Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006
OR
[ ] 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 0-24412
MACC Private Equities Inc.
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(Exact name of registrant as specified in its charter)
Delaware 42-1421406
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
101 Second Street SE, Suite 800, Cedar Rapids, Iowa 52401
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(Address of principal executive offices) (Zip Code)
(319) 363-8249
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(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)
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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At May 5, 2006, the registrant had issued and outstanding 2,464,621
shares of common stock.
Page 1 of 32
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
------- -------------------- ----
Condensed Consolidated Balance
Sheets at March 31, 2006 (Unaudited)
and September 30, 2005 .................................................3
Condensed Consolidated Statements of Operations (Unaudited)
for the three months ended March 31, 2006 and March 31, 2005
and the six months ended March 31, 2006 and March 31,
2005....................................................................4
Condensed Consolidated Statements of
Cash Flows (Unaudited) for the six months
ended March 31, 2006 and March 31, 2005.................................5
Notes to Unaudited Condensed Consolidated
Financial Statements....................................................6
Consolidated Schedule of Investments (Unaudited)
at March 31, 2006.......................................................8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.......................13
Item 3. Quantitative and Qualitative
Disclosure About Market Risk...........................................21
Item 4. Controls and Procedures................................................22
Part II. OTHER INFORMATION...............................................................23
Item 4. Submission of Matters to a
Vote of Security Holders ..............................................23
Item 6. Exhibits...............................................................24
Signatures.............................................................24
Certifications.....................................See Exhibits 31 and 32
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
March 31, September 30,
2006 2005
(Unaudited)
-------------- ---------------
Assets
Loans and investments in portfolio securities, at market or fair value:
Unaffiliated companies (cost of $4,585,919 and $5,288,757) $ 3,914,325 5,039,691
Affiliated companies (cost of $16,200,769 and $17,406,157) 12,245,075 17,722,809
Controlled companies (cost of $3,348,048 and $3,247,063) 3,045,125 3,083,048
Cash and money market accounts 5,256,130 2,393,149
Interest receivable 275,241 172,270
Other assets 1,342,102 2,925,247
------------ ------------
Total assets $ 26,077,998 31,336,214
============ ============
Liabilities and net assets
Liabilities:
Debentures payable $ 14,790,000 16,790,000
Incentive fees payable 238,194 566,426
Accrued interest 91,310 100,378
Accounts payable and other liabilities 144,118 214,435
------------ ------------
Total liabilities 15,263,622 17,671,239
------------ ------------
Net assets:
Common stock, $.01 par value per share;
authorized 10,000,000 shares;
issued and outstanding 2,464,621 shares 24,646 24,646
Additional paid-in-capital 15,719,941 13,736,758
Unrealized depreciation on investments (4,930,211) (96,429)
------------ ------------
Total net assets 10,814,376 13,664,975
------------ ------------
Total liabilities and net assets $ 26,077,998 31,336,214
============ ============
Net assets per share $ 4.39 5.54
============ ============
See accompanying notes to unaudited condensed consolidated financial statements.
3
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
For the three For the three For the six For the six
months ended months ended months ended months ended
March 31, March 31, March 31, March 31,
2006 2005 2006 2005
---- ---- ---- ----
Investment income:
Interest:
Unaffiliated companies $ 70,434 73,194 129,972 123,294
Affiliated companies 130,969 349,795 324,855 569,262
Controlled companies 15,090 86,349 33,876 294,396
Other 35,120 16,532 69,074 35,516
Dividends:
Unaffiliated companies -- -- 2,187 --
Affiliated companies 115,459 72,313 138,792 266,465
Processing fees -- -- -- 7,700
Other -- 1,795 -- 2,795
----------- ----------- ----------- -----------
Total investment income 367,072 599,978 698,756 1,299,428
----------- ----------- ----------- -----------
Operating expenses:
Interest expenses 326,848 521,686 645,907 1,042,754
Management fees 113,169 239,955 230,608 484,394
Incentive fees 143,311 -- 143,311 --
Professional fees 81,439 145,112 123,360 321,895
Other 89,952 78,260 163,256 160,882
----------- ----------- ----------- -----------
Total operating expenses 754,719 985,013 1,306,442 2,009,925
Management fees waived -- (52,225) -- (52,225)
----------- ----------- ----------- -----------
Net operating expenses 754,719 932,788 1,306,442 1,957,700
----------- ----------- ----------- -----------
Investment expense, net before tax expense (387,647) (332,810) (607,686) (658,272)
Income tax expense (70,000) -- (70,000) --
----------- ----------- ----------- -----------
Investment expense, net (457,647) (332,810) (677,686) (658,272)
----------- ----------- ----------- -----------
Realized and unrealized (loss) gain on investments and other assets:
Net realized gain (loss) on investments:
Unaffiliated companies 457,403 38,326 670,736 (2,446,651)
Affiliated companies 1,987,604 -- 1,987,604 --
Controlled companies 31,000 -- 31,000 --
Net change in unrealized depreciation/appreciation
on investments (3,817,372) 514,421 (4,833,782) 3,496,197
Net change in unrealized loss
on other assets 1,050 110,740 (28,471) 103,649
----------- ----------- ----------- -----------
Net (loss) gain on investments (1,340,315) 663,487 (2,172,913) 1,153,195
----------- ----------- ----------- -----------
Net change in net assets
from operations $(1,797,962) 330,677 (2,850,599) 494,923
=========== =========== =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
4
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the six For the six
months ended months ended
March 31, March 31,
2006 2005
-------------- ------------
Cash flows from operating activities:
(Decrease) increase in net assets from operations $(2,850,599) 494,923
----------- -----------
Adjustments to reconcile (decrease) increase in net assets from operations
to net cash provided by (used in) operating activities:
Net realized and unrealized loss (gain) on investments 2,129,054 (1,067,114)
Net realized and unrealized loss (gain) on other assets 28,471 (86,081)
Loss on litigation settlement -- (1,713,174)
Proceeds from disposition of and payments on
loans and investments in portfolio securities 4,615,294 1,132,825
Purchases of loans and investments in
portfolio securities (103,325) (416,883)
Change in interest receivable (102,971) (257,201)
Change in other assets 1,554,674 197,598
Change in accrued interest, deferred incentive fees payable,
accounts payable and other liabilities (407,617) 16,781
----------- -----------
Total adjustments 7,713,580 (2,193,249)
----------- -----------
Net cash provided by (used in) operating activities 4,862,981 (1,698,326)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of note payable-related party -- 35,000
Debt repayment (2,000,000) --
----------- -----------
Net cash (used in) provided by financing activities (2,000,000) 35,000
----------- -----------
Net increase (decrease) in cash and cash equivalents 2,862,981 (1,663,326)
Cash and cash equivalents at beginning of period 2,393,149 4,774,771
----------- -----------
Cash and cash equivalents at end of period $ 5,256,130 3,111,445
=========== ===========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 605,612 975,429
=========== ===========
Supplemental disclosure of noncash investing and financing
information -
Assets received in exchange of securities $ 367,594 150,886
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
5
MACC PRIVATE EQUITIES INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of MACC Private Equities Inc. (Equities) and it's wholly
owned subsidiary MorAmerica Capital Corporation (MACC) which have been prepared
in accordance with accounting principles generally accepted in the United States
of America for investment companies. All material intercompany accounts and
transactions have been eliminated in consolidation.
