FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

VL DISSOLUTION CORPORATION

(Exact name of Registrant as specified in its charter.)

1625 Broadway
Suite 990
Denver, Colorado 80202

(Address of principal executive offices)

(303) 592-5700
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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____X______ No___________

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes___________ No____X______

     At May 10, 2004, 9,348,572 shares of Common Stock were outstanding. The aggregate market value of the Common Stock held by non-affiliates on May 10, 2004 was $5,796,115 based on the Pink Sheets Electronic Quotation System closing price of $0.62 per share on that date.

VL DISSOLUTION CORPORATION

March 31, 2004

Index

VL DISSOLUTION CORPORATION

Statements of Net Assets in Liquidation

(in thousands of dollars)

See accompanying notes to financial statements.

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VL DISSOLUTION CORPORATION

Statements of Changes in Net Assets in Liquidation

(in thousands of dollars)

See accompanying notes to financial statements.

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VL DISSOLUTION CORPORATION

Statements of Operations

(in thousands of dollars, except share and per share data)

See accompanying notes to financial statements.

4

VL DISSOLUTION CORPORATION

Statement of Cash Flows

(in thousands of dollars)

See accompanying notes to financial statements.

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VL DISSOLUTION CORPORATION

Notes to Financial Statements (Unaudited)

Three and nine months ended March 31, 2004

(1)		Liquidation Basis of Accounting and Sale of Substantially All Assets
		The accompanying financial statements of the Company have been prepared without audit (except for the balance sheet information as of June 30, 2003, which is derived from the Company’s audited financial statements). Certain information and note disclosures normally included in Form 10-K have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2003.
		The Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Significant assumptions inherent in the preparation of the accompanying financial statements include, but are not limited to, accrued cost of liquidation and commitments and contingencies. Actual results could differ from those estimates.
		On December 2, 2002, the Company entered into a definitive asset purchase agreement (the “Asset Purchase Agreement”) to sell substantially all of its assets to a wholly owned subsidiary of Sirenza Microdevices, Inc. (“Sirenza”).
		On May 5, 2003, the asset sale contemplated by the Asset Purchase Agreement was consummated. Pursuant to the amended plan of dissolution, which was approved by the shareholders at the special shareholders’ meeting on May 5, 2003, the Company’s operations were limited to winding-up its business and affairs, selling certain of its remaining assets, discharging its known liabilities, establishing a contingency reserve for payment of expenses and contingent liabilities, and distributing any remaining assets to its shareholders, all in accordance with the amended plan of dissolution. As a result, the Company changed its basis of accounting to the liquidation basis as of May 5, 2003, which assumes that assets and liabilities are reflected at the estimated amounts to be paid or received; however actual costs could differ from those estimates. Distributions ultimately made to shareholders upon liquidation will differ from the net assets in liquidation recorded in the accompanying statement of net assets in liquidation as a result of future events/activities, the change in the fair market value of an investment in the common stock of Sirenza, the proceeds ultimately received by the Company from the sale of Sirenza common stock and other assets, and adjustments, if any, to estimated costs of liquidation.
		It is the Company’s intention to settle its outstanding obligations and sell its remaining assets as expeditiously as possible. Any cash not used to satisfy liabilities and expenses will eventually be distributed to shareholders. Dissolution of the Company and final distributions to its shareholders will occur upon resolution of all liquidation issues. The expiration of the period in which Sirenza was entitled to make an indemnity claim against the Company was March 31, 2004. Sirenza and its indemnified parties have made no claims against the Company. During the three months ended December 31, 2003, the Company made an initial distribution (or conversion to cash in the case of fractional shares) of approximately 1.4 million shares of Sirenza’s common stock to its shareholders. Following the initial distribution, the Company held approximately 1.3 million shares of

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VL DISSOLUTION CORPORATION

Notes to Financial Statements (Unaudited)

