<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period January 1, 1996 to December 31, 1996.
[ ] 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 33-89506
BERTHEL GROWTH & INCOME TRUST I
-------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 52-1915821
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Second Street S.E., Cedar Rapids, Iowa 52401
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 365-2506
---------------
Securities registered pursuant to Section 12(b) of the Act: NONE
-------
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest
-----------------------------
Title of Class
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
filings requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of February 28, 1997, 8,987 Shares of Beneficial Interest were issued and
outstanding. Such shares were issued at $1,000 per share.
EXHIBIT INDEX AT PAGE 25
--------
<PAGE> 2
BERTHEL GROWTH & INCOME TRUST I
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business ......................................... 3
Item 2. Properties ....................................... 4
Item 3. Legal Proceedings ................................ 4
Item 4. Submission of Matters to a Vote of Shareholders .. 4
PART II
Item 5. Market for the Registrant's Common Equity
and Related Shareholder Matters .................. 4
Item 6. Selected Financial Data .......................... 5
Item 7. Management's Discussion and Analysis
of Financial Condition and
Results of Operations ............................ 6
Item 8. Financial Statements and
Supplementary Data ............................... 9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ........... 18
PART III
Item 10. Directors and Executive
Officers of the Registrant....................... 18
Item 11. Executive Compensation........................... 22
Item 12. Security Ownership of Certain
Beneficial Owners and Management................. 23
Item 13. Certain Relationships and
Related Transactions ................. 23
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.............................. 23
SIGNATURES ..................................................... 24
<PAGE> 3
PART I
Item 1. Business
Berthel Growth & Income Trust I (the "Trust"), a Delaware business trust
that has elected to be treated as a business development company under the
Investment Company Act of 1940, was organized on February 10, 1995. The
Trust's Registration Statement was declared effective, and the Trust began
offering Shares of Beneficial Interest ("shares") effective June 21, 1995. The
offering period will expire June 20, 1997. The minimum offering of 1,500
shares was reached on August 30, 1995. The Trust's principal office is located
at 100 Second Street S.E., Cedar Rapids, Iowa 52401. The Trust is a closed-end
investment company designed primarily as a long-term investment and not as a
trading vehicle.
Berthel Fisher & Company Planning, Inc. (the "Trust Advisor") is a corporation
organized under the laws of the State of Iowa on March 20, 1989. The principal
office of the Trust Advisor is located at 100 Second Street S.E., Cedar Rapids,
Iowa 52401. The Trust Advisor is an SEC Registered Investment Advisor
organized as a subsidiary of Berthel Fisher & Company ("Berthel Fisher") to
serve as a registered investment advisor. All of the voting stock of the Trust
Advisor is owned by Berthel Fisher. Berthel Fisher, a financial services
holding company, was formed in 1985 as an Iowa corporation to hold the stock of
Berthel Fisher & Company Financial Services, Inc. a broker-dealer registered
with the National Association of Securities Dealers, Inc. Berthel Fisher &
Company Financial Services, Inc. is the ("Dealer Manager") for the Trust's
current offering of its Shares of Beneficial Interest.
The Trust will terminate upon the liquidation of all of its investments,
but no later than December 31, 2005, or ten (10) years from the final closing
of the sale of its shares (the "Final Closing"). However, the independent
trustees ("Trustees") have the right to extend the term of the Trust for up to
two (2) additional one-year periods if they determine that such extensions are
in the best interest of the Trust and in the best interest of the shareholders,
after which the Trust will liquidate any remaining investments as soon as
practicable but in any event within three (3) years.
The investment objective of the Trust is to provide capital appreciation
potential and current income by investing primarily in subordinated debt,
preferred stock and related equity securities issued by small and medium sized
companies that are in need of capital and that the Trust Advisor believes offer
the opportunity for growth or appreciation of equity value while being able, if
required to do so, to service current yield bearing securities. The Trust will
direct its investment efforts to small and medium sized companies which, in the
view of the Trust Advisor, will provide opportunities for significant capital
appreciation and prudent diversification of risk. The Trust will seek
investments in a variety of companies and industries. The securities of
portfolio companies purchased by the Trust typically will be rated below
investment grade, and more frequently, not rated at all. The securities of
such portfolio companies will often have significant speculative
characteristics.
<PAGE> 4
Item 2. Properties
The Trust does not own or lease any real estate.
Item 3. Legal Proceedings
In May of 1996, the Trust made a secured loan in the amount of One Million
($1,000,000) Dollars In Soil Recovery Services, Inc. ("SRS") a Texas soil
remediation company. Following several months of non-payment, in October,
1996, the Trust filed suit against SRS, the President of SRS, the investment
banking firm which brought SRS to the Trust and the principals of the
investment banking firm, in the United States District Court for the Northern
District of Iowa. The Trust alleged that the Defendants engaged in
misrepresentation, fraud and various other securities violations and asked for
return of the full amount of the loan to SRS and other damages. Since that
time, there have been various motions filed by the Defendants, including
alleged lack of jurisdiction and an attempt to remove the proceedings to
federal court in Texas. In addition, in December, SRS filed to convert an
Involuntary Chapter 7 Bankruptcy proceeding to a Voluntary Chapter 11
Proceeding in Bankruptcy Court in San Antonio, Texas. At the present time, the
parties are awaiting a ruling by the Judge in the Federal Court in Iowa on a
number of the motions which have been filed by the Defendants. It is unknown
at this time what, if anything, the Trust will realize from the suit.
