Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No. 0-24412
MACC PRIVATE EQUITIES INC.
(Exact Name of Registrant as specified in Charter)
Delaware 42-1421406
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.
101 Second Street SE, Ste. 800 52401
Cedar Rapids, Iowa (Zip Code)
Registrant's Telephone Number
Including Area Code: (319) 363-8249
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-25 of the Act). YES NO X.
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of March 31, 2005, was approximately
$3,188,708.70 based upon the closing price for shares of the registrant's common
stock on that date. As of March 31, 2005, there were 2,329,255 shares of the
registrant's common stock outstanding, of which approximately 1,250,474 shares
were held by non-affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the year ended
September 30, 2004, are incorporated by reference into Parts II and IV of this
Report.
EXPLANATORY NOTE
This Form 10-K/A is being filed in connection with changes to the audited
financial statements of the registrant for the fiscal year ended September 30,
2004, which are included in the registrant's 2004 Annual Report to Shareholders
(the "2004 Annual Report"), filed with the Commission on January 13, 2005 as
Exhibit 13 to the registrant's Form 10-K for the fiscal year ended September 30,
2004. This Form 10-K/A is also being filed to reflect the scheduling of the
registrant's 2005 Annual Shareholders Meeting, as described in the 2004 Annual
Report. Lastly, this Form 10-K/A is being filed to correct certain clerical and
typographical errors contained in the 2004 Annual Report.
The changes in this Form 10-K/A resulting from the changes to the registrant's
fiscal year 2004 audited financial statements include the following:
o Exhibit 13--2004 Annual Report--Report of Independent Registered
Public Accounting Firm--We have included the accounting firm's
electronic signature following its report.
o Exhibit 13--2004 Annual Report--Notes to Consolidated Financial
Statements--Note 7--We have changed footnote 3 to provide that "(3) As
discussed in note 6, MACC settled the litigation suit related to the
sale of a former portfolio company. The total cost of the settlement
to MACC was $2,245,935 as of September 30, 2004, of which $968,672 was
recorded as "net operating expenses" and $1,277,263 was recorded as
part of "net gain on investments." Excluding the effect of the
settlement, total return on a net asset basis would be 1.87%, the
investment (expense) income, net ratio would be (15.29)%, and the
operating and income tax expense ratio would be 34.74% as of September
30, 2004."
o Exhibit 13--2004 Annual Report--Notes to Consolidated Financial
Statements--Note 7--We have changed footnote 4 to provide that the
availability of the registrant's net operating and capital loss
carryforwards for federal tax purposes are available to offset future
deferral taxable income through 2024.
The changes in this Form 10-K/A resulting from the scheduling of the
registrant's 2005 Annual Shareholders Meeting including the following:
o Exhibit 13--2004 Annual Report--Shareholder Information--We have
changed the information regarding our 2005 Annual Shareholders Meeting
to provide that the meeting will be held on July 19, 2005 at 10:00
a.m. Mountain Standard Time, at the Little America Hotel, 500 South
Main Street, Salt Lake City, Utah 84101.
The changes in this Form 10-K/A correcting clerical and typographical errors
contained in the 2004 Annual Report include the following:
o Exhibit 13--2004 Annual Report--Consolidated Balance Sheet--We have
clarified in the entry below "Liabilities and Stockholders' Equity"
that the registrant has 10,000,000 shares authorized.
o Exhibit 13--2004 Annual Report--Notes to Consolidated Financial
Statements--Note 7--We have corrected a typographical error in
footnote 5(b).
o Exhibit 13--2004 Annual Report--Notes to Consolidated Financial
Statements--Note 7--We have corrected a typographical error in
footnote 5(c).
o Exhibit 13--2004 Annual Report--Notes to Consolidated Financial
Statements--Note 7--We have corrected a typographical error in
footnote 6.
This Form 10-K/A only amends items 5, 6, 7, 7A and 8, and Exhibit 13 to the
registrant's Form 10-K for fiscal year 2004 to the extent that the
above-described changes have been made to the 2004 Annual Report. The remaining
Items in this Form 10-K/A consist of all other Items contained in the original
filing. These remaining Items are not amended hereby, but are included for the
convenience of the reader. Except for the foregoing changes to the 2004 Annual
Report, the registrant's Form 10-K continues to describe conditions as of the
date of the filing of Form 10-K, and we have not updated the disclosures
contained in Form 10-K to reflect events that occurred at a later date.
The registrant has filed three current reports on From 8-K subsequent to filing
its Form 10-K.
Part I
Item 1. Business.
General
MACC Private Equities Inc. (the "Corporation") was formed as a Delaware
corporation on March 3, 1994. It is qualified as a business development company
("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act").
The Corporation has one direct wholly-owned subsidiary, MorAmerica
Capital Corporation ("MorAmerica Capital"). As of September 30, 2004, MorAmerica
Capital comprised approximately 99% of the Corporation's assets. MorAmerica
Capital is an Iowa corporation incorporated in 1959 and which has been licensed
as a small business investment company since that year. It has also elected
treatment as a BDC under the 1940 Act.
The Corporation's Operation as a BDC
As noted above, both the Corporation and its wholly-owned subsidiary,
MorAmerica Capital, have elected treatment as BDCs under the 1940 Act. Under the
1940 Act, a BDC may not acquire any asset other than Qualifying Assets as
defined under the 1940 Act, unless, at the time the acquisition is made,
Qualifying Assets represent at least 70 percent of the value of the BDC's total
assets. The principal categories of Qualifying Assets relevant to the business
of the Corporation are the following:
(1) Securities purchased in transactions not involving any public
offering from the issuer of such securities, which issuer is an
eligible portfolio company. An eligible portfolio company is
defined in the 1940 Act as any issuer that:
(a) is organized under the laws of, and has its principal place
of business in, the United States;
(b) is not an investment company; and
(c) does not have any class of securities with respect to which
a broker may extend margin credit.
The Corporation's investment in all of the issued and outstanding
common stock of MorAmerica Capital is also a Qualifying Asset
under the 1940 Act.
(2) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of
investment.
In addition, a BDC must have been organized (and have its principal
place of business) in the United States for the purpose of making investments in
the types of securities described in (1) above and, in order to count the
securities as Qualifying Assets for the purpose of the 70 percent test, the BDC
must make available to the issuers of the securities significant managerial
assistance. Making available significant managerial assistance means, among
other things, any arrangement whereby the BDC, through its directors, officers
or employees offers to provide, and, if accepted, does so provide, significant
guidance and counsel concerning the management, operations or business
objectives and policies of a portfolio company.
Under the 1940 Act, once a company has elected to be regulated as a
BDC, it may not change the nature of its business so as to cease to be, or
withdraw its election as, a BDC unless authorized by vote of a majority, as
defined in the 1940 Act, of the company's shares. In order to maintain their
status as BDCs, the Corporation and MorAmerica Capital each must have at least
50% of their total assets invested in the types of portfolio companies described
by Sections 55(a)(1) though 55(a)(3) of the 1940 Act. Accordingly, the
Corporation and MorAmerica Capital may not withdraw their BDC elections or
otherwise change their business so as to cease to qualify as BDCs without
shareholder approval.