Three and nine months ended March 31, 2004

		Sirenza’s common stock. No other distributions have been made to the Company’s shareholders.
		In connection with the asset sale and subsequent dissolution of the Company, the Company filed articles of amendment to change its name from Vari-L Company, Inc. to VL Dissolution Corporation, effective May 5, 2003.
		As further described in the following notes, during the nine months ended March 31, 2004, the Company sold 570,974 shares of Sirenza’s common stock generating proceeds of approximately $2.2 million, extinguished $2.1 million of its accounts payable and accrued costs of liquidation offset by an adjustment of $194,000 to estimated costs of liquidation as further described in note 5, recognized a net death benefit of $329,000 from a life insurance policy, issued 2.0 million shares of its common stock valued at $1.2 million pursuant to the settlement of the private securities class action and distributed 1.4 million shares of Sirenza’s common stock valued at $6.5 million as of the date of distribution to its shareholders.
(2)		Restricted Cash
		Historically, $1.475 million of cash was restricted as to withdrawal and was retained in a separate bank account designated for such purpose. In accordance with the Asset Purchase Agreement, the cash was to remain restricted until the later of March 31, 2004 or the date at which all indemnification claims against the Company made by Sirenza and its indemnified parties were paid or otherwise resolved. Sirenza and its indemnified parties have made no claims against the Company. Accordingly, the restricted designation was removed effective March 31, 2004.
(3)		Marketable Securities
		Marketable securities, consisting of an investment in Sirenza’s common stock, are classified as held for trading and are recorded at fair value. At June 30, 2003, the Company held approximately 3.3 million shares with a fair market value of $6.6 million. During the nine months ended March 31, 2004, the Company sold 570,974 shares generating proceeds of approximately $2.2 million, realizing net gains of $971,000. On October 31, 2003, the Company made an initial distribution to its shareholders (or conversion to cash in the case of fractional shares) of approximately 1.4 million shares of Sirenza’s common stock that had a fair market value on that date of $6.5 million.
		Historically, the Company held approximately 1.3 million shares that were restricted as to withdrawal or distribution. In accordance with the Asset Purchase Agreement, the shares were to remain restricted until the later of March 31, 2004 or the date at which all indemnification claims against the Company made by Sirenza and its indemnified parties are paid or otherwise resolved. Sirenza and its indemnified parties have made no claims against the Company. Accordingly, the restricted designation was removed effective March 31, 2004. The fair market value of such shares was $5.6 million at March 31, 2004.

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VL DISSOLUTION CORPORATION

Notes to Financial Statements (Unaudited)

Three and nine months ended March 31, 2004

		Unrealized gains and losses are reported as mark to market adjustment on investment in common stock of Sirenza in the Statement of Changes in Net Assets in Liquidation.
(4)		Stockholders’ Equity
		In October 2003, the Company issued an aggregate of 2.0 million shares of its common stock to the shareholders in the plaintiff class pursuant to the settlement of the private securities class action. The Company recorded a liability of $1.2 million for the issuance of the settlement shares in June 2002, when all substantive aspects of the settlement were agreed upon, based upon the fair market value of the shares on such date.
(5)		Adjustment to Estimated Costs of Liquidation
		During the quarter ended March 31, 2004, the Company recorded an adjustment of $194,000 representing an increase in its original estimate of the costs to be incurred during dissolution. The increase primarily represents unanticipated costs incurred in connection with the distribution of Sirenza’s common stock to the Company’s shareholders.
		Distributions ultimately made to shareholders upon liquidation could differ from the “net assets in liquidation” recorded in the accompanying Statement of Net Assets in Liquidation as a result of future events/activities, the change in the fair market value of the Company’s investment in the common stock of Sirenza, the proceeds ultimately received by the Company from the sale of the Sirenza common stock, and any additional adjustments to estimated costs of liquidation.
(6)		Net Death Benefits from Life Insurance Policy
		The Company was a beneficiary to a life insurance policy in which a former officer was named as the insured. Under the policy, the Company was entitled to 100% of the net death benefits. In January 2004, the Company was notified of the death of this former officer. Accordingly, the Company has recorded a benefit of $329,000 in its Statement of Changes in Assets for the quarter ended March 31, 2004. The Company received the net proceeds from the life insurance policy during April 2004.
(7)		Litigation, Commitments and Contingencies
		The Company is subject to legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these matters will not have a material adverse effect on its financial condition, results of operations or liquidity. The Company may in the future be subject to legal disputes, which, even if not meritorious, could result in the expenditure of significant financial resources.

