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, 1999
[ ] 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
_____ _____
4,142,942 shares of common stock outstanding at September 30, 1999.
The Registrant's Registration Statement on Form N-2 was declared effective by
the Securities and Exchange Commission on May 6, 1994.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Statement of Assets and Liabilities
(Unaudited)
<TABLE> Assets
<S> <S>
December 31, 1998 September 30, 1999
<C> <C>
Cash $ 2,573,144 $ 6,535,823
Accounts receivable 361,374 242,842
Accounts receivable-brokerage -0- 5,355
Investments, at market value, cost of
$36,828,731 and $36,220,712 39,251,507 41,909,633
Organizational costs, net of accumulated
amortization 83,820 -0-
Other assets 52,880 72,373
----------- -----------
$42,322,725 $48,766,026
=========== ===========
Liabilities and Net Assets
Liabilities:
Accounts payable - related parties $ 218,079 $ 1,643,168
Accounts payable - trade 214,100 37,685
Dividends payable 414,845 1,484,137
----------- -----------
847,024 3,164,990
----------- -----------
Net Assets:
Common stock, $1 par value;
20,000,000 shares authorized;
4,342,942 issued, 4,143,448
and 4,142,942 outstanding 4,342,942 4,342,942
Additional paid-in capital 36,258,896 36,258,896
Treasury stock at cost,
199,494 shares at December
31, 1998 and 200,000 shares
at September 30, 1999 (1,661,439) (1,665,219)
Undistributed net investment income 2,535,302 6,664,417
----------- -----------
Net assets 41,475,701 45,601,036
----------- -----------
$42,322,725 $48,766,026
=========== ===========
Net asset value per share $10.01 $11.01
====== ======
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Statement of Operations
(Unaudited)
<TABLE> <S> <S>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1998 1999 1998 1999
----------- ------------ ----------- ------------
<C> <C> <C> <C>
Investment Income:
Interest $ 571,179 $ 145,033 $ 1,755,956 $ 960,521
Dividends 7,994 26,301 7,994 341,198
Other investment
income 22,500 (27,361) 413,488 (27,064)
----------- ----------- ----------- ------------
Total investment
income 601,673 143,973 2,177,438 1,274,655
----------- ----------- ----------- ------------
Expenses:
Amortization 31,433 0 93,275 83,820
Bank charges 6,088 6,575 15,862 17,266
Directors' fees 11,500 15,500 50,000 43,500
Legal and
professional 13,876 40,077 71,538 91,153
Management fees 170,261 229,104 627,979 674,956
Other 27,852 41,494 128,607 179,954
----------- ----------- ----------- ------------
Total expenses 261,010 332,750 987,261 1,090,649
----------- ----------- ----------- ------------
Net investment
income 340,663 (188,777) 1,190,177 184,006
Realized gain on
investments 0 5,430,972 2,504,583 9,255,363
Unrealized gain
(loss) on
investments (9,763,815) (4,008,753) (5,264,079) 3,266,135
----------- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations $(9,423,152) $1,233,442 $(1,569,319) $12,705,504
=========== ========== =========== ===========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Statement of Changes in Net Assets
(Unaudited)
<TABLE> <S> <S>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1998 1999 1998 1999
----------- ----------- ----------- -----------
<C> <C> <C> <C>
Increase
(decrease) in
net assets
resulting from
operations
Investment income
- net $ 340,663 $ (188,777) $ 1,190,177 $ 184,006
Realized gain on
investment 0 5,430,972 2,504,583 9,255,363
Unrealized gain
(loss) on
investments (9,763,815) (4,008,753) (5,264,079) 3,266,135
----------- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations (9,423,152) 1,233,442 (1,569,319) 12,705,504
Distributions to
shareholders (424,763) (5,178,677) (3,739,378) (8,576,389)
Cost of shares
repurchased (24,405) 0 (866,860) (3,780)
----------- ----------- ----------- -----------
Total increase
(decrease) (9,872,320) (3,945,235) (6,175,557) 4,125,335
Net assets
Beginning of
period 48,194,123 49,546,271 44,497,360 41,475,701
----------- ----------- ----------- -----------
End of period $38,321,803 $45,601,036 $38,321,803 $45,601,036
=========== =========== =========== ==========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements
September 30, 1999
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 convertible
debenture and convertible preferred stock investments of small and medium
size companies which are in need of capital and which the Fund 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 a $1.25 capital gain dividend
which was payable August 31, 1999 to shareholders of record as of August
10, 1999. The ex-dividend date was August 6, 1999. This dividend was
from gains made on the sale of part of the Fund's common stock position in
JAKKS Pacific, Inc. and the closing of the purchase of TAVA Technologies,
Inc. by Real Software, Inc. for $8.00 per share.
