Venture Lending & Leasing VIII 10Q 2023 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


[X]			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


[ ]			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 814-01162

Venture Lending & Leasing VIII, Inc.

(Exact Name of Registrant as specified in its charter)


Maryland			47-3919702
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

104 La Mesa Drive, Suite 102, Portola Valley, CA			94028
(Address of principal executive offices)			(Zip Code)

(650) 234-4300

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” "smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer [x]	Smaller reporting company [ ]
Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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 May 11, 2023
Common Stock, $0.001 par value						100,000

VENTURE LENDING & LEASING VIII, INC.

INDEX


PART I — FINANCIAL INFORMATION

Item 1.			Financial Statements

			Condensed Statements of Assets and Liabilities (Unaudited)
			As of March 31, 2023 and December 31, 2022

			Condensed Statements of Operations (Unaudited)
			For the three months ended March 31, 2023 and 2022

			Condensed Statements of Changes in Net Assets (Unaudited)
			For the three months ended March 31, 2023 and 2022

			Condensed Statements of Cash Flows (Unaudited)
			For the three months ended March 31, 2023 and 2022

			Condensed Schedules of Investments (Unaudited)
			As of March 31, 2023 and December 31, 2022

			Notes to Condensed Financial Statements (Unaudited)

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

Item 3.			Quantitative 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.			Mine Safety Disclosures

Item 5.			Other Information

Item 6.			Exhibits

SIGNATURES

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VENTURE LENDING & LEASING VIII, INC.

CONDENSED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022


	March 31, 2023		December 31, 2022
ASSETS
Loans, at estimated fair value
(cost of $45,229,261 and $58,117,583)	$	23,810,122	$	36,183,136

Cash and cash equivalents	17,137,362		3,225,492
Dividend and interest receivables	304,088		405,908
Other assets	158,612		717,354

Total assets	41,410,184		40,531,890

LIABILITIES

Accrued management fees	$	258,814	$	253,324

Accounts payable and other accrued liabilities	376,985		284,808
Total liabilities	635,799		538,132

NET ASSETS	$	40,774,385	$	39,993,758

Analysis of Net Assets:

Capital paid in on shares of capital stock	$	356,075,000	$	356,075,000
Cumulative return of capital distributions	(289,612,560)		(289,612,560)
Total distributable losses	(25,688,055)		(26,468,682)


Net assets (equivalent to $407.74 and $399.94 per share based on 100,000 shares of capital stock outstanding - See Note 5 and Note 10)	$	40,774,385	$	39,993,758

See notes to condensed financial statements (unaudited).

VENTURE LENDING & LEASING VIII, INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022


	For the Three Months Ended March 31, 2023		For the Three Months Ended March 31, 2022

INVESTMENT INCOME:
Interest on loans	$	1,303,612	$	5,182,213
Other income	125,757		575
Total investment income	1,429,369		5,182,788

EXPENSES:
Management fees	258,814		599,000

Interest expense	—		416,199
Banking and professional fees	162,097		571,280
Other operating expenses	33,912		22,754
Total expenses	454,823		1,609,233
Net investment income	974,546		3,573,555

Net realized loss from loans	(661,341)		(629,940)
Net realized loss from derivative instruments	—		(7,107)
Net change in unrealized gain from loans	515,307		2,388,532
Net change in unrealized gain from derivative instruments	—		67,317
Net realized and change in unrealized gain (loss) from loans and derivative instruments	(146,034)		1,818,802
Net increase in net assets resulting from operations	$	828,512	$	5,392,357

Amounts per common share:
Net increase in net assets resulting from operations per share	$	8.29	$	53.92
Weighted average shares outstanding	100,000		100,000

See notes to condensed financial statements (unaudited).

VENTURE LENDING & LEASING VIII, INC.

CONDENSED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022


	Common Stock
	Shares	Par value		Additional Paid-in-Capital		Return of Capital Distributions		Total Distributable Loss		Net assets
Balance at December 31, 2021	100,000	$	100	$	356,074,900	$	(263,033,898)	$	(27,649,765)	$	65,391,337
Net increase in net assets resulting from operations	—	—		—				5,392,357		5,392,357
Distributions of income to shareholder	—	—		—				(2,123,021)		(2,123,021)



Balance at March 31, 2022	100,000	$	100	$	356,074,900	$	(263,033,898)	$	(24,380,429)	$	68,660,673

Balance at December 31, 2022	100,000	$	100	$	356,074,900	$	(289,612,560)	$	(26,468,682)	$	39,993,758
Net increase in net assets resulting from operations	—	—		—		—		828,512		828,512
Distributions of income to shareholder	—	—		—		—		(47,885)		(47,885)




Balance at March 31, 2023	100,000	$	100	$	356,074,900	$	(289,612,560)	$	(25,688,055)	$	40,774,385

See notes to condensed financial statements (unaudited).

VENTURE LENDING & LEASING VIII, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022


	For the Three Months Ended		For the Three Months Ended
	March 31, 2023		March 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations	$	828,512	$	5,392,357
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:
Net realized loss from loans	661,341		629,940
Net realized loss from derivative instruments	—		7,107
Net change in unrealized gain from loans	(515,307)		(2,388,532)
Net change in unrealized gain from derivative instruments	—		(67,317)

Amortization of deferred costs related to borrowing facility	—		136,812

Principal payments on loans, net of accretion	12,179,095		18,483,613



Change in operating assets and liabilities:
Net decrease in dividend and interest receivables	101,820		241,638
Net (increase) decrease in other assets	558,742		(573,697)
Net increase (decrease) in accounts payable, other accrued liabilities and accrued management fees	97,667		(136,995)
Net cash provided by operating activities	13,911,870		21,724,926

CASH FLOWS FROM FINANCING ACTIVITIES:



Repayments of borrowings under debt facility	—		(21,000,000)

Payments made for derivative instruments	—		(7,107)


Net cash used in financing activities	—		(21,007,107)

Net increase in cash and cash equivalents	13,911,870		717,819

CASH AND CASH EQUIVALENTS:
Beginning of period	3,225,492		2,815,756
End of period	$	17,137,362	$	3,533,575

SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE PERIOD
Interest - Debt facility	$	—	$	313,188
NON-CASH OPERATING AND FINANCING ACTIVITIES:
Distributions of equity securities to shareholder	$	47,885	$	2,123,021
Receipt of equity securities as repayment of loans	$	47,885	$	2,123,021

See notes to condensed financial statements (unaudited).

VENTURE LENDING & LEASING VIII, INC.

CONDENSED SCHEDULE OF INVESTMENTS (UNAUDITED)

AS OF MARCH 31, 2023


Industry	Borrower	Percent of Net Assets (a)	Collateral	Interest Rate (b)	End of Term Payment (c)	Principal		Cost		Fair Value (d)		Final Maturity Date
Biotechnology
	Driver Bioengineering, Inc.		Senior Secured	11.0%		$	14,087	$	13,968	$	13,968	4/1/2023
	Driver Bioengineering, Inc.		Senior Secured	11.0%		97,718		97,453		97,453		6/1/2023
	Driver Bioengineering, Inc. Subtotal					111,805		111,421		111,421
	Orpheus Therapeutics, Inc.		Senior Secured	18.0%		178,510		174,288		—		*
	Quartzy, Inc.		Senior Secured	12.0%		516,732		512,508		512,508		5/1/2024
	Quartzy, Inc.		Senior Secured	12.0%		584,935		579,499		579,499		7/1/2024
	Quartzy, Inc.		Senior Secured	12.0%		128,597		125,930		125,930		8/1/2023
	Quartzy, Inc. Subtotal					1,230,264		1,217,937		1,217,937
Biotechnology Total		3.3%				$	1,520,579	$	1,503,646	$	1,329,358

Internet
	Ainsly, Inc. ** ^		Senior Secured	12.5%		$	55,783	$	54,328	$	54,328	9/1/2023
	Daily Muse, Inc.		Senior Secured	11.0%		2,686,248		2,681,606		2,681,606		12/1/2024
	Lenddo International ** ^		Senior Secured	18.0%		545,048		544,703		—		*
	OneLocal, Inc. ** ^		Senior Secured	12.3%		431,713		383,774		383,774		1/1/2025
	RenoFi, Inc.		Senior Secured	12.0%		28,196		28,117		28,117		6/1/2023
	RenoFi, Inc.		Senior Secured	12.0%		28,181		27,933		27,933		6/1/2023
	RenoFi, Inc. Subtotal					56,377		56,050		56,050
	Residently USA, LLC ** ^		Senior Secured	12.0%		429,014		404,421		324,954		9/1/2024
	Serface Care, Inc.		Senior Secured	12.3%		597,411		344,785		—		*
	Stay Alfred, Inc.		Senior Secured	18.0%		8,664,902		6,579,267		389,238		*
	Verishop, Inc.		Senior Secured	12.0%		1,743,750		1,727,529		1,727,529		12/1/2024
Internet Total		13.8%				$	15,210,246	$	12,776,463	$	5,617,479

Medical Devices
	CytoVale, Inc.		Senior Secured	12.0%		334,805		332,487		332,487		1/1/2024
	Medrobotics Corporation, Inc.		Senior Secured	18.0%		10,000,000		8,895,103		—		*
Medical Devices Total		0.8%				$	10,334,805	$	9,227,590	$	332,487

Other Healthcare
	GoForward, Inc.		Senior Secured	11.5%		$	1,381,181	$	1,360,467	$	1,360,467	9/1/2023
	GoForward, Inc.		Senior Secured	11.5%		1,656,049		1,640,515		1,640,515		6/1/2024
	GoForward, Inc. Subtotal					3,037,230		3,000,982		3,000,982