The financial statements included herein have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and instructions to Form 10-Q and Article 6 of
Regulation S-X. The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto of MACC Private Equities
Inc. and its Subsidiary as of and for the year ended September 30, 2005. The
information reflects all adjustments consisting of normal recurring adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of operations for the interim periods. The results of the interim
period reported are not necessarily indicative of results to be expected for the
year. The balance sheet information as of September 30, 2005 has been derived
from the audited balance sheet as of that date.
(2) Critical Accounting Policy
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are stated at the bid price on the final
day of the period. Restricted and other securities for which quotations are not
readily available are valued at fair value as determined by the Board of
Directors. Among the factors considered in determining the fair value of
investments are the cost of the investment; developments, including recent
financing transactions, since the acquisition of the investment; financial
condition and operating results of the investee; the long-term potential of the
business of the investee; market interest rates for similar debt securities; and
other factors generally pertinent to the valuation of investments. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be material.
In the valuation process, MACC uses financial information received monthly,
quarterly, and annually from its portfolio companies which includes both audited
and unaudited financial statements. This information is used to determine
financial condition, performance, and valuation of the portfolio investments.
Realization of the carrying value of investments is subject to future
developments. Investment transactions are recorded on the trade date and
identified cost is used to determine realized gains and losses. Under the
provisions of SOP 90-7, the fair value of loans and investments in portfolio
securities on February 15, 1995, the fresh-start date, is considered the cost
basis for financial statement purposes.
6
(3) Financial Highlights
For the six For the six
months ended months ended
March 31, March 31,
2006 2005
---- ----
Per Share Operating Performance
(For a share of capital stock outstanding
throughout the period):
Net asset value, beginning of period $ 5.54 4.61
----- ----
Income (loss) from investment operations:
Investment expense, net (0.27) (0.28)
Net realized and unrealized
(loss) gain on investments (0.88) 0.49
----- ----
Total from investment
operations (1.15) 0.21
----- ----
Net asset value, end of period $ 4.39 4.82
===== ====
Closing market price $ 2.71 2.55
===== ====
For the six For the six
months ended months ended
March 31, March 31,
2006 2005
---- ----
Total return
Net asset value basis (20.86) % 4.61
Market price basis (5.45) % 26.09
Net asset value, end of period
(in thousands) $ 10,814 11,233
Ratio to average net assets:
Investment (expense) income, net (4.67)% (6.35)
Operating expense 10.04 % 18.87
The ratios of investment (expense) income, net to average net assets, of
operating and income tax expenses to average net assets and total return are
calculated for common stockholders as a class. Total return, which reflects the
annual change in net assets, was calculated using the change in net assets
between the beginning of the current fiscal year and end of the current year
period. An individual common stockholders' return may vary from these returns.
7
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)
MARCH 31, 2006
Manufacturing:
Percent of
Company Security Net assets Value Cost (d)
.............................................................................................................................
AAMI, Inc. (a) 12% debt security, due March 31, 2007 (c) $ 304,577 780,000
Wichita, Kansas Warrant to purchase 11,143 common shares (c) 1 1
Manufacturer of industrial and 10% debt security, due March 31, 2007 (c) 221,000 221,000
commercial boilers and shower 121,457 common shares (c) -- 121,457
doors, frames and enclosures 12% debt security, due March 31, 2007 (c) 191,880 191,880
312,000 common shares (c) -- 3,120
---------- ----------
717,458 1,317,458
---------- ----------
Aviation Manufacturing Group, LLC (a) 14% debt security, due October 1, 2007 (c) 616,000 616,000
Yankton, South Dakota 154,000 units preferred 115,539 154,000
Manufacturer of flight critical Membership interest -- 39
parts for aircraft 19% note, due December 31, 2008 12,320 12,320
---------- ----------
743,859 782,359
---------- ----------
Central Fiber Corporation 12% debt security, due March 31, 2009 268,705 268,705
Wellsville, Kansas 12% debt security, due March 31, 2009 69,505 69,505
Recycles and manufactures Warrant to purchase 273.28 common shares (c) -- --
cellulose fiber products ---------- ----------
338,210 338,210
---------- ----------
Detroit Tool Metal Products Co. (a) 14% debt security, due February 29, 2008 1,128,793 1,128,793
Lebanon, Missouri 19,853.94 shares Series A preferred (c) 195,231 195,231
Metal stamping ---------- ----------
1,324,024 1,324,024
---------- ----------
Handy Industries, LLC (a) 12.5% debt security, due January 8, 2007 667,327 667,327
Marshalltown, Iowa 167,171 units Class B preferred (c) 167,171 167,171
Manufacturer of lifts for Membership interest 1,357 1,357
motorcycles, trucks and ---------- ----------
industrial metal products 835,855 835,855
---------- ----------
Hicklin Engineering, L.C. (a) 10% debt security, due June 30, 2007 740,000 740,000
Des Moines, Iowa Membership interest 127 127
Manufacturer of auto and ---------- ----------
truck transmission and 740,127 740,127
brake dynamometers ---------- ----------
Industrial Tooling & Fabrication, LLC (a)
Fort Madison, Iowa 10% debt security, due November 18, 2009 157,715 157,715
Metal stamping 12% debt security, due November 18, 2009 343,267 343,267
12% debt security, due November 18, 2009 208,728 208,728
---------- ----------
709,710 709,710
---------- ----------
8
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED...
