rocf_1k

PART II 2 rocf_1k.htm PART II rocf_1k

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1-K

ANNUAL REPORT PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933

For the fiscal year ended: December 31, 2019

Red Oak Capital Fund IV, LLC

(Exact name of issuer as specified in its charter)

Delaware		84-3642502
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

625 Kenmoor Avenue SE, Suite 211

Grand Rapids, Michigan 49546

(Full mailing address of principal executive offices)

(616) 734-6099

(Issuer’s telephone number, including area code)

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION AND FIGURES

This Annual Report on Form 1-K, or the Annual Report, of Red Oak Capital Fund IV, LLC, a Delaware limited liability company, contains certain forward-looking statements that are subject to various risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “outlook,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth or anticipated in our forward-looking statements. Factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, funds derived from operations, cash available for distribution, cash flows, liquidity and prospects include, but are not limited to, the factors referenced in our offering circular dated January 29, 2020, filed pursuant to Rule 253(g)(2), under the caption “RISK FACTORS” and which are incorporated herein by reference (https://www.sec.gov/Archives/edgar/data/1794418/000165495420000917/oak_253g2.htm).

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this report. The matters summarized below and elsewhere in this report could cause our actual results and performance to differ materially from those set forth or anticipated in forward-looking statements. Accordingly, we cannot guarantee future results or performance. Furthermore, except as required by law, we are under no duty to, and we do not intend to, update any of our forward-looking statements after the date of this report, whether as a result of new information, future events or otherwise.

All figures provided herein are approximate.

Item 1. Business

General

Unless the context otherwise requires or indicates, references in this Annual Report on Form 1-K to “us,” “we,” “our” or “our Company” refer to Red Oak Capital Fund IV, LLC, a Delaware limited liability company.

Red Oak Capital Fund IV, LLC, a Delaware limited liability company, was formed on October 31, 2019. We originate, acquire and manage commercial real estate loans and securities and other real estate-related debt instruments. We implement an investment strategy that preserves and protects our capital while producing attractive risk-adjusted returns generated from current income on our portfolio. We actively participate in the servicing and operational oversight of our assets through our manager, Red Oak Capital Group GP, LLC, or our Manager, rather than subrogate those responsibilities to a third party.

The Company does not intend to act as a land or real estate developer and currently has no intent to invest in, acquire, own, hold, lease, operate, manage, maintain, redevelop, sell or otherwise use any undeveloped real property or developed real property, unless such actions are necessary or prudent based upon borrower default in accordance with the terms of the debt instruments held by the Company.

We filed an offering statement on Form 1-A, or the Offering Statement, with the United States Securities and Exchange Commission, or the SEC, on November 19, 2019, which offering statement was qualified by the SEC on January 29, 2020. Pursuant to the Offering Statement, we are offering a maximum of $50,000,000 in the aggregate of the Company’s 6.25% senior secured bonds, or the “Series A Bonds,” its 8.25% senior secured bonds, or the “Series B Bonds,” its 6.5% senior secured bonds, or the “Series Ra Bonds,” and its 9.0% senior secured bonds, or the “Series Rb Bonds,” and collectively, the “Bonds.” The purchase price per Bond is $1,000, with a minimum purchase amount of $10,000. Assuming that the maximum amount of Bonds is purchased and issued, we anticipate that the net proceeds will be between approximately $44,400,000 and $45,045,000 if we sell the maximum offering amount. Proceeds from the sale of the Bonds will be used to invest in collateralized senior commercial mortgage notes, or property loans, and pay or reimburse selling commissions and other fees and expenses associated with the offering of the Bonds. As of December 31, 2019, we had not sold any bonds because our offering statement was not qualified by the SEC until January 29, 2020. We intend to continue to sell the Bonds through December 31, 2020, or the date upon which our Manager determines to terminate the offering, in its sole discretion.

We are managed by our Manager, which is wholly controlled by Red Oak Capital Group, LLC, a Delaware limited liability company, or our Sponsor, a Grand Rapids, Michigan based commercial real estate finance company specializing in the acquisition, processing, underwriting, operational management and servicing of commercial real estate debt instruments. We benefit from our Sponsor’s significant experience in the marketing and origination of project transactions in which to properly and efficiently evaluate suitable investments for our Company.

