FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: September 30, 2000
Commission File Number: 000-29945
The Oxbow Fund, LLC
New Jersey 22-09695
223 Wanaque Avenue
Pompton Lakes, New Jersey 07442
(973) 831-8020
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 September 30, 2000, there were 8,233 of the Limited Liability Company's
Units, at $100 per Unit, outstanding.
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TABLE OF CONTENTS
TO JUMP TO A SECTION, DOUBLE-CLICK ON THE SECTION NAME.
10-Q OTHERDOC
Financial Statements......................................................... 1
Statement of Assets, Liabilities and Members' Capital........................ 1
Statement of Operations...................................................... 2
Statement of Changes in Members' Capital..................................... 3
Statement of Cash Flow....................................................... 4
Notes to Financial Statements................................................ 5
Management Discussion and Analysis........................................... 8
Quantitative and Qualitative Disclosure about Market Risk.................... 9
Other Information............................................................ 10
EX-27.1 OTHERDOC
Exhibit 27 Table............................................................. 13
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The Oxbow Fund, LLC
PART 1
Financial Information
Item 1. Financial Statements (unaudited)
STATEMENT OF ASSETS, LIABILITIES AND MEMBERS' CAPITAL (UNAUDITED)
SEPTEMBER 30, 2000
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ASSET
Portfolio investments, at cost $444,186
Cash 21,445
--------
$465,631
LIABILITIES AND MEMBERS' CAPITAL
LIABILITIES
Accounts payable $154,684
Accrued expenses 225,130
--------
379,814
MEMBERS' CAPITAL 85,817
--------
$465,631
MEMBERSHIP INTEREST OUTSTANDING
8,233
--------
MEMBERS' EQUITY PER UNIT
$ 10.42
========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
1
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The Oxbow Fund, LLC
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000
THREE NINE
MONTHS MONTHS
ENDED, ENDED,
9/30/00 9/30/00
--------- ---------
EXPENSES
Officers compensation $ 112,500 $ 187,500
Professional fees 64,323 92,713
Travel 10,000 30,000
Selling and marketing 24,540 24,540
Management fees 5,197 6,573
Other 1,319 10,546
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NET LOSS $(217,879) $(351,872)
========= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2
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The Oxbow Fund, LLC
STATEMENT OF CHANGES IN MEMBERS' CAPITAL (UNAUDITED)
PERIODS ENDED JUNE 30, 2000 AND SEPTEMBER 30, 2000
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UNITS AMOUNT
MEMBERS' CAPITAL, December 31, 1999 $ --
ISSUANCE OF UNITS, net of offering expenses
and sales charges of approximately $85,000 2,180 122,740
NET LOSS (133,993)
--------- ---------
MEMBERS' CAPITAL, June 30, 2000 2,180 (11,253)
ISSUANCE OF UNITS, net of offering expenses
of and sales charges of approximately $290,000 6,053 314,949
NET LOSS (217,879)
--------- ---------
MEMBERS' CAPITAL, September 30, 2000 8,233 $ 85,817
========= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
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The Oxbow Fund, LLC
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000
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THREE NINE
MONTHS MONTHS
ENDED, ENDED,
9/30/00 9/30/00
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(217,879) $(351,872)
Adjustments to reconcile net loss to
net cash used in operating activities:
Changes in operating assets and liabilities:
Portfolio investments (444,186) (444,186)
Accounts payable (67,792) 154,684
Accrued expenses 310,580 225,130
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (419,277) (416,244)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES,
issuance of capital, net of offering expenses 314,949 437,689
--------- ---------
NET INCREASE (DECREASE) IN CASH (104,328) 21,445
CASH, beginning of period 125,773 --
--------- ---------
CASH, end of period $ 21,445 $ 21,445
========= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
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The Oxbow Fund, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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1. NATURE OF OPERATIONS AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES NATURE OF OPERATIONS
The Oxbow Fund, LLC (the "Fund") is a New
Jersey limited liability company organized on
September 15, 1999. The Fund has elected to be
regulated as a "business development company"
under the Investment Company Act of 1940, which
means that it is required to make certain types
of investments and must offer "significant
managerial assistance" to many of the companies
in which it intends to invest.
