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 June 30, 2011

[  ]
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 814-00799

Venture Lending & Leasing VI, Inc.
(Exact Name of Registrant as specified in its charter)
Maryland
27-1682622
(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 (1) 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ]   No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and 'smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [x]
Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ]  No [x]

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 August 11, 2011
Common Stock, $.001 par value
 
100,000



VENTURE LENDING & LEASING VI, INC.
INDEX

PART I — FINANCIAL INFORMATION
 
 
Item 1.
Financial Statements
 
 
 
Condensed Statements of Assets and Liabilities (Unaudited)
As of June 30, 2011 and December 31, 2010
 
 
 
Condensed Statements of Operations (Unaudited)
For the three and six months ended June 30, 2011 and the period ended June 30, 2010
 
 
 
Condensed Statements of Changes in Net Assets (Unaudited)
For the six months ended June 30, 2011 and the period ended June 30, 2010
 
 
 
Condensed Statements of Cash Flows (Unaudited)
For the six months ended June 30, 2011 and the period ended June 30, 2010
 
 
 
Notes to Financial Statements (Unaudited)
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 3.
Quantitatve and Qualitative Disclosures About Market Risk
 
 
Item 4.
Controls and Procedures
 
 
PART II — OTHER INFORMATION
 
 
Item 1.
Legal Proceedings
 
 
Item 1A.
Risk Factors
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
Item 3.
Defaults Upon Senior Securities
 
 
Item 4.
Removed and Reserved
 
 
Item 5.
Other Information
 
 
Item 6.
Exhibits
 
 
SIGNATURES




VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
AS OF JUNE 30, 2011 AND DECEMBER 31, 2010

 
June 30, 2011
 
December 31, 2010
ASSETS
 
 
 
Loans, at estimated fair value
     (Cost of $114,247,202 and $29,312,847)
$
114,247,202

 
$
29,312,847

Cash and cash equivalents
30,041,200

 
5,240,446

Other investment (Cost of $0 and $250,000)

 
250,000

Other assets
2,560,195

 
531,405

 
 
 
 
Total assets
146,848,597

 
35,334,698

 
 
 
 
LIABILITIES
 
 
 
Borrowings under debt facility
50,000,000

 

Accrued management fees
1,837,500

 
1,837,500

Accounts payable and other accrued liabilities
1,044,310

 
390,658

 
 
 
 
Total liabilities
52,881,810

 
2,228,158

 
 
 
 
NET ASSETS
$
93,966,787

 
$
33,106,540

 
 
 
 
Analysis of Net Assets:
 
 
 
 
 
 
 
Capital paid in on shares of capital stock
$
106,025,000

 
$
39,025,000

Return of capital distributions
(8,447,798
)
 
(3,010,203
)
Accumulated deficit
(3,610,415
)
 
(2,908,257
)
Net assets (equivalent to $939.67 and $331.07 per share based on
     100,000 shares of capital stock outstanding - See Note 5)
$
93,966,787

 
$
33,106,540




See Notes to Condensed Financial Statements



3



VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND THE PERIOD ENDED JUNE 30, 2010*

 
For the Three Months Ended
 
For the Period Ended
 
For the Six Months Ended
 
For the Period Ended
 
June 30, 2011
 
June 30, 2010*
 
June 30, 2011
 
June 30, 2010*
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INVESTMENT INCOME:
 
 
 
 
 
 
 
Interest on loans
$
4,054,472

 
$
658

 
$
5,824,511

 
$
658

       Other interest and other income
6,264

 

 
14,752

 

Total investment income
4,060,736

 
658

 
5,839,263

 
658

 
 
 
 
 
 
 
 
EXPENSES:
 
 
 
 
 
 
 
Management fees
1,837,500

 
29,394

 
3,675,000

 
29,394

Organization costs

 
122,079

 

 
122,079

Interest expense
324,372

 

 
492,420

 

Banking and professional fees
22,973

 
7,588

 
71,848

 
7,588

Other operating expenses
22,216

 
4,843

 
38,395

 
4,843

Total expenses
2,207,061

 
163,904

 
4,277,663

 
163,904

Net investment income (loss)
1,853,675

 
(163,246
)
 
1,561,600

 
(163,246
)
 
 
 
 
 
 
 
 
Net realized gain (loss) from investments
(241,200
)
 

 
360,960

 

Net change in unrealized gain from investments
230,000

 

 

 

Net change in realized and unrealized loss from hedging activities
(556,537
)
 

 
(745,146
)
 

Net realized and unrealized loss from investment and hedging activities
(567,737
)
 

 
(384,186
)
 

 
 
 
 
 
 
 
 
Net increase (decrease) in net assets resulting from operations
$
1,285,938

 
$
(163,246
)
 
$
1,177,414

 
$
(163,246
)
Net increase (decrease) in net assets resulting from operations per share
$
12.86

 
$
(1.63
)
 
$
11.77

 
$
(1.63
)
Weighted average shares outstanding
100,000

 
100,000

 
100,000

 
100,000


* From June 29, 2010, commencement of operations, through June 30, 2010




See Notes to Condensed Financial Statements


4



VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND THE PERIOD ENDED JUNE 30, 2010*

 

        
 
For the Six Months Ended
 
For the Period Ended
 
June 30, 2011
 
June 30, 2010*
Net increase (decrease) in net assets resulting from operations:
 
 
 
Net investment income (loss)
$
1,561,600

 
$
(163,246
)
Net realized gain from investments
360,960

 

Net change in unrealized gain from investments

 

Net change in realized and unrealized loss from hedging activities
(745,146
)
 

 
 
 
 
Net increase (decrease) in net assets resulting from operations
1,177,414

 
(163,246
)
 
 
 
 
Distributions of income to shareholder
(1,879,573
)
 
 
Return of capital distributions to shareholder
(5,437,594
)
 
(85,132
)
Capital share transactions
67,000,000

 
10,000,000

  Increase in capital transactions
59,682,833

 
9,914,868

 
 
 
 
Total increase
60,860,247

 
9,751,622

 
 
 
 
Net assets
 
 
 
Beginning of period
33,106,540

 
25,000

 
 
 
 
End of period
$
93,966,787

 
$
9,776,622


* From June 29, 2010, commencement of operations, through June 30, 2010





See Notes to Condensed Financial Statements


5



VENTURE LENDING & LEASING VI, INC.