Industry	Borrower	Percent of Net Assets (a)	Collateral	Interest Rate (b)	End of Term Payment (c)	Principal		Cost		Fair Value (d)		Final Maturity Date
	Hello Heart Inc.		Senior Secured	11.0%		218,266		217,389		217,389		11/1/2023
	Hello Heart Inc.		Senior Secured	11.0%		37,556		37,519		37,519		4/1/2023
	Hello Heart Inc.		Senior Secured	11.0%		46,932		46,785		46,785		4/1/2023
	Hello Heart Inc. Subtotal					302,754		301,693		301,693
	HumanAPI, Inc.		Senior Secured	11.8%		131,383		130,678		130,678		7/1/2023
	Myolex, Inc.		Senior Secured	18.0%		762,531		726,537		—		*
	Therapydia, Inc.		Senior Secured	12.5%	1.7%	14,158		14,158		14,158		6/1/2023
Other Healthcare Total		8.5%				$	4,248,056	$	4,174,048	$	3,447,511

Other Technology
	Abiquo Group, Inc. ** ^		Senior Secured	18.0%		$	53,294	$	53,294	$	—	*
	Aclima, Inc.		Senior Secured	12.0%		515,932		500,865		500,865		10/1/2023
	Antitoxin Technologies Inc. ** ^		Senior Secured	11.5%		153,380		104,415		78,397		*
	ATeam Army, Inc.		Senior Secured	12.0%		47,441		47,274		47,274		4/1/2023
	Beautiful Beanfields, Inc.		Senior Secured	6.0%		275,000		259,449		259,449		*
	BloomTech Inc.		Senior Secured	11.3%		461,863		461,863		461,863		8/1/2023
	BloomTech Inc.		Senior Secured	11.3%		742,370		736,325		736,325		7/1/2023
	BloomTech Inc. Subtotal					1,204,233		1,198,188		1,198,188
	BW Industries, Inc.		Senior Secured	11.8%		207,218		206,743		206,743		6/1/2023
	BW Industries, Inc.		Senior Secured	11.8%		138,839		137,734		137,734		5/1/2023
	BW Industries, Inc. Subtotal					346,057		344,477		344,477
	Fitplan, Inc. ** ^		Senior Secured	12.5%		373,252		345,100		345,100		11/1/2023
	Flo Water, Inc.		Senior Secured	11.8%		561,488		553,756		553,756		12/1/2023
	Higher Ground Education, Inc.		Senior Secured	12.5%		52,764		52,709		52,709		4/1/2023
	Higher Ground Education, Inc.		Senior Secured	12.5%		34,995		34,941		34,941		5/1/2023
	Higher Ground Education, Inc.		Senior Secured	12.5%		86,138		85,875		85,875		8/1/2023
	Higher Ground Education, Inc. Subtotal					173,897		173,525		173,525
	Hint, Inc.		Senior Secured	12.0%		617,082		608,852		608,852		6/1/2023
	Jiko Group, Inc.		Senior Secured	12.0%		394,713		392,414		392,414		6/1/2023
	NewGlobe Education, Inc. ** ^		Senior Secured	12.5%		653,659		647,667		647,667		8/1/2023
	Noteleaf, Inc.		Senior Secured	18.0%		2,277,124		1,861,011		25,000		*
	Opya, Inc.		Senior Secured	12.0%		142,445		140,500		140,500		11/1/2023
	Plae Co.		Senior Secured	2.7%		667,500		33,375		33,375		*
	Romaine Empire, Inc.		Senior Secured	12.3%		1,164,371		1,153,225		1,153,225		9/1/2023
	Saltbox, Inc.		Senior Secured	12.3%		48,441		48,201		48,201		6/1/2023
	SMS OPCO LLC		Senior Secured	8.0%		29,942		11,192		—		*
	Sustainable Living Partners, LLC		Senior Secured	12.5%		1,653,479		1,574,695		1,357,247		*
	UniEnergy Technologies LLC		Senior Secured	18.0%		1,120,954		1,078,851		700,068		*
	Veev Group, Inc.		Senior Secured	12.5%		141,528		139,673		139,673		6/1/2023
	Veev Group, Inc.		Senior Secured	12.5%		424,672		423,754		423,754		6/1/2023
	Veev Group, Inc. Subtotal					566,200		563,427		563,427
	Velo Holdings Limited		Senior Secured	12.0%		2,471,720		1,584,884		1,191,061		*
	Wheels Labs, Inc.		Senior Secured	18.0%		1,000,000		920,675		920,675		*
Other Technology Total		27.7%				$	16,511,604	$	14,199,312	$	11,282,743


Industry	Borrower	Percent of Net Assets (a)	Collateral	Interest Rate (b)	End of Term Payment (c)	Principal		Cost		Fair Value (d)		Final Maturity Date
Software
	Estify, Inc.		Senior Secured	18.0%		842,819		559,344		—		*
	ICX Media, Inc.		Senior Secured	18.0%		676,299		503,904		488,687		*
	Metarail, Inc.		Senior Secured	18.0%		709,588		700,656		47,254		*
	Parkoursc, Inc.		Senior Secured	12.0%		434,465		431,359		431,359		9/1/2024
	Parkoursc, Inc.		Senior Secured	12.0%		257,192		254,220		254,220		8/1/2023
	Parkoursc, Inc. Subtotal					691,657		685,579		685,579
	Truthset, Inc.		Senior Secured	10.5%		261,907		253,071		204,379		1/1/2024
Software Total		3.4%				$	3,182,270	$	2,702,554	$	1,425,899

Technology Services
	Blazent, Inc.		Senior Secured	12.0%		$	1,135,737	$	307,925	$	114,942	*
	Klar Holdings Limited ** ^		Senior Secured	14.2%	4.0%	46,979		46,532		46,532		7/1/2023
	Loansnap Holdings Inc. **		Senior Secured	11.0%		313,240		291,191		213,171		6/1/2023
Technology Services Total		0.9%				$	1,495,956	$	645,648	$	374,645
Grand Total		58.4%				$	52,503,516	$	45,229,261	$	23,810,122

				Percent of Net Assets		Cost				Fair Value
Cash Equivalents
First American Government Obligations				41.8%		$	17,029,884			$	17,029,884
Total Cash Equivalents				41.8%		$	17,029,884			$	17,029,884

* As of March 31, 2023, loans with a cost basis of $26.8 million and a fair value of $5.6 million were classified as non-accrual. These loans have been accelerated from their original maturity and are due in their entirety. During the period for which these loans have been on non-accrual status, no interest income has been recognized.

** Indicates assets that the Fund deems “non-qualifying assets.” As of March 31, 2023, 5.1% of the Fund’s total assets represented non-qualifying assets. Under Section 55(a) of the 1940 Act, the Fund is prohibited from acquiring any additional non-qualifying assets unless, at the time of acquisition, certain specified qualifying assets (e.g., securities issued by an “eligible portfolio company, ” as defined in Section 2(a)(46)) represent at least 70% of its total assets. As part of this calculation, the numerator consists of the fair value of the Fund’s investments in all eligible portfolio companies and the denominator consists of total assets less those assets described in Section 55(a)(7) of the 1940 Act.

^ Entity is not domiciled in the United States and does not have its principal place of business in the United States.

(a) The percentage of net assets that each industry group represents is shown with the industry totals (the sum of the percentages does not equal 100% because the percentages are based on net assets as opposed to total loans).

(b) The interest rate is the designated annual interest rate exclusive of any original issue discount, fees or end of term payment.

(c) The end of term payments are contractually due on the maturity date and are in addition to the interest rate shown. End of term payments are the percentage of the final payment divided by the original loan amount and are amortized over the full term of the loan.

(d) There is no readily available market price or secondary market for the Fund’s loan investments, hence the Manager determines fair value of all loan investments presented in the Condensed Schedule of Investments based on a hypothetical market and the estimates may include the use of significant unobservable inputs.

As of March 31, 2023, all loans were made to non-affiliates.

See notes to condensed financial statements (unaudited).

VENTURE LENDING & LEASING VIII, INC.

CONDENSED SCHEDULE OF INVESTMENTS (UNAUDITED)

AS OF DECEMBER 31, 2022


Industry	Borrower	Percent of Net Assets (a)	Collateral	Interest Rate (b)	End of Term Payment (c)	Principal		Cost		Fair Value (d)		Final Maturity Date
Biotechnology
	Driver Bioengineering, Inc.		Senior Secured	11.0%		$ 55,584		$ 54,428		$ 54,428		4/1/2023
	Driver Bioengineering, Inc.		Senior Secured	11.0%		192,798		191,887		191,887		6/1/2023
	Driver Bioengineering, Inc. Subtotal					248,382		246,315		246,315
	Orpheus Therapeutics, Inc.		Senior Secured	18.0%		178,510		174,288		-		*
	Quartzy, Inc.		Senior Secured	12.0%		618,402		612,373		612,373		5/1/2024
	Quartzy, Inc.		Senior Secured	12.0%		684,617		677,177		677,177		7/1/2024
	Quartzy, Inc.		Senior Secured	12.0%		202,740		196,508		196,508		8/1/2023
	Quartzy, Inc. Subtotal					1,505,759		1,486,058		1,486,058
Biotechnology Total		4.3%				$ 1,932,651		$ 1,906,661		$ 1,732,373

Computers & Storage
	Canary Connect, Inc.		Senior Secured	12.8%		$	283,713	$	282,621	$	282,621	3/1/2023
Computers & Storage Total		0.7%				$	283,713	$	282,621	$	282,621