C. Management Estimates - The financial statements have been prepared in
conformity with generally accepted accounting principles. The preparation
of the accompanying financial statements requires estimates and
assumptions made by management of the Fund that affect the reported
amounts of assets and liabilities as of the date of the statements of
financial condition and income and expenses for the period. Actual
results could differ significantly from those estimates.
D. Financial Instruments - In accordance with the reporting requirements of
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," the Company calculates the fair
value of its financial instruments and includes this additional
information in the notes to the financial statements when the fair value
is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no
additional disclosure is made.
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 were deferred and amortized on a straight-line basis
over a five-year period. These expenses were fully amortized in a prior
period.
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 <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
September 30, 1999
4. Investment Advisory Agreement (continued)
Assets each quarter. The Fund accrued a liability of $229,104 for such
operational management fees performed during the quarter ended September 30,
1999.
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 a quarterly basis. In the third quarter, the Fund realized
capital gains of $6,788,716 on the sale of 90,000 shares of JAKKS Pacific,
Inc. common stock and the sale of the fund's entire investment in TAVA
Technologies, Inc. The gain is shown on the accompanying statement of
operations net of the $1,357,744 management incentive fee payable to the
Investment Adviser.
5. Capital Share Transactions
As of September 30, 1999 there were 20,000,000 shares of $1 par value capital
stock authorized, 4,342,942 shares issued, 4,142,942 shares outstanding, and
additional paid-in capital aggregating $38,936,619.
Year-to-date transactions in capital stock are as follows:
<TABLE> <S> <S>
Shares Amount
<C> <C>
Balance December 31, 1998 4,143,448 $38,940,399
Shares repurchased (506) (3,780)
--------- -----------
Balance September 30, 1999 4,142,942 $38,936,619
</TABLE>
6. Related Party Transactions
The Investment Adviser is reimbursed by the Fund for certain administrative
expenses under the Investment Advisory Agreement. Such expenses were
$25,513 for the quarter ended September 30, 1999.
7. Temporary Investments
Temporary investments are currently held in a money market fund made up of
U.S. Treasury obligations and in U. S. Government and Agency obligations
having slightly higher yields and maturity dates of three months or less.
These 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 securities and equity investments
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 <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
September 30, 1999
8. Investments (continued)
on the Statement of Assets and Liabilities as of September 30, 1999 at fair
value, as determined in good faith by the Investment Adviser. Some
securities held by the Fund are unregistered and their value does not
necessarily represent the amounts that may be realized from their immediate
sale or disposition. Some investments held by the Fund are convertible into
the common stock of the issuer 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, although the Fund may be entitled to demand
registrations and other registration rights which vary from investment to
investment. The preferred stock positions often have call options, usually
commencing three years subsequent to issuance, at prices specified in the
stock purchase agreements, and typically have a dividend right.
INVESTMENT VALUATION SUMMARY
<TABLE> <S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
<C> <C> <C>
Bentley Pharmaceuticals, Inc.
12% Convertible Debenture 744,800 1,040,000 1,029,600
Common Stock 791,229 1,635,300 1,618,947
Dexterity Surgical, Inc.
9% Convertible Debenture 1,500,000 1,500,000 1,500,000
8% Convertible Preferred Stock 1,000,000 890,626 890,626
Common Stock 500,000 148,438 146,954
Display Technologies, Inc.