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS PERIOD ENDED JUNE 30, 2011 AND THE PERIOD ENDED JUNE 30, 2010*


 
For the Six Months Ended
 
For the Period Ended
 
June 30, 2011
 
June 30, 2010*
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net increase (decrease) in net assets resulting from operations
$
1,177,414

 
$
(163,246
)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
 
 

Net realized gain from investments
(360,960
)
 

Net change in unrealized loss from hedging activities
702,158

 

       Amortization of deferred costs related to borrowing facility
103,545

 

Net increase in other assets and other investment
(1,302,956
)
 
(7,669
)
Net increase (decrease) in accounts payable, other accrued liabilities, and accrued management fees
(48,505
)
 
222,397

Origination of loans
(96,280,896
)
 
(625,000
)
Principal payments on loans
11,087,622

 
98,814

Acquisition of equity securities
(6,445,693
)
 
(85,132
)
Net cash used in operating activities
(91,368,271
)
 
(559,836
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Contribution from shareholder
67,000,000

 
10,000,000

  Borrowings under debt facility
50,000,000

 

Payment of bank facility fees and costs
(830,975
)
 

Net cash provided by financing activities
116,169,025

 
10,000,000

Net increase in cash and cash equivalents
24,800,754

 
9,440,164

CASH AND CASH EQUIVALENTS:
 
 
 
Beginning of period
5,240,446

 
25,000

End of period
$
30,041,200

 
$
9,465,164

SUPPLEMENTAL DISCLOSURES:
 
 
 
CASH PAID DURING THE PERIOD:
   

 
 
Interest
$
183,994

 
$

Settlement under interest rate swap agreement
$
42,988

 
$

NON-CASH ACTIVITIES:
   

 
 
Distributions of equity securities to shareholder
$
7,317,167

 
$
85,132

Receipt of equity securities as repayment of loans
$
17,719

 
$

Conversion of receivable to stock
$
1,595

 
$


* From June 29, 2010, commencement of operations, through June 30, 2010



See Notes to Condensed Financial Statements


6



VENTURE LENDING & LEASING VI, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.
ORGANIZATION AND OPERATIONS OF THE FUND

Venture Lending & Leasing VI, Inc. (the “Fund”), was incorporated in Maryland on January 11, 2010 as a nondiversified closed-end management investment company electing status as a business development company (“BDC”) under the Investment Company Act of 1940, as amended ("1940 Act") and is managed by Westech Investment Advisors, LLC, formerly known as Westech Investment Advisors, Inc. (“Manager” or “Management”). One hundred percent of the stock of the Fund is held by Venture Lending & Leasing VI, LLC (the “Company”).  Prior to commencing its operations on June 29, 2010, 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 January 2010.  This issuance of stock was a requirement in order to apply for a finance lender's license from the California Commissioner of Corporations, which was obtained on April 13, 2010.

In the Manager'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. Certain information and note disclosures normally included in audited annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted; however, the Fund believes that the disclosures made are adequate to make the information presented not misleading.The interim results for the three and six months ended June 30, 2011 are not necessarily indicative of what the results would be for a full year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Fund's Annual Report on Form 10-K for the period from June 29, 2010 to December 31, 2010.

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and money market funds in banks with maturities of 90 days or less.

Interest Income

Interest income on loans is recognized using the effective interest method including amounts from the amortization of discounts attributable to equity securities received as part of the loan transaction.  Additionally, fees received as part of the transaction are added to the loan discount and amortized over the life of the loan.

Valuation Procedures

The Fund accounts for loans at fair value in accordance with the “Valuation Methods” below.  All valuations are determined under the direction of the Manager, in accordance with these Methods.

The Fund's loans are valued in connection with the issuance of its periodic financial statements, the issuance or repurchase of the Fund's shares at a price equivalent to the current net asset value per share, and at such other times as

7



required by law.  On a quarterly basis, Management will submit to the Board of Directors (“Board”) a “Valuation Report,” which details the rationale for the valuation of investments.

Valuation Methods

As of June 30, 2011 and December 31, 2010, the financial statements include nonmarketable investments of $114,247,202 and $29,562,847 (or approximately 78% and 84% of total assets) with fair values determined by the Manager in the absence of readily determinable market values.  Because of the inherent uncertainty of these valuations, estimated fair values of such investments may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. Below is the information used by the Manager in making these estimates.

Fair value is the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants.  There is no secondary market for the loans; hence Management determines fair value based on hypothetical markets.  Venture loans are generally held to maturity and are recorded at estimated fair value.  Management determines whether to adjust the estimated fair value of a loan based on a number of factors, including but not limited to the borrower's payment history, available cash and “burn rate,” revenues, net income or loss, the likelihood that the borrower will be able to secure additional financing in the future, as well as an evaluation of the general interest rate environment.  The amount of any valuation adjustment is determined based upon a credit analysis of the borrower and an analysis of the expected recovery from the borrower, including consideration of factors such as the nature and quality of the Fund's security interests in collateral, the estimated value of the Fund's collateral, the size of the loan, and the estimated time that will elapse before the Fund achieves a recovery.   

Money market funds held as Cash and Cash Equivalents are valued at their most recently posted net asset value, if available, or at amortized cost, provided such amount is not materially different from quoted price.

Warrants and Stock

Warrants and stock that are received in connection with loan transactions generally will be assigned a fair value at the time of acquisition. These securities are then distributed by the Fund to the Company at the assigned value. Warrants are valued based on a modified Black-Scholes option pricing model which takes into account underlying stock value, expected term, volatility, and risk-free interest rate, among other factors.  

Nonaccrual Loans

The Fund's policy is to place a loan on nonaccrual status when the loan stops performing and Management deems that it is uncertain that the loan will return to performing status.  When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed for the quarter in which the loan was placed on nonaccrual status.  Any uncollected interest related to quarters prior to when the loan was placed on nonaccrual status is added to the principal balance, and the aggregate balance of the principal and interest is evaluated in accordance with the policy for valuation of loans in determining Management's best estimate of fair value.

No loans were classified as non-accrual as of June 30, 2011 and as of December 31, 2010.

Commitment Fees

Unearned income and commitment fees on loans are recognized using the effective interest method over the term of the loan. Commitment fees are carried as liabilities when received for commitments upon which no draws have been made. When the first draw is made, the fee is treated as unearned income and is recognized as described above.  If a draw is never made, the commitment fee less any applicable legal costs becomes recognized as other income after the commitment expires.



8



Interest Rate Swap Agreement

The Fund entered into an interest rate swap agreement to hedge its interest rate on its expected long term borrowings under its debt facility (see Note 7). The effect of the interest rate swap agreement is to convert a variable rate obligation into a fixed rate on the contract notional value. The purpose of the swap is to protect the Fund against rising interest rates on amounts that were borrowed. Unrealized gains and losses from hedging activities have been separately reported from unrealized gains and losses from investment activities and are included in net realized and unrealized gain (loss) from hedging activities in these financial statements. Also included in realized and unrealized gain (loss) from hedging activities is the net interest received or paid on the interest rate swap transactions . The fair value of the interest rate swap is recorded in accounts payable and other accrued liabilities in the Condensed Statement of Assets and Liabilities. The valuation of the swap agreement is based on future expected interest rates on the notional principal balance remaining which is comparable to what a prospective acquirer would pay on the measurement date.

Deferred Bank Fees

Through June 30, 2011, the deferred bank fees and costs associated with the debt facility have been allocated
over the estimated life of the facility, which was determined to be January 2014 (see Note 6).

Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board ( "FASB") issued Accounting Standards Update No. 2010-06 (“ASU 2010-06”), Improving Disclosures about Fair Value Measurements, which, among other things, amends Accounting Standard Codification ("ASC") 820, Fair Value Measurements ("ASC 820"), and requires additional disclosure related to recurring and nonrecurring fair value measurements with respect to transfers in and out of Levels 1 and 2 and requires entities to separately present purchases, sales, issuances, and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis). It also clarifies existing disclosure requirements provided by ASC 820 regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements (which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years). The adoption of ASU
2010-06 did not have a material impact on the Fund's financial statements.

On May 12, 2011, the FASB, together with the International Accounting Standards Board ("IASB"), jointly issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). ASU 2011-04 is intended to converge the definition of fair value between U.S. generally accepted accounting principles and International Financial Reporting Standards, and improves consistency of disclosures relating to fair value. The provisions of ASU 2011-04 are effective for public entities for reporting periods (including interim periods) beginning after December 15, 2011. The Fund is currently evaluating the impact this adoption will have on its financial statements.

Tax Status

As long as the Fund qualifies as a Regulated Investment Company ("RIC,") it will not pay any federal or state corporate income tax on income that is distributed to its shareholder (pass-through status).  Should the Fund not qualify as a RIC or lose its qualification as a RIC, it could be taxed as an ordinary corporation on its taxable income for that year (even if that income is distributed to its shareholder), and all distributions out of its earnings and profits would be taxable to its shareholder as ordinary income.  As of June 30, 2011 the Fund had no uncertain tax positions.

The Fund's tax years open to examination by major jurisdictions are 2010 and forward.

3.    SUMMARY OF INVESTMENTS

9




Loans generally are made to borrowers pursuant to commitments whereby the Fund agrees to finance assets and/or provide working or growth capital up to a specified amount for the term of the commitment, upon the terms and subject to the conditions specified by such commitment. As of June 30, 2011, the Fund's investments in loans are primarily to companies based within the United States and are diversified among borrowers in the industry segments shown below.  The percentage of 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).  

The Fund defines fair value as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date; that is, an exit price. The exit price assumes the asset or liability was exchanged in an orderly transaction; it was not a forced liquidation or distressed sale.

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 with the interest rate on each loan fixed at the time each loan is funded. Each loan drawn under a commitment may have a different maturity date and amount.  For the three and six months ended June 30, 2011, the weighted-average interest rate on the performing loans was 18.12% and 17.55%.  For the period from June 29, 2010, commencement of operations, through June 30, 2010, the weighted-average interest rate on the performing loan was 22.51%. 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 June 30, 2011 are to non-affiliates and consist of the following:

 
Percentage of
Estimated Fair
Par Value
Final
Borrower
Net Assets
Value 6/30/11
6/30/2011
Maturity Date
Biotechnology
 
 
 
 
Stem CentRx, Inc.
 
$
909,049

$
909,049

1/1/2014
Subtotal:
1%
$
909,049

$
909,049

 
 
 
 
 
 
Computers & Storage
 
 
 
 
D-Wave Systems, Inc.
 
$
795,501

$
795,501

1/1/2014
Nexenta Systems, Inc.
 
1,805,539

1,805,539

3/1/2014
Veloxum, Inc.
 
398,361

398,361

2/1/2014
Subtotal:
3.2%
$
2,999,401

$
2,999,401

 
 
 
 
 
 
Internet
 
 
 
 
Care2, Inc.
 
$
1,963,062

$
1,963,062

9/1/2014
CloudTalk, Inc.
 
135,770

135,770

10/1/2013
DisplayLink, Ltd.
 
1,136,701

1,136,701

6/1/2013
Experience Project, Inc.
 
937,926

937,926

4/1/2014
FanBridge, Inc.
 
450,658

450,658

6/1/2014
Ignighter, Inc.
 
456,933

456,933

6/1/2014
Insider Guides, Inc.
 
1,090,401

1,090,401

5/1/2014
Involver, Inc.
 
236,419

236,419

3/1/2013
Juice in the City, Inc.
 
324,502

324,502

2/1/2014
LOLapps, Inc.
 
933,589

933,589

1/1/2014
Mojo Motors, Inc.
 
293,588

293,588

6/1/2014
Philotic, Inc.
 
104,269

104,269

8/1/2013
Quantcast Corp.
 
6,011,502

6,011,502

4/1/2014

10



Rivet Games, Inc.
 
923,724

923,724

6/1/2014
ShopSocial, Inc.
 
456,000

456,000

5/1/2014
Sittercity, Inc.
 
1,860,519

1,860,519

2/1/2014
Topsy Labs, Inc.
 
554,403

554,403

6/1/2014
Totsy, Inc.
 
1,669,192

1,669,192

3/1/2014
Ustream, Inc.
 
3,532,046

3,532,046

1/1/2014
WeddingWire, Inc.
 
906,771

906,771

2/1/2014
Youku.com, Inc.
 
1,877,573

1,877,573

7/1/2013
Subtotal:
27.5%
$
25,855,548

$
25,855,548

 
 
 
 
 
 
Medical Devices
 
 
 
 
Bacterin International Holdings, Inc.
 
$
875,480

$
875,480

11/1/2013
C8 Medisensors, Inc.
 
2,280,192

2,280,192

4/1/2014
Cayenne Medical, Inc.
 
1,886,771

1,886,771

3/1/2014
Cellscape Corp.
 
461,621

461,621

6/1/2014
ConforMIS, Inc.
 
2,190,820

2,190,820

5/1/2014
CV Ingenuity Corp.
 
729,095

729,095

4/1/2014
Fluxion Biosciences, Inc.
 
1,378,733

1,378,733

12/1/2013
Oculus Innovative Sciences, Inc.
 
1,251,798

1,251,798

9/1/2014
PEAK Surgical, Inc.
 
632,866

632,866

12/1/2013
Spinal Kinetics, Inc.
 
1,334,903

1,334,903

10/1/2013
Xlumena, Inc.
 
1,060,223

1,060,223

5/1/2014
Subtotal:
15%
$
14,082,502

$
14,082,502

 
 
 
 
 
 
Other Healthcare
 
 
 
 
Health Guru Media, Inc.
 
$
1,807,041

$
1,807,041

10/1/2014
Quantia Communications, Inc.
 
3,670,730

3,670,730

9/1/2014
Wellfount, Inc.
 
1,338,115

1,338,115

5/1/2014
Subtotal:
7.3%
$
6,815,886

$
6,815,886

 
 
 
 
 
 
Other Technology
 
 
 
 
Berkeley Bionics, Inc.
 
$
887,980

$
887,980

4/1/2014
Coulomb Technologies, Inc.
 
1,120,705

1,120,705

6/1/2013
EcoSMART Technologies, Inc.
 
1,374,378

1,374,378

3/1/2014
eIQ Energy, Inc.
 
388,678

388,678

6/1/2013
Laurus Energy, Inc.
 