Internet
	Ainsly, Inc. ** ^		Senior Secured	12.5%		$	82,401	$	79,368	$	79,368	9/1/2023
	Daily Muse, Inc.		Senior Secured	11.0%		2,908,293		2,902,568		2,902,568		12/1/2024
	Lenddo International ** ^		Senior Secured	18.0%		545,048		544,703		-		*
	Merchbar, Inc.		Senior Secured	11.8%		56,203		55,817		55,817		3/1/2023
	OneLocal, Inc. ** ^		Senior Secured	12.3%		465,894		458,470		458,470		3/1/2023
	RenoFi, Inc.		Senior Secured	12.0%		55,563		55,291		55,291		6/1/2023
	RenoFi, Inc.		Senior Secured	12.0%		55,533		54,685		54,685		6/1/2023
	RenoFi, Inc. Subtotal					111,096		109,976		109,976
	Residently USA, LLC ** ^		Senior Secured	12.0%		431,102		400,184		320,718		9/1/2024
	Serface Care, Inc.		Senior Secured	12.3%		597,411		349,785		14,176		*
	Stay Alfred, Inc.		Senior Secured	18.0%		8,664,902		6,579,267		389,238		*
	Verishop, Inc.		Senior Secured	12.6%		1,931,034		1,910,712		1,910,712		12/1/2024
Internet Total		15.6%				$	15,793,384	$	13,390,850	$	6,241,043

Medical Devices
	Ablacon, Inc.		Senior Secured	11.0%		279,146		278,538		278,538		3/1/2023
	Ablacon, Inc.		Senior Secured	11.0%		279,043		277,395		277,395		3/1/2023
	Ablacon, Inc. Subtotal					558,189		555,933		555,933
	CytoVale, Inc.		Senior Secured	12.0%		368,168		364,332		364,332		11/1/2023
	Medrobotics Corporation, Inc.		Senior Secured	18.0%		10,000,000		8,895,103		-		*
	Renovia, Inc.		Senior Secured	18.0%		4,416,737		4,183,124		2,950,420		*
Medical Devices Total		9.7%				$	15,343,094	$	13,998,492	$	3,870,685


Industry	Borrower	Percent of Net Assets (a)	Collateral	Interest Rate (b)	End of Term Payment (c)		Principal		Cost		Fair Value (d)		Final Maturity Date
Other Healthcare
	GoForward, Inc.		Senior Secured	11.5%			$	1,959,766	$	1,938,067	$	1,938,067	6/1/2024
	GoForward, Inc.		Senior Secured	11.5%			2,042,690		1,999,322		1,999,322		9/1/2023
	GoForward, Inc. Subtotal						4,002,456		3,937,389		3,937,389
	Hello Heart Inc.		Senior Secured	11.0%			148,189		147,825		147,825		4/1/2023
	Hello Heart Inc.		Senior Secured	11.0%			185,184		183,753		183,753		4/1/2023
	Hello Heart Inc.		Senior Secured	11.0%			296,095		294,517		294,517		11/1/2023
	Hello Heart Inc. Subtotal						629,468		626,095		626,095
	HumanAPI, Inc.		Senior Secured	11.8%			352,506		349,409		349,409		7/1/2023
	Myolex, Inc.		Senior Secured	18.0%			762,531		726,537		-		*
	Therapydia, Inc.		Senior Secured	12.0%	1.7	%	14,158		14,030		14,030		3/1/2023
	Therapydia, Inc.		Senior Secured	11.5%			9,694		9,682		9,682		1/1/2023
	Therapydia, Inc.		Senior Secured	12.5%	1.7	%	25,788		25,788		25,788		6/1/2023
	Therapydia, Inc. Subtotal						49,640		49,500		49,500
Other Healthcare Total		12.4%					$	5,796,601	$	5,688,930	$	4,962,393

Other Technology
	Abiquo Group, Inc. ** ^		Senior Secured	18.0%			$ 53,294		$ 53,294		$ 13,323		*
	Aclima, Inc.		Senior Secured	12.0%			726,279		697,474		697,474		10/1/2023
	Antitoxin Technologies Inc. ** ^		Senior Secured	11.5%			159,602		115,166		101,203		*
	ATeam Army, Inc.		Senior Secured	12.0%			186,965		185,327		185,327		4/1/2023
	Beautiful Beanfields, Inc.		Senior Secured	6.0%			275,000		263,574		263,574		*
	BloomTech Inc.		Senior Secured	11.3%			728,813		728,813		728,813		8/1/2023
	BloomTech Inc.		Senior Secured	11.3%			1,281,243		1,264,684		1,264,684		7/1/2023
	BloomTech Inc. Subtotal						2,010,056		1,993,497		1,993,497
	Brightside Benefit, Inc.		Senior Secured	12.4%			97,039		96,855		96,855		3/1/2023
	BW Industries, Inc.		Senior Secured	11.8%			408,466		406,837		406,837		6/1/2023
	BW Industries, Inc.		Senior Secured	11.8%			342,089		336,699		336,699		5/1/2023
	BW Industries, Inc. Subtotal						750,555		743,536		743,536
	Fitplan, Inc. ** ^		Senior Secured	12.5%			505,434		455,724		455,724		11/1/2023
	Flo Water, Inc.		Senior Secured	11.8%			737,971		724,862		724,862		12/1/2023
	Higher Ground Education, Inc.		Senior Secured	12.5%			207,813		207,283		207,283		4/1/2023
	Higher Ground Education, Inc.		Senior Secured	12.5%			86,147		85,879		85,879		5/1/2023
	Higher Ground Education, Inc.		Senior Secured	12.5%			87,938		87,636		87,636		1/1/2023
	Higher Ground Education, Inc.		Senior Secured	12.5%			135,718		135,102		135,102		8/1/2023
	Higher Ground Education, Inc. Subtotal						517,616		515,900		515,900
	Hint, Inc.		Senior Secured	12.0%			1,216,016		1,187,962		1,187,962		6/1/2023
	Jiko Group, Inc.		Senior Secured	12.0%			777,818		769,951		769,951		6/1/2023
	Merlin Labs, Inc.		Senior Secured	11.0%			9,392		9,381		9,381		1/1/2023
	NewGlobe Education, Inc. ** ^		Senior Secured	12.5%			1,029,903		1,015,859		1,015,859		8/1/2023
	Noteleaf, Inc.		Senior Secured	18.0%			2,277,124		1,861,011		-		*
	Opya, Inc.		Senior Secured	12.0%			193,005		189,520		189,520		11/1/2023
	Percepto, Inc.		Senior Secured	12.2%			80,187		79,373		79,373		4/1/2023
	Plae Co.		Senior Secured	2.7%			667,500		33,375		33,375		*
	Romaine Empire, Inc.		Senior Secured	12.3%			1,744,683		1,720,818		1,720,818		9/1/2023


Industry	Borrower	Percent of Net Assets (a)	Collateral	Interest Rate (b)	End of Term Payment (c)	Principal		Cost		Fair Value (d)		Final Maturity Date
	Saltbox, Inc.		Senior Secured	12.3%		95,430		94,606		94,606		6/1/2023
	SMS OPCO LLC		Senior Secured	8.0%		29,942		11,192		11,192		*
	Sustainable Living Partners, LLC		Senior Secured	12.5%		1,262,870		1,222,074		1,222,074		8/1/2023
	UniEnergy Technologies LLC		Senior Secured	18.0%		1,120,954		1,078,852		700,068		*
	Veev Group, Inc.		Senior Secured	12.5%		278,723		272,406		272,406		6/1/2023
	Veev Group, Inc.		Senior Secured	12.5%		836,345		833,200		833,200		6/1/2023
	Veev Group, Inc. Subtotal					1,115,068		1,105,606		1,105,606
	Velo Holdings Limited		Senior Secured	12.0%		2,471,720		1,659,035		1,265,212		*
	Wheels Labs, Inc.		Senior Secured	12.0%		1,000,000		920,675		920,675		*
Other Technology Total		40.3%				$	21,111,423	$	18,804,499	$	16,116,947

Software
	Bloomboard, Inc.		Senior Secured	11.5%		$	463,298	$	—	$	449,425	*
	Eskalera, Inc.		Senior Secured	10.5%		111,075		110,615		110,615		3/1/2023
	Estify, Inc.		Senior Secured	18.0%		842,819		559,344		-		*
	ICX Media, Inc.		Senior Secured	18.0%		712,318		554,085		538,868		*
	Medable, Inc.		Senior Secured	12.0%		151,008		150,084		150,084		2/1/2023
	Medable, Inc.		Senior Secured	12.0%		75,514		75,399		75,399		2/1/2023
	Medable, Inc. Subtotal					226,522		225,483		225,483
	Metarail, Inc.		Senior Secured	18.0%		709,588		700,656		47,254		*
	Parkoursc, Inc.		Senior Secured	12.0%		499,608		495,497		495,497		9/1/2024
	Parkoursc, Inc.		Senior Secured	12.0%		405,476		398,511		398,511		8/1/2023
	Parkoursc, Inc. Subtotal					905,084		894,008		894,008
	Safe Securities Inc.		Senior Secured	12.0%		37,760		37,500		37,500		2/1/2023
	Truthset, Inc.		Senior Secured	10.5%		336,132		321,852		273,159		1/1/2024
Software Total		6.5%				$	4,344,596	$	3,403,543	$	2,576,312

Technology Services
	Blazent, Inc.		Senior Secured	12.0%		$	1,135,737	$	307,926	$	125,176	*
	Klar Holdings Limited ** ^		Senior Secured	14.2%	4.0%	73,594		72,510		72,510		7/1/2023
	Loansnap Holdings Inc. **		Senior Secured	11.0%		313,240		261,551		203,076		6/1/2023
Technology Services Total		1.0%				$	1,522,571	$	641,987	$	400,762
Grand Total Loans		90.5%				$	66,128,033	$	58,117,583	$	36,183,136


	Percent of Net Assets	Cost		Fair Value
Cash Equivalents
First American Government Obligations	7.8%	$	3,135,402	$	3,135,402
Total Cash Equivalents	7.8%	$	3,135,402	$	3,135,402

* As of December 31, 2022, loans with a cost basis of $29.6 million and a fair value of $7.8 million were classified as non-accrual. These loans have been accelerated from their original maturity and are due in their entirety. During the period for which these loans have been on non-accrual status, no interest income has been recognized.