The Fund's principal investment objective is to
seek long-term capital appreciation by
investing primarily in securities of private
U.S. companies, although the Fund may make
other types of investments.
The Fund's Investment Manager is C.J.M. Asset
Management, LLC (the "Investment Manager").
Four Independent Directors and three persons
affiliated with the Investment Manager serve as
directors of the Fund. The Investment Manager
is responsible for the Fund's investments,
subject to the supervision of the Directors.
BASIS OF PRESENTATION
The unaudited financial statements reflect, in
the opinion of management, all adjustments, all
of which are of a normal recurring nature,
necessary to present fairly the financial
position of the Fund as of September 30, 2000
and the results of its operations and its cash
flows for the 3 months and nine months ended
September 30, 2000. Interim results are not
necessarily indicative of results to be
expected for a full fiscal year.
From inception (September 15, 1999) to December
31, 1999, the Fund was still in its development
stage and had no material transactions.
VALUATION OF PORTFOLIO INVESTMENTS
Privately placed securities are carried at fair
values determined in good faith by or under the
direction of the Board of Directors. Generally,
the fair value of each security will initially
be based primarily upon its original cost to
the Fund. Cost will be the primary factor used
to determine fair value on an ongoing basis
until significant developments or other factors
affecting the investment (such as results of
the portfolio company's operations, changes in
general market conditions, subsequent
financings or the availability of market
quotations) provide a basis for value other
than cost valuation.
INCOME TAXES
The Fund does not record a provision for income
taxes because the individual members report
their share of the Fund's income or loss on
their income tax returns. The financial
statements reflect the Fund's transactions
without adjustment, if any, required for income
tax purposes.
5
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The Oxbow Fund, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
1. NATURE OF OPERATIONS AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED) USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
amounts disclosed in the financial statements.
Actual results could differ from those
estimates.
2. MEMBERS' CAPITAL The Fund is offering up to 250,000 units of
ownership interests in the Fund in an aggregate
amount of up to $25,000,000. As of September
30, 2000 there were 8,233 shares outstanding.
The offering commenced on June 13, 2000. The
minimum investment in the Fund is 20 units at
$100 per unit. The units are being offered and
sold through C.J.M. Planning Corp., a
registered Broker-Dealer and an affiliate of
the Investment Manager, which receives a 7%
sales charge per unit sold. The offering will
terminate on August 31, 2001, unless terminated
earlier at the discretion of the Fund's Board
of Directors.
For the three and nine months ended September
30, 2000, C.J.M. Planning Corp., an affiliate
of the Investment Manager received a sales
charge for raising the capital of the Fund of
approximately $42,000 and $51,000,
respectively. The sales charge was treated as a
reduction of members' capital.
The Fund's fiscal year-end is December 31. The
Fund will continue until March 31, 2010,
subject to the right of the Fund's Board of
Directors to extend the term for up to two
additional two-year periods.
3. INVESTMENT ADVISORY AND
OPERATING AGREEMENTS The Investment Manager is responsible for
oversight of asset management and
administration of the Fund. The Fund pays the
Investment Manager an annual management fee
equal to 2.5% of total investor "adjusted
capital contributions" payable quarterly in
arrears. The Fund will also pay the Investment
Manager an annual fee for its services as fund
administrator which will equal approximately
.25% of total investor "adjusted capital
contributions." Additionally, after the members
(including the Investment Manager) have
received aggregate distributions from the Fund
equal to the amount of their initial
investments in the Fund, the Fund will pay the
Investment Manager an "incentive fee." The
incentive fee will become payable commencing
with the fiscal year of the Fund during which
members have received such distributions equal
to their initial investments and for each
fiscal year thereafter. The amount of the fee
will equal 20% of the taxable income of the
Fund during the relevant fiscal year
(calculated without giving effect to payment of
the incentive fee) less unrealized capital
depreciation for the year.