Investments and Divestitures
The Corporation made one new portfolio company investment during the
fiscal year ended September 30, 2004, of $200,049 and invested $481,934 in
follow-on investments in three existing portfolio companies. The Corporation's
investment-level objectives on a consolidated basis call for follow-on
investments of approximately $885,000 during fiscal year 2005, unless the
Corporation raises additional capital, subject to adjustment based upon current
economic and operating conditions.
During fiscal year 2004, the Corporation recorded a net realized gain
on investments of $3,021,176.
Item 2. Properties.
The Corporation does not own or lease any properties or other tangible
assets. Its business premises and equipment are furnished by Atlas Management
Partners, LLC (the "Investment Advisor," or "Atlas"), the investment advisor to
the Corporation.
Item 3. Legal Proceedings.
Since May, 2002, MorAmerica Capital has been party to arbitration
proceedings instituted by TransCore Holdings, Inc., a company (the "Buyer")
seeking indemnification under the Stock Purchase Agreement (the "Stock Purchase
Agreement") by which MorAmerica Capital and three other small business
investment companies (the "SBICs") and certain other individuals (collectively,
the "Sellers") sold their interests in a former portfolio company investment
(the "Portfolio Company"). Under the Stock Purchase Agreement, the Sellers
agreed to indemnify Buyer for breaches of representations and warranties as to
Portfolio Company made by the Sellers. Buyer claims that accounting
irregularities by management at Portfolio Company resulted in a breach of the
Sellers' representations and warranties.
On November 30, 2004, the arbitrator issued an interim award against
the Sellers. Since that time, Buyer and the Sellers have been engaged in
intensive settlement negotiations. Further proceedings were also held to
finalize the interest component of the judgment and to determine whether legal
fees would be awarded to the Buyer.
On December 31, 2004, the arbitrator delivered a final award against
the Sellers. On January 4, 2005, the SBICs reached an Agreement of Settlement
and Mutual Release (the "Settlement Agreement") with TransCore, pursuant to
which the SBICs agreed to pay TransCore a total of $20 million. Of this amount,
approximately $9 million was already held in escrow subject to the arbitration
proceedings. The full amount of the agreed settlement was funded by the SBICs on
January 5, 2005.
Under the Stock Purchase Agreement, the Sellers are jointly and
severally liable to Buyer for breaches of representations and warranties.
However, the Sellers are party to a Contribution Agreement executed at the time
of sale among the institutional investors and two individuals. Under the
Contribution Agreement, after giving effect to MorAmerica Capital's portion of
the escrow, MorAmerica Capital's cash payment on January 5, 2005 was $1.713
million.
As an SBIC, MorAmerica Capital is required to comply with SBA
regulations (the "SBA Regulations"). These regulations include the capital
impairment rules. MorAmerica Capital is expected to exceed the maximum
impairment percentage as of September 30, 2004, after giving effect to the
arbitration settlement. Accordingly, SBA will have the discretion not to extend
additional financing to MorAmerica Capital and the right to declare MorAmerica
Capital's debentures, currently in the principal amount of $25.8 million, in
default, to accelerate MorAmerica Capital's payment obligations under the
debentures and to seek appointment of SBA as receiver. The exercise by SBA of
any of these rights could have a material adverse effect on the financial
position, results of operations, cash flow and liquidity of MACC and MorAmerica
Capital. MorAmerica Capital anticipates meeting with the SBA in coming weeks to
review in detail MorAmerica Capital's financial condition after giving effect to
the arbitration settlement.
Under the Settlement Agreement, should an attempt be made by any party
to recover amounts paid to TransCore in the settlement, under certain
circumstances the SBICs will be liable for an additional amount equal to the
difference between the final award and the settlement ($10.4 million). However,
the SBA, which, under statute and by contract would be the receiver
of the SBICs in the event of receivership, has stipulated that it has no
objection to the settlement, has agreed that the payment of the settlement was
permissible under SBA law and Regulations and has further agreed that it will
not seek in any proceeding to set aside the settlement. In approving the
settlement, the SBA required the SBICs to agree, jointly and severally, to be
liable to SBA for up to one-half of the SBA's potential losses on SBA debentures
issued by the SBICs, up to a maximum of $7.5 million. The SBA will incur losses
under this agreement only following full and final liquidation of one of the
SBICs whose SBA debentures are not repaid in full. Should MorAmerica Capital
ever be required to make a payment under this agreement, it will have a claim
against the other three SBICs which are party to the Contribution Agreement.
BFS Diversified Products, LLC ("BFS") was a supplier to Water
Creations, Inc. ("Water Creations"), a former portfolio company of MorAmerica
Capital. Water Creations went out of business in December, 2002, at which time
BFS was owed approximately $900,000 for products sold to Water Creations. On
March 26, 2004, BFS filed suit in the Iowa District Court of Polk County, Iowa
against board members of and investors in Water Creations, including MorAmerica
Capital, David Schroder (Chief Financial Officer of the Corporation), and
InvestAmerica Venture Group, Inc., an affiliate of InvestAmerica Investment
Advisors, Inc., the subadviser to the Corporation. BFS has sued the defendants
for fraud, fraudulent transfer, breach of fiduciary duty, civil conspiracy,
breach of contract, conversion, and alter ego/piercing corporate veil. The
central allegation of the case is that the defendants knew that Water Creations
was insolvent and owed a duty to BFS to protect it from selling to Water
Creations under these circumstances. The defendants have hired counsel and
intend to vigorously defend this litigation.
Item 4. Submission of Matters to a Vote of Security Holders
There are no items to report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Information in response to this Item is incorporated by reference to
the "Shareholder Information" section of the Corporation's Annual Report to
Shareholders for the fiscal year ended September 30, 2004 (the "2004 Annual
Report").
Item 6. Selected Financial Data.
Information in response to this Item is incorporated by reference to
the "Selected Financial Data" section of the 2004 Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Information in response to this Item is incorporated by reference to
the "Management's Discussion and Analysis" section of the 2004 Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information in response to this Item is incorporated by reference to
the "Quantitative and Qualitative Disclosures About Market Risk" section of the
2004 Annual Report.
Item 8. Financial Statements and Supplementary Data.
Information in response to this Item is incorporated by reference to
the Consolidated Financial Statements, notes thereto and report thereon
contained in the 2004 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There are no items to report.
Item 9A. Controls and Procedures.
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 the Corporation (the "Certifying Officers") have conducted
evaluations of the Corporation'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 the
Corporation's disclosure controls and procedures and have concluded that those
disclosure controls and procedures are effective as of the date of this Annual
Report on Form 10-K. 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 Annual Report on Form 10-K.