MARCH 31, 2006
Manufacturing Continued:
Percent of
Company Security Net assets Value Cost (d)
................................................................................................................................
Kwik-Way Products, Inc. (a) 2% debt security, due January 31, 2008 (c) $ 267,254 267,254
Marion, Iowa 2% debt security, due January 31, 2008 (c) 281,795 281,795
Manufacturer of automobile 38,008 common shares (c) -- 126,651
aftermarket engine and 29,340 common shares (c) -- 92,910
brake repair machinery ---------- ----------
549,049 768,610
---------- ----------
Linton Truss Corporation 542.8 common shares (c) -- --
Delray Beach, Florida 400 shares Series 1 preferred (c) 640,000 40,000
Manufacturer of residential roof Warrants to purchase common shares (c) 15 15
and floor truss systems ---------- ---------
640,015 40,015
---------- ----------
M.A. Gedney Company (a) 648,783 shares preferred (c) 216,342 1,450,601
Chaska, Minnesota Warrant to purchase 83,573 preferred shares (c) -- --
Pickle processor ---------- ----------
216,342 1,450,601
---------- ----------
Magnum Systems, Inc. (a) 12% debt security, due July 31, 2006 574,163 574,163
Parsons, Kansas 48,038 common shares (c) 48,038 48,038
Manufacturer of industrial 292,800 shares preferred (c) 304,512 304,512
bagging equipment Warrant to purchase 56,529 common shares (c) 210,565 565
---------- ----------
1,137,278 927,278
---------- ----------
Metal Tooling Holdings, Inc. (a) 7,887.17 common shares (c) 126,741 126,741
Lebanon, Missouri ---------- ----------
Metal stamping
Pratt-Read Corporation (a) 13,889 shares Series A Preferred 750,000 750,000
Bridgeport, Connecticut 7,718 shares Series A preferred 300,000 416,667
Manufacturer of screwdriver shafts 13% debt security, due July 26, 2006 (c) 277,800 277,800
and handles and other hand tools Warrants to purchase common shares (c) -- --
---------- ----------
1,327,800 1,444,467
---------- ----------
Simoniz USA, Inc. 12% debt security, due April 1, 2008 327,878 327,878
Bolton, Connecticut ---------- ----------
Producer of cleaning
and wax products under both the
Simoniz brand and private label brand names
9
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED...
MARCH 31, 2006
Manufacturing Continued:
Percent of
Company Security Net assets Value Cost (d)
................................................................................................................................
Spectrum Products, LLC (b) 13% debt security, due October 9, 2006 (c) $ 1,077,650 1,077,650
Missoula, Montana 385,000 units Series A preferred (c) 192,500 385,000
Manufacturer of equipment for Membership interest (c) -- 351
the swimming pool industry Redeemable preferred (c) 23,655 47,355
----------- ---------
1,293,805 1,510,356
----------- ---------
Total manufacturing 101.98% 11,028,151 12,643,689
========= ----------- ----------
Service:
Concentrix Corporation (a) 3,758,750 shares Series A preferred (c) 157,275 2,255,250
Pittsford, New York 130,539 shares Series C preferred (c) 104,431 104,431
Provides marketing outsourcing 328,485 shares Series D preferred (c) 262,788 262,788
solutions including -------------- ---------
telemarketing, fulfillment 524,494 2,622,469
and web communications -------------- ---------
FreightPro, Inc. 18% debt security, due February 21, 2007 (c) 131,250 262,500
Overland Park, Kansas 18% debt security, due February 15, 2007 (c) 43,750 87,500
Internet based outsource Warrant to purchase 366,177.80 common shares (c) 2 2
provider of freight logistics ------------- -------------
175,002 350,002
------------- -------------
JHT Holdings, Inc. 1,238 shares Class A common (c) 350,000 975,026
Joplin, Missouri ------------- ---------
Provider of provider of freight
logistics truck drive-away, internet
based auction and related services
to the commercial truck industry
Lee Mathews Equipment, Inc. 12% debt security, due March 10, 2005 450,000 450,000
Kansas City, Missouri 12% debt security, due March 10, 2005 60,606 60,606
Distributor of industrial -------------- ----------
pump systems 510,606 510,606
-------------- ----------
Monitronics International, Inc. 73,214 common shares (c) 439,285 54,702
Dallas, Texas ------------- ----------
Provides home security
systems monitoring services
10
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDTIED) CONTINUED...
MARCH 31, 2006
Service Continued:
Percent of
Company Security Net assets Value Cost (d)
................................................................................................................................