We do not have any employees. We rely on the employees of our Sponsor, as the sole member of our Manager, and its affiliates for the day-to-day operation of our business.

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

General

As of the date of this annual report, Red Oak Capital Fund IV, LLC has not yet commenced active operations. Offering Proceeds will be applied to invest in collateralized senior commercial mortgage notes, or property loans, and the payment or reimbursement of selling commissions and other fees, expenses and uses as described throughout the offering circular. We will experience a relative increase in liquidity as we receive additional proceeds from the sale of Bonds and a relative decrease in liquidity as we spend net offering proceeds in connection with the acquisition and operation of our assets.

Further, we have not entered into any arrangements creating a reasonable probability that we will own a specific property loan or other asset. The number of additional property loans and other assets that we will acquire will depend upon the number of Bonds sold and the resulting amount of the net proceeds available for investment in additional property loans and other assets. Until required for the acquisition or operation of assets or used for distributions, we will keep the net proceeds of the offering in short-term, low risk, highly liquid, interest-bearing investments.

We intend to make reserve allocations as necessary to (i) aid our objective of preserving capital for our investors by supporting the maintenance and viability of assets we acquire in the future and (ii) meet the necessary covenants of the Bonds. If reserves and any other available income become insufficient to meet our covenants and cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, restructuring property loans or liquidating our investment in one or more assets. There is no assurance that such funds will be available, or if available, that the terms will be acceptable to us. Additionally, our ability to borrow additional funds will be limited by the restrictions placed on our and our subsidiaries' borrowing activities by our indenture.

Results of Operations

Having not commenced active operations, we have not acquired any property loans or other assets. Our management is not aware of any material trends or uncertainties, favorable or unfavorable, which may be reasonably anticipated to have a material impact on the capital resources or income to be derived from the operation of our assets, except as follows;

●

National economic conditions affecting our targeted assets

●

The overall real estate market

●

The impacts of COVID-19 as discussed in recent trends below

Liquidity and Capital Resources

We are offering and selling to the public in the offering up to $50,000,000 of Bonds. Our principal demands for cash will be for acquisition costs, including the purchase price of any property’s loans, securities or other assets we acquire, the payment of our operating and administrative expenses, and all continuing debt service obligations, including our debt service on the Bonds. Generally, we will fund additional acquisitions from the net proceeds of the offering. We intend to acquire additional assets with cash and/or debt. As we are dependent on capital raised in the offering to conduct our business, our investment activity over the next twelve (12) months will be dictated by the capital raised in the offering. We expect to originate or acquire property loans and meet our business objectives regardless of the amount of capital raised in the offering. If the capital raised in the offering is insufficient to purchase assets solely with cash, we will implement a strategy of utilizing a mix of cash and debt to acquire assets.

Subsequent to December 31, 2019, Red Oak Capital Fund IV, LLC’s offering was qualified with the SEC on January 29, 2020. We have held three closings through the issuance date of this report on February 21, 2020 ($7.5 million in gross proceeds), March 24, 2020 ($17.8 million in gross proceeds) and April 21, 2020 ($4.4 million in gross proceeds). Through the issuance date of this report, $29.7 million of bonds have been issued and $20.3 million of proceeds available for issuance.

We expect to use debt financing as a source of capital. We have a 25% limit on the amount of debt that can be employed in the operations of the business. For purposes of complying the with 25% limitation described above, any principal owed on the Bonds will not count as indebtedness.

We anticipate that adequate cash will be generated from operations to fund our operating and administrative expenses, and all continuing debt service obligations, including the debt service obligations of the Bonds. However, our ability to finance our operations is subject to some uncertainties. Our ability to generate working capital is dependent upon the performance of the mortgagor related to each of our assets and the economic and business environments of the various markets in which our underlying collateral properties are located. Our ability to liquidate our assets is partially dependent upon the state of real estate markets and the ability of mortgagors to obtain financing at reasonable commercial rates. In general, we intend to pay debt service from cash flow obtained from operations. If cash flow from operations is insufficient then we may exercise the option to partially leverage the asset to increase liquidity. If we have not generated sufficient cash flow from our operations and other sources, such as from borrowings, we may use funds out of our Bond Service Reserve. Moreover, our Manager may change this policy, in its sole discretion, at any time to facilitate meeting its cash flow obligations.

