1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended March 31, 1997
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or
[] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period From
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to
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Commission File Number 33-89506
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BERTHEL GROWTH & INCOME TRUST I
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(Exact name of Registrant as specified in its charter)
DELAWARE 52-1915821
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Second Street SE, Cedar Rapids, Iowa 52401
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(Address of principal executive offices) (Zip Code)
(319) 365-2506
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Registrant's telephone number, including area code:
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
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 practical date.
Shares of Beneficial Interest - 9,439 shares as of April 30, 1997
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BERTHEL GROWTH & INCOME TRUST I
INDEX
PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial statements (unaudited):
Statements of assets and liabilities - March 31, 1997 and
December 31, 1996 3
Statements of operations - three months ended March 31,
1997 and March 31, 1996 4
Statements of changes in net assets - three months ended
March 31, 1997 and March 31, 1996 5
Statements of cash flows - three months ended March 31,
1997 and March 31, 1996 6
Notes to the financial statements 7
Item 2. Management's discussion and analysis of financial condition and
results of operations. 7
PART II. OTHER INFORMATION
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Item 1. Legal proceedings - none
Item 2. Changes in securities - none
Item 3. Defaults upon senior securities - none
Item 4. Submission of matters to a vote of shareholders - none
Item 5. Other information - none
Item 6. Exhibits and reports on Form 8-K
a. Exhibits - none
b. No report on Form 8-K was filed for the quarter ended
March 31, 1997
SIGNATURES 11
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BERTHEL GROWTH & INCOME TRUST I
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
March 31, 1997 December 31, 1996
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ASSETS
Investments in securities (Note B) $1,129,696 $1,405,000
Cash 24,120 97,025
Temporary investment in money
market securities 5,602,583 4,993,174
Interest receivable 36,232 40,186
Other assets 10,608 7,690
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Total Assets 6,803,239 6,543,075
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LIABILITIES
Accounts payable and other accrued expenses 17,341 23,594
Distributions payable to shareholders 805,221 584,480
Due to affiliate 41,473 47,022
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Total Liabilities 864,035 655,096
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COMMITMENTS AND CONTINGENCIES
NET ASSETS (equivalent to $646.97 per share
in 1997 and $662.24 per share in 1996) $5,939,204 $5,887,979
========== ==========
Net assets consist of:
Shares of beneficial interest (25,000 shares
authorized; 9,180 and 8,891 shares issued
and outstanding in 1997 and 1996, respectively $6,808,083 $6,782,316
Undistributed net investment loss (868,879) (894,337)
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$5,939,204 $5,887,979
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See notes to financial statements.
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BERTHEL GROWTH & INCOME TRUST I
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31, 1997 March 31, 1996
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REVENUES:
Interest income $104,693 $56,045
Other income 500 -0-
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105,193 56,045
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EXPENSES:
Management fees 41,473 30,290
Administrative services 9,754 9,912
Trustee fees 6,000 2,000
Auditing and accounting fees 4,225 3,375
Legal expense 14,840 -0-
Other general and administrative
expenses 3,443 3,422
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Total expenses 79,735 48,999
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NET INVESTMENT INCOME AND
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 25,458 $ 7,046
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NET INVESTMENT INCOME PER
BENEFICIAL SHARE $ 2.82 $ 1.78
WEIGHTED AVERAGE SHARES $ 9,038 $ 3,968
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See notes to financial statements.
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BERTHEL GROWTH & INCOME TRUST I
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
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Shares of Shares of
Beneficial Beneficial
Interest Amount Interest Amount
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Net investment income --- $25,458 --- $7,046
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Net increase in assets
resulting from operations --- 25,458 7,046
Proceeds from sales of Shares of
beneficial interest 294 294,000 688 688,000
Syndication costs incurred --- (42,492) --- (98,154)
Shares of beneficial interest redeemed (5) (5,000) --- -0-
Distributions payable to shareholders --- (220,741) --- (137,451)
Net assets at beginning of period 8,891 5,887,979 5,128 4,242,814
--------- --------- --------- ---------
Net assets at end of period 9,180 $5,939,204 5,816 $4,702,255
========== ========== ===== ==========
See notes to financial statements.