Morgan Ohare, Inc. (b) 0% debt security, due January 1, 2007 (c) $ 1,068,750 1,125,000
Addison, Illinois 10% debt security, due January 1, 2007 375,000 375,000
Fastener plating and heat treating 57 common shares (c) 1 1
10% debt security, due January 1, 2007 43,750 43,750
10% debt security, due January 1, 2007 131,250 131,250
10% debt security, due January 1, 2007 32,813 32,813
10% debt security, due January 1, 2007 4,375 4,375
------------- ----------
1,655,939 1,712,189
------------- ----------
SMWC Acquisition Co., Inc. (a) 13% debt security due May 19, 2007 110,000 110,000
Kansas City, Missouri 1,320 shares common (c) 387,140 42,900
Steel warehouse distribution Warrant to purchase 2,200 common shares (c) -- --
and processing 176,550 shares Series A preferred 353,100 353,100
------------- ----------
850,240 506,000
------------- ----------
Warren Family Funeral Homes, Inc. Warrant to purchase 346.5 common shares (c) 100,012 12
Topeka, Kansas ------------- ----------
Provider of value priced funeral
services
Total service 42.59% 4,605,578 6,731,006
======== ---------- -----------
Technology and Communications:
Feed Management Systems, Inc. (a) 540,551 common shares (c) 687,331 1,327,186
Brooklyn Center, Minnesota 674,309 shares Series A preferred (c) 674,309 674,309
Batch feed software and systems 12% debt security, due May 20, 2008 64,520 64,520
and B2B internet services 12% debt security, due August 21, 2008 64,510 64,510
Warrants to purchase 166,500 Series A preferred (c) -- --
------------- ----------
1,490,670 2,130,525
------------- ----------
MainStream Data, Inc. (a) 322,763 shares Series A preferred (c) 180,044 200,049
Salt Lake City, Utah ------------- ----------
Content delivery solutions provider
Miles Media Group, Inc. (a) 1,000 common shares (c) 866,767 440,000
Sarasota, Florida 100 common options (c) -- --
Tourist magazine publisher ------------- ----------
866,767 440,000
------------- ----------
11
MACC PRIVATE EQUITIES INC. AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED...
MARCH 31, 2006
Technology and Communications Continued:
Percent of
Company Security Net assets Value Cost (d)
................................................................................................................................
Phonex Broadband Corporation 1,855,302 shares Series A preferred (c) 288,750 1,155,000
Midvale, Utah ------------ ---------
Power line communications
Portrait Displays, Inc. 8% debt security, due April 1, 2009 56,688 79,816
Pleasanton, California 8% debt security, due April 1, 2012 (c) 562,877 750,001
Designs and markets pivot enabling Warrant to purchase 39,400 common shares (c) -- --
software for LCD computer monitors ------------ ---------
619,565 829,817
------------ ---------
SnapNames.com, Inc. 465,000 common shares (c) 125,000 4,650
Portland, Oregon 46,500 common shares (c) -- --
Domain name management ------------ ---------
125,000 4,650
------------ ---------
Total technology and communications 33.02% 3,570,796 4,760,041
========== ------------ ----------
$ 19,204,525 24,134,736
============ ===========
(a) Affiliated company.
(b) Controlled company.
(c) Non-income producing.
(d) For all debt securities presented, the cost is equal to the principal
balance.
12
See accompanying notes to unaudited condensed consolidated financial statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). Such
statements are made in good faith by MACC pursuant to the safe-harbor provisions
of the 1995 Act, and are identified as including terms such as "may," "will,"
"should," "expects," "anticipates," "estimates," "plans," or similar language.
In connection with these safe-harbor provisions, MACC has identified in its
Annual Report to Shareholders for the fiscal year ended September 30, 2005,
important factors that could cause actual results to differ materially from
those contained in any forward-looking statement made by or on behalf of MACC,
including, without limitation, the high risk nature of MACC's portfolio
investments, the effects of general economic conditions on MACC's portfolio
companies, the effects of recent or future losses on the ability of MorAmerica
Capital to comply with applicable regulations of the Small Business
Administration and MorAmerica Capital's ability to obtain future funding,
changes in prevailing market interest rates, and contractions in the markets for
corporate acquisitions and initial public offerings. MACC further cautions that
such factors are not exhaustive or exclusive. MACC does not undertake to update
any forward-looking statement which may be made from time to time by or on
behalf of MACC.
Results of Operations
MACC's investment income includes income from interest, dividends and fees.
Investment expense, net represents total investment income minus net operating
expenses. The main objective of portfolio company investments is to achieve
capital appreciation and realized gains in the portfolio. These gains and losses
are not included in investment expense, net. However, another one of MACC's
on-going goals is to reduce net investment expense. MACC is currently seeking to
achieve this goal by reducing its operating expenses. MACC also earns interest
on short-term investments of cash.
Second Quarter Ended March 31, 2006 Compared to Second Quarter Ended March 31, 2005
For the three months
ended March 31,
---------------
2006 2005 Change
---- ---- ------
Total investment income $ 367,072 599,978 (232,906)
Net operating expense (824,719) (932,788) 108,069
----------- ----------- -----------
Investment expense, net (457,647) (332,810) (124,837)
----------- ----------- -----------
Net realized gain on investments 2,476,007 38,326 2,437,681
Net change in unrealized depreciation/
appreciation on investments (3,817,372) 514,421 (4,331,793)
Net change in unrealized gain on other assets 1,050 110,740 (109,690)
----------- ----------- -----------
Net (loss) gain on investments (1,340,315) 663,487 (2,003,802)
----------- ----------- -----------
Net change in net assets from operations $(1,797,962) 330,677 (2,128,639)
=========== =========== ===========
Net asset value:
Beginning of period $ 5.12 4.68
=========== ===========
End of period $ 4.39 4.82
=========== ===========
13
Total Investment Income
During the current fiscal year second quarter, total investment income was
$367,072, a decrease of $232,906, or 39%, from total investment income of
$599,978 for the prior year second quarter. In the current year second quarter
as compared to the prior year second quarter, interest income decreased
$274,257, or 52%, dividend income increased $43,146, or 60%, and other income
decreased $1,795, or 100%. The decrease in interest income is the net result of
repayments of principal on debt portfolio securities issued by eight portfolio
companies, a decrease in interest income on three debt portfolio securities
which have been placed on non-accrual of interest status, a decrease in interest
income on one debt portfolio security of which interest has been forgiven since
the end of the prior year fiscal year end, an increase in interest income on one
debt portfolio security which made a deferred interest payment in the current
year second quarter, and the conversion of accrued interest on one portfolio
investment to stock in one portfolio company in the prior year second quarter.