As of the date of this Annual Report on Form 10-K, there have not been
any significant changes in the Corporation'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.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The following chart identifies the persons nominated to serve as
directors of the Corporation at the Corporation's 2005 Annual Shareholders'
Meeting. Unless otherwise indicated, the addresses for all director nominees is
15 West South Temple Street, Suite 520, Salt Lake City, Utah 84101.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Name, Address and Position(s) Term of Principal Occupation(s) During Past 5 Years Other
Age Held with Office and Directorships
the Length of Held by Director
Corporation Time Served or Director
Nominee
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Goeffrey T. Director and Director Mr. Woolley is currently Executive Chairman None
Woolley, 45 Chairman of since 2003, of European Venture Partners, a company he
the Board elected founded in 1997 to introduce "venture
Chairman leasing," an asset-backed debt instrument
April, 2004 with equity participation to the European and
Israeli markets. He holds an M.B.A. from the
University of Utah and a B.S. in Business
Management with a Minor in Economics from
Brigham Young University.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Benjamin Director Since Mr. Jiaravanon has served as President of None
Jiaravanon Jiaravanon, 33 February, Strategic Planning
33 Group of Charoen Pokphand 2004 Indonesia, an
agribusiness conglomerate with sales in excess
of $1.5 billion, since 2002. From 1996 to
2002, Mr. Jiaravanon was an Associate in the
Direct Investments Group at Merrill Lynch. He
was responsible for helping manage Merrill
Lynch's capital in a portfolio of companies
across Asia including China, Malaysia,
Indonesia, Korea, and Singapore. Mr.
Jiaravanon received his Bachelor of Science
degree in industrial management from Carnegie
Mellon University.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Kent I. Madsen, 38 Director, Director Mr. Madsen has served as a Managing Director None
President since 2003, of Wasatch Venture Fund, where he has been
and Secretary President employed since 1998, and as an officer of
and Zion's Bank SBIC Venture Fund since 2001. Mr.
Secretary Madsen is a member of three investment
since 2004 advisers which are affiliated with the
Corporation's investment advisor: ZWMC,
L.L.C., Wasatch Management Partners, L.L.C.,
and DWMC II, L.L.C. From 1994 to 1996, Mr.
Madsen worked for Ford Motor Company,
initially in the Advanced Technology Group and
later in Ford's China Operations. Mr. Madsen
received a B.S. in Mechanical Engineering and
Applied Mechanics
--------------------- -------------- ------------- ----------------------------------------------- -------------------
--------------------- -------------- ------------- ----------------------------------------------- -------------------
with a Minor in Mathematics from the
University of Pennsylvania. He also received a
M.S.E. from the University of Michigan, an
M.A. in International Studies from the Lauder
Institute at the University of Pennsylvania
and an M.B.A. from the Wharton School at the
University of Pennsylvania.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Paul M. Bass, Jr., Director Since 1994 Mr. Bass was Chairman of the Boards of • Keystone
69 Directors of the Corporation and of Consolidated
MorAmerica from 1994 to April, 2004. Mr. Industries:
Bass has served as Vice Chairman of First Director
Southwest Company, a regional investment (Chairman of the
banking firm from 1988 to the present. Mr. Audit Committee)
Bass specializes in corporate finance, • Compx
investment management and public finance. International
Mr. Bass holds a B.B.A. in finance from Inc.: Director
Southern Methodist University. (member of the
Audit Committee)
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Michael W. Dunn, 55 Director Since 1994 Mr. Dunn has also been a Director of None
MorAmerica since 1994. Mr. Dunn has been
C.E.O. since 1980 and President and Director
since 1983 of Farmers & Merchants Savings Bank
of Manchester, Iowa.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Jasja Kotterman, 35 Director Since Ms. Kotterman joined Avon Products as None
February, Director of Business Development in
2004 February, 2004. Prior to joining Avon, she
was Vice President, Strategic Planning and
Business Development for Primedia Inc., a
diversified media company, from 2003-2004,
and Managing Director of Primedia
International, the international development
group for Primedia, from 2000-2003. Prior
to joining Primedia, Ms. Kotterman was
Director, Finance and Business Development
at Smartcasual.com, an internet start-up
company, from 1999-2000. Prior to this, Ms.
Kotterman was an associate with Merrill
Lynch's Investment Banking Division from
1998 to 1999, working on corporate finance
and M&A transactions for Latin American
clients. Ms. Kotterman started her business
career at Bain & Company, a
strategy-consulting firm, joining its London
office, and subsequently moving to its
Spanish office in Madrid. Ms. Kotterman
holds an M.B.A. from the Wharton School and
an M.A. in International Studies from the
University of Pennsylvania. Ms. Kotterman
is a graduate of Cambridge University in
England, where she received an M.A. in
Genetics and an M.Phil. in International
Development.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Shane Robison, 50 Director Since Mr. Robison has served as Executive Vice None
February, President and Chief Strategy and Technology
2004 Officer of Hewlett-Packard Company since
2002. Prior to this, Mr. Robison was Senior
Vice President and Chief Technology Officer of
--------------------- -------------- ------------- ----------------------------------------------- -------------------
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Strategy and Technology at Compaq Computer
Corporation. Prior to joining Compaq, Robison
was President of Internet Technology and
Development at AT&T Labs, a position he had
held since 1999. Prior to AT&T Labs, he was
Executive Vice President, Research and
Development and President of the Design
Productivity Group at Cadence Design Systems,
Inc., from 1995 to 1999. Mr. Robison also
spent seven years at Apple Computer Corp-
oration. Mr. Robison's experience includes
work at Schlumberger's research groups in
Silicon Valley, at Evans & Sutherland Computer
Corporation and consulting for the University
of Utah in the area of database systems
architecture. Mr. Robison is a graduate of
the University of Utah, from which he received
bachelor's and master's degrees in computer
science.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Martin Walton, 39 Director Since Mr. Walton has served as President of TD None
February, Options LLC in Chicago, Illinois, one of the
2004 largest equity options market makers, and
Global Head of Equity Derivatives for TD
Securities, the Investment Bank arm of the
Toronto-Dominion Bank since 2000. From 1995 to
2000, he managed a $240 million hedge fund and
later a $600 million fund of hedge funds until
joining TD Securities in 2000. Mr. Walton
began his career in capital markets, trading
for Canadian Imperial Bank of Commerce (London
and Toronto) later becoming VP, Derivatives
trading at Bank of America in London. Mr.
Walton graduated with a B.A. degree (Honours)
from Brasenose College, Oxford University in
1985.
--------------------- -------------- ------------- ----------------------------------------------- -------------------
Executive Officers of the Corporation
Unless otherwise indicated, the addresses for all officers is 15 West
South Temple Street, Suite 520, Salt Lake City, Utah 84101.