8.75% Convertible Debenture 1,750,000 1,750,000 1,750,000
5.25% Convertible Preferred 500,000 500,000 500,000
Common Stock 878,189 764,969 757,320
Warrants to purchase 105,000 shares -0- -0- -0-
Warrants to purchase 15,000 shares -0- -0- -0-
The Dwyer Group, Inc.
Common Stock 1,966,632 1,687,500 1,670,625
eOriginal, Inc.
5% Convertible Preferred Stock 1,738,700 1,738,700 1,738,700
Warrants to purchase 659 shares 165 165 165
Fortune Natural Resources Corp.
12% Convertible Debenture 350,000 464,437 459,793
Grand Adventures Tour & Travel
Publishing Corp.
10% Convertible Debenture 350,000 350,000 350,000
Integrated Security Systems, Inc.
Promissory Note 115,000 115,000 115,000
Convertible Promissory Note 375,000 375,000 375,000
9% Convertible Debenture 2,084,101 2,084,101 2,084,101
Common Stock 215,899 184,831 182,983
Warrants to purchase 689,299 shares 3,750 3,750 3,750
<PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
September 30, 1999
8. Investments (continued)
INVESTMENT VALUATION SUMMARY
</TABLE>
<TABLE> <S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
<C> <C> <C>
Interscience Computer Corporation
8% Promissory Note 500,000 500,000 500,000
Common Stock 4,000,000 1,312,500 1,299,375
Warrants to purchase 500,000 shares -0- -0- -0-
Warrants to purchase 250,000 shares -0- 62,500 8,750
Intile Designs, Inc.
Common Stock 500,000 31,250 31,250
JAKKS Pacific, Inc.
Common Stock 3,738,125 17,383,688 17,209,850
NewCare Health Corporation
8.5% Convertible Debenture 2,500,000 2,500,000 250,000
Options -0- -0- -0-
Optical Security Group, Inc.
8% Convertible Debenture 500,000 500,000 500,000
Play by Play Toys & Novelties, Inc.
8% Convertible Debenture 2,500,000 2,500,000 2,500,000
Poore Brothers, Inc.
9% Convertible Debenture 1,718,094 2,147,618 2,018,761
Common Stock 154,628 229,079 165,334
Warrants to purchase 25,000 shares -0- 6,250 5,875
RailAmerica, Inc.
6% Convertible Debenture 500,000 500,000 500,000
Warrants to purchase 15,000 shares -0- -0- -0-
Simtek Corporation
9% Convertible Debenture 750,000 750,000 750,000
ThermoView Industries, Inc.
10% Convertible Preferred Stock 250,000 150,000 150,000
Common Stock 250,000 156,250 96,874
Voice It Worldwide, Inc.
8% Convertible Debenture 2,450,000 2,450,000 750,000
Common Stock 1,046,400 440,672 -0-
Warrants to purchase 500,000 shares -0- -0- -0-
---------- ---------- ----------
36,220,712 46,852,624 41,909,633
========== ========== ==========
<FN>
The fair value of debt securities and preferred securities convertible into
common stock is the sum of (a) the value of such securities without regard to
the conversion feature, and (b) the value, if any, of the conversion feature.
The fair value of debt securities without regard to conversion features is
determined on the basis of the terms of the debt security, the interest yield
and the financial condition of the issuer. The fair value of preferred
securities without regard to conversion features is determined on the basis of
the terms of the preferred security, its dividend, and its liquidation and
redemption rights. The fair value of the conversion features of a security, if
any, are based on fair values as of this date less an allowance, as appropriate,
for costs of registration, if any, and selling expenses. Publicly traded
securities, or securities that are convertible into publicly traded securities,
are valued at the last sale price, or at the average closing bid and asked
price, as of the valuation date. While these valuations are believed to
represent fair value, these values do not necessarily reflect amounts which may
be ultimately realized upon disposition of such securities.</FN> </TABLE> <PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(1) Material Changes in Financial Condition
The following portfolio transactions are noted for the quarter ended September
30, 1999 (portfolio companies are herein referred to as the "Company"):
Display Technologies, Inc. (DTEK) In the third quarter of 1999, the Fund
invested an additional $500,000 into the Company by purchasing 5,000 shares of
the Company's Series A Cumulative Convertible Preferred Stock (the "Preferred").