** Indicates assets that the Fund deems “non-qualifying assets.” As of December 31, 2022, 6.9% of the Fund’s total assets represented non-qualifying assets. Under Section 55(a) of the 1940 Act, the Fund is prohibited from acquiring any additional non-qualifying assets unless, at the time of acquisition, certain specified qualifying assets (e.g., securities issued by an “eligible portfolio company,” as defined in Section 2(a)(46)) represent at least 70% of its total assets. As part of this calculation, the numerator consists of the fair value of the Fund’s investments in all eligible portfolio companies and the denominator consists of total assets less those assets described in Section 55(a)(7) of the 1940 Act.

^ Entity is not domiciled in the United States and does not have its principal place of business in the United States.

(b) The interest rate is the designated annual interest rate exclusive of any original issue discount, fees or end of term payment.

As of December 31, 2022, all loans were made to non-affiliates.

See notes to condensed financial statements (unaudited).

VENTURE LENDING & LEASING VIII, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.ORGANIZATION AND OPERATIONS OF THE FUND

Venture Lending & Leasing VIII, Inc. (the “Fund”) was incorporated in Maryland on May 6, 2015, as a non-diversified, closed-end management investment company electing status as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”) and is managed by Westech Investment Advisors, LLC (the “Manager” or “Management”). All of the issued and outstanding membership interests of the Manager were acquired by P10 Intermediate Holdings LLC, a Delaware limited liability company whose ultimate parent is P10, Inc., a Delaware corporation (together, “P10”) on October 13, 2022 (the “Transaction”). The management of day-to-day operations of the Manager remains substantially unchanged and continues to be directed by the Manager’s personnel following the closing of the Transaction.

The Fund will be dissolved on December 31, 2025 unless the Board of Directors (the “Board”) opts to elect early dissolution. One hundred percent of the stock of the Fund is held by Venture Lending & Leasing VIII, LLC (the “Company”). Prior to commencing its operations on August 12, 2015, 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 July 2015. This issuance of stock was a requirement to apply for a finance lender’s license from the California Commissioner of Corporations, which was obtained on August 20, 2015.

The Fund’s investment objective is to achieve superior risk-adjusted investment returns and it seeks to achieve that objective by providing debt financing to portfolio companies, most of which are private. The Fund generally receives warrants to acquire equity securities in connection with its portfolio investments and generally distributes these warrants to its shareholder upon receipt, or soon thereafter. The Fund also has guidelines for the percentages of total assets that are invested in different types of assets. The portfolio investments of the Fund primarily consist of debt financing to early and expansion stage venture capital-backed technology companies.

In the Manager’s opinion, the accompanying condensed interim financial statements (hereafter referred to as “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 United States Generally Accepted Accounting Principles (“U.S. GAAP”) 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 months ended March 31, 2023 are not necessarily indicative of what the results would be for a full year. These financial statements should be read in conjunction with the financial statements and the notes included in the Fund’s Annual Report on Form 10-K for the year ended December 31, 2022.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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. As an investment company, the Fund follows accounting and reporting guidance as set forth in Topic 946 (“Financial Services – Investment Companies”) of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification, as amended (“ASC”). Certain prior period information has been reclassified and/or disclosed to conform to the current year presentation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and money market mutual funds with maturities of or the ability to redeem or liquidate holdings within 90 days or less. Cash and cash equivalents are held in three bank accounts with two financial institutions, Mitsubishi UFJ Financial Group, Inc. and U.S. Bank National Association, and as a result are subject to custodial concentration risk for cash and cash equivalents. Cash in excess of the Federal Deposit Insurance Corporation (“FDIC”) limit of $250,000 is unsecured. Money market mutual funds held as cash equivalents are valued at their most recently traded net asset value. Within cash and cash equivalents, as of March 31, 2023, the Fund held 17,029,884 units in the First American Government Obligations Fund, valued at $1 per unit at a yield of 4.61%, and $107,478 of cash, which together represented 42.03% of the net assets of the Fund. Within cash and cash equivalents, as of December 31, 2022, the Fund held 3,135,402 units in the First American Government Obligations Fund, valued at $1 per unit at a yield of 4.06% and $90,090 in cash, which combined represented 8.06% of the net assets of the Fund.

Interest Income

Interest income on loans is recognized on an accrual basis using the effective interest method including amounts resulting from the accretion of discount on loans included as additional compensation as part of the loan agreements. Additionally, fees received as part of the transaction are added to the loan discount and accreted over the life of the loan.

Realized Gains and Losses from Loans

Realized gains or losses on the sale of loans are computed using the difference between the amortized cost and the sales proceeds. Realized losses on loan write-offs are recognized when management determines a loan is uncollectible.

Investment Valuation

The Fund accounts for loans for which market quotations are not readily available at fair value as determined in good faith by the Manager, who has been appointed as the Fund’s valuation designee, pursuant to Rule 2a-5 under the 1940 Act. Subject to the oversight of the Fund’s Board of Directors, all valuations are determined under the direction of the Manager, in accordance with the valuation methods described below and Rule 2a-5.

As of March 31, 2023 and December 31, 2022, the financial statements included nonmarketable investments of $23.8 million and $36.2 million, respectively, (or 57.5% and 89.3% of the total assets, respectively), with the 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 fair values that would have been used had a readily available market for the securities existed, and the differences could be material. Below is the information used by the Manager in making these estimates.

Loans

The Fund defines fair value as the price that would be received to sell an asset or paid to lower a liability in an orderly transaction between market participants at the measurement date. Because there is no readily available market price and no secondary market for substantially all of the debt investments made by the Fund in its borrowing portfolio companies, Management determines fair value based on hypothetical markets, and on several factors related to each borrower, 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, and an evaluation of the general interest rate environment. The amount of any valuation adjustment considers the estimated amount and timing of cash payments of principal and interest from the borrower and/or liquidation analysis and 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 fair value of the Fund’s collateral, the size of the loan, and the estimated time that will elapse before the Fund achieves a recovery. Management has evaluated these factors and has concluded that, the effect of deterioration in the quality of the underlying collateral, increase in size of the loan, increase in the estimated time to recovery and increase in the hypothetical market coupon rate would have the effect of lowering the fair value of the current portfolio of loans.

Non-Accrual Loans

The Fund’s policy is to classify a loan as non-accrual when the portfolio company is delinquent for three consecutive months on its monthly loan payment, or, in the opinion of Management, either ceases or drastically curtails its operations and Management deems that it is unlikely that the loan will return to performing status. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed for the quarter in which the loan was placed on non-accrual status. Any uncollected interest related to quarters prior to when the loan was placed on non-accrual 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. Interest received by the Fund on non-accrual loans will be recognized as interest income if and when the proceeds exceed the book value of the respective loan.

If a borrower of a non-accrual loan resumes making regular payments and Management believes that such borrower has regained the ability to service the loan on a sustainable basis, the loan is reclassified back to accrual or performing status. Interest that would have been accrued during the time a loan was classified as non-accrual will be added back to the remaining payment schedule causing a change in the effective interest rate.

As of March 31, 2023, loans with a cost basis of $26.8 million and a fair value of $5.6 million were classified as non-accrual. As of December 31, 2022, loans with a cost basis of $29.6 million and a fair value of $7.8 million were classified as non-accrual.

Warrants and Equity Securities

Warrants and equity securities received in connection with loan transactions are measured at fair value at the time of acquisition. Warrants are valued based on a Black-Scholes option pricing model which considers, among several factors, the underlying stock value, expected term, volatility, and risk-free interest rate. It is anticipated that such securities will be distributed by the Fund to the Company simultaneously with, or shortly following, their acquisition.

The underlying asset value is estimated based on available information.

Volatility, or the amount of uncertainty or risk about the size of the changes in the warrant price, is based on an index of publicly traded companies grouped by industry and which are similar in nature to the underlying portfolio companies issuing the warrant (“Industry Index”). The volatility assumption for each Industry Index is based on the average volatility for individual public companies within the portfolio company’s industry for a period of time approximating the expected life of the warrants. A hypothetical increase in the volatility of the warrants used in the Black-Scholes option pricing model would have the effect of increasing the fair value of the warrants.

The remaining expected lives of warrants are based on historical experience of the average life of the warrants, as warrants are often exercised in the event of acquisitions, mergers, or initial public offerings, and terminated due to events such as bankruptcies, restructuring activities, or additional financings. These events cause the expected term to be less than the remaining contractual term of the warrants. As of March 31, 2023 and December 31, 2022, the Fund assumed the average duration of a warrant is 4.0 years. The effect of a

hypothetical increase in the estimated initial term of the warrants used in the Black-Scholes option pricing model would have the effect of increasing the fair value of the warrants. However, the estimated initial term of the warrants is one factor, of many, used in the valuation of warrants, and by itself does not have a significant impact on the results of operations.

The risk-free interest rate is derived from the constant maturity tables issued by the U.S. Treasury Department. The effect of a hypothetical increase in the estimated risk-free rate used in the Black-Scholes option pricing model would have the effect of increasing the fair value of the warrants.

