-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FfvEmndk4mARsuUqKnwARvLfnCSTK+3B9BRWUEP6ChN7d1REgImowG2mNJKoHhJB rjk4Hrhl6b7TeRu2bHCYnQ== 0000919567-96-000042.txt : 19970610 0000919567-96-000042.hdr.sgml : 19970610 ACCESSION NUMBER: 0000919567-96-000042 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961119 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENAISSANCE CAPITAL GROWTH & INCOME FUND III INC CENTRAL INDEX KEY: 0000919567 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 752533518 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11701 FILM NUMBER: 96669211 BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPRWY STREET 2: STE 210 LB59 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2148918294 MAIL ADDRESS: STREET 1: 8080 N CENTRAL EXPWY., SUITE 210 LB 59 CITY: DALLAS STATE: TX ZIP: 75206 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended September 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _________________ Commission File Number: 0-20671 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. __________________________________________________________________________ (Exact name of registrant as specified in its charter) Texas 75-2533518 __________________________________________________________________________ (State or other jurisdiction (I.R.S. Employer I.D. No.) of incorporation or organization) 8080 North Central Expressway, Dallas, Texas 75206-1857 __________________________________________________________________________ (Address of principal executive offices) (Zip Code) 214/891-8294 __________________________________________________________________________ (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 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Assets and Liabilities (Unaudited)
Assets ------ December 31, 1995 September 30, 1996 ----------------- ------------------ Cash $3,378,905 $ 7,527,529 Short term investments at quoted market value, cost of $21,348,889 and $12,572,236 21,550,005 12,615,931 Investments at fair value, cost of $12,948,546 and $20,676,582 13,445,700 21,385,250 Accounts receivable 3,163,359 369,074 Organizational costs, net of accumulated amortization 457,946 364,671 ---------- ---------- 41,995,915 42,262,455 Liabilities ----------- Liabilities: Accounts payable - related parties 307,607 219,609 Accounts payable - trade - 16,545 Dividends payable 1,188,136 373,781 1,495,743 609,935 ---------- ---------- Net Assets: Common stock, $1 par value; 10,000,000 shares authorized; 4,244,630 and 4,339,353 shares issued and outstanding 39,776,354 40,561,318 Accumulated undistributed income 723,818 1,091,202 ---------- ---------- Net assets $40,500,172 $41,652,520 ========== ========== Net asset value per share $ 9.54 $ 9.60 ========== ==========
See accompanying notes to financial statements. 3 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Operations (Unaudited)
Three Months Three Months Nine months Nine Months Ended Ended Ended Ended Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 -------------- -------------- -------------- -------------- Income: Investment Income: Interest $ 605,947 $ 583,839 $1,931,341 $1,697,980 Dividends 67,500 75,000 195,714 231,190 Other investment income 13,500 85,323 81,179 203,823 --------- --------- --------- --------- Total investment income 686,947 744,162 2,208,234 2,132,993 --------- --------- --------- --------- Expenses: Operating expenses 117,334 112,714 405,075 436,080 Management fees 177,135 183,031 523,394 558,605 --------- --------- --------- --------- Total Expenses 294,469 295,745 928,469 994,685 --------- --------- --------- --------- Net investment income 392,478 448,417 1,279,765 1,138,308 Gain on sale of investments - 398,400 - 398,400 Unrealized gain (loss) on investments (39,914) (1,352,719) (156,878) 48,722 --------- --------- --------- --------- Net increase (decrease) in net assets resulting from operations $ 352,564 $ (505,902) $1,122,887 $1,585,430 ========= ========= ========= =========
See accompanying notes to financial statements. 4 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Changes in Net Assets CAPTION> Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 -------------- -------------- -------------- -------------- Increase in net assets resulting from operations Investment income - net $ 392,478 $ 448,417 $ 1,279,765 $ 1,138,308 Realized gain on investments - 398,400 - 398,400 Unrealized gain (loss) on investments (39,914) (1,352,719) (156,878) 48,722 --------- --------- --------- --------- Net increase (decrease) in net assets resulting from operations 352,564 (505,902) 1,122,887 1,585,430 Distributions to shareholders from net investment income (295,962) (386,402) (797,689) (1,218,046) Capital share transactions 158,405 - 644,639 784,964 ---------- ---------- ---------- ---------- Total increase (decrease) 215,007 (892,304) 969,837 1,152,348 Net assets Beginning of period 39,937,355 42,544,824 39,182,525 40,500,172 ========== ========== ========== ========== End of period $40,152,362 $41,652,520 $40,152,362 $41,652,520 ========== ========== ========== ==========