1,196,183

1,196,183

5/1/2014
Lehigh Technologies, Inc.
 
2,441,069

2,441,069

7/1/2014
PlantSense, Inc.
 
446,369

446,369

8/1/2013
Solaria Corp.
 
2,134,997

2,134,997

9/1/2014
Svaya Nanotechnologies, Inc.
 
173,006

173,006

6/1/2014
Thoughtful Media Group, Inc.
 
1,276,672

1,276,672

6/1/2014
ZeaChem, Inc.
 
3,926,095

3,926,095

7/1/2013
Subtotal:
16.4%
$
15,366,132

$
15,366,132

 
 
 
 
 
 
Software
 
 
 
 
AcousticEye, Ltd.
 
$
708,359

$
708,359

12/1/2013
Appconomy, Inc.
 
466,994

466,994

4/1/2014

11



ClearPath, Inc.
 
1,073,090

1,073,090

6/1/2014
Corduro, Inc.
 
404,715

404,715

12/1/2013
D Software Inc.
 
70,684

70,684

1/1/2013
EnPrecis, Inc.
 
112,846

112,846

11/1/2013
Gazillion, Inc.
 
1,037,881

1,037,881

4/1/2014
gloStream, Inc.
 
1,401,838

1,401,838

5/1/2014
Image Vision Labs, Inc.
 
231,540

231,540

3/1/2014
Innerworkings Holdings, Ltd.
 
447,351

447,351

2/1/2014
Innotas, Inc.
 
823,077

823,077

3/1/2014
Intalio, Inc.
 
1,460,732

1,460,732

2/1/2014
Kareo, Inc.
 
340,083

340,083

2/1/2014
KIT Digital, Inc.
 
14,383,453

14,383,453

7/1/2014
Knowledge Adventure, Inc.
 
2,719,448

2,719,448

4/1/2014
Krux Digital, Inc.
 
468,003

468,003

12/1/2013
Lending Stream, Ltd.
 
1,811,121

1,811,121

12/1/2014
Lex Machina, Inc.
 
432,272

432,272

4/1/2014
Medsphere Systems Corp.
 
2,688,249

2,688,249

6/1/2014
Palantir Technologies, Inc.
 
9,425,748

9,425,748

3/1/2014
Queplix Corp.
 
399,464

399,464

8/1/2013
RightsFlow, Inc.
 
942,228

942,228

3/1/2014
SoundHound, Inc.
 
870,833

870,833

9/1/2013
Validare, Inc.
 
207,538

207,538

10/1/2013
WebLink International, Inc.
 
539,633

539,633

4/1/2014
XOS Technologies, Inc.
 
2,382,743

2,382,743

7/1/2014
Yap, Inc.
 
615,953

615,953

9/1/2013
Subtotal:
49.4%
$
46,465,876

$
46,465,876

 
 
 
 
 
 
Technology Services
 
 
 
 
DigitalPath, Inc.
 
$
971,352

$
971,352

4/1/2014
Subtotal:
1%
$
971,352

$
971,352

 
 
 
 
 
 
Wireless
 
 
 
 
GPShopper, LLC
 
$
223,903

$
223,903

2/1/2014
July Systems, Inc.
 
557,553

557,553

9/1/2013
Subtotal:
0.8%
$
781,456

$
781,456

 
 
 
 
 
 
Total: (Cost of $114,247,202)
121.6%
$
114,247,202

$
114,247,202

 
No loans were classified as non-accrual as of June 30, 2011


12



Loans as of December 31, 2010 are to non-affiliates and consist of the following:

 
Percentage of
Estimated Fair
Par Value
Final
Borrower
Net Assets
Value 12/31/10
12/31/10
Maturity Date
Biotechnology
 
 
 
 
Stem CentRx, Inc.
 
$936,471
$936,471
1/1/14
Subtotal:
2.8%
$936,471
$936,471
 
 
 
 
 
 
Computers & Storage
 
 
 
 
D-Wave Systems, Inc.
 
$409,767
$409,767
11/1/13
Subtotal:
1.2%
$409,767
$409,767
 
 
 
 
 
 
Internet
 
 
 
 
DisplayLink, Ltd.
 
$1,343,240
$1,343,240
6/1/13
Insider Guides, Inc.
 
382,684
382,684
12/1/13
Involver, Inc.
 
285,660
285,660
3/1/13
LOLapps, Inc.
 
453,810
453,810
11/1/13
PeerPong, Inc.
 
469,871
469,871
6/1/13
Philotic, Inc.
 
122,626
122,626
8/1/13
Quantcast Corp.
 
2,548,249
2,548,249
1/1/14
Sittercity, Inc.
 
461,036
461,036
11/1/13
Ustream, Inc.
 
3,445,372
3,445,372
1/1/14
WeddingWire, Inc.
 
328,400
328,400
10/1/13
Youku.com, Inc.
 
2,232,573
2,232,573
7/1/13
Subtotal:
36.5%
$12,073,521
$12,073,521
 
 
 
 
 
 
Medical Devices
 
 
 
 
Bacterin International Holdings, Inc.
 
$814,518
$814,518
11/1/13
Spinal Kinetics, Inc.
 
1,504,677
1,504,677
10/1/13
Subtotal:
7.0%
$2,319,195
$2,319,195
 
 
 
 
 
 
Other Technology
 
 
 
 
Coulomb Technologies, Inc.
 
$545,028
$545,028
6/1/13
EcoSMART Technologies, Inc.
 
463,689
463,689
10/1/13
eIQ Energy, Inc.
 
461,842
461,842
6/1/13
PlantSense, Inc.
 
449,866
449,866
8/1/13
ZeaChem, Inc.
 
4,670,162
4,670,162
7/1/13
Subtotal:
19.9%
$6,590,587
$6,590,587
 
 
 
 
 
 
Semiconductors & Equipment
 
 
 
 
SiPort, Inc.
 
$576,853
$576,853
9/1/13
Subtotal:
1.7%
$576,853
$576,853
 
 
 
 
 
 
Software
 
 
 
 
AcousticEye, Ltd.
 
$702,614
$702,614
12/1/13
Corduro, Inc.
 
450,196
450,196
12/1/13

13



D Software Inc.
 
84,090
84,090
1/1/13
Gazillion, Inc.
 
941,348
941,348
11/1/13
Intalio, Inc.
 
790,343
790,343
9/1/13
Krux Digital, Inc.
 
455,793
455,793
12/1/13
Queplix Corp.
 
234,420
234,420
7/1/13
SoundHound, Inc.
 
458,933
458,933
9/1/13
Validare, Inc.
 
212,497
212,497
10/1/13
Yap, Inc.
 
690,576
690,576
9/1/13
Subtotal:
15.2%
$5,020,810
$5,020,810
 
 
 
 
 
 
Technology Services
 
 
 
 
DigitalPath, Inc.
 
$758,765
$758,765
10/1/13
Subtotal:
2.3%
$758,765
$758,765
 
 
 
 
 
 
Wireless
 
 
 
 
July Systems, Inc.
 
