Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
(Mark one)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2008
[ ] TRANSITION REPORT UNDER 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.
(Exact name of registrant as specified in its charter)
Delaware 42-1421406
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
580 Second Street; Suite 102, Encinitas, California 92024
---------------------------------------------------------
(Address of principal executive offices)
(760) 479-5080
--------------
(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 has (1) 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, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer |X| Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No |X| At December 31, 2008, the
registrant had issued and outstanding 2,464,621 shares of common stock.
Index
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Balance Sheets
at December 31, 2008 (Unaudited)
and September 30, 2008..........................................3
Condensed Statements of Operations
(Unaudited) for the three months ended
December 31, 2008 and December 31, 2007.........................4
Condensed Statements of Cash Flows
(Unaudited) for the three months ended
December 31, 2008 and December 31, 2007.........................5
Notes to Unaudited
Condensed Financial Statements..................................6
Schedule of Investments (Unaudited)
at December 31, 2008............................................9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ...............12
Item 3. Quantitative and Qualitative
Disclosure About Market Risk....................................18
Item 4. Controls and Procedures.........................................18
Item 4T. Controls and Procedures.........................................19
Part II. OTHER INFORMATION...............................................19
Item 6. Exhibits........................................................19
Signatures......................................................20
Certifications..................................................See Exhibits 31 and 32
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
MACC PRIVATE EQUITIES INC.
Condensed Balance Sheets
December 31, September 30,
2008 2008
(Unaudited)
----------------- ----------------
Assets
Cash and cash equivalents $ 143,836 145,790
Loans and investments in portfolio securities, at market or fair value:
Unaffiliated companies (cost of $2,267,557 and $2,274,595) 1,807,139 1,530,127
Affiliated companies (cost of $12,249,659 and $12,234,007) 10,529,151 10,528,449
Controlled companies (cost of $2,885,356 and $2,932,231) 2,396,400 2,443,275
Interest receivable 307,675 313,561
Other assets 318,055 352,675
--------------------- ----------------
Total assets $ 15,502,256 15,313,877
===================== ================
Liabilities and net assets
Liabilities:
Note payable $ 4,702,084 4,750,405
Incentive fees payable 16,361 16,361
Accounts payable and other liabilities 161,750 112,130
--------------------- ----------------
Total liabilities 4,880,195 4,878,896
--------------------- ----------------
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 13,267,297 13,349,317
Unrealized depreciation on investments (2,669,882) (2,938,982)
--------------------- ----------------
Total net assets 10,622,061 10,434,981
--------------------- ----------------
Total liabilities and net assets $ 15,502,256 15,313,877
===================== ================
Net assets per share $ 4.31 4.23
===================== ================
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1
MACC PRIVATE EQUITIES INC.
Condensed Statements of Operations
(Unaudited)
For the three For the three
months ended months ended
December 31, December 31,
2008 2007
------------------ ----------------
Investment income:
Interest
Unaffiliated companies $ 7,986 8,529
Affiliated companies 86,823 142,970
Controlled companies 6,788 21,511
Other 158 1,731
Dividends
Affiliated companies 109,624 85,263
--------------------- ----------------
Total investment income 211,379 260,004
--------------------- ----------------
Operating expenses:
Interest expenses 72,507 128,115
Management fees 74,943 66,964
Professional fees 57,228 55,720
Other 88,721 56,764
--------------------- ----------------
Total operating expenses and income tax expense 293,399 307,563
--------------------- ----------------
Investment expense, net (82,020) (47,559)
--------------------- ----------------
Realized and unrealized (loss) gain on investments: Net realized gain on
investments:
Unaffiliated companies --- ---
Net change in unrealized appreciation/depreciation investments 269,100 (721,354)
--------------------- ----------------
Net (loss) gain on investments 269,100 (721,354)
--------------------- ----------------
Net change in net assets from operations $ 187,080 (768,913)
===================== ================
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
2
MACC PRIVATE EQUITIES INC.