Item 4. Submission of Matters to a Vote of Shareholders
No matters were submitted to a vote of shareholders, through the
solicitation of proxies or otherwise during the period covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters:
The Registrant's shares are not publicly traded. There is no
established public trading market for the Shares of Beneficial
Interest of the Trust and it is unlikely that any will develop. The
Trust Advisor will resist the development of a public market for
the shares.
Number of Shareholders Number of Shares of
at Beneficial Interest at
Title of Class February 28, 1997 February 28, 1997
- --------------------------------------------------------------------------------
Shares of Beneficial Interest 732 8,987
Distributions payable of $584,480 were accrued at December 31,
1996. This underwriting return is based on actual interest earned
by the Trust on the investors funds held in escrow through the
initial closing, plus 10% simple annual interest, computed on a
daily basis from the initial closing (August 31, 1995) through
December 31, 1996.
<PAGE> 5
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters: (Continued)
On July 30, 1996, the Trust made a special distribution of a
portion of the investors underwriting return. This special
distribution amounted to $250,000 and was paid to investors of
record as of June 30, 1996.
At the final closing, the Trust will have the obligation to
distribute the lesser of all the cash earnings of the Trust earned
during the offering period or the underwriting return. There is no
guarantee that the full underwriting return will be paid at the
final closing.
Item 6. Selected Financial Data
----------------------------------------
The Trust had no activity prior to 1995.
<TABLE>
<CAPTION>
February 10, 1995
Year Ended (date of inception) to
December 31, 1995 December 31, 1995
--------------------------------------------------------------------------------
<S> <C> <C>
Total Assets $6,543,075 $4,396,815
Net Decrease in Net Assets
Resulting from Operations $(879,654) $ (14,683)
Interest Income $411,551 $ 54,566
Management and Administrative Fees $195,495 $ 55,155
Unrealized Loss on Investments $1,000,000 -0-
Net Loss Per Beneficial Share $ (122.07) $ (4.64)
</TABLE>
The above selected financial data should be read in connection with the
financial statements and related notes appearing elsewhere in this report.
<PAGE> 6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS:
February 10, 1995
<TABLE>
<CAPTION>
Year Ended (date of inception) to
Description: December 31, 1996 December 31, 1995
------------ -----------------------------------------
<S> <C> <C>
Interest Income $411,551 $54,566
Management Fees $155,847 $30,435
Administrative Services $39,648 $24,720
Trustee Fees $44,000 $8,000
Audit and Accounting Fees $33,150 -0-
Legal Expense $65,292 -0-
Unrealized Loss on Investments $1,000,000 -0-
</TABLE>
INTEREST INCOME: The Trust has earned $185,108 of interest income from short
term temporary investments in 1996. Interest from these short term investments
increased $130,542 from 1995. On April 30, 1996, $2,180,000 of short term
money market investments were liquidated to acquire a 14% senior secured note
with VisionComm, Inc. ("VCI"). The VCI investment generated $201,443 of
interest income in 1996. On May 31, 1996, $1,000,000 of money market funds
were liquidated to acquire a 15% convertible subordinated debenture issued by
Soil Recovery Systems, Inc. ("SRS"). The Trust received $25,000 of interest
payments on this investment in 1996. No further interest income was recorded
for SRS in 1996. See portfolio income investments for a further discussion of
these investments.
MANAGEMENT FEES: The Trust pays the Trust Advisor an annual management fee
equal to 2.5% of the total assets of the Trust. The increase of $125,412
from 1995 is attributed to the increase in the assets of the Trust.
ADMINISTRATIVE SERVICES: Administrative services of $3,304 per month is paid
to the Dealer Manager for administration of shareholder accounts and other
administrative services. The increase of $14,928 from 1995 is due to the
shorter operating period that this fee was assessed on in 1995.
TRUSTEE FEES: As compensation for services rendered to the Trust, each
Independent Trustee is paid $12,000 annually plus $1,000 per Board meeting
attended up to a maximum of $24,000 in meeting fees per year.
AUDIT AND ACCOUNTING FEES: The Trust incurred $13,500 for audit and tax
preparation fees relating to the 1995 financials and $13,500 has been accrued
for the audit and tax preparation fees relating to the 1996 financials. The
Trust also incurred charges related to the auditors review of the Trust's
Securities and Exchange filings in 1996.
<PAGE> 7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LEGAL EXPENSE: The legal expenses incurred are associated with the structuring
and monitoring of Trust activities and Trust investments. Additional legal
charges were incurred in connection with the Soil Recovery Services, Inc.
bankruptcy.
UNREALIZED LOSS ON INVESTMENTS: As reported in the 3rd Quarter, 1996 10-Q,
Soil Recovery Services, Inc. ("SRS") experienced and continues to experience
severe cash flow problems and the Trust served a Notice of Default and a Notice
of Rescission on SRS and commenced litigation against key parties. The last
interest payment received by the Trust was in July 1996. SRS filed for Chapter
11 bankruptcy protection on December 12, 1996. The Trust is continuing its
avenues of recovery through the bankruptcy court and litigation. The Trust
believes it has a strong case, however, at this time it is unable to determine
the available assets of the defendants. Accordingly, at this time, the Trust
has decided to recognize an unrealized loss of $1,000,000, the cost of the
investment.
SECURITIES AND EXCHANGE COMMISSION FILINGS: On June 14, 1996, the Trust filed,
with the Securities and Exchange Commission, a Cumulative Supplement No. 2
("Sup. 2") to the prospectus dated June 21, 1995. Sup. 2 provides for the
renewal of registration and extension of the offering period to June 20, 1997.
In addition to the extension of the offering period, the purpose of Sup. 2 was
to: a) report the status of the offering; b) provide information on the
status of investments in portfolio companies through May 31, 1996; c) provide
a description of additional information regarding the Trust and the Offering;
and d) report the financial statements of the Trust and Berthel Fisher &
Company Planning, Inc.