------------------ -------------- ------------ --------------------------------------------------- -------------------
Name, Address Position(s) Term of Principal Occupation(s) During Past 5 Years
and Age Held with Office and
the Length of
Corporation Time Served
------------------ -------------- ------------ --------------------------------------------------- -------------------
Kent I. Madsen, Director, Director Mr. Madsen has served as a Managing Director of
38 President since Wasatch Venture Fund, where he has been employed
and Secretary 2003, since 1998, and as an officer of Zion's Bank SBIC
President Venture Fund since 2001. Mr. Madsen is a member of
and three investment advisers which are affiliated
Secretary with the Corporation's investment advisor: ZWMC,
since 2004 L.L.C., Wasatch Management Partners, L.L.C., and
DWMC II, L.L.C. From 1994 to 1996, Mr. Madsen
worked for Ford Motor Company, initially in the
Advanced Technology Group and later in Ford's
China Operations. Mr. Madsen received a B.S. in
Mechanical Engineering and Applied Mechanics with
a Minor in Mathematics from the University of
Pennsylvania. He also received a M.S.E. from the
University of Michigan,
------------------ -------------- ------------ --------------------------------------------------- -------------------
------------------ -------------- ------------ --------------------------------------------------- -------------------
an M.A. in International Studies from the Lauder
Institute at the University of Pennsylvania and an
M.B.A. from the Wharton School at the University
of Pennsylvania.
------------------ -------------- ------------ --------------------------------------------------- -------------------
David R. Chief Since Prior to his current position, Mr. Schroder served
Schroder, 61 Financial March, 2004 as President, Secretary and a Director of the
Officer and Corporation since 1994. Since 1985, Mr. Schroder
Treasurer has been a principal of InvestAmerica Investment
Advisors, Inc., the Corporation's subadvisor, and
is presently President, Secretary and a Director.
Mr. Schroder is also President, Secretary and a
Director of InvestAmerica N.D. Management, Inc.,
which provides management and investment services
to NDSBIC, L.P., and which is affiliated with the
Subadvisor. Mr. Schroder is also President,
Secretary and a Director of InvestAmerica ND,
L.L.C., the general partner of NDSBIC, L.P. Since
2002 Mr. Schroder has also served as President and
Secretary of InvestAmerica L&C Management, Inc.
("InvestAm L&C") and InvestAmerica L&C, LLC,
respectively the Manager and General Partner of
Lewis and Clark Private Equities, LP, an SBIC.
InvestAm L&C is also affiliated with the
Subadvisor. Since August, 2004, Mr. Schroder has
also served as President and Secretary of
InvestAmerica NW Management, Inc. and
InvestAmerica NW, LLC, respectively the Manager
and General Partner of Invest Northwest, LP, a
private venture capital limited partnership. As a
representative of the Subadviser and affiliates,
Mr. Schroder also serves on the boards of
directors of several of the Corporation's
portfolio companies and the portfolio companies of
other managed funds. Mr. Schroder received a
B.S.F.S. from Georgetown University and an M.B.A.
from the University of Wisconsin.
------------------ -------------- ------------ --------------------------------------------------- -------------------
Mr. Timothy A. Vice Since Mr. Bridgewater is currently the President of
Bridgewater, 43 President February, Interlink Management Corporation, a management
and 2004 consulting firm he founded in 1994. He is also a
Assistant Managing Director of Bridgewater International
Secretary Group, LLC. Mr. Bridgewater received a B.S. in
Business Finance from Brigham Young University in
1985. From 2000 until 2003, Mr. Bridgewater served
on the board of directors of China Motion Telecom
International, Ltd., and from 2001 until 2003 he
served on the advisory board of LiveTutor, Inc.
Since 1998, Mr. Bridgewater has also served as the
Vice President of the American-Thai Foundation for
Education, a non-profit scholarship and rural Thai
support organization.
------------------ -------------- ------------ --------------------------------------------------- -------------------
Nick Efstratis, Vice Since 2004 Mr. Efstratis is also employed by Wasatch
34 President Management Partners, LLC, which manages the
and Chief Wasatch Venture Funds. He joined Wasatch
Compliance immediately after completing his MBA at the
Officer Marriott School at BYU in 1999. While pursuing
his MBA, Mr. Efstratis was retained as a
consultant for Wasatch to research, analyze, and
make recommendations on strategic investments. In
addition, he worked for Excite Corporation as an
Associate in Business Development. While at
Excite, Mr. Efstratis worked with Excite's Senior
Management and production teams to identify the
key content and technology elements needed to
further advance Excite's services, distribution
and branding. Prior to pursuing his MBA, Mr.
Efstratis was a founding member of the management
team of NetDocuments. He received a B.S. in
Entrepreneurship with a minor in
Accounting/Economics from Brigham Young
University in 1997.
------------------ -------------- ------------ --------------------------------------------------- -------------------
------------------ -------------- ------------ --------------------------------------------------- -------------------
Audit Committee Financial Expert
The Corporation's board of directors has determined that Gordon J. Roth
is an audit committee financial expert and that Mr. Roth is independent, as that
term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.
Audit Committee
The Audit Committee of the Board of Directors of the Corporation (the
"Audit Committee") is a separately-designated standing audit committee
established in accordance with section 3(a)(58)(A) of the Exchange Act, and is
composed of three directors and operates under a written charter originally
adopted by the Board of Directors and annually updated by the Audit Committee.
The current charter of the Audit Committee was attached to the Proxy Statement
for the 2004 Annual Shareholders Meeting. The current members of the Audit
Committee are Michael W. Dunn (Chair), Paul M. Bass and Gordon J. Roth. Under
the terms of the charter and the listing standards of The Nasdaq Stock Market,
Inc., all of the Audit Committee members are considered to be independent.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act, officers and directors
of the Corporation and persons beneficially owning 10% or more of the
Corporation's Common Stock (collectively, "reporting persons") must file reports
on Forms 3, 4 and 5 regarding changes in their holdings of the Corporation's
equity securities with the Securities and Exchange Commission. Based solely upon
a review of copies of these reports sent to the Secretary of the Corporation,
the Corporation believes that all Forms 3, 4, and 5 required to be filed by all
reporting persons have been properly and timely filed with the Securities and
Exchange Commission, except that Mr. Walton was to have filed a Form 3 by March
5, 2004, and that form was filed with the SEC on April 29, 2004.
Code of Ethics
The Corporation has adopted a Code of Business Conduct and Ethics that
applies to all of the Corporation's officers, directors and employees. The
Corporation's Code of Business Conduct and Ethics is filed with the Commission
as an exhibit to its 2003 Annual Report on Form 10-K.
If the Corporation makes any substantive amendments to the Code of
Business Conduct and Ethics or grant any waiver, including any implicit waiver,
from a provision of the Code of Business Conduct and Ethics to its principal
executive or principal financial officer, the Corporation will disclose the
nature of such amendment or waiver in a report on Form 8-K.
Item 11. Executive Compensation.
