UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended June 30, 2004.

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 000-50049

OFC DISTRIBUTION CORPORATION

(formerly Oxford Finance Corporation)

(Exact name of registrant as specified in its charter)


Maryland (State or other jurisdiction of incorporation or organization)		01-061-5368 (I.R.S. Employer Identification No.)

133 North Fairfax Street Alexandria, VA (Address of principal executive office)		22314 (Zip Code)

(703) 519-4900

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant is an accelerated filer. Yes o No x.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares of the issuer’s Common Stock, $.01 par value, outstanding as of August 13, 2004 was 5,200,000.

OFC DISTRIBUTION CORPORATION
TABLE OF CONTENTS


		PAGE
PART I.	FINANCIAL INFORMATION		3
Item 1.	Financial Statements		3
	Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003		3
	Statements of Operations for the three and six months ended June 30, 2004 and 2003(unaudited)		4
	Statement of Stockholders’ Equity for the six months ended June 30 30, 2004 (unaudited)		5
	Statement of Cash Flows for the six months ended June 30, 2004 and 2003 (unaudited)		6
	Schedule of Investments as of December 31, 2003		7
	Notes to Financial Statements (unaudited)		10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
	Overview		16
	Results of Operations		19
	Liquidity and Capital Resources		21
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		23
Item 4.	Control Procedures		23
PART II.	OTHER INFORMATION		24
Item 1.	Legal Proceedings		24
Item 2	Changes in Securities and Use of Proceeds		24
Item 3	Defaults upon Senior Securities		24
Item 4	Submission of Matters to a Vote of Security Holders		24
Item 5	Other Information		24
Item 6	Exhibits and Reports on Form 8-K		24

Item I. Financial Statements

OFC DISTRIBUTION CORPORATION

BALANCE SHEETS


	(Unaudited)
	June 30, 2004		December 31, 2003
ASSETS
Cash and cash equivalents	$	6,835,280	$	488,883
Investments:
Loans at fair value (cost of $0 and $62,460,108)		—		62,460,108
Less: unearned income		—		(1,098,712	)
Investment in equity securities at fair value (cost of $0 and $1,752,204 respectively)		—		1,682,509
Other investments		—		302,865

Total Investments		—		63,346,770
Principal and interest receivable on loans		—		2,291,435
Intangible assets, net		—		201,233
Prepaid & other assets		3,601		772,737

TOTAL ASSETS	$	6,838,881	$	67,101,058

LIABILITIES & STOCKHOLDERS’ EQUITY
LIABILITIES
Notes payable	$	—	$	20,688,714
Accounts payable		1,004,453		43,251
Dividends Payable		5,200,000		—
Accrued expenses and other liabilities		24,924		458,026
Customer deposits		—		246,021

Total Liabilities	$	6,229,377	$	21,436,012

STOCKHOLDERS’ EQUITY
Preferred stock, 10,000,000 shares authorized, no shares issued or outstanding	$	—	$	—
Common stock, $0.01 par value, 40,000,000 shares authorized and 5,200,000 shares issued and outstanding		52,000		52,000
Capital in excess of par value		557,504		45,739,152
Earnings in excess (deficit) of distributions		—		(56,411	)
Net unrealized depreciation on investments		—		(69,695	)

Total Stockholders’ Equity		609,504		45,665,046

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,838,881	$	67,101,058

SEE ACCOMPANYING NOTES.

OFC DISTRIBUTION CORPORATION

STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months			Six Months			Three Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2004			June 30, 2004			June 30, 2003			June 30, 2003
Interest and fee income
Interest and fee income - loans	$	1,204,878		$	3,067,219		$	1,369,527		$	3,194,266
Interest income - cash and cash equivalents		14,008			14,680			20,821			50,767

Total interest and fee income		1,218,886			3,081,899			1,390,348			3,245,033
Operating expenses
Salaries, payroll taxes and benefits		577,133			1,100,942			497,287			943,143
Interest and financing fees		286,253			635,086			137,348			271,986
General and administrative		210,583			524,876			275,846			528,754

Total operating expense		1,073,969			2,260,904			910,481			1,743,883

Net operating income		144,917			820,995			479,867			1,501,150
Costs associated with proposed sale of assets (Note 15)		(828,158	)		(1,140,422	)		—			—
Net unrealized (depreciation) on investments		(88,235	)		(112,033	)		(5,163	)		(19,629	)
Net realized gain on investments		135,000			85,342			—			—
Gain on sale of assets		3,390,577			3,390,577			—			—

Net increase in stockholders’ equity resulting from net income	$	2,754,101		$	3,044,459		$	474,704		$	1,481,521

Per common share data:
Earnings per common share - basic	$	0.53		$	0.59		$	0.09		$	0.28
Earnings per common share - diluted	$	0.52		$	0.58
Dividends declared and paid per common share	$	8.25		$	8.25		$	0.19		$	0.26
Weighted average common shares outstanding -
- basic		5,200,000			5,200,000			5,200,000			5,200,000
- diluted		5,246,561			5,246,561			5,200,000			5,200,000

SEE ACCOMPANYING NOTES.

OFC DISTRIBUTION CORPORATION

STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


					Capital in			Earnings			Net realized			Net unrealized			Total
	Common Stock				Excess of Par			in excess of			depreciation			depreciation			Stockholders’
	Shares		Amount		Value			distributions			on investments			on investments			Equity
Balance at December 31, 2003		5,200,000	$	52,000	$	45,739,152		$	(56,411	)	$	—		$	(69,695	)	$	45,665,046
Net increase / (decrease) in stockholders’ equity resulting from net earnings									(319,428	)		85,342			(112,033	)		(346,119	)
Gain on sale of assets									3,390,577									3,390,577
Dividends declared						(45,181,648	)		(3,014,738	)		(85,342	)		181,728			(48,100,000	)

Balance at June 30, 2004		5,200,000	$	52,000	$	557,504		$	—		$	—		$	—		$	609,504

SEE ACCOMPANYING NOTES.