INVESTMENTS:
<TABLE>
<CAPTION>
VISIONCOMM, INC.: Cost Valuation
<S> <C> <C>
14% five year secured note receivable $1 ,405,000 $1,405,000
Warrants for 125,000 shares at $5 per share -0- -0-
-------------------------
Total $1,405,000 $1,405,000
</TABLE>
VisionComm continues to install payphones and has acquired or contracted for a
greater number of private cable operations than originally projected to date.
Since (1.) the age of the Trust's investment is less than one year, (2.)
VisionComm, Inc. is performing satisfactorily, (3.) the Trust is adequately
collateralized, and (4.) the absence of any transaction that would imply a
different value, the Trustees have recommended that the Trust's investment in
VisionComm, Inc. be valued at its original cost less principal repayments.
The original investment was $2,180,000 at 14%. VisionComm had principal
repayment of $775,000 in December 1996 and $275,000 in January 1997. The
remaining $1,130,000 continues to perform at 14%. The Trust continues to hold
warrants to purchase 21.5% of the company. The principals of VisionComm
invested an additional $800,000 in the company prior to December 31, 1996.
<PAGE> 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
SOIL RECOVERY SERVICES, INC.: Cost Valuation
Convertible subordinated debenture $1,000,000 -0-
As reported in the 3rd Quarter, 1996 10-Q, Soil Recovery Services, Inc. ("SRS")
experienced and continues to experience severe cash flow problems and the Trust
served a Notice of Default and a Notice of Rescission on SRS and commenced
litigation against key parties. The last interest payment received by the
Trust was in July 1996. SRS filed for Chapter 11 bankruptcy protection on
December 12, 1996. The Trust is continuing its avenues of recovery through the
bankruptcy court and litigation. The Trust believes it has a strong case,
however, at this time it is unable to determine the available assets of the
defendants. Accordingly, at this time, the Trust has decided to recognize an
unrealized loss of $1,000,000, the cost of the investment.
OTHER POTENTIAL PORTFOLIO COMPANIES AND TRUST ACTIVITIES: The Trust signed a
Letter of Intent with a company in February 1997. The proposed investment
terms call for a $2,000,000, six-year promissory note, at a rate of 14% per
annum. The Trust is completing due diligence and finalization of legal
documents. The Trust continues to receive and review inquiries for financing.
The Trust is also completing an application for the establishment of a small
business investment company ("SBIC"). The application is expected to be
completed and filed with the Small Business Administration ("SBA") by March 31,
1997.
LIQUIDITY AND CAPITAL RESOURCES:
<TABLE>
<CAPTION> February 10, 1995
Year Ended (date of inception) to
December 31, 1996 December 31, 1995
---------------------------------------------
<S> <C> <C>
Major Cash Source:
Proceeds from issuance of beneficial shares $3,763,000 $5,128,000
Major Cash Uses:
Payments for syndication costs $ 530,488 $743,716
Distributions $ 250,000 $-0-
Net cash from investing activities $2,405,000 $ 5,000
</TABLE>
- --------------------------------------------------------------------------------
Pending investment in enhanced yield investments, the Trust invested $4,993,174
in a money market mutual fund at December 31, 1996.
Distributions of $584,480 have been accrued as of December 31, 1996. The Trust
will continue to accrue distributions based on 10% simple annual interest
computed on a daily basis from the initial closing (August 30, 1995) until the
Final Closing.
The Trust Advisor is not aware of any regulatory issues that may have a
substantial negative impact on the portfolio companies it is currently
researching for possible investment of Trust funds.
The effect of interest rate fluctuations and inflation on the current Trust
investments is negligible.
<PAGE> 9
Item 8. Financial Statements and Supplementary Data
The following financial statements and related information as of
the year ended December 31, 1996 and for the period February 10,
1995 (Date of Inception) to December 31, 1995 are included in Item
8:
Independent Auditors' Report
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Statements of Cash Flows
Notes to Financial Statements
<PAGE> 10
BERTHEL GROWTH & INCOME TRUST I
Financial Statements for the
Year Ended December 31, 1996 and for the
Period February 10, 1995 (Date of Inception)
to December 31, 1995 and
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Berthel Growth & Income Trust I
We have audited the accompanying statements of assets and liabilities of
Berthel Growth & Income Trust I (the "Trust") as of December 31, 1996 and 1995,
and the related statements of operations, changes in net assets, and cash flows
for the year ended December 31, 1996 and for the period February 10, 1995 (date
of inception) to December 31, 1995. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Trust at December 31, 1996 and 1995 and
the results of its operations and its cash flows for the year ended December
31, 1996 and for the period February 10, 1995 (date of inception) to December
31, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, investments in securities
not readily marketable amounting to $1,405,000 as of December 31, 1996 have
been valued at fair value, as determined by the Board of Trustees ("Trustees").
We have reviewed the procedures applied by the Trustees in valuing such
securities and have inspected underlying documentation and, in the
circumstances, we believe that the procedures are reasonable and the
documentation appropriate. However, because of the inherent uncertainty of
valuation, the Trustees' estimate of fair values may differ significantly from
the values that would have been used had a ready market existed for the
securities, and the differences could be material.
