<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999 or
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file numbers 0-23203 and 814-00153
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Universal Bridge Fund, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 54-1844639
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
c/o Walnut Financial Services, Inc.
8000 Towers Crescent Drive, Suite 1070
Vienna, Virginia 22182
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(Address of Principal Executive Offices) (Zip Code)
(703) 448-3771
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
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
--- ---
As of October 29, 1999, the Registrant had 1,000 shares of common
stock, $.01 par value per share, issued and outstanding.
<PAGE> 2
UNIVERSAL BRIDGE FUND, INC.
INDEX TO FORM 10-Q
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Page Number
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<S> <C>
Part I - Financial Information
Item 1. Financial Statements 3
Statements of Assets and Liabilities as of September 30, 1999 and 3
December 31, 1998
Investments in Securities as of September 30, 1999 4
Statements of Operations for the Nine Months and Three Months ended 5
September 30, 1999 and 1998
Statements of Changes in Net Assets for the Nine Months ended September 6
30, 1999 and 1998
Statements of Cash Flows for the Nine Months ended September 30, 1999 7
and 1998
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition 9
and Results of Operations
Part II - Other Information
Item 1. Legal Proceedings 11
Item 5. Other Information 11
Item 6. Exhibits Required by Item 601 and Reports on Form 8-K 11
Signatures 12
Exhibits 13
Exhibit 27.1
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL BRIDGE FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
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<S> <C> <C>
Assets:
Investments at Market or Fair Value:
Partnership interests (cost of $1,762,000 in 1999 and
$1,762,000 in 1998) $ 1,750,000 $ 1,884,000
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Total portfolio securities 1,750,000 1,884,000
Cash and cash equivalents 0 0
Other assets 10,000 0
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Total assets 1,760,000 1,884,000
Liabilities:
Accounts payable, accrued expenses and other current liabilities 49,000 61,000
Due to Parent for tax liability 167,000 145,000
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Net assets $ 1,544,000 $ 1,678,000
============== ==============
Common stock, $.01 par value, 1,000 shares authorized, 1,000 and
1,000 issued and outstanding $ 0 $ 0
Additional paid in capital 1,762,000 1,762,000
Accumulated deficit:
Net unrealized depreciation of investments (218,000) (84,000)
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Net assets applicable to outstanding common shares
(equivalent to $1,544 and $1,678 per share based on 1,000 and 1,000
outstanding common shares at September 30, 1999
and December 31, 1998, respectively) $ 1,544,000 $ 1,678,000
============== ==============
</TABLE>
<PAGE> 4
UNIVERSAL BRIDGE FUND, INC.
INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
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<S> <C>
Partnership interest - 100%
Universal Partners, L.P. (majority-owned subsidiary) 1,760,000
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Total partnership interests (cost $1,762,000) 1,760,000
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Total - 100% (cost $1,762,000) $ 1,760,000
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</TABLE>
<PAGE> 5
UNIVERSAL BRIDGE FUND, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Investment income:
Interest income 0 0 0 0
Dividend income 0 0 0 0
-------------- -------------- -------------- --------------
Total income 0 0 0 0
Expenses:
Interest expense 0 0 0 0
General and administrative 0 0 0 0
-------------- -------------- -------------- --------------
Net investment (loss) before taxes 0 0 0 0
Income tax benefit 0 0 0 0
-------------- -------------- -------------- --------------
Net investment (loss) 0 0 0 0
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Realized and unrealized gains on investments:
Realized gain on sale of investments
before income tax 0 0 0 0
Income tax provision 0 0 0 0
-------------- -------------- -------------- --------------
Net realized gain on sale of investments 0 0 0 0
-------------- -------------- -------------- --------------
Unrealized (depreciation) on
investments before income tax (134,000) (420,000) (69,000) (82,000)
Income tax benefit 0 168,000 0 33,000
-------------- -------------- -------------- --------------
Net unrealized (depreciation) on
investments (134,000) (252,000) (69,000) (49,000)
-------------- -------------- -------------- --------------
Net realized and unrealized gains
(losses) on investments (134,000) (252,000) (69,000) (49,000)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations $ (134,000) $ (252,000) $ (69,000) $ (49,000)
============== ============== ============== ==============
Loss per share - basic and diluted $ (134.00) $ (52.00) $ (69.00) $ (49.00)
============== ============== ============== ==============
Weighted average shares outstanding 1,000 1,000 1,000 1,000
============== ============== ============== ==============
</TABLE>
<PAGE> 6
UNIVERSAL BRIDGE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1999 1998
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<S> <C> <C>
Decrease in net assets resulting from operations:
Net investment loss $ 0 $ 0
Net realized gains on investments 0 0
Net unrealized depreciation on investments (134,000) (252,000)
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Total increase (decrease) in net assets (134,000) (252,000)
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Net assets at beginning of period 1,894,000 2,082,000
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Net assets at end of period $ 1,760,000 $ 1,830,000
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</TABLE>
<PAGE> 7
UNIVERSAL BRIDGE FUND, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net decrease in net assets resulting from operations $ (134,000) $ (252,000)
Adjustments to reconcile net increase (decrease) in net assets
resulting from operations to net cash provided by operating
activities:
Net unrealized depreciation of investments 134,000 420,000
Net realized gain on investments 0 0
Change in net deferred tax liability 0 (168,000)
Changes in assets and liabilities:
Other assets 13,000 8,000
Other liabilities (13,000) (8,000)
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Net cash used in operating activities 0 0
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Cash flows from investing activities:
Net cash provided by investing activities 0 0
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Cash flows from financing activities:
Net cash (used in) provided by financing activities 0 0
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Net increase (decrease) in cash and cash equivalents 0 0
Cash and cash equivalents, beginning 0 0
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Cash and cash equivalents, end $ 0 $ 0
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Supplemental Information:
Cash paid for interest $ 0 $ 0
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</TABLE>
<PAGE> 8
UNIVERSAL BRIDGE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PREPARATION.