OFC DISTRIBUTION CORPORATION

STATEMENT OF CASH FLOWS AND CASH EQUIVALENTS

(UNAUDITED)


	Six Months			Six Months
	Ended			Ended
	June 30, 2004			June 30, 2003
Cash Flows from Operating Activities:
Net increase (decrease) in stockholders’ equity resulting from net income excluding gain on sale of assets	$	3,044,459		$	1,481,521
Adjustments to reconcile net income to net cash used by operating activities:
Less Gain on sale of assets		(3,390,577	)		—
Depreciation expense		28,599			25,267
Amortization of intangible asset		9,850			11,820
Amortization of deferred financing costs		158,349			5,748
Accretion of unearned income		(324,864	)		(304,202	)
Changes in operating assets and liabilities:
Interest receivable		(459,299	)		(88,819	)
Prepaid and other assets		(69	)		(60,596	)
Accounts payable		(37,697	)		20,207
Accrued and other liabilities		(79,730	)		111,991

Net Cash Flows Provided by Operating Activities		(1,050,979	)		1,202,937

Cash Flows from Investing Activities:
Capital expenditures		(15,122	)		(28,429	)
Net (increase) decrease in loans and equity investments		(4,064,009	)		(11,688,794	)
Sale of Assets		49,000,000			—

Net Cash Flows Used in Investing Activities		44,920,869			(11,717,223	)

Cash Flows from Financing Activities:
Stock issuance costs		—			(110,282	)
Proceeds from borrowings		6,500,000			3,981,569
Repayments of borrowings		(1,123,493	)		(1,118,940	)
Dividends paid		(42,900,000	)		(1,352,000	)

Net Cash Flows Provided by Financing Activities		(37,523,493	)		1,400,347

Net (Decrease) Increase in Cash and Cash Equivalents		6,346,397			(9,113,939	)
Cash and Cash Equivalents - Beginning of Period		488,883			11,831,439

Cash and Cash Equivalents - End of Period	$	6,835,280		$	2,717,500

Supplemental Data:
Cash paid for interest	$	508,516		$	245,542
Non-cash Financing and Investing Activity:
Equity investments received in connection with loan originations	$	181,596		$	435,812

SEE ACCOMPANYING NOTES.

OFC DISTRIBUTION CORPORATION

SCHEDULE OF INVESTMENTS


		December 31, 2003
Portfolio Company	Investment	Cost (2)		Fair Value (2)
Agilix Corporation	Senior Debt	$	1,253,564	$	1,253,564
	Warrants to Purchase Common Stock		21,646		21,445
Alphavax Human Vaccines, Inc.	Senior Debt		360,881		360,881
	Warrants to Purchase Common Stock		1,932		2,053
Altus Biologics, Inc.	Senior Debt		2,106,928		2,106,928
	Warrants to Purchase Common Stock		53,294		37,931
Ambit Biosciences, inc	Senior Debt		635,301		635,301
	Warrants to Purchase Preferred Stock		17,769		14,987
Amnis	Senior Debt		230,392		230,392
Amphora Discovery, Inc.	Senior Debt		3,502,758		3,502,758
	Warrants to Purchase Common Stock		101,218		66,523
Ardent Pharmaceuticals, Inc.	Senior Debt		185,343		185,343
	Warrants to Purchase Common Stock		9,143		4,113
Athenix, Inc.	Senior Debt		235,704		235,704
	Warrants to Purchase Preferred Stock		20,018		14,013
Axya Medical, Inc.	Senior Debt		41,994		41,994
Beyond Genomics, Inc.	Senior Debt		2,386,815		2,386,815
	Warrants to Purchase Common Stock		76,695		80,500
BioTrove, Inc.	Senior Debt		1,160,138		1,160,138
	Warrants to Purchase Preferred Stock		22,973		29,027
Cellular Genomics, Inc.	Senior Debt		2,243,644		2,243,644
	Warrants to Purchase Preferred Stock		123,588		124,454
Ceptyr	Senior Debt		1,328,359		1,328,359
	Warrants to Purchase Preferred Stock		34,331		34,331
Cogent Neuroscience, Inc. (1)	Intellectual Property		302,865		302,865
CropSolution, Inc.	Senior Debt		857,067		857,067
	Warrants to Purchase Common Stock		49,156		48,564
Dynogen Pharmaceuticals, Inc.	Senior Debt		1,012,099		1,012,099
	Warrants to Purchase Preferred Stock		30,821		29,394
Egea Biosciences, Inc.	Senior Debt		1,075,213		1,075,213
	Warrants to Purchase Preferred Stock		44,488		44,333
Elixir Pharmaceuticals, Inc.	Senior Debt		1,764,650		1,764,650
	Warrants to Purchase Common Stock		55,876		64,703

(Continued on next page)

OFC DISTRIBUTION CORPORATION

SCHEDULE OF INVESTMENTS

(Continued on next page)


		December 31, 2003
Portfolio Company	Investment	Cost (2)		Fair Value (2)
Elusys Therapeutics, Inc.	Senior Debt		332,521		332,521
	Warrants to Purchase Preferred Stock		8,031		8,674
Entelos, Inc.	Senior Debt		779,192		779,192
Guava Technologies, Inc.	Senior Debt		1,201,524		1,201,524
	Warrants to Purchase Preferred Stock		27,260		27,260
ICAgen, Inc.	Senior Debt		1,073,899		1,073,899
Impact Rx	Senior Debt		985,179		985,179
Infinity Pharmaceuticals	Senior Debt		4,185,099		4,185,099
	Warrants to Purchase Preferred Stock		87,578		83,136
Iomai Corporation	Senior Debt		2,273,517		2,273,517
	Warrants to Purchase Preferred Stock		34,015		34,015
LipoScience, Inc.	Senior Debt		1,801,477		1,801,477
	Warrants to Purchase Common Stock		62,391		61,873
Locus Discovery, Inc.	Senior Debt		2,550,747		2,550,747
	Warrants to Purchase Common Stock		175,478		127,579
Memory Pharmaceuticals, Inc.	Senior Debt		2,492,151		2,492,151
	Warrants to Purchase Common Stock		119,129		167,209
Metabasis Therapeutics, Inc.	Senior Debt		788,533		788,533
Microbia, Inc.	Senior Debt		2,628,394		2,628,394
Navimedix, Inc.	Senior Debt		1,297,828		1,297,828
	Warrants to Purchase Common Stock		21,574		22,010
Nobex, Inc.	Senior Debt		461,186		461,186
	Warrants to Purchase Preferred Stock		22,762		18,514
Norak BioSciences	Senior Debt		981,452		981,452
	Warrants to Purchase Preferred Stock		18,301		19,065
Nuada Pharmaceuticals	Senior Debt		610,431		610,431
	Warrants to Purchase Preferred Stock		31,492		24,587
Odyssey Thera, Inc.	Senior Debt		758,114		758,114
	Warrants to Purchase Preferred Stock		23,937		23,899
Optobionics Corporation	Senior Debt		1,114,182		1,114,182
	Warrants to Purchase Preferred Stock		48,339		47,653
Picoliter, inc.	Senior Debt		854,962		854,962
	Warrants to Purchase Preferred Stock		29,523		31,248
Plexxikon, Inc.	Senior Debt		1,729,548		1,729,548
	Warrants to Purchase Preferred Stock		75,104		74,620
Protometrix, Inc.	Senior Debt		701,990		701,990
	Warrants to Purchase Preferred Stock		61,423		47,187
Quantum Dot	Senior Debt		276,990		276,990
	Warrants to Purchase Preferred Stock		6,333		6,505

(Continued on next page)

OFC DISTRIBUTION CORPORATION

SCHEDULE OF INVESTMENTS

(Continued from prior page)