DELOITTE & TOUCHE LLP/s/
Cedar Rapids, Iowa
February 28, 1997
<PAGE> 11
BERTHEL GROWTH & INCOME TRUST I
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS:
Investments in securities (Note 2):
VisionComm, Inc. note receivable (cost $1,405,000) $1,405,000
Soil Recovery Services, Inc. convertible subordinated
debenture (cost $1,000,000)
Cash 97,025 $ 102,269
Temporary investment in money market securities 4,993,174 4,272,549
Interest receivable 40,186 17,830
Other assets 7,690 4,167
---------- ----------
Total assets 6,543,075 4,396,815
---------- ----------
LIABILITIES:
Accounts payable and other accrued expenses 23,594
Distributions payable to shareholders (Note 5) 584,480 126,787
Due to affiliate (Note 3) 47,022 27,214
---------- ----------
Total liabilities 655,096 154,001
---------- ----------
COMMITMENTS AND CONTINGENCIES
NET ASSETS (equivalent to $662.24) per share in 1996
and $827.38 per share in 1995) $5,887,979 $4,242,814
---------- ----------
Net assets consist of:
Shares of beneficial interest, 25,000 shares authorized -
8,891 and 5,128 shares issued and outstanding in
1996 and 1995, respectively $6,782,316 $4,257,497
Undistributed net investment loss (894,337) (14,683)
---------- ----------
$5,887,979 $4,242,814
---------- ----------
</TABLE>
See notes to financial statements.
-2-
<PAGE> 12
BERTHEL GROWTH & INCOME TRUST I
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
REVENUES:
Interest income $ 411,551 $ 54,566
Commitment fees 63,600
------------ --------
475,151 54,566
------------ --------
EXPENSES:
Management fees (Note 3) 155,847 30,435
Administrative services 39,648 24,720
Trustee fees 44,000 8,000
Audit and accounting fees 33,150
Legal expense 65,292
Other general and administrative expenses 16,868 6,094
------------ --------
Total expenses 354,805 69,249
------------ --------
NET INVESTMENT INCOME (LOSS) 120,346 (14,683)
------------ --------
UNREALIZED LOSS ON INVESTMENTS (1,000,000)
------------ --------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (879,654) $(14,683)
------------ --------
INVESTMENT INCOME PER BENEFICIAL SHARE $ 65.94 $ 17.23
EXPENSES PER BENEFICIAL SHARE (49.24) (21.87)
------------ --------
NET INVESTMENT INCOME(LOSS)
PER BENEFICIAL SHARE 16.70 (4.64)
UNREALIZED LOSS ON INVESTMENTS PER
BENEFICIAL SHARE (138.77)
------------ --------
NET LOSS PER BENEFICIAL SHARE $ (122.07) $ (4.64)
------------ --------
WEIGHTED AVERAGE SHARES 7,206 3,167
</TABLE> ------------ --------
See notes to financial statements.
-3-
<PAGE> 13
BERTHEL GROWTH & INCOME TRUST I
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST AMOUNT
<S> <C> <C>
NET ASSETS AT FEBRUARY 10, 1995
Proceeds from sales of shares of beneficial interest
(initial capitalization) 10 $ 10,000
Proceeds from sales of shares of beneficial interest 5,118 5,118,000
Net investment loss (14,683)
Syndication costs incurred (743,716)
Distributions payable to shareholders (126,787)
------- ----------
NET ASSETS AT DECEMBER 31, 1995 5,128 4,242,814
Net investment income 120,346
Unrealized loss on investments (1,000,000)
------- ----------
Net decrease in assets resulting from operations (879,654)
Proceeds from sales of shares of beneficial interest 3,763 3,763,000
Syndication costs incurred (530,488)
Distributions to shareholders (250,000)
Distributions payable to shareholders (457,693)
------- ----------
NET ASSETS AT DECEMBER 31, 1996 8,891 $5,887,979
------- ----------
</TABLE>
See notes to financial statements.
-4-
<PAGE> 14
BERTHEL GROWTH & INCOME TRUST I
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets $ (879,654) $ (14,683)
Adjustments to reconcile net decrease in net assets to net cash
flows from operating activities:
Amortization of organizational costs 1,000 833
Unrealized loss on investments 1,000,000
Changes in operating assets and liabilities:
Temporary investment in money market securities (720,625) (4,272,549)
Interest receivable (22,356) (17,830)
Other assets (4,523)
Accounts payable and accrued expenses 23,594
Due to affiliate 19,808 27,214
----------- -----------
Net cash flows from operating activities (582,756) (4,277,015)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of VisionComm, Inc. note receivable (2,180,000)
Repayment of note receivable 775,000
Investment in Soil Recovery Services, Inc. (1,000,000)
Payment of organizational costs (5,000)
----------- -----------
Net cash flows from investing activities (2,405,000) (5,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of shares of beneficial interest 3,763,000 5,128,000
Distribution payments to shareholders (250,000)
Syndication costs incurred (530,488) (743,716)
----------- -----------
Net cash flows from financing activities 2,982,512 4,384,284
----------- -----------
NET INCREASE (DECREASE) IN CASH (5,244) 102,269
CASH AT BEGINNING OF PERIOD 102,269
----------- -----------
CASH AT END OF PERIOD $ 97,025 $ 102,269
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash financing activities - Distributions payable to shareholders $ 584,480 $ 126,787
----------- -----------
</TABLE>
See notes to financial statements
-5-
<PAGE> 15
BERTHEL GROWTH & INCOME TRUST I
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996 AND FOR THE PERIOD
FEBRUARY 10, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS- Berthel Growth & Income Trust I (the "Trust") is registered under
the Investment Company Act of 1940, as amended, as a nondiversified,
closed-end management investment company electing status as a business
development company. The Trust was formed on February 10, 1995 under the
laws of the State of Delaware and received approval from the Securities and
Exchange Commission to begin offering shares of beneficial interest
("Shares") effective June 21, 1995. The Trust's investment objective is to
achieve capital appreciation in the value of its net assets and to achieve
current income principally by making investments through private placements
in securities of small and medium sized privately and publicly owned
companies. Securities to be purchased will consist primarily of
subordinated debt or preferred stock combined with equity participation in
common stock or rights to acquire common stock. The Trust is offering a
minimum of 1,500 Shares and a maximum of 50,000 Shares at an offering price
of $1,000 per Share. The minimum offering of 1,500 Shares sold was reached
on August 30, 1995. The offering period will expire June 20, 1997.