Potential future sources of capital include secured or unsecured financings from banks or other lenders, establishing additional lines of credit, proceeds from the sale of assets and undistributed cash flow, subject to the limitations previously described. Note that, currently, we have not identified any additional source of financing, other than the proceeds of the offering, and there is no assurance that such sources of financing will be available on favorable terms or at all.

Recent Trends

As a result of the global outbreak of a new strain of coronavirus, COVID-19, economic uncertainties have arisen that continue to have an adverse impact on economic and market conditions. The global impact of the outbreak has been rapidly evolving, and the outbreak presents material uncertainty and risk with respect to our future financial results and capital raising efforts. We are unable to quantify the impact COVID-19 may have on us at this time. Although we have successfully raised approximately $29.7 million in gross proceeds as of the date of this report, we may experience delays in our capital raising efforts as a result of COVID-19 which may materially alter our ability to originate and acquire property loans at the pace previously anticipated.

Item 3. Directors and Officers

The following table sets forth information on our board of managers and executive officers of our Sponsor. We are managed by our Manager, which is wholly controlled by our Sponsor. Consequently, we do not have our own separate board of managers or executive officers.

Name	Age	Position with our Company	Director/Officer Since
Chip Cummings	56	Chief Executive Officer*	November 2019
Joseph Elias	40	Chief Operations Officer*	November 2019
Kevin P. Kennedy	53	Chief Marketing Officer*	November 2019
Jason Anderson	34	Chief Financial Officer	November 2019
Raymond T. Davis	52	Chief Business Development Officer	November 2019

*Member of the board of managers of the Sponsor, which controls our Manager, which controls our company.

Set forth below is biographical information for our Sponsor’s executive officers.

Chip Cummings is a founding partner, Chief Executive Officer and a member of the board of managers for our Sponsor. He joined our Sponsor in September 2015. He is responsible for asset acquisition, compliance and portfolio management. Chip has over 30 years of experience in the real estate lending arena and managed various private equity funds for the past 6 years, including Red Oak Capital Fund LLC, Pineridge Park Properties LLC, Northwind Holdings 14 LLC and Special Assets VI LLC. Chip has also been the President and Chief Executive Officer of Northwind Financial Corporation since November 2000. Chip is licensed broker and lender and has overseen several billion dollars in transactions. He has underwritten for Fannie Mae, Freddie Mac, Federal Housing Administration and several Fortune 100 lenders. He is Certified Fraud Examiner and has been recognized in federal and state courts as a mortgage finance expert. Chip has developed and administered programs for the U.S. Department of Housing and Urban Development and numerous financial institutions throughout the U.S. Chip served many Commercial Real Estate Boards and national committees and is a #1 best-selling author of several real estate books, he has appeared on numerous radio and television programs and recently was the financial expert for FOX News. Chip attended Eastern Michigan University and is a Certified National Trainer in the areas of real estate fraud and mortgage finance.

Joseph Elias is a founding partner, Chief Operations Officer and a member of the board of managers for our Sponsor. He is responsible for platform development and enhancement. Previously, Joe cofounded Loquidity in 2014, a commercial real estate crowdfunding platform where he served as COO, in which capacity he served until 2018. Joe possesses more than 14 years of executive technology operations experience with Fortune 50 companies and 17 years of experience in real estate finance and development. He has spent his career leading corporate transformation and achieving significant operational efficiencies by successfully integrating new technologies. This expertise combined with an entrepreneurial spirit, inspired him to develop innovative scalable solutions to transform the real estate investing landscape through the ROCX Platform. Prior to that, Joe served as a senior director at Comcast from 2003 to 2014, managing a $1 billion portfolio program. He and his team worked to implement new technology realizing an estimated $300 million in cost savings. Prior to Comcast, he was a project manager at General Motors. Joe operated multiple successful family businesses, managing millions of dollars’ worth of real estate assets in major Midwestern markets. Joe earned his Bachelor of Science in Management Information Systems from Wayne State University and holds an MBA from the Ross School of Business at the University of Michigan.