		December 31, 2003
Portfolio Company	Investment	Cost (2)		Fair Value (2)
Sagres Discovery, Inc.	Senior Debt		1,390,175		1,390,175
	Warrants to Purchase Preferred Stock		36,304		38,428
Stemco Biomedical	Senior Debt		406,713		406,713
	Warrants to Purchase Preferred Stock		10,549		11,355
Stressgen Biotechnologies, Inc. (3)	Senior Debt		679,072		679,072
Structural GenomiX, Inc.	Senior Debt		3,563,859		3,563,859
	Warrants to Purchase Preferred Stock		91,806		93,695
Surface Logix, Inc.	Senior Debt		554,295		554,295
	Warrants to Purchase Common Stock		2,642		3,137
Targeted Molecules Corporation	Senior Debt		171,247		171,247
	Warrants to Purchase Preferred Stock		3,736		3,736
Transmolecular, Inc.	Senior Debt		94,913		94,913
	Warrants to Purchase Preferred Stock		6,004		4,937
TransTech Pharma, Inc.	Senior Debt		1,174,418		1,174,418
	Warrants to Purchase Common Stock		29,118		29,155
Triad Therapeutics, Inc.	Senior Debt		121,134		121,134
	Warrants to Purchase Common Stock		3,865		4,086
Trubion Pharmacueticals, Inc.	Senior Debt		1,609,569		1,609,569
	Warrants to Purchase Preferred Stock		24,669		24,719
US Genomics, Inc	Senior Debt		374,348		374,348
Vanda Pharmaceuticals, Inc.	Senior Debt		442,480		442,480
	Warrants to Purchase Common Stock		14,424		14,424
Xcyte Therapies, Inc.	Senior Debt		519,408		519,408
	Warrants to Purchase Preferred Stock		13,468		13,431

Total Investments		$	63,416,465	$	63,346,770

(1)		Non-income producing.

(2)		None of the investments listed are readily marketable. The warrants we hold represent, in each instance, less than 1% of the company issuing the warrants and are not currently income producing.

(3)		The portfolio company is publicly traded.

SEE ACCOMPANYING NOTES.

OFC DISTRIBUTION CORPORATION

NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2004

NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS

Interim financial statements of OFC Distribution Corporation (the “Company”, “we” or “us”) are prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim periods have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. These financial statements and the accompanying notes should be read in connection with the audited financial statements of OFC Distribution Corporation for the year ended December 31, 2003, which are included in its Form 10K, as amended, filed on April 30, 2004.

NOTE 2. DESCRIPTION OF BUSINESS

On June 25, 2004, the Company changed its name from Oxford Finance Corporation to OFC Distribution Corporation.

On May 28, 2004, OFC Distribution Corporation held a special meeting of stockholders at which our shareholders approved the sale of substantially all of our assets to and the assumption of certain of our liabilities by Oxford Finance Corporation (formerly known as Oxford Finance Acquisition Corp.), a Delaware corporation which we refer to as OFC, pursuant to an asset purchase agreement (the “Agreement”) between us and OFC dated January 28, 2004. OFC is a wholly-owned subsidiary of Sumitomo Corporation of America, a New York corporation and integrated global trading firm with diversified investments in businesses producing both capital and consumer products. Our shareholders also approved the articles of transfer filed with the Maryland State Department of Assessments and Taxation upon completion of the asset sale, and our plan of liquidation and dissolution, under which we will, following closing of the asset sale, take all steps necessary to dissolve as a corporation under Maryland law and withdraw our election as a business development company under the Investment Company Act of 1940, as amended. The foregoing measures were approved by the affirmative vote of at least two-thirds of all the stockholder votes entitled to be cast on the matter at the meeting.

On June 1, 2004, we sold substantially all of our assets to OFC, and OFC assumed certain of our liabilities, relating to our business of providing senior secured equipment financing primarily to emerging-growth life science companies, including all of our financing contracts, leases, securities and warrants issued in connection with any financing contract and all intangible assets. In exchange for our assets, in addition to the payoff of certain liabilities in the approximate amount of $26.6 million, OFC paid an initial payment at closing of $49 million in cash and agreed to make an additional contingent payment of up to $2 million, to be paid within 90 days after closing subject to certain post-closing adjustments. The total payment was determined through an arm’s length negotiation between us and OFC, based upon the net book value of our investment portfolio at approximately $46 million, and an estimate of good will at approximately $5 million. The gain on the sale of assets of approximately $3.4 million was derived from the proceeds of $49 million less the book value at the date of the sale of approximately $45.6 million.

On June 4, 2004 the Company declared dividends payable to holders of record on June 4, 2004 of $8.25 paid on June 11, 2004 and $1.00 paid on July 2, 2004. The Company expects to receive a contingent payment of up to $2 million during the third quarter of 2004 based upon the performance of certain portfolio company investments. The Company expects to distribute any contingent payment received along with any remaining funds to shareholders as soon as practicable. Costs associated with this transaction are expensed as incurred.

Prior to the asset sale, the Company’s investment objective was to achieve a high level of current income from interest payments from the loans made to portfolio companies and to achieve capital gains through an increase in the value of the warrants received from portfolio companies in connection with these loans. The Company provided loans primarily to emerging-growth life sciences companies. The Company generally secured loans with equipment and other assets. Following the asset sale, the Company is no longer engaged in active operations.

The Company was incorporated under the General Corporation Laws of the State of Maryland on October 23, 2001. On December 31, 2002, the Company elected to be regulated as a

business development company, or BDC, under the Investment Company Act of 1940. In addition, the Company intend to elect to be regulated for tax purposes as a Regulated Investment Company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for the calendar year 2003.

To qualify as a RIC for federal income tax purposes, the Company was required to distribute any “earnings and profits” (as determined for federal income tax purposes) from operations prior to the election to be taxed as a RIC. To meet this requirement, the Company paid dividends during 2002 of substantially all of the earning and profits for the year ended December 31, 2002.

As a RIC, the Company is required to pay out as a dividend 90% of its ordinary income and short-term capital gains for each taxable year in order to maintain its status as a RIC under Subtitle A, Chapter 1 of Subchapter M of the Code. The Company has paid, and intends to pay out, as a dividend substantially all those amounts. The amount to be paid out as a dividend is determined by the Board of Directors each quarter and is based on the annual earnings estimated by the management of the Company. The Company has a policy of retaining long-term capital gains and not paying them out as dividends.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. The Company believes that the following are some of the more critical judgment areas in the application of the Company’s accounting policies that currently affect the Company’s financial condition and results of operations.

Stock-based compensation – The Company accounts for stock-based compensation arrangements in accordance with the intrinsic value method as defined by the Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock-Based Compensation – Transition and Disclosure”, which for the Company requires certain disclosures related to the Company stock-based compensation arrangements. Under APB No. 25 and related interpretations, if the exercise price of the employee stock options equals or exceeds the fair value of the underlying stock on the date of grant, and other criteria are met, the Company records no compensation expense for the award of employee stock options.