The Trust will terminate upon the liquidation of all of its investments, but
no later than December 31, 2005, or ten years from the final closing of the
sale of the Shares offered hereby, subject to possible extension for up to
two additional one-year periods.
Planning, Inc. (the "Trust Advisor") is the Trust's investment advisor and
manager. TJB Capital Management, Inc. (the "Corporate Trustee") provides
certain management services necessary for the conduct of the Trust's
business. Shares are being offered by Berthel Fisher & Company Financial
Services, Inc. (the "Dealer Manager"). Each of these three entities is a
wholly owned subsidiary of Berthel Fisher & Company.
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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near-term relate to
the valuation of not readily marketable securities by the Trustees.
TEMPORARY INVESTMENT IN MONEY MARKET SECURITIES - Pending investment in
enhanced yield investments, the Trust has invested in money market
securities with National Financial Services Corporation which are reported
at market value, which approximates cost.
ORGANIZATIONAL COSTS - Organizational costs were capitalized and are being
amortized over five years using the straight-line method.
INVESTMENTS IN SECURITIES - In accordance with accounting practices,
investments that are not readily marketable are valued at fair value, as
determined by the Board of Trustees ("Trustees"). The resulting difference
between cost and market is included in the Statements of Operations.
<PAGE> 16
In determining fair value for securities not readily marketable, investments
are initially stated at cost until significant subsequent events and
operating trends require a change in valuation. Among the factors
considered by the Trustees in determining fair value of investments are the
cost of the investment, developments since the acquisition of the
investment, the sales price of recently issued securities, the financial
condition and operating results of the issuer, earnings trends and
consistency of operating cash flows, the long-term business potential of the
issuer, the quoted market price of securities with similar quality and yield
that are publicly traded and other factors generally pertinent to the
valuation of investments. The Trustees, in making their evaluation, have
relied on financial data of investees provided by the management of the
investee companies.
NET LOSS PER BENEFICIAL SHARE - Net loss per beneficial share is based on
the weighted average of shares outstanding.
RECLASSIFICATIONS - Certain amounts in the 1995 financial statements have
been reclassified to conform to the 1996 financial statement presentation.
2. INVESTMENTS
The Trust has invested in a senior secured note issued by VisionComm, Inc.,
which is primarily engaged in the telecommunications and private cable
television business. The five year note carries a 14% interest rate with
interest only due the first year, due in equal monthly installments
thereafter.
The Trust has also invested $1,000,000 in a convertible subordinated
debenture issued by Soil Recovery Services, Inc. ("SRS"). The debenture is
for a seven year term with an annual interest rate of 15% with no prepayment
penalty. Interest only is due the first two years with equal principal
payments due at the end of years three through seven. The debenture can be
converted at any time at a conversion rate that will provide the Trust with
approximately 21.5% of common stock of SRS.
SRS experienced and continues to experience severe cash flow problems and
the Trust served a Notice of Default and a Notice of Rescission on SRS and
commenced litigation against key parties. The last interest payment received
by the Trust was in July 1996. SRS filed for Chapter 11 bankruptcy
protection on December 12, 1996. The Trust is continuing its avenues of
recovery through the bankruptcy court and litigation.
The Trust has recognized an unrealized loss of $1,000,000 for SRS as
management believes that SRS is insolvent and will be unable to make
payments pursuant to the convertible subordinated debenture.
3. RELATED PARTY TRANSACTIONS
The Trust has entered into a management agreement with the Trust Advisor
that provides for incentive compensation to the Trust Advisor based on the
capital appreciation of the Trust's investments. The Trust pays the Trust
Advisor an annual management fee equal to 2.5% of the value of the assets of
the Trust. The management fee is paid quarterly, in arrears, and is
determined by reference to the value of the assets of the Trust as of
the first day of that quarter. Management fees incurred during the periods
ended December 31, 1996 and 1995 relating to this agreement aggregated
$155,847 and $30,435, respectively.
<PAGE> 17
In addition, the Trust paid the Dealer Manager $39,648 and $24,720 during
the periods ended December 31, 1996 and 1995, respectively, for
administration of shareholder accounts and other administrative services.
4. SYNDICATION COSTS
As part of the issuance of Shares, the Trust has paid certain fees described
below to the Dealer Manager, Trust Advisor and Corporate Trustee. These
syndication costs have been treated as a direct reduction of net assets.
The Trust compensates the Dealer Manager through selling commissions and a
wholesale marketing fee in conjunction with the offering of Shares, and
reimbursement of due diligence expenses. Selling commissions vary between
7% and 2% of the aggregate purchase price of all Shares sold, depending on
the number of Shares purchased by the investor. Selling commissions paid
during the periods ended December 31, 1996 and 1995 aggregated $236,410 and
$321,300, respectively. The wholesale marketing fee of $94,075 and $127,950
is equal to 2.5% of the public offering price of all Shares sold during the
periods ended December 31, 1996 and 1995, respectively. Due diligence
expenses totaled $3,668 and $27,196 during the periods ended December 31,
1996 and 1995, respectively.