Kevin P. Kennedy is a founding partner, Chief Marketing Officer and a member of the board of managers for our Sponsor. He is responsible for capital acquisition, platform distribution and broker dealer relationships. Kevin has 25 years of experience in investment management. Most recently, he was with BlackRock Investment Management Corporation from 1990 to 2016, where he served as Managing Director and Divisional Sales Director prior to leaving. His team was responsible for selling and marketing BlackRock’s active, passive and alternative investments. Prior to BlackRock, Kevin was a Director and Vice President for Merrill Lynch Investment Managers covering the Midwest region. He began his career with Merrill Lynch in 1990 as a trading liaison. He was instrumental in helping both firms raise billions in sales, increase revenue, new offerings, platform enhancements and sales team development. Kevin holds a Series 7, 24, 63, 65 and 66 securities licenses. He received his Bachelor of Arts degree from Duquesne University, in Pittsburg, PA. He completed his Certified Investment Management Analyst certification (CIMA) designation from Wharton Executive Education-University of Pennsylvania in 2007.

Jason Anderson is Chief Financial Officer for our Sponsor. He focuses on the creation and development of operational and accounting expertise. Jason has more than 12 years in the financial services industry. Under his tenure as a Shareholder, Director and Executive Committee Member at Strait Capital from 2009 to 2017, assets under administration increased from $40 million to nearly $4 billion. His expertise lies in architecting and delivering a full-fledge institutional operating platform for hedge funds, private equity groups, and family offices. Jason launched over 100 alternative investment vehicles while at Strait Capital. Jason has also served as Director of Anderson Capital Consulting LLC since 2017. He began his career as a hedge fund analyst specializing in distressed securities, mergers and acquisitions, and capital arbitrage strategies. While a university student, he was hand-picked to serve as an analyst for the $1+ Billion SMU Endowment Fund. Jason graduated Magna Cum Laude with a Bachelor of Business Administration in Finance and a Bachelor of Science in Economics with Business Honors and Department Distinction from Southern Methodist University. Jason has earned the Chartered Financial Analyst (CFA) designation.

Raymond T. Davis is Chief Business Development Officer for our Sponsor. Ray is responsible for product development and sales distribution for our Sponsor. He focuses on developing and creating strategic offerings with distribution partners within the Independent Broker Dealer community and Pension Funds. Ray holds more than 20 years of management experience. Since 2014, Ray has focused on his operational and strategic skills to implement policy, process and operational enhancements for product offerings for the broker dealer community. Ray has served both private companies and registered alternative investment funds in various senior roles. Previously, Ray was a Senior Managing Director responsible for growth and build out of two distribution channels. Ray attended Wayne State University.

Director and Executive Compensation

Our company does not have executives. It is operated by our Manager. We will not reimburse our Manager for any portion of the salaries and benefits to be paid to its executive officers.

Item 4. Security Ownership of Management and Certain Security Holders

The table below sets forth, as of December 31, 2019, certain information regarding the beneficial ownership of our outstanding membership units for (1) each person who is expected to be the beneficial owner of 10% or more of our outstanding membership units and (2) each of our named executive officers, if together such group would be expected to be the beneficial owners of 10% or more of our outstanding membership units. Each person named in the table has sole voting and investment power with respect to all of the membership units shown as beneficially owned by such person. The SEC has defined “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security.

Title of Class

Name and Address of Beneficial Owner

Amount and Nature of Beneficial Ownership Acquirable

Percent of Class

LLC Interests

Chip Cummings*

N/A

30.00%

LLC Interests

Joseph Elias*

N/A

30.00%

LLC Interests

Kevin Kennedy*

N/A

30.00%

LLC Interests

Raymond Davis*

N/A

10.00%

LLC Interests

All Executives and Managers*

N/A

100.00%

_________________

*625 Kenmoor Avenue SE, Suite 211, Grand Rapids, Michigan 49546

Item 5. Interest of Management and Others in Certain Transaction

For further details, please see Note 3, Related Party Transactions in Item 7, Financial Statements.

Item 6. Other Information

None.