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6
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The Oxbow Fund, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
3. INVESTMENT ADVISORY AND
OPERATING AGREEMENTS
(CONTINUED) For the three and nine months ended September
30, 2000, accrued management fees payable to
the Investment Manager was approximately $5,000
and $7,000, respectively.
4. SUBSEQUENT EVENTS As of October 31, 2000 the Fund has issued an
additional 3,721 units of members' capital
resulting in net proceeds of approximately
$345,000.
In November 2000, the Board of Directors
decided to rescind certain investments of
approximately $472,000 made by the Fund due to
the uncertain issue of whether the investments
were subject to the applicable statutes and
rules of the Investment Company Act of 1940
concerning affiliate transactions. Management
of the Fund is assisting the companies in
question in securing capital in order to return
the monies invested by the Fund as soon as
practicable with the objective of concluding
the transactions by December 31, 2000.
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[607627-1]
7
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The Oxbow Fund, LLC
Item 2. Management Discussion and Analysis
The Oxbow Fund, LLC (the "Fund") is a New Jersey limited liability company
organized in September 1999. The Fund has elected to be regulated as a business
development company under the Investment Company Act of 1940, as amended (the
Act). The Fund operates as a non-diversified investment company as defined in
the Act.
The Fund's principal investment objective is to seek long-term capital
appreciation by investing primarily in securities of private U.S. companies
seeking capital for start-up operations, business expansion, venture capital, or
other strategic acquisitions, although the Fund may make other types of
investments.
The Fund's Investment Manager is CJM Asset Management, LLC (the "Investment
Manager"). There are four Independent Directors, and three persons affiliated
with the Investment Manager, who are Affiliated Directors. The Investment
Manager guides the investments, although is subject to supervision of the
Directors.
The Fund continues to offer up to 250,000 units of ownership interests in the
Fund in an aggregate amount of to $25,000,000. The offering commenced on June
13, 2000. The units are being offered and sold through CJM Planning Corp., a
registered Broker-Dealer and an affiliate of the Investment Manager. As
discussed in Item 5 of Part 2, below, the Fund has temporarily suspended the
offer of shares until its post-effective amendment is declared effective by the
SEC.
RESULTS OF OPERATIONS
From inception (September 15, 1999) to December 31, 1999, the fund was still in
its development stage and had no material transactions.
Net loss for the three and nine months ended September 30, 2000 were
approximately $218,000 and $352,000, respectively. The Fund's officers commenced
researching investment opportunities in May 2000 and invested approximately
$444,000 during the three months ended September 30, 2000. The investments
(noted below) were made to seek long-term appreciation and accordingly, no
revenue or income from these investments were generated for the three months
ended september 30, 2000.
Portfolio Investment Transactions
After July 1, 2000 the Fund began making investments into the following
companies: Oxbow Credit Company, LLC ("Oxbox Credit"), which is a credit
facilitation company providing lending and leasing, The Kamaas Group ("Kamaas"),
which is a marketing, advertising, graphics and public relations firm, and
Kaboombooks.com, which is a seller of scholarly books.
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8
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The Oxbow Fund, LLC
As of September 30, 2000 the amount which the Fund has invested in each entity
and the Fund's percentage of ownership of the entity are as follows:
Amount Invested Percentage Ownership
Oxbow Credit $345,860 70%
Kamaas $ 34,140 80%
Kaboombooks.com $ 64,186 50.7%
-------- ----
As of September 30, 2000, the fair value of the investments was based upon the
initial cost of the investment since no significant developments or other
factors affecting the investment have occurred through that date. As discussed
in Item 5 of Part 2, below, the fund has decided to rescind its investment in
Oxbow Credit and Kamaas.
Liquidity and Capital Resources
During the three months ended September 30, 2000, the Fund issued approximately
6,053 units to new members of the Fund resulting in net proceeds of
approximately $315,000. At September 30, 2000, the fund has accepted
subscriptions for 8,082 units which will provide net proceeds of $751,626 to the
Fund.