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VL DISSOLUTION CORPORATION

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

Forward Looking Statements

The Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. We base these forward-looking statements on a number of assumptions about the future, usually based on current conditions. These assumptions may or may not prove to be correct and, as a result, our own forward-looking statements may also be inaccurate. On the other hand, based on what we know today and what we expect in the future, we believe that the forward-looking statements we make in this report are reasonable. In most cases, when we use words like “believe,” “expect,” “estimate,” “anticipate,” “project,” “plan,” or “predict” to describe something which has not yet occurred, we are making a forward-looking statement.

We cannot list here all of the risks and uncertainties that could cause our actual future financial and operating results to differ materially from our historical experience and our present expectations or projections but we can identify many of them. For example, our future results could be affected by the cost of satisfying currently known liabilities, the need to satisfy unanticipated liabilities that might arise in the future, the expenses of dissolving and winding up the Company, and the price at which Sirenza stock may be held or sold. It is important to remember that forward-looking statements speak only as of the date when they are made and we do not promise that we will publicly update or revise those statements whenever conditions change or future events occur. Accordingly, we do not recommend that any person seeking to evaluate our Company should place undue reliance on any forward-looking statement in this report.

Critical Accounting Policies and Estimates

Our discussion and analysis of our historical and liquidation based financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluated our estimates, including those related to accrued costs of liquidation and commitments and contingencies. We based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies impacted our more significant judgments and estimates used in the preparation of our historical and liquidation based financial statements.

Commitments and Contingencies

We were party to various legal proceedings and claims, as well as various other commitments and contingencies. We recorded a liability if it was (1) probable that an obligation was incurred because of a transaction or event happening on or before the date of the financial statements and (2) the amount of the obligation could be reasonably estimated.

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Accrued Costs of Liquidation and Effects of Change to Liquidation Basis

Pursuant to the amended plan of dissolution, which was approved by the shareholders at the special meeting on May 5, 2003, our operations were limited to winding-up our business and affairs, selling our remaining assets, discharging our known liabilities, establishing a contingency reserve for payment of expenses and contingent liabilities, and distributing any remaining assets to our shareholders, all in accordance with the amended plan of dissolution. As a result, we changed our basis of accounting to the liquidation basis as of May 5, 2003, which assumes that assets and liabilities are reflected at the estimated amounts to be paid or received; however, actual costs could differ from those estimates. Distributions ultimately made to shareholders upon liquidation will differ from the “net assets in liquidation” recorded in the accompanying Statement of Net Assets in Liquidation as a result of future events/activities, the change in the fair market value of our investment in the common stock of Sirenza, the proceeds ultimately received by us from the sale of the Sirenza common stock and other assets, and adjustments, if any, to estimated costs of liquidation.

During the quarter ended March 31, 2004, the Company recorded an adjustment of $194,000 representing an increase in its original estimate of the costs to be incurred during dissolution. The increase primarily represents unanticipated costs incurred in connection with the distribution of Sirenza’s common stock to the Company’s shareholders.

Comparison of our Results of Operations

On May 5, 2003, we completed the sale of all of our operating assets to Sirenza and ceased preparing our financial statements on a going concern basis under generally accepted accounting principles. Accordingly, results of operations for the three and nine months ended March 31, 2004 are not comparable to the three and nine months ended March 31, 2003.

Changes in Net Assets in Liquidation for the Three Months Ended March 31, 2004

For the three months ended March 31, 2004, we recorded a mark-to market adjustment of $466,000 due to a decrease in value in our investment in the common stock of Sirenza, we recorded a net death benefit of $329,000 as we were the sole beneficiary on a life insurance policy and we recorded an adjustment of $194,000 representing an increase in our original estimate of the costs to be incurred during dissolution. The increase primarily represents unanticipated costs incurred in connection with the distribution of Sirenza’s common stock to the Company’s shareholders. Additionally, we sold 20,974 shares of Sirenza common stock realizing net losses of $2,000.