Item 7. Financial Statements

RED OAK CAPITAL FUND IV, LLC

FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR'S REPORT

FOR THE PERIOD OCTOBER 31, 2019 (DATE OF FORMATION)

THROUGH DECEMBER 31, 2019

Red Oak Capital Fund IV, LLC

Contents

Independent Auditor's Report	9

Financial Statements

Balance Sheet	10

Statement of Operations	11

Statement of Changes in Member's Capital	12

Statement of Cash Flows	13

Notes to Financial Statements	14-18

Independent Auditor’s Report

To the Managing Member

Red Oak Capital Fund IV, LLC

We have audited the accompanying financial statements of Red Oak Capital Fund IV, LLC (a Delaware limited liability corporation), which comprise the balance sheet as of December 31, 2019, and the related statements of operations, changes in member’s capital, and cash flows for the period from October 31, 2019 (date of formation) to December 31, 2019, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Red Oak Capital Fund IV, LLC as of December 31, 2019, and the results of its operations, changes in member’s capital, and cash flows for the period from October 31, 2019 (date of formation) to December 31, 2019 in accordance with accounting principles generally accepted in the United States of America.

/s/ UHY LLP

Farmington Hills, Michigan

April 30, 2020

Red Oak Capital Fund IV, LLC

Balance Sheet

December 31, 2019

Assets

Total assets	$-

Liabilities and Member's Capital

Liabilities:
Total liabilities	-

Total member's capital	-

Total liabilities and member's capital	$-

Red Oak Capital Fund IV, LLC

Statement of Operations

For the period October 31, 2019 (Date of Formation) through December 31, 2019

Revenue:
Total revenue	$-

Expenses:
Total expenses	-

Net income (loss)	$-

Red Oak Capital Fund IV, LLC

Statement of Changes in Member's Capital

For the period October 31, 2019 (Date of Formation) through December 31, 2019

	Managing Member

Member's capital, October 31, 2019	$-

Capital contributions	-

Capital distributions	-

Net income (loss)	-

Member's capital, December 31, 2019	$-

Red Oak Capital Fund IV, LLC

Statement of Cash Flows

For the period October 31, 2019 (Date of Formation) through December 31, 2019

Cash flows from operating activities:
Net income (loss)	$-

Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:

Net cash provided by (used in) operating activities	-

Cash flows from financing activities:

Net cash provided by (used in) financing activities	-

Net change in cash and cash equivalents	-

Cash and cash equivalents, beginning of period	-

Cash and cash equivalents, end of period	$-

Red Oak Capital Fund IV, LLC

Notes to Financial Statements

For the period October 31, 2019 (Date of Formation) through December 31, 2019

1. Organization

Red Oak Capital Fund IV, LLC, (the “Company”) is a Delaware limited liability company formed to originate senior loans collateralized by commercial real estate in the United States of America. The Company’s plan is to originate, acquire, and manage commercial real estate loans and securities and other commercial real estate-related debt instruments. Red Oak Capital GP, LLC is the Managing Member and owns 100% of the member interests in the Company.

The Company formed on October 31, 2019 and has not commenced operations. The Company anticipates raising a maximum of $50 million of Series A, B, Ra, and Rb Bonds (collectively the “Bonds”) pursuant to an exemption from registration under Regulation A of the Securities Act of 1933, as amended. The Company’s term is indefinite.

2. Significant accounting policies

Basis of presentation

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and all values are stated in United States dollars.

Use of estimates

The preparation of the financial statements requires the Managing Member to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. The Managing Member believes the estimates utilized in preparing the Company’s financial statements are reasonable and prudent; however, actual results could differ from these estimates and such differences could be material to the Company's financial statements.

Fair value – hierarchy of fair value

In accordance with FASB ASC 820-10, Fair Value Measurements and Disclosures, the Company discloses the fair value of its assets and liabilities in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation. FASB ASC 820-10-35-39 to 55 provides three levels of the fair value hierarchy as follows:

Level One - Inputs use quoted prices in active markets for identical assets or liabilities of which the Company has the ability to access.

Level Two - Inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Level Three - Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset.

In instances whereby inputs used to measure fair value fall into different levels of the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgement and considers factors specific to each asset or liability.