$626,878
$626,878
9/1/13
Subtotal:
1.9%
$626,878
$626,878
 
 
 
 
 
 
Total: (Cost of $29,312,847)
88.5%
$29,312,847
$29,312,847
 
No loans were classified as non-accrual as of December 31, 2010.

Valuation Hierarchy
 
The Fund categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Fund's valuation techniques. A level is assigned to each fair value measurement based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

Level 1
 
Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date.
Level 2
 
Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3
 
Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The Fund's cash equivalents were valued at the net asset value of the money market fund. As a result, these measurements are classified as Level 1. The valuation of the Fund's interest rate swap agreement is based on observable inputs for identical instruments in the market. As a result it is classified as a Level 2 liability.
The Fund uses estimated exit values when determining the value of its investments.  Because these transactions are individually negotiated and unique, and there is no market in which these assets trade, the inputs for these assets, which are discussed in the Valuation Methods listed above, are classified as Level 3.  


14



The following table presents the balances of assets as of June 30, 2011 measured at fair value on a recurring basis:

As of June 30, 2011
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Loans to borrowers
$

$

$
114,247,202

$
114,247,202

Other investment




Cash equivalents
30,041,200



30,041,200

Total
$
30,041,200

$

$
114,247,202

$
144,288,402

 
 
 
 
 
LIABILITIES
 
 
 
 
Interest Rate Swap Agreement
$

$
702,158

$

$

Total
$

$
702,158

$

$

As of December 31, 2010
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Loans to borrowers
$

$

$
29,312,847

$
29,312,847

Other investment


250,000

250,000

Cash equivalents
5,240,446



5,240,446

Total
$
5,240,446

$

$
29,562,847

$
34,803,293

 
 
 
 
 
LIABILITIES
 
 
 
 
Interest Rate Swap Agreement




Total





The following table provides a summary of changes in Level 3 assets measured at fair value on a recurring basis:

 
For the Three Months Ended
 
June 30, 2011
 
Loans to
borrowers
 
Warrants
 
Stock
Beginning balance
$
65,647,365

 
$

 
$

Acquisitions and originations
55,329,789

 
3,380,864

 
17,719

Principal reductions
(6,718,752
)
 

 

Distribution to shareholder

 
(3,380,864
)
 
(17,719
)
Conversion of note to stock

 

 

Conversion of receivable to stock

 

 

Net change in unrealized gain from investments
230,000

 

 

Net realized gain (loss) from investments
(241,200
)
 

 

Ending balance
$
114,247,202

 
$

 
$



15



 
For the Six Months Ended
 
June 30, 2011
 
Loans to
borrowers
 
Warrants
 
Stock
Beginning balance
$
29,312,847

 
$

 
$

Acquisitions and originations
96,280,896

 
6,445,693

 
17,719

Principal reductions
(11,105,341
)
 

 

Distribution to shareholder

 
(6,445,693
)
 
(871,474
)
Conversion of note to stock

 

 
250,000

Conversion of receivable to stock

 

 
1,595

Net realized gain (loss) from investments
(241,200
)
 

 
602,160

Ending balance
$
114,247,202

 
$

 
$


 
For the Period Ended
 
June 30, 2010
 
Loans to
borrowers
 
Warrants
 
Stock
Beginning balance
$

 
$

 
$

Acquisitions and originations
625,000

 
85,132

 

Principal reductions
(98,814
)
 

 

Distribution to shareholder

 
(85,132
)
 

Ending balance
$
526,186

 
$

 
$


4.    EARNINGS PER SHARE

Basic earnings per share are computed by dividing net decrease in net assets resulting from operations by the weighted average common shares outstanding.  Diluted earnings per share are computed by dividing net decrease in net assets resulting from operations by the weighted average common shares outstanding, including the dilutive effects of potential common shares (e.g., stock options).  The Fund has no instruments that would be potential common shares; thus, reported basic and diluted earnings per share are the same.

5.    CAPITAL STOCK

As of June 30, 2011, there were 10,000,000 shares of $0.001 par value common stock authorized, and 100,000 shares issued and outstanding.  Total committed capital of the Company, as of June 30, 2011 is $294.0 million.  Total contributed capital to the Company through June 30, 2011 was $117.6 million, of which $106.0 million was contributed to the Fund.  

The chart below shows the distributions of the Fund for the six months ended June 30, 2011 and the period ended June 30, 2010.

16



 
For the Six Months Ended
 
For the Period Ended
 
June 30, 2011
 
June 30, 2010
Cash distributions
$

 
$

Distributions of equity securities
7,317,167

 
85,132

 
 
 
 
Total distributions to shareholder
$
7,317,167

 
$
85,132


Final classification of the distributions as either a return of capital or a distribution of income is an annual determination made at the end of each year dependent upon the Fund's current year and cumulative earnings and profits.

6. DEBT FACILITY

On January 14, 2011, the Fund entered into agreements with Union Bank, N.A. that established a secured revolving loan facility in an initial amount of up to $40 million. The Fund has the option to request that lenders providing such facility increase the borrowing availability thereunder to no more than $125 million in the aggregate, as commitments may be obtained, however, the lenders are under no obligation to do so. Additional fees would be required to be paid in order to upsize the facility. Loans under the facility may be, at the option of the Fund, either Reference Rate loans (as defined in the agreement) or LIBOR loans. The Fund will pay interest on its borrowings and will also pay a fee on the unused portion of the facility. The facility will terminate on January 14, 2014, but can be accelerated under an event of default such as failure by the Fund to make timely interest or principal payments.

Borrowings under this facility are collateralized by receivables under loans advanced by the Fund with assignment to the financial institution, plus other assets of the Fund. The amortization schedule for each borrowing under the facility is expected to correspond to the amortization of the loans supporting each borrowing. The Fund pays a commitment fee of 0.325 percent (annual fee paid quarterly) based on the total commitment related to the facility.

Bank fees of $500,000 were incurred in connection with initially procuring the facility. The bank fees and other costs incurred have been capitalized and are being amortized to interest expense on a straight line basis over the expected life of the facility (January 2014).

The facility is revolving and as such does not have a specified repayment schedule, though advances are secured by the assets of the Fund and thus repayments will be required as assets decline.

The facility contains various covenants including financial covenants related to: (i) Debt to Net Worth Ratio, (ii Minimum Debt Service Coverage Ratio, (iii) Interest Coverage Ratio, (iv) Asset Coverage, (v) Asset Coverage Under Investment Company Act, (vi) Maximum Loan Loss Reserves, and (vii) Unfunded Commitment Ratio.

There are also various restrictive covenants, including limitations on (i) the incurrence of liens, (ii) consolidations, mergers and asset sales, and (iii) capital expenditures. As of June 30, 2011, the Fund was in compliance with these covenants.

On May 26, 2011, the Fund increased the size of the amount available under the debt facility to $60 million. An additional $250,000 in bank fees were incurred in connection with the increase. The bank fees have been capitalized and are being amortized on a straight line basis over the expected life of the facility (January 2014). As of June 30, 2011, the Fund has a balance of $50.0 million under the facility.