The Corporation has no employees and does not pay any compensation to
any of its officers. All of the Corporation's officers and staff are employed by
Atlas Management Partners, LLC or InvestAmerica Investment Advisors, Inc., which
pay all of their cash compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The Corporation does not have any equity compensation plans. As of
November 30, 2004, there were 2,329,255 shares issued and outstanding. The
following table sets forth certain information as of November 30, 2004, with
respect to the Common Stock ownership of: (i) those persons or groups (as that
term is used in Section 13(d)(3) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act") who beneficially own more than 5% of the Common
Stock, (ii) each Director and nominee for Director of the Corporation, and (iii)
all Officers and Directors of the Corporation, twelve in number, as a group.
Unless otherwise provided, the address of those in the following table is 15
West South Temple Street, Suite 520, Salt Lake City, Utah 84101.
Name and Address of Beneficial Amount and Nature Percent of Class of Voting
Owner Of Beneficial Ownership Common Stock
----- ----------------------- ------------
Atlas Management Partners, LLC(1) 910,146 Shares 39.10%
One South Main Street, Suite 1660, Salt Lake
City, Utah 84133
Bridgewater International Group, LLC(1) 804,689 Shares 34.55%
10500 South 1300 West, South Jordan, Utah
84095
Geoffrey T. Woolley(2) 926,094 Shares 39.76%
Paul M. Bass, Jr. 37,000 Shares 1.59%
Michael W. Dunn 26,827 Shares 1.15%
Benjamin Jiaravanon(3) 910,146 Shares 39.10%
Kent I. Madsen(4) 913,846 Shares 39.23%
Robert T. Madsen(5) 105,457 Shares 4.53%
Gordon J. Roth 3,951 Shares 0.17%
David R. Schroder(6) 77,416 Shares 3.32%
Kevin F. Mullane(6) 11,264 Shares 0.48%
Nick Efstratis(7) 910,646 Shares 39.01%
Todd J. Stevens(8) 911,146 Shares 39.12%
Timothy Bridgewater(9) 5,000 Shares 0.21%
Martin C. Walton -- --
Shane V. Robison -- --
Jasja Kotterman 1,000 Shares 0.04%
Robert A. Comey(6) 57,019 Shares 2.4%
All Officers and Directors as a Group 1,150,771 Shares 49.41%
------------------------------------
(1) Information with respect to Atlas and Bridgewater International
Group, LLC ("Bridgewater") is based upon Amendment No. 2 to Schedule 13D, dated
February 13, 2004, filed by Atlas with the SEC in which Atlas disclosed that its
has sole power to vote or to direct the vote and shared power to dispose or to
direct the disposition of approximately 804,689 shares of the Corporation's
Common Stock previously acquired by Bridgewater under a Shareholder and Voting
Agreement entered into between Atlas and Bridgewater. In addition, Atlas has
sole power to vote or to direct the vote and shared power to dispose or to
direct the disposition of approximately 105,457 shares of the Corporation's
Common Stock previously acquired by Robert T. Madsen under a Shareholder and
Voting Agreement entered into between Atlas and Robert T. Madsen. Both
Shareholder and Voting Agreements referenced above grant Atlas the right to vote
the respective shares of Bridgewater and Robert T. Madsen for an initial period
ending six years after the date upon which Atlas entered into that Investment
Advisory Agreement with the Corporation and MorAmerica.
(2) Information with respect to Mr. Woolley is based upon Amendment No.
2 to Schedule 13D, dated February 13, 2004, filed by Atlas with the SEC, and
Form 4 filed with the SEC by Mr. Woolley on March 16, 2004. Mr. Woolley has sole
voting and sole dispositive power over 13,948 shares of the Corporation's Common
Stock and, as a manager of Atlas, has shared control over the voting power of
Atlas on an additional 910,146 shares of the Corporation's Common Stock. To the
extent that Atlas may be deemed to be in control of the Corporation as a result
of beneficial ownership and voting control of the Corporation's Common Stock, or
to the extent that Atlas is the investment advisor for the Corporation and
MorAmerica as provided in that Investment Advisory Agreement between Atlas and
MorAmerica dated March 1, 2004 and the Investment Advisory Agreement between
Atlas and the Corporation dated March 1, 2004, Mr. Woolley, as a Member and
Voting Managing Director of Atlas under the Strategic Agreement, may be an
"interested person" of the Corporation, as that term is defined in Section
2(a)(19) of the Investment Company Act.
(3) Information with respect to Mr. Jiaravanon is based upon Amendment
No. 2 to Schedule 13D, dated February 13, 2004, filed by Atlas with the SEC. As
the sole manager of Bridgewater, which is a member of Atlas, Mr. Jiaravanon has
shared control over the voting power of Atlas on the 910,146 shares of the
Corporation's Common Stock Atlas controls. To the extent that Bridgewater may be
deemed to be in control of the Corporation as a result of beneficial ownership
of the Corporation's Common Stock, Mr. Jiaravanon, as the sole manager of
Bridgewater, may be an "interested person" of the Corporation, as that term is
defined in Section 2(a)(19) of the Investment Company Act.
(4) Information with respect to Mr. Kent Madsen is based upon Amendment
No. 2 to Schedule 13D, dated February 13, 2004, filed by Atlas with the SEC, and
Form 4 filed by Mr. Madsen with the SEC on September 23, 2004. Mr. Kent Madsen
has sole voting and sole dispositive power over 3,700 shares of the
Corporation's Common Stock and, as a manager of Atlas, has shared control over
the voting power of Atlas on an additional 910,146 shares of the Corporation's
Common Stock. To the extent that Atlas may be deemed to be in control of the
Corporation as a result of beneficial ownership and voting control of the
Corporation's Common Stock, or to the extent that Atlas is the investment
advisor for the Corporation and MorAmerica as provided in that Investment
Advisory Agreement between Atlas and MorAmerica dated March 1, 2004 and the
Investment Advisory Agreement between Atlas and the Corporation dated March 1,
2004, Mr. Kent Madsen, who is currently a member and the sole manager of Atlas,
may be an "interested person" of the Corporation, as that term is defined in
Section 2(a)(19) of the Investment Company Act. Mr. Kent Madsen is the son of
Mr. Robert Madsen.
(5) Information with respect to Mr. Robert Madsen is based upon
Amendment No. 2 to Schedule 13D, dated February 13, 2004, filed by Atlas with
the SEC. As the holder of shared dispositive power over 105,457 shares of the
Corporation's Common Stock, Mr. Robert Madsen may be deemed to a member of a
"group" as that term is used in Section 13(d)(3) of the Exchange Act, together
with Bridgewater, Kent I. Madsen and Geoffrey T. Woolley. In addition, to the
extent that Atlas may be deemed to be in control of the Corporation as a result
of beneficial ownership and voting control of the Corporation's Common Stock, or
to the extent that Atlas is the investment advisor for the Corporation and
MorAmerica as provided in that Investment Advisory Agreement between Atlas and
MorAmerica dated March 1, 2004 and the Investment Advisory Agreement between
Atlas and the Corporation dated March 1, 2004, Mr. Robert Madsen, who is a
Member of Atlas under that Strategic Agreement entered into among Robert T.