The Preferred pays dividends at a rate of 5.25% per year from July 30, 1999,
the date the Preferred was issued, which are payable quarterly on the last day
of March, June, September, and December of each year commencing on the first
such dividend payment following the issuance. The Preferred is convertible into
common stock of the Company at the rate of $3.50 per share, subject to downward
adjustments in the event the Company issues, sells, distributes, or otherwise
transfers shares of its common stock, other than the result of exercise of
options, warrants, or conversion rights outstanding on the original issuance
date, for a consideration per share less than the conversion price in effect
immediately prior to such issuance. The Preferred has a liquidation preference
equal to 100% of the dollar amount invested by the Fund, has voting rights equal
to the number of whole shares of common stock into which the Preferred is
convertible at the conversion price then in effect, and further entitles the
Preferred Shareholders to vote as a single class. The Preferred shall be
redeemed on the fifth anniversary date of issuance or in the event of a
"default" as defined in the Certificate of Designation of Series A Preferred
Stock. Finally, the preferred will automatically be converted into the
Company's common stock at the then prevailing conversion price if the closing
price for the Company's common stock for a period of twenty consecutive trading
days following the second anniversary of the original issuance date exceeds
200% of the conversion price then in effect.
As additional consideration for the Fund's agreement to invest in the
Preferred, the Fund received warrants to purchase 15,000 shares of the Company's
common stock at $3.50 on or before July 30, 2004.
In addition to the Fund's investment in the Series A Cumulative Convertible
Preferred Stock and warrants of the Company, Renaissance US Growth and Income
Trust PLC ("RUSGIT") also invested $500,000 into the Series A Cumulative
Convertible Preferred Stock and warrants to purchase 15,000 shares of the
Company's common stock under the same terms and conditions as the Fund.
eOriginal, Inc. (Private) In the second quarter, the Company raised
sufficient equity capital allowing it to force the Fund to convert its $219,250
Bridge Loan plus $19,450 in accrued interest into the Company's Series B-1
Preferred Stock.
In addition to the conversion of the Fund's Bridge Note into Series B-1
Preferred, the Bridge Note and accrued interest of RUSGIT was converted into
Series B-1 Preferred Stock of the Company.
Grand Adventures Tour and Travel Publishing Corp. (GATT) In the third
quarter, the Fund invested $350,000 into the Convertible Debentures of the
Company. The Debentures accrue interest at 10% payable quarterly and mature
on the fourth anniversary of the date of the initial closing. The Debentures
are convertible into the Company's common stock at $2.65 per share for any
portion of the debentures the Fund converts on or before September 21, 2000.
For any portion of the debentures converted after September 21, 2000, the Fund's
conversion price is $2.50 per share. The debentures are redeemable by the
Company at any time after the later of one year from the date of the initial
closing or the first day after which, at the close of the trading on the ten
preceding days, the per share "bid" price is at least $7. The Debentures offer
its holders demand and piggyback registration rights, with demand rights only
being available if a majority of holders of Debentures file the requisite
registration statement, and also contain some standard anti-dilution provisions.
In addition to the Fund's investment in the Convertible Debentures of the
Company, RUSGIT also invested $400,000 in the Company's Convertible Debentures
under the same terms and conditions as the Fund's investment.
Integrated Security Systems, Inc. (IZZI) In the third quarter, the Fund
advanced $115,000 to the Company pursuant to a 9% Promissory Note. The
principal balance and all accrued unpaid interest on the Note is due and payable
on or before May 12, 2000 and the Note is secured by the assets of the Company
and its subsidiaries, which security is subordinated to the Company's credit
facility with the Frost National Bank.
