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 March 31, 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.)
7020 A.C. Skinner Parkway, Jacksonville, Florida 32256
- -------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (904) 296-1760
--------------
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 May 14, 1997.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, 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) 2,450,000 2,900,000
Investment in ServiceMax Tire & Auto
Centers, Inc. (100.0% owned) 0 0
--------------------------
16,350,000 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 718,723 250,341
--------------------------
Total investments (cost $13,594,345 and
$13,122,865 at March 31, 1997 and
December 31, 1996, respectively) 17,181,704 17,163,322
Cash and cash equivalents 1,561,537 951,782
Receivables from affiliates 467,563 458,093
Other assets 4,148 4,555
--------------------------
Total assets 19,214,952 18,577,752
Liabilities:
Accounts payable 4,000 36,445
Payables to affiliates 570,000 434,000
Deferred income taxes 2,461,619 1,962,619
--------------------------
Net assets $16,179,333 $16,144,688
==========================
Net Assets:
Common Stock, par value $.01 per share -
authorized 20,000,000 shares, issued
5,538,906 at March 31, 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 operating losses 1,135,252 274,607
Net realized losses on investments (781,921) (886,921)
Net unrealized appreciation of
investments (net of deferred
income taxes of $1,906,902 and
$1,429,000 at March 31, 1997 and
December 31, 1996) 1,680,457 2,611,457
--------------------------
2,033,788 1,999,143
--------------------------
Net assets applicable to outstanding
common shares (equivalent to $2.92
per share in 1997 and $2.91 per share
in 1996, based on outstanding common
shares of 5,538,906 in 1997 and 1996) $16,179,333 $16,144,688
==========================
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------------------------
<S> <C> <C>
Investment Income:
Interest $ 18,494 $ 4,226
Dividends from affiliates 434,000 302,500
Consulting and management fee
income from affiliates 593,500 150,000
----------- ----------
1,045,994 456,726
----------- ----------
Expenses:
Consulting fees 2,641 4,642
Compensation 104,101 131,653
Legal and accounting 42,478 35,004
Payroll taxes 10,001 9,874
Registration and exchange 5,925 5,413
Director fees 5,000 6,500
Other 15,203 28,247
----------- ----------
185,349 221,333
----------- ----------
Net investment income 860,645 235,393
----------- ----------
Realized and unrealized gains (losses)
on investments:
Realized gains from sales
of investments 105,000 0
Net change in unrealized appreciation
(depreciation) of investments (450,000) 0
----------- ----------
Net realized and unrealized gains
(losses) on investments (345,000) 0
----------- ----------
Net increase in net assets
resulting from operations before
income tax provision 515,645 235,393
Income tax provision (481,000) 50,000
----------- ----------
Net increase in net assets resulting
from operations $ 34,645 $ 285,393
=========== ==========
Per share amounts:
Net investment income $0.15 $0.04
Net realized gains on investments $0.02 $0.00
Net unrealized gains (losses) on investments ($0.08) $0.00
Income tax provision ($0.08) $0.01
----------- ----------
$0.01 $0.05
=========== ==========
Weighted average number of shares
in per share computation 5,665,253 5,566,427
=========== ==========
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Statements of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------------------------
<S> <C> <C>
Net investment income $ 860,645 $ 235,393
Net realized gains on investments 105,000 -
Net increase in unrealized appreciation
(depreciation) of investments (450,000) -
Income tax provision (481,000) 50,000
------------ ------------
Net increase (decrease) in assets
resulting from operations 34,645 285,393
Net assets at beginning of period 16,144,688 14,183,554
------------ ------------
Net assets at end of period $16,179,333 $14,468,947
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Condensed Interim Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------------------------
<S> <C> <C>
Net cash provided by operating
activities $ 511,236 $ 227,983
------------ ------------
Investing activities:
Investment in Automotive Industries, Inc. - (460,330)
Purchase of U.S. Treasury bill (471,481) (197,584)
Redemption of U.S. Treasury bill - 200,000
------------ ------------
Net cash used in investing activities (471,481) (457,914)
------------ ------------
Financing activities:
Proceeds from note payable to
Automotive Industries, Inc. 600,000 -
Payment on note payable to Automotive
Industries, Inc. (30,000) -
------------ ------------
Net cash provided by financing activities 570,000 -
------------ ------------
Increase in cash and cash equivalents 609,755 (229,931)
Cash and cash equivalents at beginning
of period 951,782 383,563
------------ ------------
Cash and cash equivalents at end of period $ 1,561,537 $ 153,632
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Acorn Venture Capital Corporation
Notes to Condensed Interim Financial
Statements (Unaudited)
March 31, 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 March 31, 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 March 31, 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 March 31, 1997, the Board of Directors maintained the valuation of
Recticon at $13,900,000.
During the quarter ended March 31, 1997, Recticon paid the Company
management fees totaling $118,500, and payroll expense paid to the Chairman of
the Company of $30,000.