Madsen, Kent I. Madsen, Geoffrey T. Woolley, Bridgewater and Atlas (the
"Strategic Agreement"), may be an "interested person" of the Corporation, as
that term is defined in Section 2(a)(19) of the Investment Company Act. Mr.
Robert Madsen is the father of Mr. Kent Madsen.
(6) As principals, officers and directors of InvestAmerica Investment
Advisors, Inc. ("InvestAmerica"), 101 Second Street S.E., Suite 800, Cedar
Rapids, IA 52401, the investment advisor for the Corporation and MorAmerica,
during the fiscal year ended September 30, 2004, Messrs. Schroder, Mullane and
Comey were "interested persons" of the Corporation, as that term is defined in
Section 2(a)(19) of the Investment Company Act.
(7) Information with respect to Mr. Nick Efstratis is based upon
Amendment No. 2 to Schedule 13D, dated February 13, 2004, filed by Atlas with
the SEC, and Form 4 filed by Mr. Efstratis with the SEC on February 23, 2004.
Mr. Efstratis has sole voting and sole dispositive power over 500 shares of the
Corporation's Common Stock and, as a manager of Atlas, has shared control over
the voting power of Atlas on an additional 910,146 shares of the Corporation's
Common Stock. To the extent that Atlas may be deemed to be in control of the
Corporation as a result of beneficial ownership and voting control of the
Corporation's Common Stock, or to the extent that Atlas is the investment
advisor for the Corporation and MorAmerica as provided in that Investment
Advisory Agreement between Atlas and MorAmerica dated March 1, 2004 and the
Investment Advisory Agreement between Atlas and the Corporation dated March 1,
2004, Mr. Efstratis, who is currently a Voting Managing Director of Atlas, may
be an "interested person" of the Corporation, as that term is defined in Section
2(a)(19) of the Investment Company Act.
(8) Information with respect to Mr. Todd Stevens is based upon
Amendment No. 2 to Schedule 13D, dated February 13, 2004, filed by Atlas with
the SEC, and Form 4 filed by Mr. Stevens with the SEC on February 20, 2004. Mr.
Stevens has sole voting and sole dispositive power over 1,000 shares of the
Corporation's Common Stock and, as a manager of Atlas, has shared control over
the voting power of Atlas on an additional 910,146 shares of the Corporation's
Common Stock. To the extent that Atlas may be deemed to be in control of the
Corporation as a result of beneficial ownership and voting control of the
Corporation's Common Stock, or to the extent that Atlas is the investment
advisor for the Corporation and MorAmerica as provided in that Investment
Advisory Agreement between Atlas and MorAmerica dated March 1, 2004 and the
Investment Advisory Agreement between Atlas and the Corporation dated March 1,
2004, Mr. Stevens, who is currently a Voting Managing Director of Atlas, may be
an "interested person" of the Corporation, as that term is defined in Section
2(a)(19) of the Investment Company Act.
(9) Information with respect to Mr. Timothy Bridgewater is based upon
Amendment No. 2 to Schedule 13D, dated February 13, 2004, filed by Atlas with
the SEC, and Form 4 filed by Mr. Bridgewater with the SEC on February 13, 2004.
Mr. Bridgewater has sole voting and sole dispositive power over 5,000 shares of
the Corporation's Common Stock and, as Managing Director of Bridgewater and as a
manager of Atlas, has shared control over the voting power of Atlas on an
additional 910,146 shares of the Corporation's Common Stock. To the extent that
Atlas may be deemed to be in control of the Corporation as a result of
beneficial ownership and voting control of the Corporation's Common Stock, or to
the extent that Atlas is the investment advisor for the Corporation and
MorAmerica as provided in that Investment Advisory Agreement between Atlas and
MorAmerica dated March 1, 2004 and the Investment Advisory Agreement between
Atlas and the Corporation dated March 1, 2004, Mr. Bridgewater, who is currently
a Voting Managing Director of Atlas, may be an "interested person" of the
Corporation, as that term is defined in Section 2(a)(19) of the Investment
Company Act.
Item 13. Certain Relationships and Related Transactions.
Atlas is the investment advisor to the Corporation pursuant to that
Investment Advisory Agreement between the Corporation and Atlas dated March 1,
2004 (the "MACC Investment Advisory Agreement"). Atlas's address is One South
Main Street, Suite 1660, Salt Lake City, Utah 84133. The MACC Investment
Advisory Agreement provides that Atlas is entitled to receive a management fee
equal to an annual rate of 2.5% of the Corporation's Net Assets, payable monthly
in arrears. In addition to the annual management fee of 2.5% of the
Corporation's net assets, Atlas is entitled to receive an incentive fee (the
"Incentive fee") in an amount equal to 20% of the Corporation's realized capital
gains in excess of realized capital losses of the Corporation after allowance
for any unrealized capital losses on the portfolio investments of the
Corporation. The Incentive fee is calculated, accrued, and paid on a quarterly
basis, subject to adjustment at the end of each fiscal year. Total management
fees under the MACC Investment Advisory Agreement amounted to $2,892 for the
year ended September 30, 2004. There were no incentive fees accrued or paid
under the MACC Investment Advisory Agreement in 2004.
Mr. Geoffrey Wolley, Director and Chairman of the Board of the
Corporation, is a Voting Managing Director of Atlas. Mr. Kent Madsen, Director,
President and Secretary of the Corporation, is a Voting Managing Director of
Atlas. Mr. Timothy Bridgewater, Vice President and Assistant Secretary of the
Corporation, is a Voting Managing Director of Atlas. Mr. Nick Efstratis, Vice
President and Chief Compliance Officer of the Corporation, is a Voting Managing
Director of Atlas.
MorAmerica is a wholly-owned subsidiary of the Corporation. The current
members of the Board of Directors and the nominees for fiscal year 2005 of the
Board of Directors of MorAmerica are the same individuals as are nominated for
directors of the Corporation's Board of Directors. Mr. Geoffrey Woolley is
Chairman of the Board of both the Corporation and of MorAmerica. Mr. Kent
Madsen, Director, President and Secretary of the Corporation, is the President
and Secretary of MorAmerica. Mr. Timothy Bridgewater, Assistant Secretary of the
Corporation, is the Vice President and Assistant Secretary of MorAmerica. Mr.
Nick Efstratis, Vice President and Chief Compliance Officer of the Corporation
is the Vice President and Chief Compliance Officer of MorAmerica.