Cash and Cash equivalents at September 30, 2000, WAS APPROXIMATELY $21,000.
Future proceeds from the sales of units, and operating cash reserves are
expected to be adequate to fund the Investment Company's operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable
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The Oxbow Fund, LLC
PART 2
Other Information
Item 1. Legal Proceedings
None
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
None
Item 5. Other Information
A. INVESTMENTS IN OXBOW CREDIT AND KAMAAS
Two entities in which the Fund has invested, Oxbow Credit and Kamaas,
were formed with the assistance of Dan Dyer, the Chief Executive Officer of the
Fund. An affiliate of Mr. Dyer loaned start-up capital to these entities. When
the Fund invested in Oxbow Credit, approximately $148,000 of the loan by the
affiliate of Mr. Dyer was repaid. Although Mr. Dyer's affiliate was an original
member of Oxbow Credit, Mr. Dyer's affiliate relinquished all interest in Oxbow
Credit prior to the date on which the Fund invested in Oxbow Credit. A similar
arrangement existed with respect to the formation of Kamaas and the Fund's
investment of $34,140 in Kamaas.
When counsel for the Fund reviewed the Fund's investment in Oxbow Credit
and Kamaas with Mr. Dyer and the Board, a question arose as to whether, because
of Mr. Dyer's involvement in the formation of these entities, the investments
might be governed by the statutes and rules of the Investment Company Act of
1940 concerning affiliate transactions. Rather than attempt to resolve the
uncertain issue of whether the investments were subject to the applicable
statutes and rules, the Board and Mr. Dyer decided that the transactions would
be rescinded and the Fund's investments in Oxbow Credit and Kamaas would be
returned. Mr. Dyer has informed the Board that he is assisting Oxbow Credit and
Kamaas in securing other capital in order to return the monies invested by the
Fund as soon as practicable with the objective of concluding the transaction by
the end of the fiscal quarter, December 31, 2000.
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The Oxbow Fund, LLC
B. POST-EFFECTIVE AMENDMENT
The Fund intends to file a post-effective amendment to its Registration
Statement on Form N-2 with the Securities and Exchange Commission to update
certain information including financial statements regarding the Fund. As part
of this process, the Fund has requested its new auditors to re-certify the
financial statements in the Registration Statement. Until the SEC review of the
post-effective amendment is completed, the Fund has decided to suspend
temporarily the sale of units in the Fund.
It is the Fund's intention to resume selling shares immediately upon the
effectiveness of the post-effective amendment.
C. INVESTMENT MANAGER REGISTRATION
The Fund recently learned that, through a clerical error, the Investment
Manager's investment advisor registration with the SEC was not effective. (The
Investment Manager has been registered in 24 states since October, 1999.) The
Investment Manager of the Fund used an outside service to file its registration
with the SEC and had received confirmation from the outside service that the
registration had been filed and had also been renewed. The Investment Manager
recently learned, however, that documents filed on its behalf by the outside
service were not properly filed with the SEC and, therefore, the registration
was not effective. When the Investment Manger learned of this situation, it
immediately refiled its registration application with the SEC and its
registration became effective on November 2, 2000. Management of the Fund does
not believe that the inadvertent failure of the Investment Adviser to be
registered with the SEC has had a material effect of the Fund or its
investments.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. (27.1) Financial Data Schedule (for EDGAR filing
purposes only).
(b) The Fund did not file any reports on Form 8-K during the quarter
ended September 30, 2000. The Fund changed its accounting firm from
Moss Adams to Rothstein, Kass & Company, P.C., as disclosed in
Reports on Form 8-K filed by the Fund on October 30, 2000 and
November 8, 2000.
None.
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11
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The Oxbow Fund, LLC
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Oxbow Fund, LLC
a New Jersey limited partnership
By: /s/ Daniel D. Dyer Date: November 20, 2000
----------------------------
Daniel D. Dyer, Chairman and
Chief Executive Officer
By: /s/ Joseph Musumeci Date: November 20, 2000
----------------------------------------
Joseph Musumeci, Chief Financial Officer
and Vice President
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