In the current year second quarter, MACC received dividends on two existing
portfolio investments, one of which was a distribution from a limited liability
company, compared to dividend income received in the prior year second quarter
from five existing portfolio companies, two of which were distributions from
limited liability companies. The dividends in the current year second quarter
were larger than in the prior year second quarter.
Net Operating Expenses
Net operating expenses for the second quarter of the current year were
$754,719, a decrease of $178,069, or 19%, as compared to net operating expenses
for the prior year second quarter of $932,788. Interest expense decreased
$194,838, or 37%, in the current year second quarter due to the repayment of
borrowings from the Small Business Administration ("SBA") of $9,000,000 in the
prior fiscal year and $2,000,000 in the current year second quarter. Management
fees decreased $126,786, or 53%, in the current year second quarter due to the
decrease in capital under management and a decrease in the management fee as a
percentage of capital under management from 2.50% to 1.50%, which became
effective April 30, 2005. Incentive fees increased $143,311, or 100%, because no
incentive fees were earned in the prior year second quarter. Incentive fees are
calculated on an annual basis, but MACC accrues incentive fees expense on a
quarterly basis. Accordingly, MACC's financial results for the second six months
of the current fiscal year may impact the amount of incentive fee expense
accrued during the second quarter of the current year. Professional fees
decreased $63,673, or 44%, in the current year second quarter primarily due to
the legal expenses incurred in the prior year second quarter from the
arbitration proceedings related to the sale of a former portfolio company which
has been settled, legal expenses from a lawsuit related to another former
portfolio company which has been settled, and legal expenses incurred in
connection with the change of MACC's investment advisor. Other expenses
increased $11,692, or 15%, in the current year second quarter as compared to the
prior year second quarter. The increase in other expenses is the net result of
increases in insurance and administrative expenses, mainly due to the timing of
administrative expenses in the prior year second quarter due to the postponement
of the 2005 Annual Shareholders Meeting, offset by a decrease in director's fees
resulting from a reduction in the size of MACC's Board of Directors.
14
Investment Expense, Net
For the current year first quarter, MACC recorded investment expense, net
of $457,647, as compared to investment expense, net of $332,810 during the prior
year second quarter. The increase in investment expense, net is the result of
the decrease in investment income described above, partially offset by the
decrease in operating expenses described above.
Net Realized (Loss) Gain on Investments
During the current year second quarter, MACC recorded net realized gain on
investments of $2,476,007, as compared with net realized gain on investments of
$38,326 during the prior year second quarter. In the current year second
quarter, MACC realized a gain of $1,987,604 from the sale of one portfolio
company, $454,470 from the sale of warrant shares in one other portfolio
company, and $33,933 on two previously sold portfolio companies. Management does
not attempt to maintain a comparable level of realized gains quarter to quarter
but instead attempts to maximize total investment portfolio appreciation through
realizing gains in the disposition of securities. MACC's investment advisor
earns an incentive fee which is calculated as a percentage of the excess of
MACC's realized gains in a particular period, over the sum of net realized
losses and unrealized depreciation during the same period. As a result, the
timing of realized gains, realized losses and unrealized depreciation can have
an effect on the amount of the incentive fee payable to the investment advisor.
Net Change in Unrealized Appreciation/Depreciation of Investments and Other Assets
MACC recorded net change in unrealized appreciation/depreciation on
investments of ($3,817,372) during the current year second quarter, as compared
to $514,421 during the prior year second quarter. This net change in unrealized
appreciation/depreciation on investments of ($3,817,372) is the net effect of an
increase in fair value of one portfolio company totaling $120,350, decreases in
fair value of three portfolio companies of $1,672,528 and the reversal of
appreciation of $1,900,000 in one portfolio investment from the sale of a
portfolio company and $365,194 in one portfolio investment from the sale of
warrant shares resulting in realized gains.
Net change in unrealized appreciation/depreciation on investments
represents the change for the period in the unrealized appreciation, net of
unrealized depreciation, on MACC's total investment portfolio. When the fair
value of a portfolio investment increases above its cost, the unrealized
appreciation for the portfolio as a whole increases, and when the fair value of
a portfolio investment decreases below its cost, unrealized depreciation for the
portfolio as a whole increases. When MACC sells an appreciated portfolio
investment for a gain, unrealized appreciation for the portfolio as a whole
decreases as the gain is realized. Similarly, when MACC sells or writes off a
depreciated portfolio investment for a loss, unrealized depreciation for the
portfolio as a whole decreases as the loss is realized.
Net change in unrealized gain on other assets of $1,050 during the current
year second quarter was recorded with respect to other securities which are
classified as other assets, as compared to a net change in unrealized gain on
other assets of $110,740 during the prior year second quarter.
15
Net Change in Net Assets from Operations
MACC experienced a decrease of $1,797,962 in net assets at the end of the
second quarter of fiscal year 2006, and the resulting net asset value per share
was $4.39 as of March 31, 2006, as compared to $5.54 as of September 30, 2005.
MACC has six portfolio investments valued at cost, has recorded unrealized
appreciation on seven portfolio investments, and has recorded unrealized
depreciation on fourteen portfolio investments. The decrease in net assets
recorded during the current year second quarter was primarily the result of
decreases in the fair value of three portfolio investments. Valuations from
quarter to quarter are affected by a portfolio company's short term performance
that changes unrealized depreciation and unrealized appreciation in the quarter.
This may or may not be indicative of the long term performance of the portfolio
company.
While MACC may periodically make follow-on investments, MACC is not
currently making investments in new portfolio companies, and is instead using
any excess cash generated from portfolio investment liquidity events to prepay
MorAmerica Capital's outstanding SBA-guaranteed debentures when appropriate.
MACC recorded significant reductions in its interest expense and management fees
in the second quarter of the current fiscal year as a result of these
prepayments.