The following is the summary of the outstanding facility draws as of June 30, 2011:

17



Draw Date
Amount
Maturity Date
Interest Rate
January 19, 2011
$
8,000,000

7/20/2011
3.03%
February 3, 2011
$
12,000,000

7/20/2011
3.02%
May 12, 2011
$
20,000,000

7/20/2011
2.99%
June 1, 2011
$
10,000,000

7/20/2011
2.98%
TOTAL OUTSTANDING
$
50,000,000

 
 

7. INTEREST RATE SWAP AGREEMENT

On February 18, 2011, the Fund entered an interest rate swap transaction with Union Bank, N.A.with a notional principal amount of $20 million, to convert floating rate liabilities to fixed rates. The purpose of the interest rate swap agreement is to protect the Fund against rising interest rates. On May 23, 2011, the notional principal amount was increased to $50 million. The Fund pays a fixed rate of 1.42 percent and receives from the counterparty a floating rate based on 90-day LIBOR. Payments are made quarterly and will terminate on January 14, 2014. As of June 30, 2011, the fair value of the interest rate swap was $(0.7) million and is recorded as accounts payable and other accrued liabilities in the Condensed Statement of Assets and Liabilities.

8. OTHER INVESTMENT

On September 30, 2010, the Fund acquired a convertible note in Stem Centrx, LLC for $250,000. As of December 31, 2010, the fair value of the convertible note was determined to be $250,000 based on the estimated value of the shares of stock into which the note will convert, and the amount recorded as Other Assets in the Statement of Assets and Liabilities included the accrued interest on the note of $1,595. On March 11, 2011, the note and its accrued interest were converted into series C preferred shares of stock in Stem Centrx, LLC, and was distributed to the Fund's shareholder.

9.  FINANCIAL HIGHLIGHTS

Accounting principles generally accepted in the United States of America require disclosure of financial highlights of the Fund for the periods presented.  The total rate of return is defined as the return based on the change in value during the period of a theoretical investment made at the beginning of the period.  The total rate of return assumes a constant rate of return for the Fund during the period reported and weights each cash flow by the amount of time held in the Fund.  This required methodology differs from an internal rate of return.

The ratios of expenses and net investment income to average net assets, calculated below, are annualized for the three and six months ended June 30, 2011 only and are computed based upon the aggregate weighted average net assets of the Fund for the periods presented.  Net investment income is inclusive of all investment income net of expenses, and excludes realized or unrealized gains and losses.

Beginning and ending net asset values per share are based on the beginning and ending number of shares outstanding.
Other per share information is calculated based upon the aggregate weighted average net assets of the Fund for the periods presented.


18



The following per share data and ratios have been derived from the information provided in the financial statements.

 
For the Three Months Ended
 
For the Period Ended
 
For the Six Months Ended
 
For the Period Ended
 
June 30, 2011
 
June 30, 2010
 
June 30, 2011
 
June 30, 2010
 
 
 
 
 
 
 
 
Total return*
7.63
%
 
(1.64
)%
 
3.20
%
 
(1.64
)%
 
 
 
 
 
 
 
 
Per share amounts:
 
 
 
 
 
 
 
   Net asset value, beginning of period
$
400.79

 
$
0.25

 
$
331.07

 
$
0.25

   Net investment income (loss)
18.54

 
(1.63
)
 
15.62

 
(1.63
)
   Net change in unrealized and realized gain from investments
(5.67
)
 

 
(3.84
)
 

   Net increase (decrease) in net assets from operations
12.87

 
(1.63
)
 
11.78

 
(1.63
)
   Capital contributions
560.00

 
100.00

 
670.00

 
100.00

   Income distribution to shareholder
(18.80
)
 

 
(18.80
)
 

   Return of capital to shareholder
(15.19
)
 
(0.85
)
 
(54.38
)
 
(0.85
)
 
 

 
 
 
 
 
 
Net asset value, end of period
$
939.67

 
$
97.77

 
$
939.67

 
$
97.77

 
 

 
 
 
 
 
 
Net assets, end of period
$
93,966,787

 
$
9,776,622

 
$
93,966,787

 
$
9,776,622

 
 
 
 
 
 
 
 
Ratios to average net assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses*
13.03
%
 
1.66
 %
 
16.35
%
 
1.66
 %
Net investment income (loss)*
10.94
%
 
(1.65
)%
 
5.97
%
 
(1.65
)%
* Annualized for the three and six months ended June 30, 2011


19



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

The information in this Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the securities laws.  These forward-looking statements reflect the current view of Venture Lending & Leasing VI, Inc. (the “Fund”) with respect to future events and financial performance and are subject to a number of risks and uncertainties, many of which are beyond the Fund's control.  All statements, other than statements of historical facts included in this report, regarding the strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of the Fund are forward-looking statements.  When used in this report, the words “will”, “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  All forward-looking statements speak only as of the date of this report.  The Fund does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

General

The Fund is 100% owned by Venture Lending & Leasing VI, LLC (the “Company”).  The Fund's shares of Common Stock, $.001 par value were sold to its shareholder under a stock purchase agreement.  The Fund has issued 100,000 of the Fund's 10,000,000 authorized shares.  The Fund's shareholder may make additional capital contributions to the Fund.

In addition to the historical information contained herein, this Quarterly Report on Form 10-Q contains certain forward-looking statements.  The reader of this Quarterly Report should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome.  The Fund's actual results could differ materially from those suggested by such forward-looking statements.  Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, loan losses, expenses, rates charged on loans and earned on securities investments and competition.  This entire Quarterly Report should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Fund's business.

Overview

The Fund is a financial services company primarily providing financing and advisory services to a variety of carefully selected venture-backed companies primarily located throughout the United States with a focus on growth oriented companies.  The Fund's portfolio is expected to become well diversified and consists of companies in the communications, information services, media, and technology, including software and technology-enabled business services, bio-technology, and medical devices industry sectors, among others.  The Fund's capital is generally used by our portfolio companies to finance acquisitions of fixed assets and/or for working capital.  On June 29, 2010, the Fund completed its first closing of capital contributions, made its first investments, and became a non-diversified, closed-end investment company that elected to be treated as a business development company under the Investment Company Act of 1940.  The Fund elected to be treated for federal income tax purposes as a regulated investment company (“RIC”) under the Internal Revenue Code with the filing of its federal corporate income tax return for either 2010 .  Pursuant to this election, the Fund generally will not have to pay corporate-level taxes on any income it distributes to the stockholder as dividends, allowing the Fund's shareholder to substantially reduce or eliminate its corporate-level tax liability.

The Fund will seek to meet the ongoing requirements, including the diversification requirements, to qualify as a RIC under the Internal Revenue Code.  If the Fund fails to meet these requirements, it would be taxed as an ordinary corporation on its taxable income for that year (even if that income were distributed to the Company) and all distributions out of its earnings and profits would be taxable to the Members of the Company as ordinary income; thus, such income will be subject to a double layer of tax.  There is no assurance that the Fund will meet the ongoing requirements to qualify as a RIC for tax purposes.