On February 28, 2003, the Company granted 674,000 stock options with a strike price of $8.81, to executive management. One third of these options vested immediately, with the remainder then vesting on a quarterly basis. These options expire in February, 2013. In connection with the asset sale, the executive management each entered into an option buyout and cancellation agreement with the Company. Under the agreement, the Company will pay an amount equal to the excess of the value of the cumulative distribution of proceeds received from the asset sale over the exercise price for all vested options in exchange for the cancellation of the options.

The following tables presents the effect on net increase (decrease) in stockholders’ equity resulting from net earnings / net income (loss) and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, to the Company’s stock-based compensation.


	Six months			Six months			Three months			Three months
	Ended			Ended			Ended			Ended
	June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
Net increase (decrease) in stockholders’ equity resulting form earnings / net income	$	3,044,459		$	1,481,521		$	2,754,101		$	474,704
Add: Stock-based compensation included in net increase (decrease) in stockholders’ equity resulting from earnings / net income (loss)		238,000			—			238,000			—
Less: Stock-based compensation expense determined under the fair value based method for all awards		(181,981	)		(454,951	)		(90,991	)		(90,991	)

Pro Forma net increase (decrease) in stockholders’ equity resulting form earnings / net income (loss)	$	3,100,478		$	1,026,570		$	2,901,110		$	383,713

Earnings (loss) per share
Basic and diluted - as reported	$	0.59		$	0.28		$	0.53		$	0.09
Basic and diluted - pro forma	$	0.60		$	0.20		$	0.56		$	0.07

Use of estimates in the preparation of financial statements - The preparation of financial statements in conformity with accounting principles generally accepted in the United

States 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 revenues and expenses during the period reported. Actual results could differ from those estimates. As a , because all of the Company’s investments were acquired in privately negotiated transactions and do not have readily determinable market values, the investments are required to be carried at fair value. Fair value is determined in good faith by the Company’s Board of Directors pursuant to the Company’s valuation policy, with changes in value reported quarterly through the Company’s statement of operations under the caption “unrealized appreciation (depreciation) on investments.” Determination of fair value involves subjective judgments and the resultant values may not represent amounts at which investments could be bought or sold in an independent third party transaction, and the difference could be material.

NOTE 4. INVESTMENTS

At June 30, 2004 as a result of the asset sale described in Note 2, OFC Distribution Corporation held no investments. At December 31, 2003, investments consisted of the following:


	December 31, 2003
	Cost			Fair Value
Senior Debt	$	62,460,109			62,460,109
Investments in Equity Securities		1,752,204			1,682,509
Other Investments		302,865			302,865
Unearned income		(1,098,713	)		(1,098,713	)

Total	$	63,416,465		$	63,346,770

The composition of the Company’s portfolio of investments as of December 31, 2003 at cost and fair values was as follows:


	Investments at Fair Value
	December 31, 2003
Senior Debt	$	61,361,396	96.8	%
Investments in Equity Securities		1,682,509	2.7	%
Other Investments		302,865	0.5	%

Total	$	63,346,770	100.0	%


	Investments at Cost
	December 31, 2003
Senior Debt	$	61,361,396	96.7	%
Investments in Equity Securities		1,752,204	2.8	%
Other Investments		302,865	0.5	%

Total	$	63,416,465	100.0	%

The Company ceased operations on May 31, 2004. Previously, it provided loans primarily to emerging-growth life science companies. The Company’s loans were generally collateralized by a first priority security interest in essential-use assets, primarily laboratory equipment, and to a lesser extent, computers, furniture, software and manufacturing equipment that tends to retain secondary market value. The monthly amortization of the loans is intended to keep the loan balances in line with secondary market values based on management’s experience. Generally, the Company did not finance special purpose or customized equipment. The Company’s loans were amortizing term loans that generally matured between 30 and 48 months. Debt instruments were at fixed rates of interest which range from 600 to 1,000 basis points above coterminous Treasury Bills.

Set forth below is a table showing the composition of Oxford’s portfolio by industry section at cost and fair value at December 31, 2003.


	Investments at Fair Value
	December 31, 2003
			Percent of
	Investment		Total
Industry Sector:
Therapeutics	$	34,003,439		54	%
Enabling technology		20,145,320		33	%
Diagnostics		1,863,350		3	%
Agriculture biotechnology		1,155,348		2	%
Other		6,179,313		8	%

Total	$	63,346,770		100	%


	Investments at Cost
	December 31, 2003
			Percent of
	Investment		Total
Industry Sector:
Therapeutics	$	33,952,177		53	%
Enabling technology	$	20,259,032		34	%
Diagnostics	$	1,863,868		3	%
Agriculture biotechnology	$	1,161,945		2	%
Other	$	6,179,443		8	%

Total	$	63,416,465		100	%

The Company funded investments of $15.2 million from January 1, 2004 through June 1, 2004 prior to the sale of its assets. During the first six months of 2003, repayments included a prepayment in full of an investment in a portfolio company with a balance of $5,948,421 in 2003. This portfolio company was acquired during the first quarter of 2003, and the new parent company elected to repay the loan as well as a prepayment fee of $551,759 which is included in interest and fee income in the statement of operations. During 2004, portfolio companies made regularly scheduled principal repayments of $10.7 million prior to the asset sale.

Investments in equity securities represented the Company’s ownership of warrants received primarily as part of a loan arrangement. In certain loan arrangements, warrants were received from the borrower as additional origination fees to provide the Company with an enhanced internal rate of return. At December 31, 2003, 75% of Oxford’s loans had associated warrants. When the Company received warrants to purchase stock in a borrower in connection with a loan, the warrant typically had an exercise price equal to the price of the stock as determined in the most recent equity round of financing, and entitles the Company to purchase a non-controlling percentage of the borrower’s stock. Any resulting discount on the loan from recordation of warrants was accreted into income over the term of the loan.

The staff of the Commission has informed Oxford that a business development company should provide the interest rates and maturity dates applicable to loan transactions such as those presented in the Schedule of Investments set forth on page 7 to satisfy reporting requirements under the U.S. federal securities laws. Oxford believes that the Schedule of Investments in the form presented is consistent with its historical practice and the current practices of other business development companies. In light of the asset sale and liquidation of Oxford and the fact that OXFORD FINANCE CORPORATION is not expected to be a reporting company under the Securities Exchange Act of 1934, the Company has not restated the Schedule of Investments to include this information

NOTE 5 BORROWINGS

All of the company’s borrowings were paid off in full in connection with the asset sale on June 1, 2004 and each of the following lines has been cancelled.