The Trust pays organizational and offering expenses paid or incurred by the
Trust Advisor in connection with organizing the Trust and offering the
Shares. The amount of reimbursement may not exceed 4% of the aggregate
purchase price of all Shares sold. During the periods ended December 31,
1996 and 1995, respectively, these reimbursement costs aggregated $150,520
and $204,720. Any organizational and offering expenses (excluding the
expenses mentioned above) of the Trust in excess of this amount will be paid
by the Trust Advisor.
The Trust paid the Corporate Trustee a fee equal to .5% of the aggregate
purchase price of all Shares sold aggregating $18,815 and $25,590 during the
periods ended December 31, 1996 and 1995, respectively.
5. DISTRIBUTIONS PAYABLE TO SHAREHOLDERS
Distributions payable is based on actual interest earned by the Trust on the
investors funds held in escrow through the initial closing, plus 10% simple
annual interest, computed on a daily basis from the initial closing (August
31, 1995) through December 31, 1996, less distributions.
At the final closing, the Trust will distribute the lesser of all the cash
earnings of the Trust earned during the offering period or the underwriting
return. There is no guarantee that the full underwriting return will be
paid at the final closing.
6. FEDERAL INCOME TAXES
The Trust has received an opinion from counsel that it will be treated as a
partnership for federal income tax purposes. As such, under present income
tax laws, no income taxes will be reflected in these financial statements as
taxable income or loss of the Trust is included in the income tax returns of
the investors.
* * * * *
<PAGE> 18
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
A management board consisting of the Independent Trustees and
the Trust Advisor is responsible for the management of the Trust
and its business.
Trustees of the Registrant:
Corporate Trustee - TJB Capital Management, Inc. was
organized as a Delaware corporation on January 25, 1995 for
the purpose of organizing the Trust. The principal office of
the Corporate Trustee is located at 1105 N. Market Street,
Suite 1300, Wilmington, Delaware, 19801. The Corporate
Trustee is an affiliate of the Trust Advisor.
Henry T. Madden (Age 66) - Mr. Madden is an Independent
Trustee of the Trust. He was awarded a B.S.M.E. from the
University of Notre Dame in 1951 and an M.B.A. from the
University of Pittsburgh in 1966. He began his career as an
Industrial Engineer, then Quality Control Manager in
Technical Ceramics for 3M Company in Chattanooga, Tennessee.
He became Manager of Production Engineering, then Manager for
a 1,500 employee, $50 million in sales Allis-Chalmers Plant,
manufacturing power and distribution transformers in
Pittsburgh, Pennsylvania. In 1966, he became General Plant
Manager of the Allis-Chalmers, Cedar Rapids, Iowa Plant
manufacturing construction machinery. In 1969, Mr. Madden
became Division Manager for Hydraulic Truck Cranes for
Harnischfeger Corporation. In 1975 Mr. Madden became
President, Harnischfeger GMBH in Dortmund, West Germany, a
joint venture with August Thyssen A.G. of West Germany,
manufacturing truck cranes, creating a 100 million deutsche
mark business. He also served as Managing Director for
Harnischfeger International Corporation for Europe, East
Europe, and North and West Africa, responsible for all
product sales in those areas. In 1981, Mr. Madden became a
consultant to and assumed the responsibilities of General
Manager of Oak Hill Engineering Inc. in Cedar Rapids, Iowa,
manufacturing wire harnesses. In 1983, he started a company,
Enertrac Inc., designing, manufacturing and marketing
communications systems. Mr. Madden financed Enertrac Inc.
through an initial public offering and merged it into another
company in 1986. Mr. Madden organized the Institute for
Entrepreneurial Management in the University of Iowa College
of Business Administration in 1986, advising potential and
new
<PAGE> 19
entrepreneurs and teaching courses on entrepreneurship in
the MBA program. He also teaches courses in Corporate
Strategy in the Executive MBA and MBA programs. Mr. Madden
has been consulting with developmental stage companies since
1981.
Henry Royer (Age 64) - Mr. Royer is an Independent
Trustee of the Trust. He graduated in 1953 from Colorado
College with a B.A. in Money and Banking. From 1950 until
1962, Mr. Royer was employed for four years by Pillsbury
Mills and for four years by Peavey Company as a grain
merchandiser. From 1962 through 1965 he was employed as
Treasurer and served on the Board of Lehigh Sewer Pipe and
Tile. Mr. Royer joined First National Bank of Duluth in
1965, where he served in various capacities, including
Assistant Cashier, Assistant Vice President, Assistant
Manager of the Commercial Loan Department and Senior Vice
President in Charge of Loans. When he left the bank in 1983
he was serving as Executive Vice President/Loans. He then
joined The Merchants National Bank of Cedar Rapids (currently
Firstar Bank Cedar Rapids, N.A.) where he served as Chairman
and President until August, 1994. Since September, 1994, Mr.
Royer has been the President and Chief Executive Officer of
River City Bank, Sacramento, California.
Executive Officers and Directors of the Trust Advisor:
Thomas J. Berthel (age 44) - Mr. Berthel serves as Chief
Executive Officer and Chairman of the Board of the Trust
Advisor and as the Chief Executive Officer of Berthel Fisher
& Company, the parent company of the Trust Advisor and the
Dealer Manager. He has held these positions since 1985.
Until June, 1993, Mr. Berthel served as President of the
Dealer Manager. From 1993 until the present he has served as
Chief Executive Officer and as a Director of the Dealer
Manager. Mr. Berthel is also President and a Director of
various other subsidiaries of Berthel Fisher & Company that
act or have acted as general partners of separate private
leasing programs and two publicly sold leasing programs. He
serves as the Chairman of the Board of Amana Colonies Golf
Course, Inc., and, in November 1995, he was elected to the
Board of Directors of Intellicall, Inc., an advanced
telecommunications technologies company in Carrollton, Texas.