The Fund's investment objective is to achieve a superior risk adjusted investment returns.  The Fund seeks to

20



achieve its investment objective by providing debt financing to portfolio companies.  Since inception, the Fund's investing activities have focused primarily on private debt securities.  The Fund generally receives warrants to acquire equity securities in connection with its portfolio investments.  The Fund generally distributes these warrants to its shareholder upon receipt.  The Fund also has guidelines for the percentages of total assets which will be invested in different types of assets.

The portfolio investments of the Fund will primarily consist of debt financing to venture capital backed technology companies.  The borrower's ability to repay its loans may be adversely impacted by a number of factors, and as a result, the loan may not fully be repaid.  Furthermore, the Fund's security interest in any collateral over the borrower's assets may be insufficient to make up any shortfall in payments.
 
Critical Accounting Policies

We identified and determined the most critical accounting principles upon which our financial statements depend by considering accounting policies that involve the most complex or subjective decisions or assessments.  Such critical accounting policies relate to the valuation of loans and treatment of non-accrual loans.  

Loans are held at estimated fair value as determined by Management, in accordance with the valuation methods described in the valuation of loans section of Note 2 of the Fund's financial statements (Summary of Significant Accounting Policies).  Critical factors in determining the fair value of a loan include payment history, collateral position, financial strength of the borrower, prospects for the borrower's raising future equity rounds, likelihood of sale or acquisition of the borrower, and length of expected holding period of the loan, as well as an evaluation of the general interest rate environment.  The actual value of the loans may differ from Management's estimates, which would affect net income as well as assets.

Results of Operations -For the three and six months ended June 30, 2011 and for the period ended June 30, 2010

Total investment income for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010 was $4.1 million and less than $0.1 million, respectively which primarily consisted of interest on the venture loans outstanding. Total investment income for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010 was $5.8 million and less than $0.1 million, respectively which primarily consisted of interest on the venture loans outstanding. The remaining income consisted of interest and dividends on the temporary investment of cash and forfeited commitment fees. The increase was primarily due to the increase in the average loan outstanding from $0.1 million for the period from June 29, 2010, commencement of operations, through June 30, 2010 to $89.5 million for the three months ended June 30, 2011; and from less than $0.1 million for the period from June 29, 2010, commencement of operations, through June 30, 2010 to $66.4 million for the six months ended June 30, 2011. This was partially offset by the decrease in the average interest rates from 22.51% for the period from June 29, 2010, commencement of operations, through June 30, 2010 to 18.12% for the three months ended June 30, 2011; and 22.51% for the period from June 29, 2010, commencement of operations, through June 30, 2010 to 17.55% for the six months ended June 30, 2011. 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 (if any).

Management fees for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010 were $1.8 million and less than $0.1 million. Management fees for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010 were $3.7 million and less than $0.1 million. Management fees are calculated as 2.5 percent of the committed capital of the Company. The difference between the periods is due to the shorter time period for the partial period in fiscal year 2010.

Total interest expense was $0.3 million and $0 for the three months ended June 30, 2011 and for the period

21



from June 29, 2010, commencement of operations, through June 30, 2010, respectively. Total interest expense was $0.5 million and $0 for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively. The Fund entered into agreements with Union Bank, N.A. that established a secured revolving loan facility on January 14, 2011. There was no loan facility during 2010.

The banking and professional fees was less than $0.1 million for the three and six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively. The banking and professional fees was comprised of legal, audit, banking and other professional fees.

Total other operating expenses for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, was less than $0.1 million. Total other operating expenses for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, was less than $0.1 million, respectively.

Net investment income (loss) for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, was $1.9 million and $(0.2) million, respectively. Net investment income (loss) for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010 was $1.6 million and $(0.2) million, respectively.

Total net realized loss from investments was $0.2 million and $0 for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively. Total net realized gain from investments was $0.4 million and $0 for the six months ended June 30, 2011, respectively.

Net change in unrealized gain from investments was $0.2 million and $0 for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively. Net change in unrealized loss from investments was $0 for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively.  The unrealized loss consists of fair market value adjustment taken against loans.  

Net change in realized and unrealized loss from hedging activities was $0.6 million and $0 for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively.   Net change in realized and unrealized loss from hedging activities was $0.7 million and $0 for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively. The realized and unrealized loss consist of the unrealized losses from hedging activities and the net interest received or paid on the interest rate swap transaction. The Fund entered an interest rate swap transaction with Union Bank, N.A to convert floating rate liabilities to fixed rates on February 18, 2011. There was no swap transaction during 2010.

Net increase (decrease) in net assets resulting from operations for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010 was $1.3 million and $(0.2) million, respectively. On a per share basis, the net decrease in net assets resulting from operations was $12.86 and $(1.63) for the three months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively. Net increase (decrease) in net assets resulting from operations for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010,was $1.2 million and $(0.2) million, respectively. On a per share basis, the net decrease in net assets resulting from operations was $11.77 and $(1.63) for the six months ended June 30, 2011 and for the period from June 29, 2010, commencement of operations, through June 30, 2010, respectively.

Liquidity and Capital Resources – June 30, 2011 and December 31, 2010

Total capital contributed to the Fund was $106.0 million as of June 30, 2011. Committed capital to the Company at June 30, 2011 was $294.0 million, of which $117.6 million has been called.  The remaining $176.4 million in committed capital as of June 30, 2011 is due to expire in June 2015 as the five year anniversary will have

22



passed, at which time no further capital can be called.

On January 14, 2011, the Fund entered into agreements with Union Bank, N.A. that established a secured revolving loan facility in an initial amount of up to $40 million. The Fund has the option to request that lenders providing such facility increase the borrowing availability thereunder to no more than $125 million in the aggregate, as commitments may be obtained, however, the lenders are under no obligation to do so. Additional fees would be required to be paid in order to upsize the facility. Loans under the facility may be, at the option of the Fund, either Reference Rate loans (as defined in the agreement) or LIBOR loans. The Fund will pay interest on its borrowings and will also pay a fee on the unused portion of the facility. On May 26, 2011, the Fund increased the size of the amount available under the debt facility to $60 million. The facility will terminate on January 14, 2014, but can be accelerated under an event of default such as failure by the Fund to make timely interest or principal payments. As of June 30, 2011, the Fund has a balance of $50.0 million under the facility.

As of June 30, 2011 and December 31, 2010, 20.5% and 14.8%, respectively, of the Fund's assets consisted of cash and cash equivalents.  The Fund invested its assets in venture loans during the six months ended June 30, 2011. Amounts disbursed under the Fund's loan commitments totaled approximately $96.3 million during the six months ended June 30, 2011.  Net loan amounts outstanding after amortization and fair market adjustment increased by approximately $84.9 million for the same period.  Unexpired, unfunded commitments totaled approximately $41.7 million as of June 30, 2011.