Red Oak Capital Fund IV, LLC

Notes to Financial Statements

For the period October 31, 2019 (Date of Formation) through December 31, 2019

2. Significant accounting policies (continued)

Cash and cash equivalents

Cash represents cash deposits held at financial institutions. Cash equivalents may include short-term highly liquid investments of sufficient credit quality that are readily convertible to known amounts of cash and have original maturities of three months or less. Cash equivalents are carried at cost, plus accrued interest, which approximates fair value. Cash equivalents are held to meet short-term liquidity requirements, rather than for investment purposes. Cash and cash equivalents are held at major financial institutions and are subject to credit risk to the extent those balances exceed applicable Federal Deposit Insurance Corporation or Securities Investor Protection Corporation or Securities Investor Protection Corporation limitations.

Mortgage loans receivable

Mortgage loans receivable are classified as held-for-investment based on the Company’s intention and ability to hold the loans until maturity. The loans are stated at the amount of unpaid principal adjusted for any impairment or allowance for loan losses. The Company’s mortgage loans receivable are expected to consist of senior secured private company loans collateralized by the borrower’s underlying commercial real estate assets. The repayment of the loans will be dependent upon the borrower’s ability to obtain a permanent financing solution or to sell the commercial real estate asset. The Company’s mortgage loans receivable will have heightened credit risk stemming from several factors, including the concentration of loans to a limited number of borrowers, the likelihood of construction projects running over budget, and the inability of the borrower to sell the underlying commercial real estate asset.

Impairment and allowance for loan losses

Mortgage loans receivables are considered “impaired” when, based on observable information, it is probable the Company will be unable to collect the total amount outstanding under the contractual terms of the loan agreement. The Managing Member assesses mortgage loans receivable for impairment on an individual loan basis and determines the extent to which a specific valuation allowance is necessary by comparing the loan’s remaining balance to either the fair value of the collateral, less the estimated cost to sell, or the present value of expected cash flows, discounted at the loan’s base interest rate.

An allowance for loan losses on mortgage loans receivable is established through a provision for loan losses charged against income and includes specific reserves for impaired loans. Loans deemed to be uncollectible are charged against the allowance when the Managing Member believes that the collectability of the principal is unlikely and subsequent recoveries, if any, are credited to the allowance. The Managing Member’s periodic evaluation of the adequacy of the allowance is based on an assessment of the current loan portfolio, including known inherent risks, adverse situations that may affect the borrowers’ ability to repay, the estimated value of any underlying collateral, and current economic conditions.

Revenue recognition and accounts receivable

Interest income on mortgage loans receivable is recognized over time using the interest method. Interest is accrued when earned in accordance with the terms of the loan agreement. Interest income is recognized to the extent paid or if the analysis performed on the related receivables supports the collectability of the interest receivable. A loan is placed on nonaccrual when the future collectability of interest and principal is not expected, unless, in the determination of the Managing Member, the principal and interest on the loan are well collateralized and in the process of collection. When classified as nonaccrual, accrued interest receivable on the loan is reversed and the future accrual of interest is suspended. Payments of contractual interest are recognized as income only to the extent that full recovery of the principal balance of the loan is reasonably certain.

Red Oak Capital Fund IV, LLC

Notes to Financial Statements

For the period October 31, 2019 (Date of Formation) through December 31, 2019

2. Significant accounting policies (continued)

Loan origination income is amortized over the life of the mortgage loan receivable using the straight-line method and is reflected as a direct deduction from the related mortgage loans receivable in the accompanying balance sheet.

The Company follows ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. It includes a five-step process to assist an entity in achieving the main principles of revenue recognition under the Company’s consolidated statements of comprehensive income most closely associated with the financial instruments (such as interest income and interest expense).

Bonds payable

Company issued bonds will be held as a liability upon the effective date of closing. The bond interest will be expensed on an accrual basis. The contingent interest associated with the bonds will be recognized on an accrual basis at the end of each reporting period assuming a hypothetical liquidation of the Company’s mortgage loans receivable at fair value.

Income taxes

As a limited liability company, the Company itself is not subject to United States federal income taxes. Each member is individually liable for income taxes, if any, on its share of the Company's net taxable income. Accordingly, no provision or credit for income taxes is recorded in the accompanying financial statements. The Company anticipates paying distributions to members in amounts adequate to meet their tax obligation.