While the economy continues to perform well, it is not even in all sectors.
Portfolio companies have had to deal with high energy costs, high raw material
costs, and in some cases flat or decreased sales. The growth of China and India
and continued competition from imported products from Asia, Central America, and
South America have made it more difficult to increase prices as commodity prices
rise. Gas prices, world tensions, terrorism, and the continuing conflict in Iraq
increase the uncertainty of future performance. Management believes MACC's
investment portfolio may benefit from an anticipated robust market for corporate
acquisitions and investments. The overall activity in the market for corporate
acquisitions is strong. MACC has exited two investments in 2006 and continues to
explore other potential exits.
Six Months Ended March 31, 2006 Compared to Six Months Ended March 31, 2005
For the six months
ended March 31,
---------------
2006 2005 Change
---- ---- ------
Total investment income $ 698,756 1,299,428 (600,672)
Net operating expense (1,376,442) (1,957,700) 581,258
----------- ----------- -----------
Investment expense, net (677,686) (658,272) (19,414)
----------- ----------- -----------
Net realized gain (loss) on investments 2,689,340 (2,446,651) 5,135,991
Net change in unrealized depreciation/
appreciation on investments (4,833,782) 3,496,197 (8,329,979)
Net change in unrealized gain on other assets (28,471) 103,649 (132,120)
----------- ----------- -----------
Net (loss) gain on investments (2,172,913) 1,153,195 (3,326,108)
----------- ----------- -----------
Net change in net assets from operations $(2,850,599) 494,923 (3,345,522)
=========== =========== ===========
Net asset value:
Beginning of period $ 5.54 4.61
=========== ===========
End of period $ 4.39 4.82
=========== ===========
16
Total Investment Income
During the current year six-month period, total investment income was
$698,756, a decrease of $600,672, or 46%, from total investment income of
$1,299,428 for the prior year six-month period. In the current year six-month
period as compared to the prior year six-month period, interest income decreased
$464,691, or 45%, dividend income decreased $125,486, or 47%, processing fees
decreased $7,700, or 100%, and other income decreased $2,795, or 100%. The
decrease in interest income is the net result of repayments of principal on debt
portfolio securities issued by eight portfolio companies, a decrease in interest
income on three debt portfolio securities which have been placed on non-accrual
of interest status, a decrease in interest income on one debt portfolio security
of which interest has been forgiven since the end of the prior year fiscal year
end, an increase in interest income on one debt portfolio security which made a
deferred interest payment in the current year six-month period, and the
conversion of interest to stock in one portfolio company in the prior year
six-month period. In the current year six-month period, MACC received dividends
on four existing portfolio investments, one of which was a distribution for a
limited liability company, as compared to dividend income received in the prior
year six-month period from six existing portfolio companies, three of which were
distributions from a limited liability companies. The dividends in the prior
year six-month period were also larger than in the current year six-month
period. Processing fees decreased due to no fees received in the current year
six-month period compared to fees received on one follow-on investment made in
the prior year six-month period.
Net Operating Expenses
Net operating expenses for the six-month period of the current year were
$1,306,442, a decrease of $651,258, or 33%, as compared to net operating
expenses for the prior year six-month period of $1,957,700. Interest expense
decreased $396,847, or 38%, in the current year six-month period due to the
repayment of borrowings from the SBA of $9,000,000 in the prior fiscal year and
$2,000,000 in the current year six-month period. Management fees decreased
$201,561, or 47%, in the current year six-month period due to the decrease in
capital under management and a decrease in the management fee as a percentage of
capital under management from 2.50% to 1.50%, which became effective April 30,
2005. Incentive fees increased by $143,311, or 100%, because no incentive fees
were earned in the prior year six-month period. Incentive fees are calculated on
an annual basis, but MACC accrues incentive fees expense on a quarterly basis.
Accordingly, MACC's financial results for the second six months of the current
fiscal year may impact the amount of incentive fee expense accrued during the
six-month period of the current year. Professional fees decreased $198,535, or
62%, in the current year six-month period primarily due to the legal expenses
incurred in the prior year six-month period from the arbitration proceedings
related to the sale of a former portfolio company which has been settled, legal
expenses from a lawsuit related to another portfolio company which has been
settled, and legal expenses incurred in the change of MACC's investment advisor.
Other expenses increased $2,374, or 1%, in the current year six-month period as
compared to the prior year six-month period. The increase in other expenses is
the net result of increases in insurance and administrative expenses, mainly due
to the timing of expenses in the prior year six-month period due to the
postponement of the 2005 Annual Shareholders Meeting, offset by decreases in
director's fees and board travel expense resulting from a reduction in the size
of MACC's Board of Directors.
17
Investment Expense, Net
For the current year six-month period, MACC recorded investment expense,
net of $677,686, as compared to investment expense, net of $658,272 during the
prior year six-month period. The increase in investment expense, net is the
result of the decrease in investment income, partially offset by the decrease in
operating expenses described above.
Net Realized (Loss) Gain on Investments
During the current year six-month period, MACC recorded net realized gain
on investments of $2,689,340, as compared with net realized loss on investments
of $2,446,651 during the prior year six-month period. In the current year
six-month period, MACC realized gains of $1,987,604 from the sale of one
portfolio company, $667,803 from the sale of warrant shares in two other
portfolio companies, and $33,933 on two previously sold portfolio companies.
Management does not attempt to maintain a comparable level of realized gains
quarter to quarter but instead attempts to maximize total investment portfolio
appreciation through realizing gains in the disposition of securities. MACC's
investment advisor earns an incentive fee which is calculated as a percentage of
the excess of MACC's realized gains in a particular period, over the sum of net
realized losses and unrealized depreciation during the same period. As a result,
the timing of realized gains, realized losses and unrealized depreciation can
have an effect on the amount of the incentive fee payable to the investment
advisor.