As of
Cumulative Amount
Disbursed
Principal
Reductions and Fair
Market Adjustments
Balance
Outstanding - Fair
Value
Unexpired
Unfunded
Commitments
June 30, 2011
$128.9 million
$14.7 million
$114.2 million
$41.7 million
December 31, 2010
$32.6 million
$3.3 million
$29.3 million
$37.5 million

Venture loans are privately negotiated transactions.  Investments in these assets are relatively illiquid.  It is the Fund's experience that not all unfunded commitments will be used by borrowers.

The Fund seeks to meet the requirements to qualify for the special pass-through status available to RICs under the Internal Revenue Code, and thus to be relieved of federal income tax on that part of its net investment income and realized capital gains that it distributes to its shareholder.  To qualify as a RIC, the Fund must distribute to its shareholder for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income and net short-term capital gain) (“Distribution Requirement”).  To the extent that the terms of the Fund's venture loans provide for the receipt by the Fund of additional interest at the end of the loan term or provide for the receipt by the Fund of a purchase price for the asset at the end of the loan term (“residual income”), the Fund would be required to accrue such residual income over the life of the loan, and to include such accrued income in its gross income for each taxable year even if it receives no portion of such residual income in that year.  Thus, in order to meet the Distribution Requirement and avoid payment of income taxes or an excise tax on undistributed income, the Fund may be required in a particular year to distribute as a dividend an amount in excess of the total amount of income it actually receives.  Those distributions will be made from the Fund's cash assets, from amounts received through amortization of loans or from borrowed funds.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Fund's business activities contain elements of risk.  The Fund considers the principal types of market risk to be interest rate risk and credit risk.  The Fund considers the management of risk essential to conducting its business and to maintaining profitability.  Accordingly, the Fund's risk management procedures are designed to identify and analyze the Fund's risks, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.  

The Fund anticipates managing its credit risk by maintaining a portfolio that is diverse by industry, size of investment, stage of development, and borrower.  The Fund has limited exposure to public market price fluctuations

23



as the Fund primarily invests in private business enterprises and the Fund generally distributes all equity securities upon receipt to the Company.

The Fund's sensitivity to changes in interest rates is regularly monitored and analyzed by measuring the characteristics of assets and liabilities.  The Fund utilizes various methods to assess interest rate risk in terms of the potential effect on interest income net of interest expense, the value of net assets and the value at risk in an effort to ensure that the Fund is insulated from any significant adverse effects from changes in interest rates.  

Based on the model used for the sensitivity of interest income net of interest expense, if the balance sheet were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 100 basis point change in interest rates would have affected net income by less than $0.1 million.  This translates to less than 1% of net income for the six months ended June 30, 2011.  Although Management believes that this measure is indicative of the Fund's sensitivity to interest rate changes, it makes estimates to adjust for potential changes in credit quality, size and composition of the balance sheet and other business developments that could affect net income.  Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by these estimates.

Item 4.  Controls and Procedures:


Evaluation of Disclosure Controls and Procedures:

As of the end of the period covered by this quarterly report on Form 10-Q, the Fund's chief executive officer and chief financial officer conducted an evaluation of the Fund's disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934).  Based upon this evaluation, the Fund's chief executive officer and chief financial officer concluded that the Fund's disclosure controls and procedures were effective in timely alerting them of any material information relating to the Fund that is required to be disclosed by the Fund in the reports it files or submits under the Securities Exchange Act of 1934.

Changes in Internal Controls:

There were no changes in the Fund's internal controls or in other factors that could materially affect these controls during the period covered by this quarterly report on Form 10-Q.

PART II OTHER INFORMATION

Item 1.  Legal Proceedings

The Fund may become party to certain lawsuits from time to time in the normal course of business.  While the outcome of these legal proceedings cannot at this time be predicted with certainty, the Fund does not expect these proceedings will have a material effect upon the Fund's financial condition or results of operation. Management is not aware of any pending legal proceedings involving the Fund.  


Item 1A. Risk Factors

See item 1A - 'Risk Factors' in the Fund's 2010 Annual Report on Form 10-K for a detailed description of the risks attendant to the Fund and its business.


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

Prior to the Fund's commencement of operations on June 29, 2010, the Fund sold 100,000 shares to the Fund's sole shareholder, Venture Lending & Leasing VI, LLC for $25,000 in January 2010.  No other shares of the Fund have been sold; however, the Fund received an additional $106.0 million of paid in capital during the period from

24



June 29, 2010 through June 30, 2011 which is expected to be used to acquire venture loans and fund operations.

Item 3.  Defaults Upon Senior Securities

Not applicable

Item 4. Removed and Reserved

None

Item 5.  Other Information

None

Item 6.  Exhibits

Exhibit Number
Description
3(i)
Articles of Incorporation of the Fund as filed with the Maryland Secretary of State on January 11, 2010, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
3(ii)
Bylaws of the Fund, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
4.1
Form of Purchase Agreement between the Fund and the Company, incorporated by reference to the Fund's Registration Statement on Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
31.1-32.2
Certifications pursuant to The Sarbanes-Oxley Act of 2002.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

VENTURE LENDING & LEASING VI, INC.
(Registrant)

By:
/S/ Maurice C. Werdegar
By:
/S/ Martin D. Eng
Maurice C. Werdegar
Martin D. Eng
President and Chief Executive Officer
Chief Financial Officer
Date:
August 11, 2011
Date:
August 11, 2011


26



EXHIBIT INDEX

Exhibit Number
Description
3(i)
Articles of Incorporation of the Fund as filed with the Maryland Secretary of State on January 11, 2010, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
3(ii)
Bylaws of the Fund, incorporated by reference to the Fund's Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
4.1
Form of Purchase Agreement between the Fund and the Company, incorporated by reference to the Fund's Registration Statement on Form 10 filed with the Securities and Exchange Commission on February 9, 2010.
31.1-32.2
Certifications pursuant to The Sarbanes-Oxley Act of 2002.


27



Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14

I, Martin D. Eng, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Venture Lending & Leasing VI, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2011

/S/ Martin D. Eng
Martin D. Eng
Chief Financial Officer


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Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14

I, Maurice C. Werdegar, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Venture Lending & Leasing VI, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2011

/S/ Maurice C. Werdegar
Maurice C. Werdegar
Chief Executive Officer                  


29



Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Venture Lending & Leasing VI, Inc. (the "Fund") on Form 10-Q for the period ending June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Maurice C. Werdegar, Chief Executive Officer of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Fund.



/S/ Maurice C. Werdegar
Maurice C. Werdegar
Chief Executive Officer
August 11, 2011


30



Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Venture Lending & Leasing VI, Inc. (the "Fund") on Form 10-Q for the period ending June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Martin D. Eng, Chief Financial Officer of the Fund, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Fund.


 
/S/ Martin D. Eng
Martin D. Eng
Chief Financial Officer
August 11, 2011





31