The Company applies the authoritative guidance for uncertainty in income taxes included in Financial Accounting Standards Board (“FASB”) ASC 740, Income Taxes, as amended by Accounting Standards Update 2009-06, Implementation Guidance on Accounting for Uncertainty in Taxes and Disclosures Amendments for Nonpublic Entities. This guidance requires the Company to recognize a tax benefit or liability from an uncertain position only if it is more likely than not that the position is sustainable, based on its technical merits and consideration of the relevant taxing authority’s widely understood administrative practices and precedents. If this threshold is met, the Company would measure the tax benefit or liability as the largest amount that is greater than 50% likely of being realized upon ultimate settlement.

As of December 31, 2019, the Company had not recorded any benefit or liability for unrecognized taxes.

The Company files United States federal income tax returns as well as various state returns. With few exceptions, the Company’s tax returns and the amount of allocable income or loss are subject to examination by taxing authorities for three years subsequent to the Company’s commencement of operations. If such examinations result in changes to income or loss, the tax liability of the members could be changed accordingly. There are currently no examinations being conducted of the Company by the Internal Revenue Service or any other taxing authority.

The Company accrues all interest and penalties under relevant tax law as incurred. As of December 31, 2019, no amount of interest and penalties related to uncertain tax positions was recognized in the Statement of Operations.

Red Oak Capital Fund IV, LLC

Notes to Financial Statements

For the period October 31, 2019 (Date of Formation) through December 31, 2019

2. Significant accounting policies (continued)

Extended Transition Period

Under Section 107 of the Jumpstart Our Business Startups Act of 2012, the Company is permitted to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. This permits the Company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, these consolidated financial statements may not be comparable to companies that adopt accounting standard updates upon the public business entity effective dates.

Recent Accounting Pronouncements – Not Yet Adopted

In June 2016, the FASB issued Accounting Standards Update 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses: Measurement of Credit Losses of Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial asset. An entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes for financial assets measured at amortized cost. ASU 2016-13 is effective for the Company, under the extended transition period under the JOBS Act, for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. The Company is still evaluating the impact of adopting ASU 2016-13 on its financial statements.

3. Related party transactions

The Company will pay an annual management fee, calculated and payable on a quarterly basis, to the Managing Member. The management fee is based on an annual rate of 1.75% of the gross offering proceeds. As of December 31, 2019, no management fees have been accrued or paid.

The Company will pay a disposition fee to the Managing Member. The disposition fee is calculated as 1.00% of the proceeds received from the repayment of the principal amount of any of our debt investments or any other disposition of the underlying real estate. As of December 31, 2019, no disposition fees have been accrued or paid.

The Managing Member has incurred and will continue to incur organizational and offering expenses which are reimbursable from the Company, at 2% of total gross proceeds from the Bond offerings. The organizational and offering costs are not represented on the Company’s financial statements due to these being contingent upon a successful completion of the Bond offerings. The Company will expense organization costs when incurred and debt issuance costs will be capitalized and amortized through the maturity of each Series as applicable. As of December 31, 2019, there have been approximately $30,000 of organizational costs incurred by the Managing Member. Through the date of issuance, the Managing Member has incurred approximately $85,000 of organizational and offering costs.

Red Oak Capital Fund IV, LLC

Notes to Financial Statements

For the period October 31, 2019 (Date of Formation) through December 31, 2019

4. Member’s equity

During 2019, the Managing Member, as sole member of the Company, made no capital contributions or received any distributions. Upon execution of the operating agreement, the Managing Member must contribute $100.

5. Bonds payable

After the close of the initial bond issuance and first full quarter of operations, the Company anticipates making quarterly interest payments to the Series A, B, Ra, and Rb Bondholders at a rate of 6.25%, 8.25%, 6.50%, and 9.00% per annum, respectively.

The maturity date of Series A and Ra Bonds will be June 30, 2023, whereas the maturity date will be June 30, 2026 for Series B and Rb Bonds. Upon the maturity of the Bonds, the Series A/Ra and Series B/Rb Bondholders will receive a Contingent Interest Payment equal to 4% and 24% of the Spread, respectively. The Spread is defined as the difference between such bond’s pro-rata share of revenue derived from senior secured private company loans less the interest paid to such bondholder, withholding for fees at the discretion of the Managing Member.