Other Assets and Liabilities

Other assets include costs incurred in conjunction with borrowings under the Fund’s debt facility and are stated at initial cost. These costs are amortized over the term of the facility.

The fair values of other assets and accrued liabilities are estimated at their carrying values because of the short-term nature of these assets and liabilities.

The carrying value of the borrowings under the debt facility approximates their fair value based on the borrowing rates available to the Fund.

Deferred Bank Fees

Prior to termination of the debt facility on September 8, 2022, the deferred bank fees and costs associated with the debt facility were included in other assets in the Condensed Statements of Assets and Liabilities and were being amortized over the estimated life of the facility, which was to mature on August 26, 2023. Upon termination of the debt facility, the remaining unamortized fees and costs were immediately expensed. The amortization of these costs was recorded as interest expense in the Condensed Statements of Operations.

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 forfeited commitment fee, less any applicable legal costs, becomes recognized as other income after the commitment expires.

Derivative Instruments

The Fund used derivative instruments to manage its exposure to changes in interest rates on expected borrowings under its debt facility, as the Fund originated fixed rate loans (see Note 8). On June 3, 2022, Management elected to terminate the interest rate collar contract.

Derivative instruments were primarily valued on the basis of quotes obtained from banks, brokers and dealers and adjusted for counterparty risk and the optionality of the interest rate floor. The valuation of the derivative instruments also considered the future expected interest rates on the notional principal balance remaining which was comparable to what a prospective acquirer would pay on the measurement date. Valuation pricing models considered inputs such as forward rates, anticipated interest rate volatility relating to the reference rate, as well as time value and other factors underlying derivative instruments.

The Fund was a party to a master netting arrangement with MUFG Union Bank, N.A., however, the Fund elected not to offset assets and liabilities under these arrangements for financial statement presentation purposes. A contract was recorded at gross fair value in either derivative asset or derivative liability in the Condensed Statements of Assets and Liabilities, depending on whether the fair value of the contract was in favor of the Fund or the counterparty. The changes in fair value were recorded in net change in unrealized gain (loss) from derivative instruments in the Condensed Statements of Operations and the quarterly interest received or paid on the derivative instruments, if any, was recorded in net realized gain (loss) from derivative instruments in the Condensed Statements of Operations.

3. FAIR VALUE DISCLOSURES

The Fund provides asset-based financing primarily to start-up and emerging growth venture-backed companies pursuant to commitments whereby the Fund agrees to finance assets and 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. Even though these loans are generally secured by the assets of the borrowers, the Fund in most cases is subject to the credit risk of such companies. As of March 31, 2023 and December 31, 2022, the Fund’s investments in loans were primarily to companies based within the United States and were diversified among borrowers in the industry segments shown in the Condensed Schedules of Investments. All loans are senior to unsecured creditors and other secured creditors, unless as indicated in the Condensed Schedules of Investments.

The Fund defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; 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. Because there is no readily available market price and no secondary market for substantially all of the loan investments made by the Fund to borrowing portfolio companies, Management determines fair value (or estimated exit value) based on a hypothetical market, and several factors related to each borrower.

Loan balances in the Condensed Schedules of Investments are listed 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 has a different maturity date and amount.

The tables below show the weighted-average interest rate of the performing loans and all loans.


Performing Loans	For the Three Months Ended March 31, 2023	For the Three Months Ended March 31, 2022
Weighted-Average Interest Rate - Cash	11.59%	15.53%
Weighted-Average Interest Rate- Non-Cash	2.75%	2.10%
Weighted-Average Interest Rate	14.34%	17.63%

All Loans	For the Three Months Ended March 31, 2023	For the Three Months Ended March 31, 2022
Weighted-Average Interest Rate - Cash	15.65%	19.20%
Weighted-Average Interest Rate- Non-Cash	2.21%	1.94%
Weighted-Average Interest Rate	17.86%	21.14%

Interest is calculated using the effective interest method, and rates earned by the Fund will fluctuate based on many factors including early payoffs, volatility of values ascribed to warrants and new loans funded during the period.

The risk profile of a loan changes when events occur that impact the credit analysis of the borrower and loan as discussed in the Fund’s loan accounting policy. Such changes result in the fair value adjustments made to the individual loans, which in accordance with U.S. GAAP, would be based on 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. Where the risk profile is consistent with the original underwriting, which is primarily the case for this loan portfolio, the cost basis of the loan often approximates fair value.

Valuation Hierarchy

Under the FASB ASC Topic 820 (“Fair Value Measurement”), 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.

Transfers of investments between levels of the fair value hierarchy are recorded on the actual date of the event or change in circumstances that caused the transfer. There were no transfers in and out of Level 1, 2, or 3 during the three months ended March 31, 2023 and 2022.

The Fund’s cash equivalents were valued at the traded net asset value of the money market fund. As a result, these measurements are classified as Level 1. The Fund’s loan investments are individually negotiated and unique, and because there is little to no market in which these assets trade, the inputs for these assets are valued using estimated exit values. As a result, the Fund’s loan investments are classified as Level 3.

The following tables provide quantitative information about the Fund’s Level 3 fair value measurements of the Fund’s investments by industry as of March 31, 2023 and December 31, 2022. In addition to the techniques and inputs noted in the tables below, the Fund may also use other valuation techniques and methodologies when determining its fair value measurements.

Investment Type - Level 3

Loan Investments

Fair Values at March 31, 2023

Valuation Techniques / Methodologies

Unobservable Input

Ranges

Weighted Averages (a)

Biotechnology

1,329,358

Hypothetical market analysis

Hypothetical market coupon rate

13% - 14%

14%

Asset recovery

Probability Weighing of Alternative Outcomes

100% *

Investment Type - Level 3

Loan Investments

Fair Values at March 31, 2023

Valuation Techniques / Methodologies

Unobservable Input

Ranges

Weighted Averages (a)

Internet

5,617,479

Hypothetical market analysis

Hypothetical market coupon rate

11% - 22%

13%

Asset recovery

Probability Weighing of Alternative Outcomes

5% - 100%^

Medical Devices

332,487

Hypothetical market analysis

Hypothetical market coupon rate

14%

Asset recovery

Probability Weighing of Alternative Outcomes

100%*

Other Healthcare

3,447,511

Hypothetical market analysis

Hypothetical market coupon rate

12% - 15%

14%

Asset recovery

Probability Weighing of Alternative Outcomes

100% *

Other Technology

11,282,743

Hypothetical market analysis

Hypothetical market coupon rate

14% - 34%

17%

Asset recovery

Probability Weighing of Alternative Outcomes

5% - 100%^

Software

1,425,899

Hypothetical market analysis

Hypothetical market coupon rate

14%

Asset recovery

Probability Weighing of Alternative Outcomes

5% - 100% ^

Technology Services

374,645

Hypothetical market analysis

Hypothetical market coupon rate

18%

Asset recovery

Probability Weighing of Alternative Outcomes

5% - 65%^

Total loan investments

23,810,122

(a) The weighted average hypothetical market coupon rates were calculated using the fair value of the loans.

* There is only one loan within the industry.

^ Probability weightings vary among portfolio companies within each industry based on different potential future outcomes.

Investment Type - Level 3

Loan Investments

Fair Values at
December 31, 2022

Valuation Techniques / Methodologies

Unobservable Inputs

Ranges

Weighted Averages (a)

Biotechnology

1,732,373

Hypothetical market analysis

Hypothetical market coupon rate

14%

Asset Recovery

Probability weighting of alternative outcomes

100% *

Computers and Storage

282,621

Hypothetical market analysis

Hypothetical market coupon rate

15%

Internet

6,241,043

Hypothetical market analysis

Hypothetical market coupon rate

11% - 22%

13%

Asset Recovery

Probability weighting of alternative outcomes

5% - 100% ^

Medical Devices

3,870,685

Hypothetical market analysis

Hypothetical market coupon rate

13% - 14%

14%

Asset Recovery

Probability weighting of alternative outcomes

5% - 100% ^

Other Healthcare

4,962,393

Hypothetical market analysis

Hypothetical market coupon rate

13% - 15%

15%

Asset Recovery

Probability weighting of alternative outcomes

100%^

Other Technology

16,116,947

Hypothetical market analysis

Hypothetical market coupon rate

14% - 34%

17%

Asset Recovery

Probability weighting of alternative outcomes

1% - 100% ^

Software

2,576,312

Hypothetical market analysis

Hypothetical market coupon rate

13% - 18%

15%

Asset Recovery

Probability weighting of alternative outcomes

5% -100%^

Technology Services

400,762

Hypothetical market analysis

Hypothetical market coupon rate

18%

Asset Recovery

Probability weighting of alternative outcomes

3% - 60% ^

Total loan investments

36,183,136

(a) The weighted average hypothetical market coupon rates were calculated using the fair value of the loans.

* There is only one loan within the industry.

^ Probability weightings vary among portfolio companies within each industry based on different potential future outcomes.

The following tables present the balances of assets and liabilities as of March 31, 2023 and December 31, 2022 measured at fair value on a recurring basis:


As of March 31, 2023
ASSETS:	Level 1		Level 2		Level 3		Total

Loans*	$	—	$	—	$	23,810,122	$	23,810,122
Cash equivalents	17,029,884		—		—		17,029,884
Total assets	$	17,029,884	$	—	$	23,810,122	$	40,840,006

* For a detailed listing of borrowers comprising this amount, please refer to the Condensed Schedules of Investments.


As of December 31, 2022
ASSETS:	Level 1		Level 2		Level 3		Total

Loans †	$	—	$	—	$	36,183,136	$	36,183,136

Cash equivalents	3,135,402		—		—		3,135,402
Total assets	$	3,135,402	$	—	$	36,183,136	$	39,318,538

† For a detailed listing of borrowers comprising this amount, please refer to the Condensed Schedules of Investments.