On November 27, 2002, the Company entered into a Master Loan and Security Agreement with Farmers & Mechanics Bank (“F&M Bank”). Pursuant to the agreement, F&M Bank agreed to provide the Company $7,500,000 in term loans that had to be drawn down by April 30, 2003. The Company had the option of selecting a fixed interest rate equal to F&M Bank’s like term cost of funds plus 320 basis points or a floating interest rate equal to the base rate plus 1 percent. The base rate is equal to the highest per annum rate published from time to time in the Wall Street Journal. The obligations to F&M Bank to repay the loans were secured by certain eligible loans.

On October 17, 2003, the Company entered into a Master Loan and Security Agreement with National City Bank, as administrative agent, and other lenders as part of a syndicate. Pursuant to the agreement, National City Bank and other lenders agreed to provide the Company $35,000,000 in revolving loans that must be drawn down by May 31, 2005. The Company had the option of selecting an interest rate equal to the 30-Day LIBOR plus 325 basis points or the base rate which is the prime rate plus 150 basis points. The obligations to National City Bank and other lenders to repay the loans are secured by certain eligible loans. Concurrent with this agreement, the Company cancelled its previous Master Loan and Security Agreement, as amended, with National City Bank dated September 25, 2003.

NOTE 6. EARNINGS / (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted loss per share for the three and six months ended June 30:


	Six Months Ended
	June 30,
	2004
Net increase in stockholder’s equity resulting from earnings/net income	$	3,044,459
Denominator for basic weighted average shares		5,200,000
Dilutive potential shares		46,451

Denominator for diluted weighted average shares		5,246,451
Basic earnings per common share	$	0.59
Diluted earnings per common share	$	0.58


	Three Months Ended
	June 30,
	2004
Net increase in stockholder’s equity resulting from earnings/net income	$	2,754,101
Denominator for basic weighted average shares		5,200,000
Dilutive potential shares		46,451

Denominator for diluted weighted average shares		5,246,451
Basic earnings per common share	$	0.53
Diluted earnings per common share	$	0.52


	Six Months Ended
	June 30,
	2003
Net increase in stockholder’s equity resulting from earnings/net income	$	1,481,521
Denominator for basic weighted average shares		5,200,000
Dilutive potential shares		—

Denominator for diluted weighted average shares		5,200,000
Basic earnings per common share	$	0.28
Diluted earnings per common share	$	0.28


	Three Months Ended
	June 30,
	2003
Net increase in stockholder’s equity resulting from earnings/net income	$	474,704
Denominator for basic weighted average shares		5,200,000
Dilutive potential shares		—

Denominator for diluted weighted average shares		5,200,000
Basic earnings per common share	$	0.09
Diluted earnings per common share	$	0.09

NOTE 7. RELATED PARTY TRANSACTIONS

During 2003 Oxford Finance and a related party, Friedman Billings and Ramsey & Co. (“FBR”) entered into an agreement in which Oxford retained FBR to serve as the financial advisor to the Company in connection with the Company’s consideration and possible implementation of a strategic transaction, including without limitation the potential purchase of another entity through the purchase of the capital stock , or the potential sale of all or substantially all of the assets and/or liabilities or capital stock of the Company. In connection with FBR’s proposed service, upon the completion of any qualified transaction, Oxford will pay FBR 1% of the fair market value of the aggregate consideration, plus 5% of the fair market value of any aggregate consideration received by the Company’s shareholders as of the closing of the transaction in excess of $10.00 per share. On July 2, 2004 the Company paid FBR $440,000.

Mr. Philbrick and Mr. Altenburger will receive in the range of $9.32 to $9.68 per share in exchange for their respective Oxford shares, the same as every other Oxford stockholder. Mr. Philbrick will receive employment compensation from OXFORD FINANCE CORPORATION in the amount of $900,000 over 3 years and a total of $307,401 in consideration for the cancellation of his options. Mr. Altenburger will receive employment compensation from OXFORD FINANCE CORPORATION in the amount of $175,000 and up to $124,280 in consideration for the cancellation of his options. Messrs. Philbrick and Altenburger will receive approximately $7,800 and $6,522 respectively in other compensation consisting of contributions to Oxford Finance Corporation’s 401(k) plan and premiums paid for group term life insurance and long-term disability.

NOTE 8. FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the six months ended June 30 31, 2004 and 2003:


	Six Months			Six Months
	Ended			Ended
	June 30, 2004			June 30, 2004
Per Share Data - basic and diluted:
Net asset value at beginning of period	$	8.78		$	8.81

Net operating income		0.60			0.28
Increase in unrealized depreciation on investments		(0.01	)		—

Net increase in stockholders’ equity resulting from earnings		0.59			0.28

Dividends paid and declared		(9.25	)		(0.27	)
Net decrease in stockholders’ equity resulting from distributions		(9.25	)		(0.27	)

Net asset value at end of period	$	0.12		$	8.82

Ratio/Supplemental Data:
Net assets at end of period	$	609,504		$	45,838,667
Ratio of operating expenses to average net assets		4.8	%		3.8	%
Ratio of net operating income to average net assets		3.5	%		3.3	%

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ALL STATEMENTS CONTAINED HEREIN, OTHER THAN HISTORICAL FACTS, MAY CONSTITUTE “FORWARD-LOOKING STATEMENTS.” THESE STATEMENTS MAY RELATE TO, AMONG OTHER THINGS, FUTURE EVENTS OR OUR FUTURE PERFORMANCE OR FINANCIAL CONDITION. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS “MAY,” “MIGHT,” “BELIEVE,” “WILL,” “PROVIDED,” “ANTICIPATE,” “FUTURE,” “COULD,” “GROWTH,” “PLAN,” “INTEND,” “EXPECT,” “SHOULD,” “WOULD,” “IF,” “SEEK,” “POSSIBLE,” “POTENTIAL” OR THE NEGATIVE OF SUCH TERMS OR COMPARABLE TERMINOLOGY. THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, (1) RECEIPT OF LESS THAN THE FULL PURCHASE PRICE FROM THE ASSET SALE AS PART OF THE HOLDBACK DISTRIBUTION, AND (2) THOSE FACTORS LISTED UNDER THE CAPTION “RISK FACTORS” IN OUR FORM 10, AS FILED ON MARCH 21, 2003.

WE CAUTION READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE AFTER THE DATE OF THIS REPORT.

THE FOLLOWING ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO CONTAINED ELSEWHERE IN THIS REPORT.

OVERVIEW

On June 4, 2004 the Company declared dividends payable to holders of record on June 4, 2004 of $8.25 paid on June 11, 2004 and $1.00 paid on July 2, 2004. The Company expects to receive a contingent payment of up to $2 million during the third quarter of 2004 based upon the performance of certain portfolio company investments. The Company expects to receive a contingent payment of up to $2 million during the third quarter of 2004 based upon the performance of certain of portfolio customer’s investments. The Company expects to distribute any payment along with any remaining funds to shareholders as soon as practicable.