Net Change in Unrealized Appreciation/Depreciation of Investments and Other Assets
MACC recorded net change in unrealized appreciation/depreciation on
investments of ($4,833,782) during the current year six-month period, as
compared to $3,496,197 during the prior year six-month period. This net change
in unrealized appreciation/depreciation on investments of ($4,833,782) is the
net effect of an increase in fair value of two portfolio companies totaling
$310,350, decreases in fair value of eleven portfolio companies of $3,103,047,
the reversal of appreciation of $1,508,206 in one portfolio investment from the
sale of a portfolio company and $532,879 in two portfolio investments from the
sale of warrant shares resulting in realized gains.
Net change in unrealized appreciation/depreciation on investments
represents the change for the period in the unrealized appreciation, net of
unrealized depreciation, on MACC's total investment portfolio. When the fair
value of a portfolio investment increases above its cost, the unrealized
appreciation for the portfolio as a whole increases, and when the fair value of
a portfolio investment decreases below its cost, unrealized depreciation for the
portfolio as a whole increases. When MACC sells an appreciated portfolio
investment for a gain, unrealized appreciation for the portfolio as a whole
decreases as the gain is realized. Similarly, when MACC sells or writes off a
depreciated portfolio investment for a loss, unrealized depreciation for the
portfolio as a whole decreases as the loss is realized.
Net change in unrealized loss on other assets of $28,471 during the current
year six-month period was recorded with respect to other securities which are
classified as other assets, as compared to a net change in unrealized gain on
other assets of $103,649 during the prior year six-month period.
18
Financial Condition, Liquidity and Capital Resources
To date, MACC has relied upon several sources to fund its investment
activities, including MACC's cash and money market accounts and the Small
Business Investment Company ("SBIC") leverage program operated by the Small
Business Administration (the "SBA").
As an SBIC, MorAmerica Capital is required to comply with the regulations
of the SBA (the "SBA Regulations"). These regulations include the capital
impairment rules, as defined by Regulation 107.1830 of the SBA Regulations. As
of March 31, 2006, the capital of MorAmerica Capital was impaired less that the
55% maximum impairment percentage permitted under SBA Regulations. MorAmerica
Captial's impairment percentage was 51% at March 31, 2006. If MorAmerica Capital
continues to experience negative operating results, no assurances can be given
that MorAmerica capital will continue to be less than the maximum impairment
percentage in future periods. If MorAmerica Capital would exceed the maximum
impairment percentage in future periods, a number of events could occur which
would have a material adverse affect on the financial condition, results of
operations, cash flow and liquidity of MACC and MorAmerica Capital. MorAmerica
Capital is also currently limited by the SBA Regulations in the amount of
distributions it may make to MACC.
As of March 31, 2006, MACC's cash and cash equivalents totaled $5,256,130.
MACC has a commitment for an additional $6,500,000 in SBA-guaranteed debentures,
which expires on September 30, 2007. MorAmerica Capital and three other SBICs
have entered into an agreement with the SBA in connection with an arbitration
settlement. As a result of the terms of this agreement, MACC does not believe
that MorAmerica Capital will have access to the SBIC capital program in fiscal
year 2006. In light of the agreement with SBA, at the present time MACC is not
making new investments, is prudently selling portfolio companies and is using
the resulting proceeds to reduce debt by prepaying SBA-guaranteed debentures
when appropriate. Subject to the other risks and uncertainties described in this
quarterly report, MACC believes that its existing cash and money market accounts
and other anticipated cash flows will provide adequate funds for MACC's
anticipated cash requirements during fiscal year 2006, including follow-on
portfolio investment activities, interest payments on outstanding debentures
payable, prepayments of principal on outstanding debentures payable, and
administrative expenses.
Debentures payable are composed of $14,790,000 in principal amount of
SBA-guaranteed debentures issued by MACC's subsidiary, MorAmerica Capital, which
mature as follows: $1,500,000 in fiscal year 2010, $5,835,000 in fiscal year
2011, and $7,455,000 in fiscal year 2012. MACC anticipates that MorAmerica
Capital will not be able to refinance these debentures through the SBIC capital
program when they mature. The following table shows MACC's significant
contractual obligations for the repayment of debt and other contractual
obligations as of March 31, 2006:
19
Payments due by period
-----------------------------------------------------------------------
Contractual Obligations
Less than More than
Total 1 Year 1-3 Years 3-5 Years 5 Years
----- ------ --------- --------- -------
SBA Debentures $14,790,000 -- -- 1,500,000 13,290,000
Incentive Fees Payable(1)$ 238,194 -- -- -- 238,194
(1) Accrued incentive fees payable to the investment advisor are
subordinated to all amounts payable by MorAmerica Capital to the SBA, including
outstanding SBA-guaranteed debentures, and any losses the SBA may incur in
connection with the settlement of arbitration proceedings occurring in late
2004.
MACC currently anticipates that it will rely primarily on its current cash
and cash equivalents and its cash flows from operations to fund its cash
requirements during fiscal year 2006. Although management believes these sources
will provide sufficient funds for MACC to meet its fiscal year 2006 investment
level objective and other anticipated cash requirements, there can be no
assurances that MACC's cash flows from operations will be as projected, or that
MACC's cash requirements will be as projected.
Portfolio Activity
MACC's primary business is investing in and lending to businesses through
investments in subordinated debt (generally with detachable equity warrants),
preferred stock and common stock. MACC, however, is not currently making new
investments. The total portfolio value of investments in publicly and
non-publicly traded securities was $19,204,525 at March 31, 2006 and $25,845,548
at September 30, 2005. During the three months ended March 31, 2006, MACC made
no follow-on investments in portfolio companies. As noted above, MACC does not
expect to make any investments in new portfolio companies during fiscal year
2006, but may invest up to $500,000 in follow-on investments in existing
portfolio companies, subject to further adjustment based on current economic and
operating conditions.
MACC frequently co-invests with other funds managed by MACC's investment
advisor. When it makes any co-investment with these related funds, MACC follows
certain procedures consistent with orders of the Securities and Exchange
Commission for related party co-investments to reduce or eliminate conflict of
interest issues. During the current year second quarter, no co-investments were
made.