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


	For the Three Months Ended March 31, 2023
	Loans		Warrants
Beginning balance	$	36,183,136	$	—
Acquisitions and originations	—		47,885
Principal payments on loans, net of accretion	(12,226,980)		—

Distributions to shareholder	—		(47,885)
Net change in unrealized gain from loans	515,307		—
Net realized loss from loans	(661,341)		—
Ending balance	$	23,810,122	$	—
Net change in unrealized loss from loans relating to loans still held at March 31, 2023	$	(267,971)


	For the Three Months Ended March 31, 2022
	Loans		Warrants		Stocks
Beginning balance	$	108,465,616	$	—	$	—
Acquisitions and originations	—		32,262		2,090,759
Principal payments on loans, net of accretion	(20,606,634)		—		—

Distributions to shareholder	—		(32,262)		(2,090,759)
Net change in unrealized gain from loans	2,388,532		—		—
Net realized loss from loans	(629,940)		—		—
Ending balance	$	89,617,574	$	—	$	—
Net change in unrealized gain from loans relating to loans still held at March 31, 2022	$	1,265,519

4. EARNINGS PER SHARE

Basic earnings per share are computed by dividing net increase (decrease) in net assets resulting from operations by the weighted-average common shares outstanding. Diluted earnings (loss) per share are computed by dividing net increase (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 (loss) per share are the same.

5. CAPITAL STOCK

As of both March 31, 2023 and December 31, 2022, 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 both March 31, 2023 and December 31, 2022, was $423.6 million. Total contributed capital to the Company through March 31, 2023 and December 31, 2022 was $415.2 million, of which $356.1 million was contributed to the Fund.

The chart below shows the distributions of the Fund for the three months ended March 31, 2023 and 2022.


	For the Three Months Ended March 31, 2023		For the Three Months Ended March 31, 2022


Distributions of equity securities	47,885		2,123,021
Total distributions to shareholder	$	47,885	$	2,123,021

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 cumulative earnings and profits.

6. DEBT FACILITY

On April 5, 2016, the Fund established a secured, syndicated revolving loan facility in an initial amount up to $150.0 million (the “Loan Agreement”) led by Wells Fargo, N.A. and MUFG Union Bank, N.A. On September 11, 2017, the Loan Agreement was amended (the “Amended Loan Agreement”) and the borrowing availability thereunder increased the size of the facility to $280.0 million.

Effective September 8, 2022, the Fund paid off the loan and terminated the debt facility.

Bank fees and other costs of $3.8 million incurred in connection with the acquisition and extension of the facility were capitalized and were amortized to interest expense on a straight-line basis over the expected life of the facility. The fees and costs were fully amortized when the debt facility was terminated on September 8, 2022.

7. MANAGEMENT FEE

On October 13, 2022, in connection with the Transaction, the Fund entered into a new investment management agreement (the “Current Agreement”), by and between the Fund and the Manager, that replaced the previous investment management agreement entered into between the Fund and the Manager (the “Previous Agreement”). The closing of the Transaction constituted a change of control of the Manager which caused the Previous Agreement to terminate. Significant terms of the Current Agreement are the same as those of the Previous Agreement, including the same fee rates.

As compensation for its services to the Fund, for the two-year period that commenced with the first capital closing, which took place on August 8, 2015, the Manager received a management fee (“Management Fee”) computed and paid at the end of each quarter at an annual rate of 2.5% of the Company’s committed equity capital (regardless of when or if the capital was called) as of the last day of each fiscal quarter. Following this two-year period, starting on August 12, 2017, Management Fees are calculated and paid at the end of each quarter at an annual rate of 2.5% of the Fund’s total assets (including amounts derived from borrowed funds) as of the last day of each quarter.

Management Fees of $0.3 million and $0.6 million were recognized as expenses for the three months ended March 31, 2023 and 2022, respectively.

8. DERIVATIVE INSTRUMENTS

The Fund used derivative instruments to manage its exposure to changes in interest rates on expected borrowings under its debt facility, as the Fund originates fixed rate loans.

Interest Rate Collar

On April 6, 2020, the Fund entered into an interest rate collar instrument with MUFG Union Bank, N.A., which terminated on September 11, 2020. On September 11, 2020, the Fund entered into another interest rate collar instrument with a termination date of January 11, 2023. On June 3, 2022, Management elected to terminate the interest rate collar contract.

The following table shows the effect of the Fund’s derivative instruments on the Fund’s Condensed Statements of Operations:


		For the Three Months Ended March 31,
Derivative Instruments	Condensed Statements of Operations Caption	2023		2022


Interest rate collar	Net change in unrealized gain from derivative instruments	$	—	$	67,317
	Net realized loss from derivative instruments	$	—	$	(7,107)

9. TAX STATUS

The Fund has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986 (the “Code”) and operates in a manner to qualify for the tax treatment applicable to RICs. Failing to maintain at least 70% of total assets in “qualifying assets” will result in the loss of BDC status, resulting in losing its favorable tax treatment as a RIC. As of March 31, 2023, the Fund has met the BDC and RIC requirements. The Fund elected to be treated for federal income tax purposes as a RIC under the Code with the filing of its federal corporate income tax return for 2016.

In order to qualify for favorable tax treatment as a RIC, the Fund is required to distribute annually to its shareholder at least 90% of its investment company taxable income, as defined by the Code. To avoid federal excise taxes, the Fund must distribute annually at least 98% of its ordinary income and 98.2% of net capital gains from the current year and any undistributed ordinary income and net capital gains from the preceding years. The Fund, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on this income. If the Fund chooses to do so, all other things being equal, this would increase expenses and reduce the amount available to be distributed to its shareholder. The Fund will accrue excise tax on estimated undistributed taxable income as required.

Below are tables summarizing the cost of investments for federal income tax purposes and the appreciation and depreciation of the investments reported on the Condensed Schedules of Investments and Condensed Statements of Assets and Liabilities.

As of March 31, 2023:


Asset	Cost		Unrealized Appreciation		Unrealized Depreciation		Net Appreciation (Depreciation)
Loans	$	45,229,261	$	—	$	(21,419,139)	$	(21,419,139)

Total	$	45,229,261	$	—	$	(21,419,139)	$	(21,419,139)

As of December 31, 2022:


Asset	Cost		Unrealized Appreciation		Unrealized Depreciation		Net Appreciation (Depreciation)
Loans	$	58,117,583	$	449,425	$	(22,383,872)	$	(21,934,447)
Total	$	58,117,583	$	449,425	$	(22,383,872)	$	(21,934,447)

Dividends from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with U.S. GAAP. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain (loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Fund’s annual RIC tax return.

Book and tax basis differences relating to shareholder dividends and distributions and other permanent book and tax differences are reclassified among the Fund’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from U.S. GAAP. The determination of the tax attributes of the Fund’s distributions is made annually as of the end of the Fund’s taxable year and is generally based upon its taxable income for the full taxable year and distributions paid for the full taxable year. As a result, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Fund’s distributions for a full taxable year. As of March 31, 2023, the Fund had determined the tax attributes of its distributions taxable year-to-date to be from its current and accumulated earnings and profits. There is not yet, however, certainty as to what the actual tax attributes of the Fund’s distributions to the shareholders will be by the year-ending December 31, 2023.

The Fund anticipates distributing all distributable earnings by the end of the year. The Fund may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce the shareholder’s tax basis in its shares.

The Fund’s tax returns remain open for examination by the federal government for a period of three years and California tax authorities for a period of four years from when they are filed. As of March 31, 2023, the Fund had no uncertain tax positions and no capital loss carryforwards.

10. FINANCIAL HIGHLIGHTS

U.S. GAAP requires disclosure of financial highlights of the Fund for the three months ended March 31, 2023 and 2022.

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 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.

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


	For the Three Months Ended March 31,
	2023			2022

Total return **	2.07		%	8.25		%

Per share amounts:
Net asset value, beginning of period	$	399.94		$	653.91
Net investment income	9.75			35.73
Net realized and change in unrealized gain (loss) from loans and derivative instruments	(1.47)			18.19
Net increase in net assets resulting from operations	8.28			53.92
Distributions of income to shareholder	(0.48)			(21.23)


Net asset value, end of period	$	407.74		$	686.60
Net assets, end of period	$	40,774,385		$	68,660,673


Ratios to average net assets:

Expenses*	4.55		%	9.84		%
Net investment income*	9.74		%	21.85		%
Portfolio turn-over rate	—		%	—		%
Average debt outstanding	$	—		$	37,250,000
*Annualized
**Total return amounts presented above are not annualized

11. SUBSEQUENT EVENTS

The Fund evaluated subsequent events through the date of this Quarterly Report on Form 10-Q and determined that no subsequent events had occurred that would require accrual or disclosure in the financial statements.

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

In addition to the historical information contained herein, 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 the Fund with respect to future events and financial performance and are subject to several risks and uncertainties, many of which are beyond the Fund’s control. All statements, other than statements of historical facts included in this Quarterly Report, regarding the strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of the Fund are forward-looking statements. For example, statements in this Form 10-Q regarding the potential future impact of the COVID-19 pandemic on the Fund’s business and results of operations 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 resulting from new information, future events or otherwise, except as required by law.

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, competition and macro-economic changes including inflation, interest rate expectations, among other factors including those set forth in the section of this Quarterly Report titled “Risk Factors” and in Item 1A - “Risk Factors” in the Fund’s 2022 Annual Report on Form 10-K. 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 100% owned by the Company. The Fund’s shares of common stock, at $0.001 par value, were sold to its sole shareholder, the Company, under a stock purchase agreement. The Fund has issued 100,000 of the Fund’s 10,000,000 authorized shares. The Company may make additional capital contributions to the Fund.