As an operating company, OFC Distribution Corporation was a financial services company that provided senior secured equipment financing primarily to emerging-growth life science companies. Such financings were generally in the form of loans with equity features, typically warrants. Our investment objective was to achieve a high level of current income from interest payments and transaction fees from the loans it makes to portfolio companies and to achieve capital gains through an increase in the value of the warrants it expects to receive from its portfolio companies in connection with these loans. We generally secured loans with equipment and other assets. Following the asset sale, we no longer continue to be engaged in active operations.

The Company was incorporated under the general corporation laws of the State of Maryland on October 23, 2001. On December 31, 2002, Oxford elected to be regulated as a business development company, under the Investment Company Act of 1940, as amended. In addition, when the Company files its 2003 tax returns it intends to elect to be regulated for tax purposes as a regulated investment company, under Subchapter M of the Internal Revenue Code of 1986, as amended, for the calendar year 2003.

To qualify as a regulated investment company for federal income tax purposes, the Company was required to distribute any “earnings and profits” (as determined for federal income tax purposes) from operations prior to the election to be taxed as a regulated investment company. To meet this requirement, the Company paid dividends during 2002 and 2003 of substantially all of the earnings and profits for the years ended December 31, 2002 and 2003, respectively.

As a regulated investment company, the Company must pay out as a dividend 90% of its ordinary income and short-term capital gains for each taxable year in order to maintain its status as a regulated investment company under Subtitle A, Chapter 1 of Subchapter M of the Code. Oxford has and intends to pay out as a dividend substantially all those amounts. The amount to be paid out as a dividend is determined by the board of directors each quarter and is based on the annual earnings estimated by the management of Oxford. Oxford has a policy of retaining long-term capital gains and not paying them out as dividends.

At June 30, 2004 as a result of the asset sale described in Note 2 to the financial statements, OFC Distribution Corporation held no investments. At December 31, 2003 the Company held investments of $63.3 million including equity investments of $1.7 million. The Company acquired its equity investments primarily in connection with its loans. Prior to the asset sale, during 2004 the Company originated approximately $15.2 million of loans.

Oxford’s principal executive offices are located at 133 N. Fairfax Street, Alexandria, Virginia 22314. Oxford’s telephone number is (703) 519-4900. Oxford’s web site address is www.oxfordfinance.com.

Conversion to Business Development Company

On December 31, 2002, Oxford elected to be regulated as a business development company under the 1940 Act. The results of operations for 2002 reflect Oxford’s results prior to operating as a business development company. There was no cumulative effect of accounting change for the conversion to a business development company on December 31, 2002. Accounting principles used in the preparation of the financial statements as a business development company differ from those used in preparing financials for an ordinary corporation primarily with regard to the carrying value of investments and the accounting for income taxes.

As a regulated investment company, Oxford began to make quarterly distributions beginning in 2003. Regulated investment companies generally are not subject to federal income tax on the portion of their income that they distribute to their stockholders if they meet certain minimum distribution requirements. Oxford intends to meet these requirements by distributing to its stockholders all of its income, except for certain net capital gains. If this happens, stockholders will be treated for tax purposes as if they received an actual distribution of the capital gains and reinvested the net after-tax proceeds in Oxford. Stockholders also may be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to such stockholder’s allocable share of the tax Oxford pays on the capital gains deemed distributed to the stockholder.

Oxford was taxed as an ordinary corporation through December 31, 2002.

PORTFOLIO COMPOSITION AND ASSET QUALITY

At June 30, 2004 as a result of the asset sale described in Note 2 to the financial statements, OFC Distribution Corporation held no investments. Prior to the asset sale we made loans primarily to emerging-growth life sciences companies to finance equipment acquisitions that are essential to their businesses. Our loans ranged from $300,000 to $8,000,000 (averaging approximately $3,000,000), and matured in approximately three to four years. Generally, our loans accrued interest at a fixed rate of from 8% to 14% and are not rated by any debt rating agency. Our loans were generally collateralized by a first priority security interest in essential-use assets, primarily laboratory equipment, and to a lesser extent, computers, furniture, software and manufacturing equipment that tends to retain secondary market value The monthly amortization of the loans was intended to keep the loan balances in line with secondary market values based on management’s experience. Generally, we did not finance special purpose or customized equipment. The loans were fully amortized over the term, with payments of principal and interest being required on a monthly basis.

Through the date of our asset sale on June 1, 2004 total investment activity for the period was:


Beginning Portfolio: January 1, 2004	$	63,346,770
Originations/Net Draws		15,159,488
Repayments		<10,705,349	>
Net Change in Appreciation (Depreciation) on Loans and Warrants		<65,268	>

Ending Portfolio June 1, 2004	$	67,735,641

The majority of our investments were senior secured loans. Our investments in equity securities were warrants to acquire equity interests. The following table shows the fair value of our portfolio by asset class as of December 31, 2003:


	December 31, 2003
	Cost			Fair Value
Senior Debt	$	62,460,109			62,460,109
Investments in Equity Securities		1,752,204			1,682,509
Other Investments		302,865			302,865
Unearned income		(1,098,713	)		(1,098,713	)

Total	$	63,416,465		$	63,346,770

Set forth below is a table showing the composition of Oxford’s portfolio by industry section at cost and fair value at December 31, 2003.


	Investments at Fair Value
	December 31, 2003
Senior Debt	$	61,361,396	96.8	%
Investments in Equity Securities		1,682,509	2.7	%
Other Investments		302,865	0.5	%

Total	$	63,346,770	100.0	%


	Investments at Cost
	December 31, 2003
Senior Debt	$	61,361,396	96.7	%
Investments in Equity Securities		1,752,204	2.8	%
Other Investments		302,865	0.5	%

Total	$	63,416,465	100.0	%

In addition to various risk management and monitoring tools, we also used a rating system to characterize and monitor our expected level of returns on each loan and warrant in our portfolio. We used the following 1 to 5 rating scale. Below is a description of the conditions associated with each rating:


Rating		Summary Description
1		Capital gain expected
2		Full return of principal and interest expected with customer performing in accordance with plan
3		Full return of principal and interest expected but customer requires closer monitoring
4		Some loss of interest expected but still expecting an overall positive internal rate of return
5		Loss of interest and some loss of principal expected which would result in an overall negative internal rate of return

The following table shows the distribution of our loans and warrants on the 1 to 5 rating scale at fair value as of December 31, 2003:


	December 31, 2003
Investment	Investments at		Percent of
Rating	Fair Value		Total Portfolio
1	$	12,246,832		19	%
2		48,620,746		77	%
3		2,176,327		3	%
4		302,865		<1	%
5		—		—

	$	63,346,770		100	%

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2004 and 2003

During the three months ended June 30, 2004 (“second quarter of 2004”) the Company completed an asset sale as described in note 2 of the financial statements and ceased operations on June 1, 2004. Therefore it was not meaningful to compare the results for the two months of operations during the second quarter of 2004 with the full three months of during the second quarter of 2003.