Critical Accounting Policy
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are stated at the bid price on the final
day of the period. Restricted and other securities for which quotations are not
readily available are valued at fair value as determined by MACC's Board of
Directors. Among the factors considered in determining the fair value of
investments are the cost of the investment; developments, including recent
financing transactions, since the acquisition of the investment; the financial
condition and
20
operating results of the investee; the long-term potential of the business of
the investee; market interest rates on similar debt securities; and other
factors generally pertinent to the valuation of investments. However, because of
the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market for
the securities existed, and the differences could be material.
In the valuation process, MorAmerica Capital uses financial information
received monthly, quarterly, and annually from its portfolio companies which
includes both audited and unaudited financial statements. This information is
used to determine financial condition, performance, and valuation of the
portfolio investments.
Realization of the carrying value of investments is subject to future
developments. Investment transactions are recorded on the trade date and
identified cost is used to determine realized gains and losses. Under the
provisions of SOP 90-7, the fair value of loans and investments in portfolio
securities on February 15, 1995, the fresh-start date, is considered the cost
basis for financial statement purposes.
Determination of Net Asset Value
The net asset value per share of MACC's outstanding common stock is
determined quarterly, as soon as practicable after and as of the end of each
calendar quarter, by dividing the value of total assets minus total liabilities
by the total number of shares outstanding at the date as of which the
determination is made.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
MACC is subject to market risk from changes in market interest rates that
affect the fair value of MorAmerica Capital's debentures payable determined in
accordance with Statement of Financial Accounting Standards No. 107, Disclosures
About Fair Value of Financial Instruments. The estimated fair value of
MorAmerica Capital's outstanding debentures payable at March 31, 2006, was
$15,314,000, with a cost of $14,790,000. Fair value of MorAmerica Capital's
outstanding debentures payable is calculated by discounting cash flows through
estimated maturity using a SBA borrowing rate currently available (6.3% at March
31, 2006) for debt of similar original maturity. None of MorAmerica Capital's
outstanding debentures payable are publicly traded. Market risk is estimated as
the potential increase in fair value resulting from a hypothetical 0.5% decrease
in interest rates. Actual results may differ.
------------------------------------------------------
March 31, 2006
------------------------------------------------------
Fair Value of Debentures Payable $15,314,000
Amount Above Cost $ 524,000
Additional Market Risk $ 323,000
------------------------------------------------------
21
Item 4. Controls and Procedures
As of the end of the period covered by this report, in accordance with Item
307 of Regulation S-K promulgated under the Securities Act of 1933, as amended,
the Chief Executive Officer and Chief Financial Officer of MACC (the "Certifying
Officers") have conducted evaluations of MACC's disclosure controls and
procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the term "disclosure
controls and procedures" means controls and other procedures of an issuer that
are designed to ensure that information required to be disclosed by the issuer
in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the issuer's
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. The
Certifying Officers have reviewed MACC's disclosure controls and procedures and
have concluded that those disclosure controls and procedures are effective as of
the date of this Quarterly Report on Form 10-Q. In compliance with Section 302
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), each of the Certifying
Officers executed an Officer's Certification included in this Quarterly Report
on Form 10-Q.
As of the date of this Quarterly Report on Form 10-Q, there have not been
any significant changes in MACC's internal controls or other factors that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no items to report.
Item 1A. Risk Factors.
There are no changes to report from the risk factors disclosed in
MACC's Annual Report on Form 10-K for the year ended September 30,
2005.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There are no items to report.
Item 3. Defaults Upon Senior Securities.
There are no items to report.
Item 4. Submission of Matters to a Vote of Security Holders.
On February 28, 2006, MACC's 2006 Annual Meeting of Shareholders (the
"Meeting") was held in Dallas, Texas. A quorum of 1,911,638 shares, or
approximately 77.56% of issued and outstanding shares as of December 31, 2005,
were represented in person or by proxy at the Meeting. The shareholders
considered two proposals at the meeting.
With respect to the first proposal, the shareholders elected five nominees
to serve as directors until the 2007 Annual Meeting of Shareholders or until
their respective successors shall be elected and qualified. The five directors
elected at the Meeting, and the votes cast in favor of and withheld with respect
to each, are as follows:
For Withheld
--- --------
Michael W. Dunn 1,887,190 24,448
Jasja Kotterman 1,883,707 27,931
Benjamin Jiaravanon 1,864,488 47,150
Gordon J. Roth 1,887,592 24,046
Geoffrey T. Woolley 1,887,353 24,285
With regard to the second proposal, the shareholders voted to ratify the
appointment of KPMG LLP as independent registered public accounting firm for
MACC for fiscal year 2006 by a vote of 1,889,746 in favor and 6,080 against
approval, with 15,812 shares abstaining.
23
Item 5. Other Information.
There are no items to report.
Item 6. Exhibits.
The following exhibits are filed with this Quarterly Report on Form 10-Q:
31.1 Section 302 Certification of David R. Schroder (CEO)
31.2 Section 302 Certification of Robert A. Comey (CFO)
32.1 Section 1350 Certification of David R. Schroder (CEO)
32.2 Section 1350 Certification of Robert A. Comey (CFO)
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.
MACC PRIVATE EQUITIES INC.
Date: 5/11/06 By: /s/David R. Schroder
----------------- -----------------------------------------------
David R. Schroder, President
Date: 5/11/06 By: /s/Robert A. Comey
----------------- -----------------------------------------------
Robert A.Comey, Chief Financial Officer
EXHIBIT INDEX
Exhibit Description Page
------- ------------ ----
31.1 Section 302 Certification of David R. Schroder (CEO) 25
31.2 Section 302 Certification of Robert A. Comey (CFO) 27
32.1 Section 1350 Certification of David R. Schroder (CEO) 29
32.2 Section 1350 Certification of Robert A. Comey (CFO) 31
24