The following selected financial data of Recticon has been derived from
unaudited financial statements provided by Recticon. The financial
information is of March 31, 1997 and March 31, 1996.
<TABLE>
<CAPTION>
Three months ended
March 31,
Income Statement Data: 1997 1996
--------------------------
(Unaudited)
<S> <C> <C>
Net Sales $1,990,805 $2,438,045
Cost of goods sold 1,387,818 1,488,258
---------- ----------
Gross margin 602,987 949,787
Operating Expense 236,059 240,224
---------- ----------
Net income before management
fees and income tax $ 366,928 $ 709,563
========== ==========
</TABLE>
Note: Above figures do not include management fees of $148,500 and income tax
provision of $87,889 for the quarter ended March 31, 1997, and management fees
of $105,000 and income tax provision of $201,778 for the quarter ended March
31, 1996.
<TABLE>
<CAPTION>
As of March 31,
Balance Sheet Data: 1997 1996
---------------------
(Unaudited)
<S> <C> <C>
Total assets $5,937,178 $7,602,747
========== ==========
Total liabilities 3,473,354 5,694,022
Stockholders equity 2,463,824 1,908,725
---------- ----------
$5,937,178 $7,602,747
========== ==========
</TABLE>
Number
of
Shares Type of Issue and Name of User Cost Value
- ----------------------------------------------------------------------
142 Common stock, Automotive
Industries, Inc., 100% owned.
$3,577,335 $2,450,000
Automotive, a wholly-owned Delaware corporation, located in Jacksonville,
Florida, operates 28 full-service automotive retail centers principally in
Florida and Georgia under the names of Jim Martin Tire, Wall Tire Distributors
and Mott Tire.
The Company has guaranteed the repayment by Automotive of a $900,000 loan to
Automotive pursuant to loan agreement and supply agreement with a tire
distributor.
During the quarter ended March 31, 1997, the Company received $1,075,000 from
Automotive, which amount was comprised of $475,000 in management fees and a
$600,000 note payable to Automotive. In addition, a dividend of $434,000 was
declared to the Company to eliminate an Income Tax Benefit receivable.
As of March 31, 1997, the Board of Directors has reduced the valuation of
Automotive to $2,450,000 due to the dividend received of $434,000 referred to
above.
The following selected financial data of Automotive has been derived from
unaudited financial statements as of March 31, 1997 and March 31, 1996.
<TABLE>
<CAPTION>
Three months ended
March 31,
Income Statement Data: 1997 1996
--------------------------
(Unaudited)
<S> <C> <C>
Net Sales $4,560,293 $4,896,162
Cost of goods sold 2,004,124 2,179,507
----------- -----------
Gross margin $2,536,169 $2,716,655
Operating expense $2,598,327 $2,763,272
----------- -----------
Net loss before management fee ($ 62,158) ($ 46,617)
=========== ===========
</TABLE>
Note: Above figures do not include a management fee of $475,000 for the
quarter ended March 31, 1997.
<TABLE>
<CAPTION>
Balance Sheet Data: As of March 31,
1997 1996
---------------------
(Unaudited)
<S> <C> <C>
Total assets $ 6,040,023 $ 7,316,068
=========== ===========
Total current liabilities $ 2,976,574 $ 3,083,128
Total long term debt 2,170,025 1,250,000
Stockholders' equity 893,424 2,982,940
----------- -----------
$ 6,040,023 $ 7,316,068
=========== ===========
</TABLE>
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 March 31, 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 March 31, 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 March 31, 1997, the Company had cash and cash equivalents of
$1,561,537, a Certificate of Deposit for $100,000, and United States Treasury
Bills of $718,723, 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
$1,078,137 from December 31, 1996, was primarily the result of a loan from an
affiliate, and management fee income from affiliates. As of March 31, 1997,
the Company had liabilities of $3,035,619 as compared to liabilities of
$2,433,064 at December 31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Company during the
quarter ended March 31, 1997.
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: May 15, 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
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 13,594,345
<INVESTMENTS-AT-VALUE> 17,181,704
<RECEIVABLES> 438,563
<ASSETS-OTHER> 4,148
<OTHER-ITEMS-ASSETS> 1,561,537
<TOTAL-ASSETS> 19,185,952
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,035,619
<TOTAL-LIABILITIES> 3,035,619
<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> 1,135,252
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (781,921)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,680,457
<NET-ASSETS> 16,179,333
<DIVIDEND-INCOME> 434,000
<INTEREST-INCOME> 18,494
<OTHER-INCOME> 593,500
<EXPENSES-NET> 185,349
<NET-INVESTMENT-INCOME> 860,645
<REALIZED-GAINS-CURRENT> 105,000
<APPREC-INCREASE-CURRENT> (931,000)
<NET-CHANGE-FROM-OPS> 34,645
<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> 185,349
<AVERAGE-NET-ASSETS> 16,179,333
<PER-SHARE-NAV-BEGIN> 2.91
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> (0.16)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 2.92
<EXPENSE-RATIO> 0.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