MorAmerica has a separate investment advisory agreement (the
"MorAmerica Capital Investment Advisory Agreement") with Atlas. The fee is equal
to 2.5% of the Capital Under Management (as defined in the MorAmerica Capital
Investment Advisory Agreement) on an
annual basis, but in no event more than 2.5% per annum of the Assets Under
Management or 7.5% of Regulatory Capital (as defined in the MorAmerica Capital
Investment Advisory Agreement). However, during fiscal 2003, MorAmerica's
investment advisor, InvestAmerica, agreed to a voluntary, temporary reduction in
management fees from January 1, 2003 through February 29, 2004. This temporary
agreement changed the management fee to be $68,750 per month not to exceed the
calculation specified in the current advisory agreement. This voluntary,
temporary reduction in management fees was terminated on February 29, 2004. In
addition, the MorAmerica Capital Investment Advisory Agreement provides that
MorAmerica will pay Atlas 20.0% of the net capital gains, before taxes, on
investments in the form of an incentive fee. Net capital gains, as defined in
the MorAmerica Capital Investment Advisory Agreement, are calculated as gross
realized gains, minus the sum of capital losses, less any unrealized
depreciation, including reversals of previously recorded unrealized
depreciation, recorded during the year, and net investment losses, if any, as
reported on page 4c, line 33 of the SBA Form 468.1. Capital losses and realized
capital gains are not cumulative under the incentive fee computation. Payments
for incentive fees resulting from noncash gains are deferred until the assets
are sold. The MorAmerica Capital Investment Advisory Agreement may be terminated
by either party upon sixty days written notice.
Total management fees (net of management fees waived) under the
MorAmerica Capital Investment Advisory Agreement amounted to $955,508 for the
year ended September 30, 2004. Incentive fees are an expense in determining net
realized gain (loss) on investments in the consolidated statement of operations.
Incentive fees of $493,050 were earned for the year ended September 30, 2004.
Total incentive fees paid under the MorAmerica Capital Investment Advisory
Agreement amounted to $497,517 in fiscal 2004. Approximately $18,353 of
incentive fees related to noncash gains from prior years is being deferred as
described above.
As previously disclosed, most recently in the Corporation's Form 8-K
filed on January 7, 2005, in anticipation of changes to the Board of Directors
of the Corporation and MorAmerica Capital and a change in investment advisors,
starting in July, 2003, Atlas, the Corporation's investment advisor since March
1, 2004, periodically notified the SBA of the proposed changes and, as required
by the Regulations, submitted the Atlas/MorAmerica Capital Investment Advisory
Agreement to the SBA for approval on January 29, 2004. While SBA has previously
notified MorAmerica Capital in writing that four of the five principals of Atlas
have SBA's approval as managers of MorAmerica Capital, SBA has recently notified
MorAmerica Capital that SBA will not grant approval of Atlas as investment
advisor of MorAmerica Capital. Atlas and MorAmerica Capital are working with SBA
to resolve this issue and anticipate a meeting on this topic with SBA during the
month of January, 2005.
The Corporation, MorAmerica and Atlas are also parties to an Investment
Advisory Support Services Agreement (the "Subadvisory Agreement") with
InvestAmerica ("InvestAmerica" or the "Subadviser"). Prior to March 1, 2004,
InvestAmerica was the investment advisor to the Corporation and MorAmerica.
Pursuant to the Subadvisory Agreement, InvestAmerica has been retained to
monitor and manage portfolio company investments in existence as of the date of
the Subadvisory Agreement, including exits, preparation of valuations, follow-on
investment analysis and recommendations and other portfolio management matters.
InvestAmerica also currently provides certain accounting and
financial services for the Corporation. Under the Subadvisory Agreement, Atlas
pays InvestAmerica certain fixed management fees and incentive fees based on a
portion of the incentive fees paid to Atlas by the Corporation and MorAmerica
under the MACC Investment Advisory Agreement and the MorAmerica Capital
Investment Advisory Agreement, respectively. The Subadvisory Agreement does not
result in any additional expense to either the Corporation or MorAmerica
Capital. Total management fees under the Subadvisory Agreement amounted to
$189,583 for the year ended September 30, 2004.
The address of the Subadviser is 101 Second Street S.E., Suite 800,
Cedar Rapids IA 52401. Mr. David Schroder, Chief Financial Officer and Treasurer
of the Corporation, is a shareholder of, and President and Secretary of
InvestAmerica. Mr. Kevin Mullane, Vice President of MorAmerica, is a shareholder
of, and the Senior Vice President and Assistant Secretary of InvestAmerica. Mr.
Robert A. Comey, Chief Financial Officer and Treasurer of MorAmerica, is the
Executive Vice President, Treasurer and Assistant Secretary of InvestAmerica.
Mr. Michael H. Reynoldson, Vice President of MorAmerica, is the Vice President
of InvestAmerica.
Pursuant to authority granted by the Corporation's shareholders at the
2004 Annual meeting, the Corporation issued convertible debt to its Chairman,
Geoffrey T. Woolley in 2004 pursuant to a Convertible Note and Security
Agreement with Mr. Woolley dated March 1, 2004 (the "Woolley Agreement"). Under
the Woolley Agreement, the Corporation may borrow up to up to $400,000 from Mr.
Woolley, which may be drawn over a twelve month period. Advances under this line
of credit bear interest at the rate of 9% per year. The Corporation is required
to make interest payments quarterly during the first year, and all accrued
interest and unpaid principal will be fully amortized in the second year. The
Woolley Agreement extends for two years, subject to extension at any time by
mutual agreement. Any outstanding principal and interest may be converted at the
option of Mr. Woolley to shares of the Corporation's Common Stock at the lesser
of (i) $3.50 per share or (ii) the same price per share as any rights offering
to shareholders within 12 months of the loan date. The loan is secured by a
first lien on cash assets of the Corporation, a letter of support from
MorAmerica Capital in which MorAmerica Capital agreed to make legally available
distributions to pay any outstanding loan amounts, and a guarantee by Atlas.
Item 14. Principal Accounting Fees and Services.
The Audit Committee of the Board of Directors of the Corporation (the
"Audit Committee") is composed of three directors and operates under a written
charter originally adopted by the Board of Directors and annually updated by the
Audit Committee. The current charter of the Audit Committee was attached to the
Proxy Statement for the 2004 Annual Shareholders Meeting. The current members of
the Audit Committee are Michael W. Dunn (Chair), Paul M. Bass and Gordon J.
Roth. Under the terms of the charter and the listing standards of The Nasdaq
Stock Market, Inc., all of the Audit Committee members are considered to be
independent.
Management is responsible for the Corporation's internal controls and
the financial reporting process. The independent accountants are responsible for
performing an independent audit of the Corporation's consolidated financial
statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
In this regard, the Audit Committee has reviewed and discussed the
audited financial statements for Fiscal Year 2004 with management and discussed
other matters related to the audit with the independent auditors. Management
represented to the Audit Committee that the Corporation's consolidated financial
statements were prepared in accordance with accounting principles generally
accepted in the United States of America. The Audit Committee met with the
independent auditors, with and without management present, and discussed with
the independent auditors matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The independent
auditors also provided to the Audit Committee the written disclosures and the
letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Audit Committee discussed with the
independent auditors the firm's independence.