Condensed Statements of Cash Flows
(Unaudited)
For the three For the three
months ended months ended
December 31, December 31,
2008 2007
----------------- -------------------
Cash flows from (used in) operating activities:
Net change in net assets from operations $ 187,080 (768,913)
Adjustments to reconcile net change in net assets from operations to net
cash provided by (used in) operating activities:
Net realized and unrealized loss (gain) on investments (269,100) 721,354
Proceeds from disposition of and payments on
loans and investments in portfolio securities 78,388 60,661
Purchases of loans and investments in portfolio securities (40,127) ---
Change in interest receivable 5,886 23,015
Change in other assets 34,620 31,594
Change in accrued interest, deferred incentive fees payable,
accounts payable and other liabilities 49,620 (298,735)
------------------ -------------------
Net cash provided by (used in) operating activities 46,367 (231,024)
Cash flows from financing activities:
Note repayment (48,321) (48,528)
------------------ -------------------
Net cash used in financing activities (48,321) (48,528)
----------------- -------------------
Net decrease in cash and cash equivalents (1,954) (279,552)
Cash and cash equivalents at beginning of period 145,790 822,295
----------------- -------------------
Cash and cash equivalents at end of period $ 143,836 542,743
================= ===================
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 72,507 124,048
================== ====================
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
3
MACC PRIVATE EQUITIES INC.
Notes to Unaudited Condensed Financial Statements
--------------------------------------------------------------------------------
(1) Basis of Presentation
The accompanying unaudited condensed financial statements include the
accounts of MACC Private Equities Inc. ("MACC," "we" or "us") and have been
prepared in accordance with U.S. generally accepted accounting principles
("GAAP") for investment companies. MACC has elected to be treated as a business
development company under the Investment Company Act of 1940. On February 15,
1995, MACC consummated a plan of reorganization as confirmed by the United
States Bankruptcy Court for the Northern District of Iowa on December 28, 1993.
As of February 15, 1995, MACC adopted fresh-start reporting in accordance with
American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 90-7, Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code, resulting in MACC's assets and liabilities being adjusted to
fair values. Effective April 30, 2008, MACC's wholly owned subsidary, MorAmerica
Capital Corporation, ("MorAm"), was merged with and into MACC.
The unaudited condensed financial statements included herein have been
prepared in accordance with GAAP for interim financial information and
instructions to Form 10-Q and Article 6 of Regulation S-X. Certain information
and note disclosures normally included in audited financial statements prepared
in accordance with GAAP have been omitted, however MACC believes that the
disclosures made are adequate to make the information presented not misleading.
The unaudited condensed financial statements should be read in conjunction with
the consolidated financial statements and notes thereto of MACC as of and for
the year ended September 30, 2008. 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, 2008 has been derived from the audited balance
sheet as of that date.
(2) Critical Accounting Policies
Investments
In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements." This statement defines fair value, establishes a framework for
measuring fair value in GAAP, and expands disclosures about fair value
measurements. The provisions of SFAS No. 157 are effective as of the beginning
of the first fiscal year that begins after November 15, 2007. MACC adopted SFAS
No. 157 effective October 1, 2008. The adoption of SFAS No. 157 did not have a
material impact on the financial statements as of and for the three months ended
December 31, 2008.
Investments in securities that are traded in the over-the-counter market or on a
stock exchange are valued by taking the average of the close (or bid price in
the case of over-the-counter equity securities) for the valuation date.
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; overall market conditions and other
factors generally pertinent to the valuation of investments. The Board of
Directors has considered the current illiquid credit market conditions, and the
risks and uncertainties associated with those conditions. The conditions have
not significantly impacted the investment values. 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, we use financial information received monthly,
quarterly, and annually from our 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.
4
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.
Accounting Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(3) Recent Accounting Pronouncements
On December 14, 2007, the FASB issued proposed FASB staff position (FSP)
FAS 157-b which would delay the effective date of SFAS 157 for all nonfinancial
assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually). This FSP partially defers the effective date of Statement 157
to fiscal years beginning after November 15, 2008. MACC is currently reviewing
the impact of this pronouncement on the financial statements.
In February 2007 the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities--Including an amendment of FASB
Statement No. 115." This statement permits entities to choose to measure many
financial instruments and certain other items to be measured at fair value. The
provisions of SFAS No. 159 are effective as of the beginning of the first fiscal
year that begins after November 15, 2007. This pronouncement had no impact on
the condensed unaudited financial statements as of December 31, 2008.