<PAGE>
Subsequent to September 30, 1999, the Fund advanced an additional $150,000
to the Company to purchase 7,500 shares of its Series D Cumulative Convertible
Preferred Stock (the "Preferred"). The Preferred accrues dividends
cumulatively at a rate of 9% to be paid at four equal quarterly installments on
December 31, March 31, June 30, and September 30, beginning with December 31,
1999, and entitles the holder to voting privileges equal to one vote for each
share of common stock into which the Preferred is convertible. The Preferred
converts into common stock at a rate $0.80 per share, is redeemable by the
Company at its option at any time on or after November 15, 2004, and carries a
liquidation preference equal to 100% of the dollar amount invested by the Fund.
As additional consideration for the Fund's investment in the Preferred Stock,
the Fund received warrants to purchase 125,000 shares of the Company's common
stock at $1.00 per share on or before October 11, 2004.
RUSGIT also invested $115,000 pursuant to a 9% Promissory Note in the third
quarter. In addition, RUSGIT purchased $150,000 of the Company's Series D
Cumulative Convertible Preferred Stock and received warrants to purchase 125,000
shares. All of these investments were made by RUSGIT under the same terms and
conditions as the Fund's investments.
Interscience Computer Corp. (IEIC) In the third quarter, the Fund advanced
the Company $500,000 pursuant to an 8% Promissory Note which matures October 31,
2000. The Note is secured by the assets of the Company and is subordinated only
to the Company's senior lender. As additional consideration for advancing the
Company money, the Fund received warrants to purchase 250,000 shares of IEIC
common at $0.50 per share on or before July 3, 2001.
JAKKS Pacific, Inc. (JAKK) In the third quarter, the Fund sold 90,000
shares of common stock resulting in proceeds of $2,770,018.44, or $30.78 per
share, representing a gain of $2,252,518.44. At September 30, 1999, the Fund
still owned 463,565 shares having a cost basis of $3,738,125.13. Also in the
third quarter, the Fund converted its entire preferred stock investment having
a cost basis of $3,000,000 into 335,195 shares of the Company's common stock,
a rate of $8.95 per share.
NewCare Health Corp. (NWCAQ) In the third quarter, the Fund took
additional reserves on its investment in the Company, reducing its valuation to
$250,000 at September 30, 1999. The Company is in bankruptcy.
Play By Play Toys & Novelties, Inc. (PBYP) Subsequent to September 30,
1999, the Company closed on a refinance of its senior lending facility and
simultaneously restructured the terms of the Fund's Convertible Debentures. As
a result of the refinancing, the Fund amended its Convertible Debentures so that
interest now accrues at 10.5% and the maturity of the Debentures is now
December 31, 2000. In addition, the Fund was granted security interests in all
the assets of the Company and its subsidiaries and had the conversion price on
the Debentures reset to equal the lesser of (a) $16.00 per share and (b) the
greater of (i) $6.00 per share and (ii) the average closing price of the common
stock for the trading days included in the thirty day period beginning on the
date following the date of the closing of the refinance. Further, a second
reset will occur if the Debentures are not redeemed in full on or before
December 31, 2000. As consideration for the restructuring of the Fund's
Debentures, the Fund agreed to waive the Company's default position and
restructure covenants contained in the Debentures.
Poore Brothers, Inc. (SNAK) Subsequent to September 30, 1999, the Company
changed its trading symbol from POOR to SNAK.
RailAmerica, Inc. (RAIL) In the quarter ended September 30, 1999, the
Fund invested $500,000 in Convertible Debentures of RailAmerica, Inc. The
Debentures bear interest at 6%, are due and payable on or before July 31, 2004,
and are convertible into the Company's common stock at $10 per share, which
conversion price is subject to certain anti-dilution provisions. The Company
may, at its option, redeem the outstanding principal amount of the Debentures
in whole or in part if the closing price per share of common stock as reported
on the NASDAQ National Market is above 200% of the conversion price for ten
consecutive trading days, subject to adjustment as set forth in the Convertible
Debenture Agreement. As additional consideration for the Fund's investment, the
Company granted the Fund warrants to purchase 15,000 shares of the Company's
common stock at $10.50 per share on or before August 5, 2004.