The accompanying financial statements as of September 30, 1999 are
unaudited; however, in the opinion of the management of Universal Bridge Fund,
Inc, a Delaware corporation (the "Company"), such statements include all
adjustments (consisting of normal recurring accruals) necessary to present a
fair statement of the information presented therein.
Pursuant to accounting requirements of the Securities and Exchange
Commission ("SEC") applicable to quarterly reports on Form 10-Q, the
accompanying financial statements and these notes do not include all disclosures
required by generally accepted accounting principles for audited consolidated
financial statements. Accordingly, these statements should be read in
conjunction with the most recent audited financial statements included in the
Form 10-K, filed by Walnut Financial Services Inc., a Utah corporation (the
"Parent Company"), for the fiscal year ended December 31, 1998, in which the
financial statements of the Company are consolidated.
Results of operations for interim periods are not necessarily
indicative of those to be achieved for fiscal years.
The Company has determined it is required to present its financial
statements in accordance with generally accepted accounting principles and SEC
regulations in the format applicable to investment companies, which generally
means that investments are reported at fair market value rather than cost.
2. ORGANIZATION.
The Company is a wholly-owned subsidiary of the Parent Company. The
Parent Company is a closed-end management investment company, which elected on
October 15, 1997 to be regulated as a Business Development Company ("BDC") under
the Investment Company Act of 1940, as amended (the "Investment Company Act").
As a result of the technical nature of the Investment Company Act, the Company
and certain of the Parent Company's other wholly-owned subsidiaries
(collectively, the "Other Subsidiaries"), Walnut Capital Corp., a Delaware
corporation, and Walnut Funds, Inc., a Delaware corporation, also elected to be
regulated as BDCs and registered as reporting companies under the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act").
Notwithstanding their registration under the Securities Exchange Act, the
Company and the Other Subsidiaries did not begin filing the periodic reports and
other information required by the Securities Exchange Act in reliance upon a
no-action letter (the "No-Action Letter") received from the staff of the SEC. In
the No-Action Letter, the SEC staff indicated that it would take no action
against the Company and the Other Subsidiaries for failing to file information
required by the Securities Exchange Act in order to permit the Company, the
Parent Company and the Other Subsidiaries to avoid the significant expense and
administrative burden of such filings while applying to the SEC to permit the
Company and the Other Subsidiaries not to file such reports. The SEC staff's
position taken in the No-Action Letter has expired by its terms and the
application of the Company, the Other Subsidiaries and the Parent Company has
not been approved by the SEC. The Company and the Other Subsidiaries have not
asked the SEC staff to renew its position in the No-Action Letter. Therefore,
the Company filed as its first periodic report under the Securities Exchange Act
a Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 1999.
The Company owns 50% of the outstanding general partnership interests
and approximately 83% of the limited partnership of Universal Partnership, L.P.,
an Illinois limited partnership ("UPLP"), which was established in 1994.
<PAGE> 9
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
NET INCOME (LOSS) PER SHARE. Net income (loss) per share is computed
based on the weighted-average number of shares outstanding for each period.
Common stock equivalents have been considered where they are not anti-dilutive.
4. RECENT DEVELOPMENTS.
The Parent Company has entered into an Amended and Restated Agreement
and Plan of Merger dated as of August 5, 1999 (the "Merger Agreement"), with
Tower Hill Securities, Inc., a New York corporation, and Tower Hill Acquisition
Corp., a New York corporation and a wholly owned subsidiary of the Parent
Company. The Parent Company has also called a special meeting (the "Special
Meeting") of its stockholders at 8 a.m. Eastern Time on November 1, 1999 and
solicited the proxies of its stockholders to vote at the Special Meeting. At the
Special Meeting, the stockholders of the Company will be asked to consider and
vote upon the transactions contemplated by the Merger Agreement, and, if
approved at the Special Meeting, the transactions are expected to be consummated
as promptly as possible thereafter. In connection with those transactions, the
Company will execute an Agreement and Plan of Mergers with THCG, LLC, a Delaware
limited liability company ("THCG"), and the Other Subsidiaries, pursuant to
which the Company and the Other Subsidiaries will merge with and into THCG and,
as a result, the Company and the Other Subsidiaries will cease to exist as
separate entities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The only operating activity of the Company is recording the change in
fair value of its investment in UPLP. Due to the nature of its business, the
Company has not generated any cash flow from investing or financing activities
during the applicable period nor has it been required to utilize any funds.