Series B and Rb Bonds will be redeemable beginning July 1, 2024. Once the Company receives written notice from the bondholder, it will have 120 days from the date of receipt to redeem the bonds at a price per bond equal to: (i) $880 plus any accrued but unpaid interest on the Bond if the notice is received on or after July 1, 2024 and (ii) $900 plus any accrued but unpaid interest on the Bond if the notice is received on or after July 1, 2025.

The Company’s obligation to redeem bonds in any given year pursuant to this Series B and Rb Redemption is limited to 10% of the outstanding principal balance of the Series B and Rb Bonds on January 1st of the applicable year. Bond redemptions pursuant to the Series B and Rb Redemption will occur in the order that notices are received.

6. Commitments and contingencies

The Company has provided general indemnifications to the Managing Member, any affiliate of the Managing Member and any person acting on behalf of the Managing Member or that affiliate when they act, in good faith, in the best interest of the Company. The Company is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim but expects the risk of having to make any payments under these general business indemnifications to be remote.

7. Subsequent events

On February 21, 2020 the Company held the initial closing with approximately $7.5 million in gross proceeds. The Company commenced operations on this date.

Additionally, on March 24, 2020 and April 21, 2020, the Company held subsequent closing of $17.8 and $4.4 million, respectively. Through the issuance date of this report, $29.7 million of bonds have been issued and $20.3 million of proceeds available for issuance.

On April 24, 2020, the Company closed a senior secured mortgage loan at an interest rate of 11% and total principal of $2,000,000. The underlying commercial property is a 40-unit apartment complex located in the state of Louisiana.

On April 30, 2020, the Company closed a senior secured mortgage loan at an interest rate of 11% and total principal of $1,556,250. The underlying commercial property is a 48-unit apartment complex located in the state of Georgia.

The Company's operations may be affected by the recent and ongoing outbreak of the coronavirus (COVID-19) which was declared a pandemic by the World Health Organization in March 2020. Possible effects of the pandemic may include, but are not limited to, prolonging the length of time required to raise $50 million of the Bonds and delaying loan closing periods due to third parties experiencing quarantines or social distancing within the labor workforce. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company's financial position, operations and cash flows.

The financial statements were approved by management and available for issuance on April 30, 2020. Subsequent events have been evaluated through this date.

Item 8. Exhibits

Exhibit Number		Exhibit Description

(2)(a)		Certificate of Formation of Red Oak Capital Fund IV, LLC*

(2)(b)		Limited Liability Company Agreement of Red Oak Capital Fund IV, LLC*

(3)(a)		Form of Indenture between Red Oak Capital Fund IV, LLC and UMB Bank, N.A.**

(3)(b)		Form of Series A Bond**

(3)(c)		Form of Series B Bond**

(3)(d)		Form of Series Ra Bond**

(3)(e)		Form of Series Rb Bond**

(3)(f)		Pledge and Security Agreement**

_____________

Incorporated by reference to the exhibit of the same number to the Company’s Offering Statement on Form 1-A filed with the SEC on November 19, 2019.

Incorporated by reference to the exhibit of the same number to the Company’s Offering Statement on Form 1-A/A filed with the SEC on December 27, 2019.

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-K and has duly caused this Form 1-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Grand Rapids of Michigan on April 30th of 2020.

RED OAK CAPITAL FUND IV, LLC,

a Delaware limited liability company

By: Red Oak Capital GP, LLC,

a Delaware limited liability company

Its: Sole Member

By: Red Oak Capital Group, LLC,

a Delaware limited liability company

Its: Sole Member

By: /s/ Chip Cummings

Name: Chip Cummings

Its: Manager

By: /s/ Joseph Elias

Name: Joseph Elias

Its: Manager

By: /s/ Kevin Kennedy

Name: Kevin Kennedy

Its: Manager

By: /s/ Chip Cummings

Name: Chip Cummings

Its: Chief Executive Officer of the Sole Member of the Manager

(Principal Executive Officer)

By: /s/ Jason Anderson

Name: Jason Anderson

Its: Chief Financial Officer of the Sole Member of the Manager

(Principal Financial Officer and Principal Accounting Officer)