In addition to the Fund's investment, RUSGIT also invested $500,000 into the
subordinated Convertible Debentures of the Company and also received warrants to
purchase 15,000 shares of the Company's common stock, which investments were
made under the same terms and conditions as the Fund's investment.
<PAGE>
Voice It Worldwide, Inc. (MEMOQ) In the third quarter, the Fund took
additional reserves on its investments in the Company and reduced the fair value
of all its investments to $750,000 at September 30, 1999. The Company is in
bankruptcy.
(2) Material Changes in Operations
The Fund had a net investment loss of $188,777 for the quarter ended
September 30, 1999, in comparison to net investment income of $340,663 booked by
the Fund in the third quarter ended September 30, 1998, a decrease of $529,440.
This decrease is primarily attributable to a reserve taken of prior accrued
income on the Voice It Worldwide, Inc. and the NewCare Health, Inc. portfolio
investments along with a conversion of debt instruments to common stock
resulting in a decrease of current income. During the third quarter, the Fund
experienced $4,008,753 of unrealized losses resulting from a decrease in the
fair value of its investments.
During the quarter ended September 30, 1999, the Registrant paid capital gains
dividends to shareholders in the amount of $302,896, which represent the
dividend payable from the previous quarter. The Registrant also accrued a
capital gains dividend payable to shareholders in the amount of $5,178,677, of
which $3,694,540 has been paid to shareholders, and $1,484,137 is being used to
purchase Fund shares pursuant to the Dividend Reinvestment Plan.
(2) Year 2000
Many computer software systems in use today cannot process date-related
information from and after January 1, 2000. The Investment Advisor has taken
steps to review and modify its computer systems as necessary and is prepared for
the Year 2000. In addition, the Fund has inquired of its major service
providers as well as its portfolio companies to determine if they are in the
process of reviewing their systems with the same goals. The majority of all
providers and portfolio companies have represented that they are either taking
the necessary steps to be prepared or are currently prepared for the Year 2000.
Should any of the computer systems employed by the major service providers, or
companies in which the Fund has an investment, fail to process this type of
information properly, that could have a negative impact on the Fund's operations
and the services provided to the Fund's stockholders. It is anticipated that
the Fund will incur no material expenses related to the Year 2000 issues. <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Fund
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 15, 1999 /S/
__________________________________________________
Russell Cleveland, President and Chairman
November 15, 1999 /S/
__________________________________________________
Barbe Butschek, Corp. Secretary and Treasurer
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 36,220,712
<INVESTMENTS-AT-VALUE> 41,909,633
<RECEIVABLES> 248,197
<ASSETS-OTHER> 72,373
<OTHER-ITEMS-ASSETS> 6,535,823
<TOTAL-ASSETS> 48,766,026
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,164,990
<TOTAL-LIABILITIES> 3,164,990
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,936,619
<SHARES-COMMON-STOCK> 4,142,942
<SHARES-COMMON-PRIOR> 4,143,448
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 35,416
<ACCUMULATED-NET-GAINS> 1,010,912
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,688,921
<NET-ASSETS> 45,601,036
<DIVIDEND-INCOME> 341,198
<INTEREST-INCOME> 960,521
<OTHER-INCOME> (27,064)
<EXPENSES-NET> 1,090,649
<NET-INVESTMENT-INCOME> 184,006
<REALIZED-GAINS-CURRENT> 9,255,363
<APPREC-INCREASE-CURRENT> 3,266,135
<NET-CHANGE-FROM-OPS> 12,705,504
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 331,935
<DISTRIBUTIONS-OF-GAINS> 8,244,454
<DISTRIBUTIONS-OTHER> 3,780
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 506
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,125,335
<ACCUMULATED-NII-PRIOR> 112,526
<ACCUMULATED-GAINS-PRIOR> 2,422,776
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 674,956
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,090,649
<AVERAGE-NET-ASSETS> 43,538,369
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 3.02
<PER-SHARE-DIVIDEND> 2.07
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.01
<EXPENSE-RATIO> 0.03
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
