SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File No. 814-29
ACORN VENTURE CAPITAL CORPORATION
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 59-2332857
- ------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer Identifi-
incorporation or organization) cation No.)
100 Park Avenue, 23rd Floor, New York, New York 10017
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(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (212) 685-5654
--------------
N/A
- --------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for such shorter period that the
issuer was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
---------- ----------
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares
outstanding of each of the issuer's classes of common equity, as of
the latest practicable date: 5,538,906 shares of common stock, $.01
par value, as of August 19, 1997.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------
(Unaudited) (Note 1)
<S> <C> <C>
Assets:
Investments at market or fair value:
Investment in Recticon Enterprises, Inc.
(100% owned) $13,900,000 $13,900,000
Investment in Automotive Industries, Inc.
(100% owned) 1,150,000 2,900,000
Investment in ServiceMax Tire & Auto
Centers, Inc. (100.0% owned) 0 0
--------------------------
15,050,000 16,800,000
Other common stock and warrants 12,981 12,981
Certificate of Deposit 100,000 100,000
Investments in U.S. Treasury bills 1,469,956 250,341
Cash balance at Broker 6 0
--------------------------
Total investments (cost $12,760,703 and
$13,122,865 at June 30, 1997 and
December 31, 1996, respectively) 16,632,943 17,163,322
Cash and cash equivalents 1,801,702 951,782
Receivables from affiliates 454,500 458,093
Other assets 3,741 4,555
--------------------------
Total assets 18,892,887 18,577,752
Liabilities:
Accounts payable 96,372 36,445
Payables to affiliates 0 434,000
Deferred income taxes 2,111,619 1,962,619
--------------------------
Net assets $16,684,896 $16,144,688
==========================
Net Assets:
Common Stock, par value $.01 per share -
authorized 20,000,000 shares, issued
5,538,906 at June 30, 1997, and
5,538,906 at December 31, 1996 $ 55,389 $ 55,389
Additional paid-in capital 14,090,156 14,090,156
Accumulated:
Net investment income 1,087,282 274,607
Net realized losses on investments (781,921) (886,921)
Net unrealized appreciation of
investments (net of deferred
income taxes of $1,556,902 and
$1,429,000 at June 30, 1997 and
December 31, 1996) 2,233,989 2,611,457
--------------------------
2,539,350 1,999,143
--------------------------
Net assets applicable to outstanding
common shares (equivalent to $3.01
per share in 1997 and $2.91 per share
in 1996, based on outstanding common
shares of 5,538,906 in 1997 and 1996) $16,684,896 $16,144,688
==========================
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1997 1996 1997 1996
----------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest $ 12,657 $ 2,357 $ 30,935 $ 6,583
Dividends from affiliates 0 102,500 434,216 405,000
Consulting and management fees
from affiliated companies 148,500 150,000 742,000 300,000
----------------------------------------------
161,157 254,857 1,207,151 711,583
----------------------------------------------
Expenses:
Consulting fees 2,642 2,642 5,284 7,284
Compensation 120,101 132,652 224,203 264,305
Insurance 41,080 - 44,080 -
Legal and accounting 24,174 9,935 66,652 44,939
Payroll taxes 5,957 - 15,958 -
Registration and exchange 1,753 1,712 7,678 7,125
Director fees 5,000 - 10,000 -
Other 8,421 92,424 20,623 137,045
----------------------------------------------
209,128 239,365 394,477 460,698
Net investment income (47,970) 15,492 812,675 250,885
----------------------------------------------
Realized and unrealized gains
on investments:
Realized gains from sales
of investments 0 0 105,000 0
Net change in unrealized
appreciation (depreciation)
of investments 203,531 2,500,000 (246,470) 2,500,000
----------------------------------------------
Net realized and unrealized
gains (losses) on investments 203,531 2,500,000 (141,470) 2,500,000
----------------------------------------------
Net increase in net
assets resulting from
operations before income
tax provision 155,560 2,515,492 671,205 2,750,885
Income tax provision 350,000 (780,000) (131,000) (730,000)
----------------------------------------------
Net increase in net
assets resulting from
operations $ 505,560 $1,735,492 $ 540,205 $2,020,885
==============================================
Per-share amounts:
Net investment income $0.008 $0.00 $0.143 $0.04
Net realized gains on
investments $0.000 $0.00 $0.000 $0.00
Net unrealized gain (losses)
on investments $0.036 $0.31 $0.025 $0.32
----------------------------------------------
$0.089 $0.31 $0.095 $0.37
==============================================
Weighted average number of
shares in per share
computation 5,665,253 5,538,906 5,665,253 5,596,780
===============================================