Changes in Net Assets in Liquidation for the Nine Months Ended March 31, 2004

For the nine months ended March 31, 2004, we recorded a mark-to market adjustment of $6.8 million due to an increase in value in our investment in the common stock of Sirenza and we recorded a net death benefit of $329,000 as we were the sole beneficiary on a life insurance policy. We sold 570,974 shares of Sirenza common stock realizing net gains of $971,000. We received a use tax settlement from the State of Colorado in the amount of $60,000 and we issued 2 million shares of our common stock valued at $1.2 million, pursuant to the settlement of the private securities class action. Additionally we recorded an adjustment of $194,000 representing an increase in our original estimate of the costs to be incurred during dissolution and we made an initial distribution to our shareholders (or conversion to cash in the case of fractional shares) of approximately 1.4 million shares of Sirenza’s common stock with a fair market value on the date of distribution of $6.5 million.

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Liquidity and Capital Resources

At March 31, 2004, our net assets in liquidation were $7.2 million, including cash and cash equivalents totaling $1.8 million. During the nine months ended March 31, 2004, we sold 570,974 shares of Sirenza common stock generating proceeds of $2.2 million and extinguished $2.1 million of our accounts payable and accrued costs of liquidation offset by an adjustment of $194,000 to estimated costs of liquidation as further described in note 5 to the Financial Statements.

The Company was a beneficiary to a life insurance policy in which a former officer was named as the insured. Under the policy, we were entitled to 100% of the net death benefits. In January 2004, we were notified of the death of this former officer. Accordingly, the Company has recorded a benefit of $329,000 in its Statement of Changes in Assets for the quarter ended March 31, 2004. We received the net proceeds from the life insurance policy during April 2004.

Outstanding Liabilities and Investment in Common Stock of Sirenza

At March 31, 2004, we had $606,000 in accounts payable and accrued costs of liquidation and held 1.3 million shares of Sirenza’s common stock with a fair market value of $5.6 million. We intend to settle our outstanding obligations and sell our remaining assets as expeditiously as possible. Any cash not used to satisfy liabilities and expenses will eventually be distributed to our shareholders. Dissolution of the Company and final distributions to our shareholders will occur upon resolution of all liquidation issues. The expiration of the period in which Sirenza was entitled to make an indemnity claim against the Company was March 31, 2004. Sirenza and its indemnified parties have made no claims against the Company.

Item 3. Qualitative and Quantitative Disclosures about Market Risk

We are exposed to certain market risks, including the effects of adverse changes in interest rates. Our exposure to such changes results from cash deposits managed by Colorado Business Bank. As of June 30, 2003 and March 31, 2004, we have no financial instruments in place to manage the impact of changes in interest rates. We estimate that a 1% increase or decrease in interest rates would have impacted our income from these assets by less than $1,000 for the year ended June 30, 2003 and for the nine months ended March 31, 2004. Additionally, as of June 30, 2003 and March 31, 2004, we are exposed to the effects of adverse changes in the fair value of marketable securities. We currently have an investment in the common stock of Sirenza acquired in connection with the asset sale with no financial instrument in place to manage the impact of a change in the fair market value. We estimate that a 10% increase or decrease in the fair value would have impacted the change in net assets in liquidation by approximately $661,000 at June 30, 2003 and $560,000 at March 31, 2004.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Board of Directors to allow timely decisions regarding required disclosure about Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act.

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As of May 5, 2003 the Company sold substantially all of its assets and began the orderly dissolution and liquidation of its assets. As the Company currently has no ongoing operations, chief executive officer, principal financial officers, principal accounting officer or employees, the evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Form 10-Q was performed by the Company’s Board of Directors. Based on that evaluation, the Board has concluded that the Company’s disclosure controls and procedures are effective as of the end of such period.

Furthermore, there have been no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended March 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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VL DISSOLUTION CORPORATION

PART II OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these matters will not have a material adverse effect on its financial condition, results of operations or liquidity. We may in the future be subject to legal disputes, which, even if not meritorious, could result in the expenditure of significant financial resources.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

31.1		Certification pursuant to Exchange Act Rule 13a-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None

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SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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EXHIBIT INDEX