Operating Income and Expenses

INTEREST AND FEE INCOME

Interest and fee income from loans to private and public companies was $1,218,886 during the second quarter of 2004, as compared to $1,390,348 during the three months ended June 30, 2003 (“second quarter of 2003”.) The Company earned higher interest income on the larger investment portfolio in 2004, which was offset by the shorter period of operations.

EXPENSES

Expenses for the second quarter of 2004 were $1,073,969 as compared to $910,481 for the second quarter of 2003. This amount consisted primarily of salaries and benefits, interest and financing fees, and general and administrative expenses.

Salaries and benefits consisted of $577,133 for the second Quarter of 2004 as compared to $497,287 for the first quarter of 2003. In the second quarter of 2004, the results include an expense of $238,000 for the cancellation of stock options in lieu of an exercise at the time of the asset sale our officers, which otherwise offset the reduced expenses of the shorter operating period in 2004.

Interest and financing fees of $286,253 represented costs associated with the loan facility and borrowings during the second quarter of 2004, as compared to $137,348 during the second quarter of 2003. During the second quarter of 2004 the Company had drawn additional borrowings available under its credit facilities as it funded investments prior to the asset sale.

General and administrative expenses were $210,583 during the second quarter of 2004 as compared to $275,846 during the second quarter of 2003. Reduced expenses were related to the shorter operating period in 2004.

INCOME TAXES

Through December 31, 2002 we were taxed under Subchapter C of the Internal Revenue Code. We intend to elect, effective as of January 1, 2003, to be a RIC under Subchapter M of the Internal Revenue Code and will not be subject to taxation of income to the extent such income is distributed to stockholders and we meet certain minimum dividend distribution and other requirements.

REALIZED DEPRECIATION AND UNREALIZED LOSS ON INVESTMENTS

Prior to the asset sale we valued our investment portfolio each quarter. At June 30, 2004 the Company held no investments and did not perform a valuation. During the second quarter of 2004, the Company realized $135,000 as the result of the exercise of warrants related to a portfolio customer which had been acquired in a private transaction.

COSTS ASSOCIATED WITH PENDING ASSET SALE

The Company is paying its expenses related to the asset sale and incurred approximately $828,000 during the quarter ended June 30, 2004. Costs are being expensed as incurred.

GAIN ON SALE OF ASSETS

The Company received $49,000,000 in connection with the asset sale. The difference between the book value of the Company and the proceeds resulted in a gain in the amount of $3,390,577. Any additional proceeds to be received as part of the contingent proceeds during the third quarter of 2004 will be recorded as an additional gain.

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM EARNINGS / NET INCOME

As a result of the operating income, operating expenses and unrealized depreciation on investments described above, we had a net increase in stockholder’s equity resulting from earnings / net income of $2,754,101 for the second quarter of 2004 as compared to a net increase in stockholder’s equity resulting from earnings / net income of $474,704 for the second quarter of 2003.

RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2004 and 2003

During the six months ended June 30, 2004 the Company completed an asset sale as described in note 2 of the financial statements and ceased operations on June 1. Therefore it is not meaningful to compare results for the five months of operations during the first two quarters of 2004 with the full first six months of during the 2003.

Operating Income and Expenses

INTEREST AND FEE INCOME

Interest and fee income from loans to private and public companies was $3,081,899 during the six months ended June 30 2004, as compared to $3,245,033 during the six months ended June 30, 2003. Income during 2003 included a prepayment fee of $551,759 related to the prepayment in full of an investment in a portfolio company with a balance of $5,948,421 in 2003. This portfolio company was acquired during the first quarter of 2003, and the new parent company elected to repay the loan as well as a prepayment fee.

EXPENSES

Expenses for the six months ended June 30 2004 were $2,260,904 as compared to $1,743,883 for the six months ended June 30 2003. This amount consisted primarily of salaries and benefits, interest and financing fees, and general and administrative expenses.

Salaries and benefits consisted of $1,100,942 for the six months ended June 30 2004 as compared to $943,143 for the six months ended June 30 2003. In the six months ended June 30 2004, the salaries and benefits included an expense for a stock option buyout in lieu of an exercise by its officers of $238,000. Which otherwise offset the reduced expenses of the shorter operating period in 2004.

Interest and financing fees of $635,086 represented costs associated with the loan facility and borrowings during the six months ended June 30 2004, as compared to $271,986 during the six months ended June 30 2003. During the six months ended June 30 2004 the Company had drawn additional borrowings available under its credit facilities.

General and administrative expenses were $524,876 during the six months ended June 30 2004 as compared to $528,754 during the six months ended June 30 2003. Slightly higher overhead costs were offset by the shorter operating period in 2004.

INCOME TAXES

REALIZED DEPRECIATION AND UNREALIZED LOSS ON INVESTMENTS

We value our investment portfolio each quarter. At June 30, 2004 the Company held no investments and did not perform a valuation. During the six months ended June 30, 2004, the Company realized $85,342 primarily as a result of the exercise of warrants related to a portfolio customer which had been acquired in a private transaction. Prior to the asset sale unrealized depreciation on investments was 112,033 during the six months ended June 30, 2004 as compared to $19,629 during the comparable period in 2003.

COSTS ASSOCIATED WITH PENDING ASSET SALE

The Company is paying its expenses related to the asset sale and incurred approximately $1,140,000 during the six months ended June 30, 2004. Costs are being expensed as incurred.

GAIN ON SALE OF ASSETS

The Company received $49,000,000 in connection with the asset sale. The difference between the book value of the Company and the proceeds resulted in a gain in the amount of $3,390,577. Additional proceeds, if any, to be received as part of the contingent proceeds during the third quarter of 2004 will be recorded as an additional gain.

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM EARNINGS / NET INCOME

As a result of the operating income, operating expenses and unrealized depreciation on investments described above, we had a net increase in stockholder’s equity resulting from earnings / net income of $3,044,459 for the six months ended June 30 2004 as compared to a net increase in stockholder’s equity resulting from earnings / net income of $474,704 for the six months ended June 30 2003.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2004 the Company held $6,835,280. On July 2, 2004, the Company paid a dividend in the amount of $5,200,000 and satisfied certain expenses related to the asset sale. The Company believes that its remaining cash on hand will be sufficient to satisfy its remaining liabilities as it dissolves. The Company may receive up to an additional $2 million in relation to the assets sale based upon the performance of certain of its portfolio company investments. The Company will remit any proceeds available for distribution as well as any remaining available cash to shareholders, if any, in a timely manner prior to dissolution.

Prior to the asset sale, cash used by operating activities for the six months ended June 30, 2004, consisting primarily of our net income, excluding the gain on the sale of assets, less working capital needs was approximately $1,062,000. The Company incurred and paid transaction costs related to the asset sale which offset operating income. Net income includes accretion of non-cash unearned income, and additionally was reduced by the settlement of certain current liabilities during the six months ended June 30, 2004.