In October 2008, the Financial Accounting Standards Board issued FSP No.
157-3, "Determining the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active." FSP No. 157-3 clarifies the application of SFAS No. 157 in
a market that is not active. More specifically, FSP No. 157-3 states that
significant judgment should be applied to determine if observable data in a
dislocated market represents forced liquidations or distressed sales and are not
representative of fair value in an orderly transaction. FSP No. 157-3 also
provides further guidance that the use of a reporting entity's own assumptions
about future cash flows and appropriately risk-adjusted discount rates is
acceptable when relevant observable inputs are not available. In addition, FSP
No. 157-3 provides guidance on the level of reliance of broker quotes or pricing
services when measuring fair value in a non active market stating that less
reliance should be placed on a quote that does not reflect actual market
transactions and a quote that is not a binding offer. The guidance in FSP No.
157-3 is effective upon issuance for all financial statements that have not been
issued and any changes in valuation techniques as a result of applying FSP No.
157-3 are accounted for as a change in accounting estimate. MACC adopted this
pronouncement during the quarter ended December 31, 2008. The adoption of this
pronouncement had no impact on the condensed financial statements as of December
31, 2008.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"), which is intended to help
investors better understand how derivative instruments and hedging activities
affect an entity's financial position, financial performance and cash flows
through enhanced disclosure requirements. The enhanced disclosures primarily
surround disclosing the objectives and strategies for using derivative
instruments by their underlying risk as well as a tabular format of the fair
values of the derivative instruments and their gains and losses. SFAS No. 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. MACC does not believe the adoption of this
pronouncement will have a material impact on its consolidated financial
statements.
5
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations"
("SFAS No. 141(R)"). SFAS No. 141(R) establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also
establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination. SFAS No. 141(R) is effective as
of the beginning of an entity's fiscal year that begins after December 15, 2008.
MACC is required to adopt SFAS No. 141 (R) on October 1, 2009 and is currently
evaluating the impact of this pronouncement on its consolidated financial
statements.
(4) Investments - Fair Value Measurements
SFAS No. 157 establishes a hierarchal disclosure framework which
prioritizes and ranks the level of market price observability used in measuring
investments at fair value. Market price observability is affected by a number of
factors, including the type of investment and the characteristics specific to
the investment. Investments with readily available active quoted prices or for
which fair value can be measured from actively quoted prices generally will have
a higher degree of market price observability and a lesser degree of judgment
used in measuring fair value.
Investments measured and reported at fair value are classified and
disclosed in one of the following categories.
Level I - Quoted prices are available in active markets for
identical investments as of the reporting date. The type of
investments included in Level 1 include listed equities and listed
derivatives.
Level II - Pricing inputs are other than quoted prices in active
markets, which are either directly or indirectly observable as of
the reporting date, and fair value is determined through the use of
models or other valuation methodologies. Investments which are
generally included in this category include corporate debt and less
liquid and restricted equity securities.
Level III - Pricing inputs are unobservable for the investments and
includes situations where there is little, if any, market activity
for the investment. The inputs into the determination of fair value
require significant management judgment or estimation and are based
on the Board of Directors' own assumptions about the assumptions
that a market participant would use, including inputs derived from
extrapolation and interpolation that are not corroborated by
observable market data. Investments that are included in this
category generally include corporate private equity.
In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, the determination
of which category within the fair value hierarchy is appropriate for any given
investment is based on the lowest level of input that is significant to the fair
value measurement. MACC's assessment of the significance of a particular input
to the fair value measurement in its entirety requires judgment and considers
factors specific to the investment.
All of MACC's investments at December 31, 2008 were classified and
disclosed under the Level III category. Investments are stated at fair value as
determined by the Board of Directors according to the procedures of MACC's
Valuation Policy. Securities are valued individually and in the aggregate as of
the end of each quarter of each fiscal year and as of the end of each fiscal
year. Interest-bearing securities are valued in an amount not greater than cost,
with adjustments to their carrying value made to reflect changes in interest
rates. Loan valuation determinations take into account portfolio companies'
financial condition, outlook, payment histories and other factors. Equity
security valuations take into account the following factors, among others: the
portfolio company's performance, the prospects of a portfolio company's future
equity financing and the character of participants in such financing, and the
utilization of various financial measures, including cash flow multiples, as
appropriate. If a portfolio company appears likely to discontinue operations, a
liquidation valuation technique may be employed. Valuations established by the
Board of Directors are not necessarily indicative of amounts which may
ultimately be realized as a result of future sales or other dispositions of
portfolio assets, and these favorable or unfavorable differences could be
material.