Mr. Berthel holds a Financial and Operation Principal
license issued by the National Association of Securities
Dealers, Inc. He is also a Certified Life Underwriter. Mr.
Berthel holds a bachelor's degree from St. Ambrose College in
Davenport, Iowa (1974). He also holds a Master's degree in
Business Administration from the University of Iowa in Iowa
City, Iowa (1993).
<PAGE> 20
James D. Thorp (Age 37) - Mr. Thorp is the President and
Managing Director of the Trust Advisor. As such he is the
person primarily responsible for the day-to-day management of
the Trust's portfolio. He was elected as a Director of Berthel
Fisher & Company in April, 1994. He serves as Vice President -
Investment Banking of Berthel Fisher & Company Financial
Services, Inc., the Dealer Manager, a position he has held
since 1993. In this position he is responsible for all the
investment banking, corporate finance and due diligence
activities of the Dealer Manager. During his tenure in this
position he has been responsible for, directed and completed
nine private financings for company clients totaling over $20
million. From 1983 to 1992, Mr. Thorp served in various
positions and finally as Principal for Allsop Venture Partners
II and its affiliates, a private equities investment management
concern managing over $105 million in capital invested in over
80 portfolio companies. These companies spanned a myriad of
industries and involved many transaction types that covered the
spectrum of private equities investing, from seed investments
to later stage expansions and turnaround financing to leveraged
buyouts. During his tenure at Allsop Venture Partners III he
reviewed and analyzed business plans for potential financings
of over $1.5 billion, performed due diligence on projects
representing potential financings of over $200 million. The
funds under management while Mr. Thorp was at Allsop Venture
Partners III and its affiliates consistently yielded twice the
average internal rate of return generated by similar private
equities investment firms. He has served as a director and on
the boards of seven portfolio companies and is a past member of
the National Venture Capital Association, the National
Association of Small Business Investment Companies and the
Midwest Regional Association of Small Business Investment
Companies. He is a graduate of the Ninth Annual Management
Institute of the National Association of Small Business
Investment Companies. Mr. Thorp received a Bachelor of Science
degree in Business Administration in 1981 from Oklahoma State
University. In 1983 he was awarded a Master of Business
Administration - Finance from the Wharton School, University of
Pennsylvania.
Ronald O. Brendengen (Age 41) - Mr. Brendengen is the
Chief Financial Officer, Treasurer and a Director of the
Trust Advisor. He has served since 1985 as Controller and
since 1987 as the Treasurer and a Director of Berthel Fisher
& Company, the parent company of the Trust Advisor. He was
elected Secretary and Chief Financial Officer of Berthel
Fisher & Company in 1994. He also serves as Treasurer and a
Director of each subsidiary of Berthel Fisher & Company. Mr.
Brendengen holds a certified public accounting certificate
and worked in public accounting during 1984 and 1985. From
1979 to 1984, Mr. Brendengen worked in various capacities for
Morris Plan and MorAmerica Financial Corp., Cedar Rapids,
Iowa. Mr. Brendengen attended the University of Iowa before
receiving a bachelor's degree in Accounting and Business
Administration
<PAGE> 21
with a minor in Economics from Mt. Mercy College, Cedar
Rapids, Iowa in 1978.
Leslie D. Smith (Age 48) - Mr. Smith is a Director and
the Secretary of the Trust Advisor. In 1994 Mr Smith was
named General Counsel of Berthel Fisher & Company. Mr. Smith
was awarded his B.A. in Economics in 1976 from Iowa Wesleyan
College, Mount Pleasant, Iowa, and his J.D. in 1980 from the
University of Dayton School of Law, Dayton, Ohio. Mr. Smith
was employed as Associate Attorney and as a Senior Attorney
for Life Investors Inc., Cedar Rapids, Iowa, from 1981
through 1985 where he was responsible for managing mortgage
and real estate transactions. From 1985 to 1990 Mr. Smith
was General Counsel for LeaseAmerica Corporation, Cedar
Rapids, Iowa. In that capacity, Mr. Smith performed all
duties generally associated with the position of General
Counsel. From 1990 to 1992, Mr. Smith was Operations Counsel
for General Electric Capital Corporation located in Cedar
Rapids, Iowa. From 1993 to 1994, Mr. Smith was employed as
Associate General Counsel for Gateway 2000, Inc. in North
Sioux City, South Dakota.
<PAGE> 22
Item 11. Executive Compensation
----------------------
Set forth is the information relating to all direct renumeration
paid or accrued by the Registrant during the period.
<TABLE>
<CAPTION>
(A) (B) (C) (C1) C2) (D)
Securities of
property
insurance Aggregate
benefits or of
Cash and Cash reimbursement contingent
Name of Individual Capacities in equivalent forms personal or forms of
persons in group which served of remuneration Fees benefits remuneration
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TJB Capital
Management, Inc. Corporate Trustee $0 $18,815 $0 $0
Henry T. Madden Independent Trustee $0 $22,000 $0 $0
Henry Royer Independent Trustee $0 $22,000 $0 $0
-----------------------------------------------------
$0 $62,815 $0 $0
=====================================================
The Trust paid the Trust Advisor $155,847 for management fees and $150,520
for reimbursement of organizational and offering expenses.
</TABLE>
<PAGE> 23
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person owns of record, or is known by the Registrant to own
beneficially, more than five percent of the shares.
Item 13. Certain Relationships and Related Transactions
Related party transactions are described in Notes 3 and 4 of Notes
to Financial Statements. See Item 8.
PART IV
<TABLE>
<S> <C> <C> <C> <C>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements Page No.