The Fund provides financing and advisory services to a variety of carefully selected venture-backed companies that have received equity funding from traditional sources of venture capital equity funding (i.e. a professionally managed venture capital firm), as well as non-traditional sources of venture capital equity funding (e.g., angel investors, strategic investors, family offices, crowdfunding investment platforms, etc.) (collectively, “Venture-Backed Companies”), primarily throughout the United States with a focus on growth-oriented companies. The Fund’s portfolio consists of companies in the communications, information services, media, technology (including software and technology-enabled business services), biotechnology, and medical devices industry sectors, among others. The Fund’s capital is generally used by its portfolio companies to finance acquisitions of fixed assets and working capital. On August 31, 2015, the Company completed its first closing of capital contributions. On September 1, 2015, the Fund made its first investment and became a non-diversified, closed-end investment company that elected to be treated as a BDC under the 1940 Act. While the Fund intends to operate as a non-diversified investment company within the meaning of Section 5(b)(2) of the 1940 Act, from time to time the Fund may act as a diversified investment company within the meaning of Section 5(b)(1) of the 1940 Act.

The Fund elected to be treated for federal income tax purposes as a RIC under the Code with the filing of its federal corporate income tax return for 2016. Pursuant to this election, the Fund generally will not have to pay corporate-level taxes on any income distributed to its shareholder as dividends, allowing the Company 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 Code. If the Fund fails to meet these requirements, it will be taxed as an ordinary corporation on

its taxable income for that year (even if that income is distributed to the Company) and all distributions out of its earnings and profits will 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 portfolio investments of the Fund primarily consist of debt financing to Venture-Backed Companies in the technology sector. The borrower’s ability to repay its loans may be adversely impacted by several factors, and as a result, the loan may not be fully 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. Some of the Fund’s portfolio companies may be impacted by rising inflation, which could have a material impact on their results of operations, specifically cost and revenues. As such, rising inflation may have an adverse impact on the portfolio borrowers’ ability to maintain their good credit standing, as well as their ability to pay their interest and principal obligations to the Fund. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce our net assets resulting from operations.

Transactions with Venture Lending & Leasing IX, Inc. (“Fund IX”)

The Manager also serves as investment manager for Fund IX. The Fund’s Board of Directors determined that so long as Fund IX has capital available to invest in loan transactions with final maturities earlier than December 31, 2028 (the date on which Fund IX will be dissolved), the Fund may invest in each portfolio company in which Fund IX invests. Generally, the amount of each investment will be allocated 50% to the Fund and 50% to Fund IX, or such other allocations as may be determined by the respective Fund Boards, so long as the Fund has capital available to invest. The ability of the Fund to co-invest with Fund IX, and other clients advised by the Manager, is subject to the conditions (the “Conditions”) with which the Funds are currently complying while seeking certain exemptive relief from the SEC from the provisions of Sections 17(d) and 57 of the 1940 Act and Rule 17d-1 thereunder. Effective December 31, 2022, Fund IX was no longer permitted to enter into new commitments to borrowers; however, Fund IX is permitted to fund existing commitments through December 31, 2023. To the extent that clients, other than Fund IX, advised by the Manager (but in which the Manager has no proprietary interest) invest in opportunities available to the Fund, the Manager will allocate such opportunities among the Fund and such other clients in a manner deemed fair and equitable considering all of the circumstances in accordance with the Conditions.

Critical Accounting Policies, Practices and Estimates

Critical Accounting Policies and Practices are those accounting policies and practices that are both the most important to the portrayal of the Fund’s net assets and results of operations and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on net assets or operating performance is material.

In evaluating the most critical accounting policies and estimates, the Manager has identified the estimation of fair value of the Fund’s loan investments along with the completeness of loans exhibiting indicators of potential credit deterioration as the most critical of the accounting policies and accounting estimates applied to the Fund’s reporting of net assets or operating performance. In accordance with U.S. GAAP, the Fund defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; 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. There is no readily available market price or secondary market for the loans made by the Fund to borrowers, hence the Manager determines fair value based on a hypothetical market and the estimates are subject to high levels of judgment and uncertainty. The Fund’s loan investments are considered Level 3 fair value measurements in the fair value hierarchy due to the lack of observability over many of the important inputs used in determining fair value. In particular, the Manager has identified the fair value of the Fund’s loan investments that exhibit indicators of the potential for credit deterioration and the completeness of those loan investments, as a critical accounting matter that may involve significant and material estimates and inputs from the Manager in determining the fair value of those loan investments.

Critical judgments and inputs in determining the fair value of a loan include the estimated timing and amount of future cash flows and probability of future payments, based on the assessment of payment history, available cash and “burn rate,” revenues, net income or loss, operating results, financial strength of borrower, prospects for the borrower’s raising future equity rounds, likelihood of sale or acquisition of the borrower, length of expected holding period of the loan, collateral position, the timing and amount of liquidation of collateral for loans that are experiencing significant credit deterioration and, as a result, collection becomes collateral-dependent, as well as an evaluation of the general interest rate environment. Management has evaluated these factors and has concluded that the effect of a deterioration in the quality of the underlying collateral, increase in the size of the loan, increase in the estimated time to recovery, and increase in the hypothetical market coupon rate would have the effect of decreasing the fair value of loan investments. The risk profile of a loan changes when events occur that impact the credit analysis of the borrower and the loan. Such changes result in the fair value being adjusted from par value of the individual loan. Where the risk profile is consistent with the original underwriting, the par value of the loan often approximates fair value.

The actual value of the loans may differ from Management’s estimates, which would affect net change in net assets resulting from operations as well as assets.

COVID-19, the Ukraine War, the Impact of Worldwide Inflation and Rising Interest Rates on Results of Operations and Liquidity & Capital Resources

The effects of the COVID-19 pandemic and the related actions by governments around the world to attempt to contain the spread of the virus had an impact on a number of the Fund’s portfolio companies’ business and operations. Uncertainty remains regarding the full extent of the long-term economic impact on the Fund’s business operations, results of operations, and access to liquidity and capital resources. The impact on the Fund will depend on many factors beyond the Fund’s control, including, without limitations, (i) the timing, extent, trajectory, and duration of the pandemic, (ii) the restrictions and advisories put in place to combat the pandemic, (iii) the effects of the pandemic and measures to combat the pandemic on the financial markets, and (iv) the impact on the economy overall, all of which are highly uncertain and cannot be predicted. In addition, the impact on local economies is uncertain and the speed of economic recovery may vary across different industries both domestically and globally.

Global and domestic financial markets have experienced an increase in volatility as concerns about the impact of higher inflation, rising interest rates, a potential recession and the current conflict in Ukraine have weighed on market participants. These factors have created disruptions in supply chains, and economic activity and have had a particularly adverse impact on certain industries. These uncertainties can ultimately impact the overall supply and demand of the market through changing spreads, deal terms and structures. The Fund is unable to predict the full impact of these macroeconomic events to the Fund's liquidity and capital resources.

The Fund is continuing to maintain close communications with its loan portfolio companies to proactively assess and manage potential risks. In addition, Management is continuing to maintain oversight analysis of credits across the Fund’s loan investment portfolio in an attempt to manage the potential credit risk and improve loan performance. Certain loans may have inherent increased credit risk due to the nature of the underlying business and its ability to maintain operations in the current economic environment.

The Fund believes its existing cash balance, scheduled monthly payments from borrowers, and the Company’s recallable distributions will be sufficient to satisfy its working capital needs, and other liquidity requirements associated with its existing operations.

Results of Operations - For the Three Months Ended March 31, 2023 and 2022

Analysis of Interest Income

The following table shows the average balance, interest income, and weighted average interest rate for the cash and non-cash portion of interest income for the three months ended March 31, 2023 and 2022.


	For the Three Months Ended March 31, 2023				For the Three Months Ended March 31, 2022
	Average Balance	Interest Income	Weighted-Ave Int Rate - Cash Portion	Weighted-Ave Int Rate - Noncash Portion	Average Balance	Interest Income	Weighted-Ave Int Rate - Cash Portion	Weighted-Ave Int Rate - Noncash Portion
Performing Loans	$23,432,681	$840,314	11.59%	2.75%	$90,832,281	$4,002,706	15.53%	2.10%
All Loans	$29,188,902	$1,303,612	15.65%	2.21%	$98,073,541	$5,182,213	19.20%	1.94%

Interest income for performing and all loans decreased by $3.2 million and $3.9 million, or 79.0% and 74.8%, respectively, for the three months ended March 31, 2023 compared to the same period in 2022. The decrease in interest income was due primarily to the decline in the loan investment portfolio as there were no new loans to offset the loans being paid down. The average outstanding balances for performing and all loans decreased by $67.4 million and $68.9 million, or 74.2% and 70.2%, respectively, for the three months ended March 31, 2023 compared to the same period in 2022.

Total investment income for the three months ended March 31, 2023 and 2022 was $1.4 million and $5.2 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 other income from commitment fees and warrants.

Analysis of Interest Expense

Interest expense was comprised of amounts related to interest on debt amounts drawn down, unused credit line fees and amounts amortized from deferred fees incurred in conjunction with the debt facility. Effective September 8, 2022, the Fund paid off the loan and terminated the debt facility.

The following table shows the average balance, interest expense and weighted-average interest rate for the three months ended March 31, 2022.


	For the Three Months Ended March 31, 2022
		Average Balance		Interest Expense		Int Expense Rate
Debt Facility		$	37,250,000	$	416,199	4.47	%

Analysis of Operating Expense

The following table shows the components of operating expense for the three months ended March 31, 2023 and 2022.


