to Condensed Financial Statements
VENTURE LENDING & LEASING IV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2005
1.
ORGANIZATION AND OPERATIONS OF THE FUND
Venture Lending & Leasing IV, Inc., (the “Fund”), was incorporated in Maryland on October 31, 2003 as a nondiversified closed-end management investment company electing status as a business development company (“BDC”) under the Investment Company Act of 1940. One hundred percent of the stock of the Fund is held by Venture Lending & Leasing IV, LLC (the “Company”). Prior to commencing its operations on May 28, 2004, the Fund had no operations other than the sale to the Company of 100,000 shares of common stock, $0.001 par value for $25,000 in November 2003. This issuance of stock was a requirement in order to apply for a finance lender's license from the California Commissioner of Corporations.
In Management's opinion, the accompanying financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position and results of operations for interim periods. The interim results for the three months ended March 31, 2005 are not necessarily indicative of what the results would be for a full year.
2. SUMMARY OF INVESTMENTS
Loans generally are made to borrowers pursuant to commitments whereby the Fund agrees to finance assets and provide working capital up to a specified amount for the term of the commitments, upon the terms and subject to the conditions specified by such commitment. As of March 31, 2005, the Fund's investments in loans are to companies based within the United States and are diversified among borrowers in the industries shown below. The percentage of shareholder's equity (net assets) that each industry group represents is shown with the industry totals below. (The sum of the percentages does not equal 100 percent because the percentages are based on net assets as opposed to total loans).
Loan balances are summarized by borrower. Typically a borrower's balance will be composed of several loans drawn under a commitment made by the Fund. As each loan drawn under a commitment has a different maturity date and amount, the interest rate for the borrower changes each month. For the three month period ended March 31, 2005, the weighted average interest rate on performing loans was 12.8%. Interest is calculated using the effective interest method, and rates earned by the Fund will fluctuate based on many factors including volatility, early payoffs, and recovery of interest from non-performing assets.
Loans as of March 31, 2005 consist of the following:
Percentage of Estimated Fair Final
Borrower Net Assets
Value 3/31/05 Maturity Date
Biotechnology |
|
|
|
Athersys |
| $5,511,760 | 6/1/08 |
Miikana |
| 1,887,131 | 10/1/07 |
Raven Biotechnologies |
| 4,847,303 | 6/1/08 |
Subtotal: | 15.4% | $12,246,194 |
|
Carrier Networking |
|
|
|
Arroyo Video Solutions |
| $454,027 | 1/1/08 |
Skystream Networks, Inc. |
| 2,912,490 | 2/1/08 |
Subtotal: | 4.2% | 3,366,517 |
|
Computers & Storage |
|
|
|
CloudShield |
| $4,373,181 | 1/1/08 |
Kashya |
| 1,005,148 | 3/1/08 |
Subtotal: | 6.7% | $5,378,329 |
|
Internet |
|
|
|
Cyclone Commerce |
| $1,892,477 | 12/1/07 |
SciQuest, Inc. |
| 2,951,963 | 10/1/07 |
TheFaceBook |
| 196,749 | 2/1/08 |
Subtotal: | 6.3% | $5,041,189 |
|
Medical Devices |
|
|
|
Ample Medical |
| $729,438 | 9/1/07 |
Aspire Medical |
| 1,060,066 | 6/1/08 |
Cardiva Medical |
| 1,695,797 | 11/1/07 |
Inogen |
| 417,890 | 1/1/08 |
LipoScience |
| 3,924,256 | 10/1/07 |
Micromed Technology |
| 1,926,481 | 3/1/07 |
SenoRx |
| 2,470,726 | 10/1/07 |
Vascular Architects |
| 4,458,482 | 6/1/07 |
VeinRx |
| 1,648,699 | 9/1/07 |
Volcano Corporation |
| 1,735,250 | 2/1/08 |
Subtotal: | 25.2% | $20,067,085 |
|
Other Healthcare |
|
|
|
MedManage Systems |
| $1,944,026 | 1/1/08 |
Skylight Systems |
| 1,845,874 | 1/1/08 |
Subtotal: | 4.8% | $3,789,900 |
|
Other Technology |
|
|
|
EoPlex |
| $543,014 | 9/1/07 |
Nanoconduction |
| 543,368 | 3/1/08 |
NeoConix, Inc. |
| 779,752 | 9/1/07 |
Triformix |
| 1,600,727 | 8/1/07 |
Subtotal: | 4.3% | $3,466,861 |
|
Security |
|
|
|
Counterpane Internet Security |
| $1,661,155 | 2/1/08 |
Subtotal: | 2.1% | $1,661,155 |
|
Semiconductors & Equipment |
|
|
|
Cswitch |
| $265,602 | 1/1/08 |
Discera |
| 1,647,720 | 3/1/08 |
Fyre Storm |
| 2,137,715 | 1/1/08 |
Integrated Materials |
| 793,634 | 1/1/08 |
InvenSense |
| 185,261 | 12/1/07 |
Luxtera |
| 549,604 | 12/1/07 |
Molecular Imprints |
| 4,079,547 | 1/1/08 |
Oraxion Diagnostics |
| 641,132 | 8/1/07 |
Raza Microelectronics |
| 5,632,394 | 10/1/07 |
Universal Network Machines |
| 4,005,752 | 5/1/08 |
Subtotal: | 25.0% | $19,938,361 |
|
Software |
|
|
|
Accruent |
| $271,494 | 12/1/07 |
Aceva |
| 2,949,547 | 5/1/07 |
Adomo |
| 2,155,970 | 4/1/08 |
Arena Solutions |
| 2,458,918 | 9/1/07 |
Biz360 |
| 1,962,122 | 10/1/07 |
Business Engine |
| 3,657,761 | 5/1/08 |
CoWare |
| 4,621,564 | 12/1/07 |
SOA Software |
| 2,700,208 | 9/1/07 |
Trados |
| 2,435,421 | 9/1/07 |
Subtotal: | 29.1% | $23,213,005 |
|
Technology Services |
|
|
|
EchoPass |
| $2,611,215 | 9/1/07 |
Jacent |
| 374,464 | 2/1/08 |
Neutral Tandem |
| 5,560,961 | 3/1/08 |
Subtotal: | 10.7% | $8,546,640 |
|
Wireless |
|
|
|
Ethertronics |
| $443,121 | 3/1/08 |
IXI Mobile |
| 2,380,495 | 4/1/07 |
Kayak Interactive |
| 2,839,033 | 9/1/07 |
Wildseed |
| 2,912,740 | 10/1/07 |
Subtotal: | 10.8% | $8,575,389 |
|
|
|
|
|
Total: (Cost of $115,290,625) | 144.6% | $115,290,625 |
|
As of March 31, 2005, no loans have been classified as non-accrual.
Loans as of December 31, 2004 consist of the following:
Percentage of Estimated Fair Final
Borrower Net Assets
Value 12/31/04 Maturity Date
Biotechnology |
|
| |
Athersys | $5,505,428 | 6/1/08 | |
Miikana | 1,879,067 | 10/1/07 | |
Raven Biotechnologies | 4,826,758 | 6/1/08 | |
Subtotal: | 15.5% | $12,211,253 |
|
|
|
| |
Carrier Networking |
|
| |
Arroyo Video Solutions | $473,567 | 1/1/08 | |
Subtotal: | 0.6% | $473,567 |
|
|