See accompanying notes to financial statements. 5 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements September 30, 1996 1. ORGANIZATION AND BUSINESS PURPOSE Renaissance Capital Growth & Income Fund III, Inc. (the "Fund"), a Texas Corporation, was incorporated on January 20, 1994, and had no operations prior to June 24, 1994. The Fund seeks to achieve current income and capital appreciation potential by investing primarily in unregistered preferred stock investments of small and medium size companies which are in need of capital and which it believes offer the opportunity for growth. The Fund has elected to be treated as a business development company under the Investment Company Act of 1940, as amended ("1940 Act"). 2. SIGNIFICANT ACCOUNTING POLICIES A. Federal Income Taxes - The Fund intends to elect the special income tax treatment available to "regulated investment companies" under Subchapter M of the Internal Revenue Code in order to be relieved of federal income tax on that part of its net investment income and realized capital gains that it pays out to its shareholders. The Fund's policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required. B. Distributions to Shareholders - Dividends to shareholders are recorded on the ex-dividend date. The Fund declared dividends of $390,542 for the quarter ended September 30, 1996. C. Other - The Fund follows industry practice and records security transactions on the trade date. Dividend income is recognized on the ex- dividend date, and interest income is recognized on an accrual basis. 3. ORGANIZATION EXPENSES In connection with the offering of its shares, the Fund paid Renaissance Capital Group, Inc. (the "Investment Adviser") organizational expenses of $623,544. Such expenses are deferred and amortized on a straight-line basis over a five-year period. Amortization expense for the quarter ended September 30, 1996 was $31,434. 4. INVESTMENT ADVISORY AGREEMENT The Investment Adviser for the Fund is registered as an investment adviser under the Investment Advisers Act of 1940. Pursuant to an Investment Advisory Agreement, the Investment Adviser performs certain services, including certain management, investment advisory and administrative services necessary for the operation of the Fund. The Investment Adviser receives a fee equal to .4375% (1.75% annually) of the Net Assets each quarter. 6 The Fund accrued a liability of $183,031 for such operational management fees performed during the quarter ended September 30, 1996. In addition, the Fund has agreed to pay the Investment Adviser an incentive fee equal to 20% of any net realized capital gains after allowance for any unrealized capital loss of the Fund. This management incentive fee is calculated on an annual basis. 7 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements (Continued) September 30, 1996 5. Capital Share Transactions As of September 30, 1996, there were 20,000,000 shares of $1 par value capital stock authorized and capital paid-in aggregated $36,221,965. Year-to-date transactions in capital stock are as follows: Shares Amount ------ ------ Balance December 31, 1995 4,244,630 $39,776,354 Shares issued Nine months ended September 30, 1996: Shares issued to original shareholder 10,000 - Shares issued in lieu of cash distributions 84,723 784,964 --------- -------- Balance September 30, 1996 4,339,353 $40,561,318 ========= ========== The dividend reinvestment program, provided $191,139.97 with which to purchase shares. The Fund purchased 21,731.036 shares for an average price of $8.80 per share on the open market. These shares were purchased before September 24, 1996. 6. RELATED PARTY TRANSACTIONS The Investment Adviser is reimbursed by the Fund for certain administrative expenses under the Investment Advisory Agreement. Such reimbursements were $72,148 for the quarter ended September 30, 1996. 