	For the Three Months Ended March 31,
Operating expense	2023		2022		Change
Management fees	$	258,814	$	599,000	$	(340,186)
Banking and professional fees	162,097		571,280		(409,183)
Other operating expenses	33,912		22,754		11,158
Total operating expense	$	454,823	$	1,193,034	$	(738,211)

Management fees were calculated as 2.5% of the Fund’s total assets and the decreases were due to declines in the Fund’s total assets due primarily to no new loan fundings to offset the loans being paid off.

Banking and professional fees decreased by $0.4 million, or 71.6%, due primarily to a decline in legal fees associated with non-performing loans.

Other operating expenses included director fees, custody fees, tax fees and other expenses related to the operations of the Fund.

Non-recurring fees

The Fund may receive non-recurring fees in connection with the origination and servicing of portfolio loans. Transactions in this category may include forfeited commitment fees and unamortized warrants, that become recognized as other income after the loan commitment period expires. Other non-recurring fees include pre-payment fees which are recognized as other income in the period received. Legal fee reimbursements for deal due diligence and drafting of documents are recognized as offsets against legal expenses. Non-recurring fees for the three months ended March 31, 2023 and 2022 were less than $0.1 million.

Realized and Change in Unrealized Gains (Losses)

Net investment income for the three months ended March 31, 2023 and 2022, was $1.0 million and $3.6 million, respectively.

Net realized loss from loans was $0.7 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. The primary reason for the losses were write-offs of non-accrual loans.

Net realized loss from derivative instruments were $0 and a net realized loss of less than $0.1 million for the three months ended March 31, 2023 and 2022, respectively. There were no gains or losses for the three months ended March 31, 2023 as the derivative was terminated in June 2022. The net realized loss in 2022 was due to interest payments paid on the interest rate collar as the floating rate was between the ceiling and floor of the collar.

Net change in unrealized gain from loans was $0.5 million and $2.4 million for the three months ended March 31, 2023 and 2022, respectively. The net change in unrealized gain consisted of fair value adjustments to loans and the reversal of fair value adjustments previously taken against loans written off.

Net change in unrealized gain from derivative instruments were a $0 and an unrealized gain of less than $0.1 million for the three months ended March 31, 2023 and 2022, respectively. There were no gains or losses for the three months ended March 31, 2023 as the derivative was terminated in June 2022. The net change in unrealized gain (loss) from derivative instruments from 2022 consisted of fair market value adjustments to the interest rate collar.

Net increase in net assets resulting from operations for the three months ended March 31, 2023 and 2022, was $0.8 million and $5.4 million, respectively. On a per share basis, the net increase in net assets resulting from operations for the three months ended March 31, 2023 and 2022 was $8.29 and $53.92, respectively.

Liquidity and Capital Resources – March 31, 2023 and December 31, 2022

The Fund is owned entirely by the Company. The Company may make further contributions to the capital of the Fund to the extent of the Company’s members’ capital commitment to the Company and excess cash balances of the Company. Total capital contributed to the Fund was $356.1 million as of March 31, 2023 and December 31, 2022. As of both March 31, 2023 and December 31, 2022, the Company had subscriptions for capital in the amount of $423.6 million, of which $415.2 million had been called. The remaining $8.5 million has expired and can no longer be called. Per the operating agreement between the Company’s managing member and members of the Company, only 10% of committed capital may be recalled effective March 31, 2021. The Company made $42.4 million in recallable distributions to its investors, as permitted under its operating agreement between the Company’s managing member and members of the Company.

The change in cash held by the Fund for the three months ended March 31, 2023 and 2022 were as follows:


	For the Three Months Ended March 31, 2023		For the Three Months Ended March 31, 2022
Net cash provided by operating activities	$	13,911,870	$	21,724,926
Net cash used in financing activities	—		(21,007,107)
Net increase in cash and cash equivalents	$	13,911,870	$	717,819

As of March 31, 2023 and December 31, 2022, 42.03% and 8.06%, respectively, of the Fund’s net assets consisted of cash and cash equivalents.

Net loan amounts outstanding after amortization and valuation adjustments decreased by $12.4 million for the three months ended March 31, 2023. As of March 31, 2023, all of the Fund’s unfunded commitments expired.

As of

Cumulative Amount
Disbursed

Principal
Reductions and Fair
Market Adjustments

Balance
Outstanding - Fair
Value

March 31, 2023

$937.9 million

$914.1 million

$23.8 million

December 31, 2022

$937.9 million

$901.7 million

$36.2 million

The Fund seeks to maintain the requirements to qualify for the special pass-through status available to RICs under the 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) (the “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 undistributed 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.

As of March 31, 2023, the Fund had a cash balance of $17.1 million and approximately $16.1 million in scheduled loan receivable payments over the next twelve months. Additionally, the Fund has access to $42.4 million in recallable distributions made by the Company to its investors. These amounts are sufficient to meet the operational expenses of the Fund over the next year.

The Fund was permitted to borrow in any amounts so long as its asset coverage ratio, as defined in the 1940 Act, is at least 200% after giving effect to such borrowings. Effective September 8, 2022, the Fund no longer has access to additional debt, as the debt facility was paid off and terminated.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Fund’s business activities contain various elements of risk, of which Management considers interest rate and credit risk to be the principal types of risks. Because the Fund considers the management of risk essential to conducting its business and to maintaining profitability, 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 manages its market 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 as the Fund primarily invests in private business enterprises and distributes all equity investments upon receipt to the Company.

The Fund’s investments are subject to market risk based on several factors, including, but not limited to, the borrower’s credit history, available cash, support of the borrower’s underlying investors, available liquidity, “burn rate,” revenue income, security interest, secondary markets for collateral, the size of the loan, term of the loan and the ability to exit via initial public offering or merger and acquisition.

The Fund’s exposure to interest rate sensitivity 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. Because the Fund terminated the debt facility on September 8, 2022 and does not plan to borrow in the future, a significant change in market interest rates will no longer have a material effect on the Fund’s interest expense.

Because all of the Fund’s loans impose a fixed interest rate upon funding, changes in short-term interest rates will not directly affect interest income associated with the loan portfolio as of March 31, 2023. However, changes in short-term interest rates could affect interest on the Fund’s short-term investments.

Based on the Fund’s Condensed Statements of Assets and Liabilities as of March 31, 2023, the following table shows the approximate annualized increase (decrease) in components of net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in investments and cash balances.


Effect of Interest Rate Change By	Other Income (Loss)		Total Income (Loss)
(0.50)%	$	(85,687)	$	(85,687)
1%	$	171,374	$	171,374
2%	$	342,747	$	342,747
3%	$	514,121	$	514,121
4%	$	685,494	$	685,494
5%	$	856,868	$	856,868

Although Management believes that the foregoing analysis is indicative of the Fund’s sensitivity to interest rate changes, it does not take into consideration potential changes in the credit market, credit quality, size and composition of the assets in the portfolio. It also does not assume any new fundings to borrowers, repayments from borrowers or defaults on borrowings. Accordingly, no assurances can be given that actual results would not differ materially from the table above.

The Fund is not sensitive to changes in foreign currency exchange rates, commodity prices and other market rates or prices.

Item 4. Controls and Procedures

Disclosure Controls and Procedures:

At the end of the period covered by this report, the Fund carried out an evaluation under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Fund’s disclosure controls and procedures pursuant to Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934 (“Exchange Act”). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Fund’s disclosure controls and procedures were effective as of the end of the period in ensuring that information required to be disclosed was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and in providing reasonable assurance that information required to be disclosed by the Fund in such reports is accumulated and communicated to the Fund’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Controls:

There have not been any changes in the Fund’s internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the Fund’s fiscal quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

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 any legal proceedings cannot now be predicted with certainty, the Fund does not expect any such 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. The Fund is not a party to any material legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors reported in the Fund’s 2022 Annual Report on Form 10-K.

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

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit Number			Description
3.1			Articles of Incorporation of the Fund as filed with the Maryland Secretary of State on May 6, 2015, incorporated by reference to the Fund’s Form 10 filed with the Securities and Exchange Commission on May 29, 2015.
3.2			Bylaws of the Fund, incorporated by reference to the Fund’s Form 10 filed with the Securities and Exchange Commission on May 29, 2015.
4.1			Purchase Agreement dated May 6, 2015 between the Fund and the Company, incorporated by reference to Exhibit 4.1 to the Fund’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on May 29, 2015.






10.1			Investment Management Agreement, dated October 13, 2022, by and between the Fund and Westech Investment Advisors LLC, incorporated by reference to Exhibit 10.1 to the Fund’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 18, 2022.
31.1			Chief Executive Officer (Principal Executive Officer) certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Rules 13a -14(a) and 15d-14(a) Certification).
31.2			Chief Financial Officer (Principal Financial Officer) certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Rules 13a -14(a) and 15d-14(a) Certification).
32.1			Chief Executive Officer (Principal Executive Officer) certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Section 1350 Certification).
32.2			Chief Financial Officer (Principal Financial Officer) certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Section 1350 Certification).

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 thereunto duly authorized.

VENTURE LENDING & LEASING VIII, INC.

(Registrant)


By:	/s/ David R. Wanek	By:	/s/ Jared S. Thear
David R. Wanek		Jared S. Thear
President and Chief Executive Officer		Chief Financial Officer
(Principal Executive Officer)		(Principal Financial Officer)
Date:	May 11, 2023	Date:	May 11, 2023

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. junior Avg

Venture Lending & Leasing VIII 10-Q2023 Q1 Quarterly report

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