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Statements of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
---------------------------
<S> <C> <C>
Net investment income $ 812,675 $ 250,885
Net realized gains on investments 105,000 0
Net increase in unrealized appreciation
(depreciation) of investments (377,470) 1,770,000
------------ ------------
Net increase (decrease) in assets
resulting from operations 540,205 2,020,885
Net assets at beginning of period 16,144,688 14,183,554
------------ ------------
Net assets at end of period $16,684,893 $16,204,439
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1997 1996
---------------------------
<S> <C> <C>
Net cash provided by operating
activities $ 732,345 $ 260,025
------------ ------------
Investing activities:
Investment in Automotive Industries, Inc. 1,886,000 (460,330)
Purchase of U.S. Treasury bill (1,198,425) (444,419)
Redemption of U.S. Treasury bill 0 398,466
Purchase of certificate of deposit 0 (100,000)
------------ ------------
Financing activities:
Payment on note payable to Automotive
Industries, Inc. (570,000) -
------------ ------------
Net cash provided by financing activities 687,575 (606,283)
------------ ------------
Increase in cash and cash equivalents 849,920 (346,258)
Cash and cash equivalents at beginning
of period 951,782 383,563
------------ ------------
Cash and cash equivalents at end of period $ 1,801,702 $ 37,305
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Notes to Condensed Interim Financial
Statements (Unaudited)
June 30, 1997
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended June 30, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information,
refer to the financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1996.
2. Investments in and Advances to Majority Owned Companies
The Company's wholly owned investments are valued at fair value by the Board
of Directors as these investments are not readily marketable. In determining
fair value, the Board of Directors considers a number of factors which
influence the value of the Company's investments, including current and
expected future operating performance, industry and general market and
economic trends, the competitive marketplace and other factors. A summary of
the Company's wholly owned investments at June 30, 1997 is as follows:
Number
of
Shares Type of Issue and Name of User Cost Value
- -----------------------------------------------------------------------------
100 Common stock, Recticon Enterprises, Inc.
100% owned. $3,195,750 $13,900,000
Recticon, located in Pottstown, Pennsylvania, manufactures two, three and
four-inch monocrystalline silicon wafers, which are made from silicon crystals
and are the basic substrate from which integrated circuits and other
semiconductor devices are fabricated. Recticon's wafers are used by
university research departments and microelectronic manufacturers, and are
best suited for use in electronics devices employed in avionics,
telecommunications and computers.
As of June 30, 1997, the Board of Directors maintained the valuation of
Recticon at $13,900,000.
During the quarter ended June 30, 1997, Recticon paid the Company
management fees totaling $148,500.
The following selected financial data of Recticon has been derived from
unaudited financial statements provided by Recticon. The financial
information is of June 30, 1997 and June 30, 1996.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
Income Statement Data: 1997 1996 1997 1996
----------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $1,968,914 $2,560,391 $3,959,719 $4,998,436
Cost of goods sold 1,332,267 1,460,320 2,720,086 2,948,578
---------- ---------- ---------- ----------
Gross Profit 636,647 1,100,071 1,239,633 2,049,858
Operating Expense 231,822 260,070 467,881 500,294
---------- ---------- ---------- ----------
Net income 404,825 840,001 771,752 1,549,564
---------- ---------- ---------- ----------
[Note: Above figures do not include taxes or management fees of $297,000 for
the six months ended June 30, 1997 and $300,000 for the six months ended June
30, 1996.
</TABLE>
<TABLE>
<CAPTION>
As of June 30,
Balance Sheet Data: 1997 1996
---------------------
(Unaudited)
<S> <C> <C>
Total Assets $5,870,548 $7,653,296
========== ==========
Total Current Liabilities 1,743,211 3,358,082
Total Long Term Debt* 1,319,298 1,589,708
Stockholders Equity/Deficit 2,808,039 2,705,506
---------- ----------
Total Liabilities/Equity $5,870,548 $7,653,296
========== ==========
* Includes Deferred Income of $1,483,325 from Customer Supply Agreement for
the period ending June 30, 1997 and $1,949,990 for the period ending June
30, 1996.
</TABLE>
On March 26, 1997, a Petition for Involuntary Bankruptcy under Chapter 7
was filed in the U.S. Bankruptcy Court, Eastern District of Michigan on behalf
of creditors of ServiceMax Tire and Auto Centers of Michigan, Inc. On May 21,
1997 an Order of Relief was issued by the Court.