7. SHORT-TERM INVESTMENTS Short-term investments are comprised of U. S. Government and Agency obligations maturing between October 25, 1996, and December 31, 1996. Such investments qualify for investment as permitted in Section 55(a) (1) through (5) of the 1940 Act. 8. Investments The Fund invests primarily in convertible preferred stocks of companies that qualify as Eligible Portfolio Companies as defined in Section 2(a) (46) of the 1940 Act or in securities that otherwise qualify for investment as permitted in Section 55(a) (1) through (5). Under the provisions of the 1940 Act at least 70% of the Fund's assets must be invested in Eligible Portfolio Companies. These stocks are carried on the Statement of Assets and Liabilities as of September 30, 1995, at fair value, as determined in good faith by the Investment Adviser. The stocks held by the Fund are convertible, generally after five years, into the common stock of the issuer 8 at a set conversion price. The common stock acquired upon exercise of the conversion feature is generally unregistered and is thinly to moderately traded but is not otherwise restricted. The Fund generally may register and sell such securities at any time with the Fund paying the costs of registration. Dividends are generally payable monthly. The stocks generally have call options, usually commencing three years subsequent to issuance, at prices specified in the stock agreements. 9 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements (Continued) September 30, 1996 INVESTMENT VALUATION SUMMARY
CONVERSION FAIR COST OR FACE VALUE VALUE Bentley Pharmaceutical 12% Convertible Debenture and Warrants $ 772,400 $1,710,000 $1,710,000 Contour Medical, Inc. 9% Convertible Debenture 2,500,000 2,500,000 2,500,000 Dwyer Group, Inc. Common Stock 2,054,182 1,750,000 1,644,500 Interscience Computer Corporation Cumulative Convertible Redeemable Preferred Stock 4,000,000 4,000,000 3,600,000 Packaging Research Corp. Convertible Debenture 3,200,000 3,200,000 2,700,000 Post Petition Loans 50,000 50,000 50,000 Poore Bros., Inc. 9% Convertible Debenture 2,100,000 2,100,000 2,100,000 Topro, Inc. 9% Convertible Debentures and Warrants 3,500,000 4,862,500 4,580,750 Voice It Worldwide, Inc. 8% Convertible Debenture 2,450,000 2,450,000 2,450,000 Warrants 50,000 50,000 50,000 --------- --------- --------- $20,676,582 $22,672,500 $21,385,250 ========== ========== ==========
10 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (1) Material Changes in Financial Condition Discuss material changes from end of preceding fiscal year to date of most recent interim balance sheet provided. If necessary for an understanding discuss seasonal fluctuations. The following portfolio transactions are notes for the quarter. Portfolio companies are referred to as the "Company": BENTLEY PHARMACEUTICAL. On February 20, 1996, the Registrant invested $800,000 in 800 units of a 12% Convertible Senior Subordinated Debenture and 1,000 Class A Redeemable Warrants, each to purchase one share of Common Stock and one Class B Redeemable Warrant. Bentley manufactures and distributes pharmaceutical products, primarily in Spain and France. On May 28, 1996, the Company announced that it would permit separate trading of its publicly traded Units (BNTU) as Debentures and Class A Redeemable Warrants, however, the units will also continue to trade. The Registrant elected to separate its units detaching the $800,000 Debenture with a cost allocation of $931 per $1,000 Debenture, and the 800,000 Class A Redeemable Warrants with a cost allocation of $69 per 1,000 Warrants. On September 20, 1996, the Registrant sold 400,000 Warrants at a price of $1.07 per Warrant with aggregate proceeds of $426,000, and Short-Term Capital Gains of $398,400. Subsequent to the quarter, On October 2, 1996, and October 17, 1996, the Registrant sold an aggregate of 8,000 Warrants with aggregate proceeds of $8,806.25, and Short-Term Capital Gains of $8,323.25. CONTOUR MEDICAL, INC. On July 12, 1996, the Registrant invested $2,500,000 for the purchase of a 9% Convertible Debenture maturing in 7 years and convertible into 1,000,000 shares of Contour Medical, Inc. common stock. The Company manufactures orthopedic and rehabilitative products as well as a full line of disposable medical products. PACKAGING RESEARCH CORP. On September 10, 1996, the Company placed its Mama Rizzo's, Inc. ("MRI") subsidiary, a manufacturer of pasta sauces, in Chapter 11 bankruptcy proceedings and has announced its intention of selling MRI. Expenses have been sharply reduced and MRI is operating at a positive cash flow. The Company is actively seeking buyers for MRI and has a goal to complete a sale in the next few months. The Registrant provided $50,000 Post Petition Financing pursuant to the Agreed Financing Order by the Court on September 11, 1996. POORE BROTHERS, INC. Subsequent to the quarter, the Company filed in October for an initial public offering. The Registrant will sell stock valued at $1 million as part of the offering which is presently anticipated to occur in late November or early December. The underwriter has estimated an offering price of $3.50. The Registrant's Debenture, which totals $2,100,000 prior to any sale, is convertible at $1.09 per share. 