Net cash provided by investing activities was $44.9 million for the six months ended June 30, 2004 as compared to a use of cash of $11.7 million during the comparable period in 2003. During the six months ended June 30, 2004 the Company received $49 million from the sale of assets as described in the note 2 to the financial statements. During the six months ended June 30, 2004 the Company made net investments in the amount of $4 million as compared $11.7 million during the comparable period in 2003.

Prior to the asset sale, net cash provided by financing activities was approximately $5.4 million for the six months ended June 30, 2004 and consisted primarily of net draws upon the Company’s credit facilities to fund investments in loans made during the period. During the six months ended June 30, 2003, the Company had net draws upon its credit facility of $2.9 million. During the six months ended June 30 the Company paid dividends of $42,900,000 or $8.25 per share as a return of capital related to the asset sale. During the six months ended June 30, 2003 the Company paid dividends of $1,352,000.

All of the company’s borrowings were paid off in full in connection with the asset sale on June 1, 2004 and each of the following lines has since been cancelled.

On October 17, 2003, the Company entered into a Master Loan and Security Agreement with National City Bank, as administrative agent, and other lenders as part of a syndicate. Pursuant to the agreement, National City Bank and other lenders agreed to provide the Company $35,000,000 in revolving loans that must be drawn down by May 31, 2005. The Company had the option of selecting an interest rate equal to the 30-Day LIBOR plus 325 basis points or the base rate which is the prime rate plus 150 basis points. The obligations to National City Bank and other lenders to repay the loans were secured by certain eligible loans. Concurrent with this agreement, the Company cancelled its previous Master Loan and Security Agreement, as amended, with National City Bank dated September 25, 2003.

Dividends

We are required to distribute at least 90% of our investment company taxable income to avoid corporate level taxes on the amount distributed and at least 98% of our investment company taxable income to avoid an excise tax. We intend to make distributions on a quarterly basis to our stockholders of all of our income, except for certain net capital gains and adjustments for long-term incentive compensation expense.

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC and due to provisions in our credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our status as a regulated investment company. We cannot assure shareholders that they will receive any distributions or distributions at a particular level.

The following table summarizes our dividends declared to date:


Date Declared	Record Date	Payment Date	Amount
June 4, 2004	June 4, 2004	July 2, 2004	$	1.00
June 4, 2004	June 4, 2004	June 11, 2004	$	8.25
December 3, 2003	December 15, 2003	December 31, 2003	$	0.15
September 2, 2003	September 15, 2003	September 30, 2003	$	0.11
May 30, 2003	June 13, 2003	June 30, 2003	$	0.19
February 28, 2003	March 14, 2003	March 31, 2003	$	0.07
November 4, 2002	December 15, 2002	December 31, 2002	$	0.03
September 5, 2002	September 15, 2002	September 30, 2002	$	0.02

During 2004, $8.75 of dividends was characterized as a return of capital and $0.50 was considered a long-term capital gain related to the sale of our assets. All dividends paid during 2002 and 2003 were characterized as ordinary income with no return of capital or capital gain components.

Critical Accounting Policies

There were no changes in the Company’s critical accounting policies from those described in the Company’s 2003 Form 10-K.

to be a reporting company under the Securities Exchange Act of 1934, the Company has not restated the Schedule of Investments to include this information.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

At June 30, 2004 the Company held $6,835,280. On July 2, 2004, the Company paid a dividend in the amount of $5,200,000 and satisfied certain expenses related to the asset sale. The remaining cash is held in money market accounts earning approximately 1%.

As a business development company, our leverage is limited. Accordingly, other things being equal, increases in interest rates will result in greater increases in our net interest income and reductions in interest rates will result in greater decreases in our net interest income as compared with the effects of interest rate changes for more highly leveraged capital structured companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-14 and 15d-14 under the Securities and Exchanges Act of 1934, as amended) as of a date within 90 days prior to filing this quarterly report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company required to be included in the Company’s reports filed or submitted under the Securities Exchange Act of 1934.

Changes in Internal Controls.

Since the Evaluation date, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect such controls.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is not currently subject to any material legal proceeding, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company.

ITEM 2. Changes in Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

The Company held a special meeting of stockholders on May 28, 2004 at which stockholders voted on the following two items:

1. Approval of the sale of substantially all of the Corporation’s assets, and the transfer of certain liabilities, to Oxford Finance Acquisition Corp., a Delaware corporation, including the articles of transfer to be filed with the Maryland State Department of Assessments and Taxation upon completion of the asset sale; and

2. Approval of the Corporation’s plan of liquidation and dissolution, under which the Corporation’s board of directors and authorized officers following the consummation of the sale of substantially all of the Corporation’s assets and transfer of certain liabilities will take all steps necessary to dissolve the Corporation as a corporation under Maryland law and withdraw the Corporation’s election as a business development company under the Investment Company Act of 1940, as amended.

Stockholders holding 4,256,292 shares of capital stock of the Corporation outstanding and entitled to vote at the Special Meeting were present in person or by proxy. Such shares constituted a quorum for the conduct of business.

On the first item, the holders of 4,016,292 shares of stock present in person or by proxy at the Special Meeting voted in favor of the measure, representing approximately 77.24% of all stock entitled to vote on the measure and exceeding the required 66 2/3% of the shares of stock necessary to approve the measure. The holders of 240,000 shares of stock voted against the measure, and there were no abstentions or votes withheld. Accordingly, the measure was approved by the stockholders of the Corporation in accordance with applicable law, the charter and bylaws of the Corporation.

On the second item, the holders of 4,016,292 shares of stock present in person or by proxy at the Special Meeting voted in favor of the measure, representing approximately 77.24% of all stock entitled to vote on the measure and exceeding the required 66 2/3% of the shares of stock necessary to approve the measure. The holders of 240,000 shares of stock voted against the measure, and there were no abstentions or votes withheld. Accordingly, the measure was approved by the stockholders of the Corporation in accordance with applicable law, the charter and bylaws of the Corporation.

ITEM 5. Other Information

None.

ITEM 6. Exhibits and Reports on Form 8-K

On June 3, 2004 the Company filed Form 8-K to announce that it completed its asset sale. On June 4, 2004 the Company filed Form 8-K to announce that it declared dividends in the amounts of $8.25 and $1.00 per share payable on June 11, 2004 and July 2, 2004 respectively.

(b)

Exhibits


31.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Act of 1934.

31.2*		Certification of Chief Financial Officer Pursuant Rule 13a-14(a) or 15d-14(a) under the Securities Act of 1934.


32.1+		Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2+		Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

SIGNATURE


	OFC DISTRIBUTION CORPORATION
	BY: /s/ Michael J. Altenburger

	Chief Financial Officer and Treasurer

	Date: August 13, 2003

OFC DISTRIBUTION CORP 10-Q