The Corporation paid KPMG LLP ("KPMG"), the Corporation's independent
auditors for fiscal year 2004, the following amounts during fiscal year 2004:
Audit Fees (including quarterly reviews,
security counts, and audit of Form 468): $58,250
Audit-related services $11,175
Financial Information Systems Design
and Implementation: $ -0-
Non-Audit Fees:
Preparation of federal and state
income tax returns $23,750
Other tax research, consultation,
correspondence and
advice $ 1,150
The Audit Committee has considered whether KPMG has maintained its
independence during Fiscal Year 2004.
Based upon the Audit Committee's discussions with management and the
independent auditors, and the Audit Committee's review of representations of
management and the report of the independent auditors to the Audit Committee,
the Audit Committee recommended that the Corporation's Board of Directors
include the audited consolidated financial statements in the Corporation's
Annual Report on Form 10-K for the year ended September 30, 2004, filed with the
Securities and Exchange Commission.
AUDIT COMMITTEE:
Michael W. Dunn, Chair
Paul M. Bass
Gordon J. Roth
Independent Auditor Fees and Services
The following table presents fees paid for professional services
rendered by KPMG for the Fiscal Year 2004 and the fiscal year ending
September
30, 2003 ("Fiscal Year 2003"):
Fee Category Fiscal Year 2004 Fees Fiscal Year 2003 Fees
---------------------------------------- ---------------------------- ----------------------------
$58,250 $54,500
Audit Fees
$11,175 4,800
Audit-Related Fees
$24,900 $50,850
Tax Fees
-0- -0-
All Other Fees
---------------------------- ----------------------------
$94,325 $110,150
Total Fees
Audit Fees were for professional services rendered for the audit of the
Corporation's consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by KPMG in connection with statutory and regulatory
filings or engagements and include quarterly reviews, security counts and audit
of SBA Form 468.
Audit-Related Fees were for assurance and related services that are
reasonably related to the performance of the audit or review of the
Corporation's consolidated financial statements and are not reported under
"Audit Fees." These services include accounting consultations in connection with
acquisitions, consultations concerning financial accounting and reporting
standards.
Tax Fees were for professional services for federal, state and
international tax compliance, tax advice and tax planning and include
preparation of federal and state income tax returns, and other tax research,
consultation, correspondence and advice.
All Other Fees are for services other than the services reported above.
The Corporation did not pay any fees for such other services in Fiscal Year 2004
or Fiscal Year 2003.
The Audit Committee has concluded the provision of the non-audit
services listed above is compatible with maintaining the independence of KPMG.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
The Audit Committee pre-approves all audit and permissible non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
the particular service or category of services and is generally subject to a
specific budget. The independent auditors and management are required to
periodically report to the Audit Committee regarding the extent of services
provided by the independent auditors in accordance with this pre-approval, and
the fees for the services performed to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this Report:
(1) A. The following financial statements are incorporated by
reference to the 2004 Annual Report.
Consolidated Balance Sheet at September 30, 2004
Consolidated Statement of Operations for the year ended
September 30, 2004
Consolidated Statements of Changes in Net Assets for
the years ended September 30, 2004 and
September 30, 2003
Consolidated Statement of Cash Flows for the year
ended September 30, 2004
Notes to Consolidated Financial Statements
Consolidated Schedule of Investments as of September
30, 2004 Notes to the Consolidated Schedule of
Investments
B. The Report of Independent Accountants with respect to
the financial statements listed in A. above is
incorporated by reference to the 2004 Annual Report.
(2) No financial statement schedules of the Corporation are
filed herewith because (i) such schedules are not required
or (ii) the information required has been presented in the
aforementioned financial statements and schedule of
investments.
(3) The following exhibits are filed herewith or incorporated by
reference as set forth below:
3(i)1 Certificate of Incorporation of the Corporation.
3(ii)4 Amended and Restated By-Laws of the Corporation.
4. See Exhibits 3.1 and 3.2.
10.12 Investment Advisory Agreement between MACC Private Equities
Inc. and Atlas Management Partners, LLC dated March 1, 2004.
10.2(2) Investment Advisory Agreement between MorAmerica Capital
Corporation and Atlas Management Partners, LLC dated March
1, 2004.
10.3(2) Investment Advisory Support Services Agreement dated March
1, 2004 among MACC Private Equities Inc., MorAmerica Capital
Corporation, Atlas Management Partners, LLC and
InvestAmerica Investment Advisors, Inc.
10.4(2) Convertible Note and Security Agreement dated March 1, 2004
between MACC Private Equities Inc. and Geoffrey T. Woolley.
10.5(2) Guarantee dated March 1, 2004 by Atlas Management Partners,
LLC in favor of Geoffrey T. Woolley.
10.6(2) Letter Agreement Regarding Subsidiary Support dated March
1, 2004 between MorAmerica Capital Corporation and MACC
Private Equities Inc.
10.7(3) Agreement and Waiver of Rights Under Section 203 of the
Delaware General Corporation Law among Zions First National
Bank, Atlas Management Partners LLC and MACC Private
Equities Inc.
13 2004 Annual Report to Stockholders.
14(3) Code of Business Conduct and Ethics
21(3) Subsidiary of the Corporation and jurisdiction of
incorporation.
31.1 Section 302 Certification of Kent I. Madsen (President).
31.2 Section 302 Certification of David R. Schroder (CFO).
32.1 Section 906 Certification of Kent I. Madsen (President).
32.2 Section 906 Certification of David R. Schroder (CFO).
99.1 Letter from United States Small Business Administration
dated January 4, 2005.
99.2 Agreement between United States Small Business
Administration, Rocky Mountain Mezzanine Fund II, L.P.,
Hanifen Imhoff
Mezzanine Fund, L.P., MorAmerica Capital Corporation and
NDSBIC, L.P.
99.3 Agreement of Settlement and Mutual Release.
1 Incorporated by reference to the Corporation's Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
1997, as filed with the Commission on May 14, 1997.
2 Incorporated by reference to the Corporation's Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
2004, as filed with the Commission on May 17, 2004.
3 Incorporated by reference to the Corporation's Annual Report
on Form 10-K for the period ended September 30, 2003, as
filed with the Commission on December 29, 2003.
4 Incorporated by reference to the Corporation's Annual Report
on Form 10-K for the period ended September 30, 2002, as
filed with the Commission on December 27, 2002.
(b) Reports on Form 8-K.
On December 3, 2004, and on January 7, 2005, the Corporation filed
reports on Form 8-K reporting information under Item 8.01 announcing
developments in the arbitration proceedings discussed in Item 3 of this
Annual Report on Form 10-K.
(c) Exhibits
See (a)(3) above.
(d) Financial Statement Schedules
See (a)(1) and (a)(2) above.
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 on June 16, 2005.
/s/ David R. Schroder
--------------------------------------------
David R. Schroder
President and Secretary
/s/ Robert A. Comey
--------------------------------------------
Robert A. Comey
Chief Financial Officer and Treasurer