11 TOPRO, INC. Subsequent to the quarter, on October 29, 1996, the Registrant and Topro have agreed to reduce the conversion price on its June 17, 1996, investment ($1,000,000 in principal amount of Debenture) to $1.50 from the original $2.25. As a result, the conversion price on the entire $3,500,000 Convertible Debentures held by the Registrant is now $1.50. The Registrant's Board of Directors has approved three additional investments in an aggregate minimum amount of $8,800,000. It is currently anticipated that, barring unforseen events, these investments will be completed during the fourth quarter. The Registrant pursuant to its dividend reinvestment plan that allows existing shareholders to make additional share purchases, received $191,139.97 in additional funds for investment. These shares may be purchased either from the Registrant at the calculated Net Asset Value or purchased in the open market. The Plan Agent purchased 21,731.036 shares for $191,139.97 on the open market, These shares were purchased before September 24, 1996. (2) Material Changes in Operations Discuss material changes with respect to the most recent year-to-date period and corresponding period for prior year, if most recent quarter included also covers changes for quarterly period. Pending investment in Portfolio investments, funds are invested in temporary cash accounts and in government securities and income and expenses are essentially stable. The Registrant anticipates an increase in income as investments are made and an aggressive search for potential investments is ongoing. BENTLEY PHARMACEUTICAL. On September 20, 1996, the Registrant sold 400,000 Warrants at a price of $1.07 per Warrant with aggregate proceeds of $426,000, and Short-Term Capital Gains of $398,400. Subsequent to the quarter, On October 2, 1996, and October 17, 1996, the Registrant sold an aggregate of 8,000 Warrants with aggregate proceeds of $8,806.25, and Short-Term Capital Gains of $8,323.25. The Registrant made dividend distributions of income to the shareholders in the amount of $394,682 and accrued dividend payable to shareholders in the amount of $390,542. 12 PART II - OTHER INFORMATION 1. Legal Proceedings. None. ----------------- 2. Changes in Securities. None. --------------------- 3. Defaults upon Senior Securities. None. ------------------------------- 4. Submission of Matter to a Vote of Security Holders. None. -------------------------------------------------- 5. Other Information. None. ----------------- 6. Exhibits and Reports on Form 8-K ------------------------------ (a) Exhibits None. (b) Reports on Form 8-K None. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. November 19, 1995 /s/ Russell Cleveland --------------------------------------------- Russell Cleveland President November 19, 1995 /s/ Barbe Butschek --------------------------------------------- Barbe Butschek Corporate Secretary / Treasurer EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 YEAR 9-MOS 9-MOS 3-MOS 3-MOS DEC-31-1995 DEC-31-1996 DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1995 SEP-30-1996 SEP-30-1995 SEP-30-1996 SEP-30-1996 34,297,435 33,019,698 0 0 0 34,995,705 34,001,181 0 0 0 3,163,359 369,074 0 0 0 3,836,851 8,110,184 0 0 0 0 0 0 0 0 41,995,915 42,262,455 0 0 0 0 0 0 0 0 0 0 0 0 0 1,495,743 609,935 0 0 0 1,495,743 609,935 0 0 0 0 0 0 0 0 39,776,354 37,357,086 0 0 0 4,244,630 4,339,353 0 0 0 0 0 0 0 0 723,818 4,295,434 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40,500,172 41,652,520 0 0 0 0 256,190 195,714 100,000 67,500 0 1,667,980 1,931,341 553,839 605,947 0 208,823 81,179 90,323 13,500 0 994,685 928,469 295,745 294,469 0 1,536,708 1,279,765 846,817 392,478 0 398,400 0 398,400 0 0 48,722 (156,878) (1,352,719) (39,914) 0 1,585,430 1,122,887 (505,902) 352,564 0 0 0 0 0 0 (1,217,687) (767,689) (386,402) (295,962) 0 0 0 0 0 0 158,405 0 644,639 784,605 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 215,007 (892,304) 969,837 1,152,348 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 177,135 183,031 523,394 558,605 0 0 0 0 0 0 294,469 295,745 928,469 994,685 0 0 0 0 0 0 9.54 9.41 9.71 9.48 0 .35 .09 .20 .30 0 .01 (.01) (.31) (.04) 0 (.28) (.07) (.09) (.19) 0 0 0 0 0 0 (.02) .08 .09 (.05) 0 9.60 9.50 9.60 9.50 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----