Certain statements contained in this Quarterly Report on Form 10-Q
which are not historical facts are forward-looking statements that are subject
to risks and uncertainties that could cause actual results to differ materially
from those set forth in or implied by such forward-looking statements.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998.
The Company had unrealized depreciation on investments of $134,000 for
the nine months ended September 30, 1999, compared to unrealized depreciation on
investments of $420,000 for the nine months ended September 30, 1998. The
unrealized depreciation on investments reflects solely the change in value of
the Company's investment in UPLP.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998.
The Company had unrealized depreciation on investments of $69,000 for
the three months ended September 30, 1999, compared to unrealized depreciation
on investments of $49,000 for the three months ended September 30, 1998. The
unrealized depreciation on investments reflects solely the change in value of
the Company's investment in UPLP.
<PAGE> 10
INVESTMENT PORTFOLIO CHANGES.
The Company's equity investments that appreciated/(depreciated) in value during
the nine months ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation)
--------------------------------------
<S> <C>
Universal Partners, L.P. $ (134,000)
</TABLE>
YEAR 2000 COMPLIANCE.
The year 2000 creates the potential for date related data to cause
computer processing errors or system shut-downs because computer-controlled
systems have historically used two digits rather than four to define years.
Computer programs that contain time data sensitive software may recognize a date
using two digits of "00" as the year 1900 rather than the year 2000. The
miscalculations and systems failures that may be caused by such date
misrecognition could disrupt the operations of the Company or its portfolio
companies. Since this risk relates to computer-controlled systems, the year 2000
issue affects computer software, computer hardware, and any other equipment with
imbedded technology that involves date sensitive functions. Since the Company's
only activity is recording the change in value of its investment in UPLP, which
is performed with software and hardware owned by the Parent Company, the Company
will be affected by the year 2000 issue only if the Parent Company is not year
2000 compliant.
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not presently involved as plaintiff or defendant in any
material legal actions.
ITEM 5. OTHER INFORMATION
The Parent Company has entered into the Merger Agreement with Tower
Hill Securities, Inc., a New York corporation, and Tower Hill Acquisition Corp.,
a New York corporation and a wholly owned subsidiary of the Parent Company. The
Parent Company has also called a Special Meeting of its stockholders at 8 a.m.
Eastern Time on November 1, 1999 and solicited the proxies of its stockholders
to vote at the Special Meeting. At the Special Meeting, the stockholders of the
Company will be asked to consider and vote upon the transactions contemplated by
the Merger Agreement, and, if approved at the Special Meeting, the transactions
are expected to be consummated as promptly as possible thereafter. In connection
with those transactions, the Company will execute an Agreement and Plan of
Mergers with THCG and the Other Subsidiaries, pursuant to which the Company and
the Other Subsidiaries will merge with and into THCG and, as a result, the
Company and the Other Subsidiaries will cease to exist as separate entities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No Current Reports on Form 8-K have been filed during the quarter
for which this Quarterly Report on Form 10-Q is being filed.
<PAGE> 12
SIGNATURES
In accordance with 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.
UNIVERSAL BRIDGE FUND, INC.
(Registrant)
Date: October 29, 1999 /s/ Joel S. Kanter
---------------------------------------
Joel S. Kanter
President (Principal Executive Officer)
Date: October 29, 1999 /s/ Robert F. Mauer
---------------------------------------
Robert F. Mauer
Treasurer (Principal Financial and
Accounting Officer)
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<S> <C>
3.1 Articles of Incorporation of Universal Bridge Fund, Inc., as amended [3.1](1)
3.2 Bylaws of Universal Bridge Fund, Inc. [3.2](1)
27.1 Financial Data Schedule
</TABLE>
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[ ] Exhibits so marked have been previously filed with the SEC as exhibits to
the filings shown below under the exhibit numbers indicated following the
respective document description and are incorporated herein by reference.
(1) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form 8-A dated October 8, 1997 as filed with the SEC on October 14,
1997.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 1,762,000
<INVESTMENTS-AT-VALUE> 1,750,000
<RECEIVABLES> 0
<ASSETS-OTHER> 10,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,760,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 216,000
<TOTAL-LIABILITIES> 216,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,762,000
<SHARES-COMMON-STOCK> 1,000
<SHARES-COMMON-PRIOR> 1,000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (218,000)
<NET-ASSETS> 1,544,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (134,000)
<NET-CHANGE-FROM-OPS> (134,000)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 1,822,000
<PER-SHARE-NAV-BEGIN> 1,678.00
<PER-SHARE-NII> (134.00)
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,544.00
<EXPENSE-RATIO> 0
</TABLE>