--------
Statements of Assets and Liabilities at December 31, 1996
and December 31, 1995 11
Statements of Operations for the Year Ended December 31,
1996 and for the Period February 10, 1995 (Date of Inception)
to December 31, 1995 12
Statements of Changes in Net Assets for the Year Ended
December 31, 1996 and for the Period February 10,
1995 (Date of Inception) to December 31, 1995 13
Statements of Cash Flows for the Year Ended December 31,
1996 and for the Period February 10, 1995 (Date of Inception)
to December 31, 1995 14
Notes to Financial Statements 15
2. Financial Statement Schedules - None
(b) Reports on Form 8-K
None
3. Exhibits
3.1 Certificate of Trust
3.2 Declaration of Trust
10.1 Management Agreement between the Trust and the Trust Advisor
10.2 Safekeeping Agreement between the Trust and Firstar Bank Cedar
Rapids, N.A.
16.0 Letter re change in certifying accountant
</TABLE>
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BERTHEL GROWTH & INCOME TRUST I
March 27, 1997 By: Thomas J. Berthel/s/
- --------------- ---------------------------------------------------
Date THOMAS J. BERTHEL, Chief Executive Officer (principal
executive officer) of Berthel Fisher & Company Planning,
Inc., Trust Advisor
March 27, 1997 By: Ronald O. Brendengen/s/
- --------------- ---------------------------------------------------
Date RONALD O. BRENDENGEN, Chief Financial Officer and Treasurer
(principal financial officer) of Berthel Fisher & Company
Planning, Inc., Trust Advisor
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
March 27, 1997 By: Thomas J. Berthel/s/
- -------------- ------------------------------------------------------------
Date THOMAS J. BERTHEL, Chairman and Director of Berthel Fisher &
Company, Berthel Fisher & Company Planning, Inc., Trust
Advisor
March 27, 1997 By: Ronald O. Brendengen/s/
- -------------- ------------------------------------------------------------
Date RONALD O. BRENDENGEN, Director of Berthel Fisher & Company
Planning, Inc., Trust Advisor
March 27, 1997 By: James D. Thorp/s/
- -------------- ------------------------------------------------------------
Date JAMES D. THORP, Director of Berthel Fisher & Company Planning,
Inc., Trust Advisor
March 27, 1997 By: Leslie D. Smith/s/
- -------------- ---------------------------------------------------
Date LESLIE D. SMITH, Director of Berthel Fisher & Company
Planning, Inc., Trust Advisor
March 27, 1997 By: Henry Royer/s/
- -------------- ---------------------------------------------------
Date HENRY ROYER, Independent Trustee of Berthel Growth & Income
Trust I
March 27, 1997 By: Thomas J. Berthel/s/
- -------------- ---------------------------------------------------
Date THOMAS J. BERTHEL, Chairman of the Board and Chief Executive
Officer of TJB Capital Management, Inc., Trustee of Berthel
Growth & Income Trust I
March 27, 1997 By: Daniel P. Wegmann/s/
- -------------- ---------------------------------------------------
Date DANIEL P. WEGMANN, Controller of Berthel Fisher & Company
Planning, Inc., Trust Advisor
<PAGE> 25
EXHIBIT INDEX
3.1 Certificate of Trust (1)
3.2 Declaration of Trust (2)
10.1 Management Agreement between the
Trust and the Trust Advisor (3)
10.2 Safekeeping Agreement between the Trust
and Firstar Bank Cedar Rapids, N.A. (4)
16.0 Letter re change in certifying accountant (5)
-----------------
(1) Incorporated by reference to the Trust's Registration
Statement on Form N-2, filed with the Commission on February 14,
1995 (File No. 33-89605).
(2) Incorporated by reference to Pre-Effective Amendment No. 3 to
the Trust's Registration Statement on Form N-2, filed with the
Commission on June 21, 1995 (File No. 33-89605).
(3) Incorporated by reference to Pre-Effective Amendment No. 1 to
the Trust's Registration Statement on Form N-2, filed with the
Commission on May 9, 1995 (File No. 33-89605).
(4) Incorporated by reference to Pre-Effective Amendment No. 2 to
the Trust's Registration Statement on Form N-2, filed with the
Commission on June 12, 1995 (File No. 33-89605).
(5) Incorporated by reference to Form 8-K filed with the
Commission on October 13, 1995 (File No. 33-895056).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
STATEMENTS OF ASSETS AND LIABILITIES OF BERTHEL GROWTH & INCOME TRUST I AS OF
DECEMBER 31, 1996, AND THE AUDITED STATEMENTS OF OPERATIONS OF THE TRUST FOR THE
YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 97,025
<SECURITIES> 7,398,174
<RECEIVABLES> 47,876
<ALLOWANCES> (1,000,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,543,075
<CURRENT-LIABILITIES> 655,096
<BONDS> 0
0
0
<COMMON> 6,767,633
<OTHER-SE> (879,654)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 5,887,979
<SALES> 475,151
<TOTAL-REVENUES> 475,151
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 354,805
<LOSS-PROVISION> 1,000,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (879,654)
<INCOME-TAX> 0
<INCOME-CONTINUING> (879,654)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (879,654)
<EPS-PRIMARY> (122.07)<F2>
<EPS-DILUTED> (122.07)
<FN>
<F1>RETAINED EARNINGS
<F2>NET INCOME PER BENEFICIAL SHARE IS BASED ON THE WEIGHTED AVERAGE OF SHARES
OUTSTANDING WHICH WAS 8,891 SHARES FOR THE YEAR ENDED DECEMBER 31, 1996.
</FN>
</TABLE>