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BERTHEL GROWTH & INCOME TRUST I
STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net investment income $ 25,458 $ 7,046
Adjustments to reconcile net investment loss
to net cash flows from operating activities:
Amortization of organizational costs 250 251
Gain on redemption of unit (500) -0-
Changes in operating assets and liabilities:
Temporary investment in money market securities (609,409) (695,951)
Other assets (3,168) (9,832)
Interest receivable 3,954 17,830
Due to affiliate (5,549) 3,075
Accounts payable and accrued expenses (6,253) 11,633
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Net cash flows from operating activities (595,217) (665,948)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of note receivable 275,304 -0-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of shares of beneficial interest 294,000 688,000
Redemption of shares of beneficial interest (4,500) -0-
Syndication costs incurred (42,492) (98,154)
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Net cash flows from financing activities 247,008 589,846
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NET DECREASE IN CASH (72,905) (76,102)
CASH AT BEGINNING OF PERIOD 97,025 102,269
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CASH AT END OF PERIOD $ 24,120 $ 26,167
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash financing activities:
Distributions payable to shareholders $220,741 $137,451
See notes to financial statements.
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BERTHEL GROWTH & INCOME TRUST I
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all information and footnotes required
by generally accepted accounting principles for complete financial statements
and should be read in conjunction with the Company's Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 1996. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair representation have been included.
Operating results for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles necessarily 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
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE B -- INVESTMENTS
COST VALUATION
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VisionComm, Inc.:
Note receivable $1,129,696 $1,129,696
Warrants for 125,000 shares at $5/share -0- -0-
Soil Recovery Services, Inc.:
Convertible subordinated debenture 1,000,000 -0-
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$2,129,696 $1,129,696
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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's investment in VisionComm is valued at its original cost less
principal repayments.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS:
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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 the 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.
RESULTS OF OPERATIONS:
Three Months Ended Three Months Ended
DESCRIPTION: March 31, 1997 March 31, 1996
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Interest income $ 104,693 $ 56,045
Management fees $ 41,473 $ 30,290
Legal expense $ 14,840 $ -0-
Berthel Growth & Income Trust I was formed on February 10, 1995. The Trust
received approval from the Securities and Exchange Commission to begin offering
shares of beneficial interest effective June 21, 1995.
The minimum offering of 1,500 shares sold was reached on August 30, 1995. As
of March 31, 1997 9,180 shares were issued and outstanding.
The Trust earned $63,423 of interest income from short term temporary
investments in the first quarter of 1997. Interest from these short term
temporary investments increased $7,378 from the corresponding period in 1996.
The interest income earned on this type of investment will vary from period to
period due to the liquidation of short term money market investments to acquire
other enhanced yield investments or to pay distributions to shareholders.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS (CONTINUED):
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The Trust also earned interest income of $41,270 from its investment in a 14%
senior secured note ("note") in VisionComm, Inc. ("VCI"). On April 30, 1996,
the Trust invested $2,180,000 in a note with VCI. As of March 31, 1997, VCI
has paid the Trust principal payments totalling $1,050,304. The interest
income the Trust earns on this note investment will fluctuate with changes in
the principal balance.
Management fees equal to 2.5% of the total assets of the Trust have increased
$11,183 in the first quarter of 1997 compared to the corresponding quarter in
1996. As more assets come under the control of the Trust, management fees will
also show a corresponding increase.
The Trust has incurred $12,057 of legal charges in 1997 in connection with the
Soil Recovery Services, Inc. bankruptcy. Future legal charges associated with
this bankruptcy are expected however, they cannot be determined at this time.
INVESTMENTS:
Cost Valuation
VisionComm, Inc.
14% five year secured note receivable $1,129,696 $1,129,696
Warrants for 125,000 shares at $5 per share -0- -0-
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Total $1,129,696 $1,129,696
========== ==========
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) VisionComm is performing satisfactorily, 2) the Trust is adequately
collateralized, and 3) the absence of any transaction that would imply a
different value, the Trustees have recommended that the Trust's investment in
VisionComm be valued at its original cost less principal repayments.
The original investment was $2,180,000 at 14%. VisionComm had a principal
repayment of $775,000 in December 1996 and $275,304 in January 1997. The
remaining $1,129,696 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS (CONTINUED):
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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 $2,000,00, 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 May 9,
1997.
LIQUIDITY AND CAPITAL RESOURCES
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
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Major Cash Source:
Proceeds from issuance of beneficial shares $ 294,000 $ 688,000
Repayment of note receivable 275,304 -0-
Major Cash Use:
Payments for syndication costs $ 42,492 $ 98,154
Investment in money market securities 609,409 695,951
Pending investment in portfolio companies, the Trust has invested $5,602,583 in
a money market mutual fund at March 31, 1997.
Distributions payable of $805,221 have been accrued as of March 31, 1997. 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 and is currently
researching for possible investment of Trust funds.
The effect of interest rate fluctuations and inflation on the current Trust
investments is negligible.
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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.
BERTHEL GROWTH & INCOME TRUST I
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(Registrant)
Date Ronald O. Brendengen/s/
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Ronald O. Brendengen, Chief Financial Officer,
Treasurer
Date Daniel P. Wegmann/s/
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Daniel P. Wegmann, Controller