Investments in Common Stock, Warrants, and Notes Receivable
Number
of
Shares Type of Issue and Name of User Cost Value
- ---------------------------------------------------------------
Common stocks - Restricted:
49,565 Amerinex Artificial
Intelligence, Inc. $ 12,040 $ 9,913
24 Cardiac Control
Systems, Inc. 68 68
Common stock warrants - Restricted:
30,000 Aqua Care Systems,
Inc., each entitling
the holder to purchase
one (1) common share
at $3 per share, exer-
cisable through April 17,
1997. 3,000 3,000
-------- --------
$ 15,108 $ 12,981
======== ========
Face
Value Type of Issue and Name of Issuer Cost Value
- -------------------------------------------------------------------------
Notes receivable - Restricted
$500,000 Note receivable from
Digital Products Cor-
poration, 10%, sub-
ordinated convertible
note, principal due on
November 22, 1996;
interest due semi-
annually commencing
May 22, 1994. $500,000 $ 0
-------- --------
$500,000 $ 0
======== ========
3. Earnings Per Share
Per share amounts for the three months ended June 30, 1997 and 1996, are based
on the weighted average number of common and common equivalent shares (stock
options) outstanding in each period and is computed in accordance with APB
Opinion No. 15.
In February 1997, The Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share". Statement No. 128 will replace APB Opinion No.
15 and is effective for periods ending after December 15, 1997. Earlier
application is not permitted. When effective, Statement No. 128 requires
restatement of all prior period earnings per share ("EPS") data presented.
Statement No. 128 replaces the current EPS presentation with dual presentation
of basic and diluted EPS for entities with complex capital structures, such as
the Company. Basic EPS includes no dilution and is computed by dividing
income by the weighted average number of common shares outstanding during the
period. Diluted EPS reflects the potential dilution of securities, such as
stock options, that could share in the earnings of an entity. If Statement
No. 128 had been applied for the periods ended June 30, 1997 and 1996, there
would have been no change from the EPS presented in the condensed Interim
Statement of Operations and Basic EPS and diluted EPS.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of June 30, 1997, the Company had cash and cash equivalents of
$1,801,702, a Certificate of Deposit for $100,000, and United States Treasury
Bills of $1,469,956, as compared to cash and cash equivalents of $951,782, a
Certificate of Deposit for $100,000, and United States Treasury Bills of
$250,341 at December 31, 1996. The increase in capital resources of
$2,072,486 from December 31, 1996, was primarily the result of the sale of the
assets of Automotive Industries, Inc. As of June 30, 1997, the Company had
liabilities of $2,557,991 as compared to liabilities of $2,433,064 at December
31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. 27 -- Financial Data Schedule
(b) Reports on Form 8-K:
On June 9, 1997, the Company filed with the Commission a Current Report
on Form 8-K, dated December 30, 1996, reporting the sale of the assets of its
wholly-owned subsidiary.
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.
ACORN VENTURE CAPITAL CORPORATION
Date: August 19, 1997 Larry V. Unterbrink
----------------------------------
Larry V. Unterbrink, Treasurer
(Principal Financial and
Accounting Officer)
Stephen A. Ollendorff
----------------------------------
Stephen A. Ollendorff,
Chairman, Chief Executive Officer,
and Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ACORN VENTURE CAPITAL CORPORATION FOR THE QUARTER ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 12,760,703
<INVESTMENTS-AT-VALUE> 16,632,943
<RECEIVABLES> 454,500
<ASSETS-OTHER> 3,741
<OTHER-ITEMS-ASSETS> 1,801,702
<TOTAL-ASSETS> 18,892,887
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,207,991
<TOTAL-LIABILITIES> 2,207,991
<SENIOR-EQUITY> 55,389
<PAID-IN-CAPITAL-COMMON> 14,090,156
<SHARES-COMMON-STOCK> 5,538,906
<SHARES-COMMON-PRIOR> 5,538,906
<ACCUMULATED-NII-CURRENT> 1,087,282
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (781,921)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,233,989
<NET-ASSETS> 16,684,896
<DIVIDEND-INCOME> 434,216
<INTEREST-INCOME> 30,935
<OTHER-INCOME> 742,000
<EXPENSES-NET> 394,477
<NET-INVESTMENT-INCOME> 812,675
<REALIZED-GAINS-CURRENT> 105,000
<APPREC-INCREASE-CURRENT> 272,400
<NET-CHANGE-FROM-OPS> 540,205
<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> 274,607
<ACCUMULATED-GAINS-PRIOR> (886,921)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 394,477
<AVERAGE-NET-ASSETS> 16,684,896
<PER-SHARE-NAV-BEGIN> 2.91
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.01
<EXPENSE-RATIO> 0.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