The following table presents the investments at fair value as of December
31, 2008 by type of investment:
6
Corporate Corporate
Fair Value Based on Private Debt Private Equity Total
----------------------------------------------------------------------------------------------------------------------
Investment Level III $ 8,677,051 $ 6,055,639 100%
The following table provides a rollforward in the changes in fair value
during the three-months ending December 31, 2008 for all investments which MACC
has determined using unobservable (Level III) factors.
Balance, September 30, 2008 $14,501,851
Purchases (Debt Repayment)
Handy Industries 40,127
Portrait Displays, Inc. (7,038)
Morgan Ohare, Inc. (46,875)
SMWC Acquisition Co. Inc. (24,475)
Unrealized Gain (Loss)
Portrait Displays, Inc. 324,050
M.A. Gedney Company 10,000
Linton Trust Company (40,000)
Mainstream Data, Inc. (24,950)
-------------------
Balance, December 31, 2008 $14,732,690
Total unrealized gains and losses recorded for Level III investments are
reported in Net Change in Unrealized Loss in the Statement of Operations.
(5) Note Payable
MACC has a term loan in the amount of $4,702,084 with Cedar Rapids Bank &
Trust Company as of December 31, 2008. This note is a variable interest rate
note secured by a Security Agreement, Commercial Pledge Agreement and a Master
Business Loan Agreement. The interest rate on the note at December 31, 2008 was
6.0%. The note has a stated maturity of August 28, 2009.
MACC has also obtained a revolving line of credit of $500,000 from Cedar
Rapids Bank & Trust Company for the purpose of providing working capital. As of
December 31, 2008, $0 were drawn on this line of credit. Availability of these
funds will terminate on August 29, 2009. Principal will be payable in one
payment on August 28, 2009.
(6) Financial Highlights (Unaudited)
For the three For the three
months ended months ended
December 31, December 31,
2008 2007
--------------- ---------------
Per Share Operating Performance (For a share of capital
stock outstanding
throughout the period):
Net asset value, beginning of period $ 4.23 4.67
--------------- ---------------
Income from investment operations:
7
Investment expense, net (0.03) (0.02)
Net realized and unrealized gain
(loss) on investment transactions 0.11 (0.29)
--------------- ---------------
Total from investment operations 0.08 (0.31)
--------------- ---------------
Net asset value, end of period $ 4.31 4.36
=============== ===============
Closing bid price $ 0.52 2.75
=============== ===============
For the three For the three
months ended months ended
December 31, December 31,
2008 2007
--------------- ---------------
Total return
Net asset value basis 1.79 % (6.67)
Market price basis (62.86) % 12.24
Net asset value, end of period
(in thousands) $ 10,622 10,752
Ratio to weighted average net assets:
Investment expense, net (2.82) % (0.41)
Operating and income tax expense (0.79) % (2.68)
The ratios of investment expense, 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.
8
MACC PRIVATE EQUITIES INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
DECEMBER 31, 2008
Manufacturing:
Percent
of Net
Company Security assets Value Cost (d)
-------------------------------------------- ---------------------------------------------------------------------------------------
Aviation Manufacturing Group, LLC (a) 14% debt security, due October 1, 2010 $ 616,000 616,000
Yankton, South Dakota 154,000 units preferred 154,000 154,000
Manufacturer of flight critical parts Membership interest 795,559 39
for aircraft 14% note, due October 1, 2010 77,000 77,000
----------- -----------
1,642,559 847,039
----------- -----------
Central Fiber Corporation 12% debt security, due March 31, 2009 205,143 205,143
Wellsville, Kansas 12% debt security, due March 31, 2009 53,079 53,079
Recycles and manufactures Warrant to purchase 273.28 common shares --- ---
cellulose fiber products ----------- -----------
258,222 258,222
----------- -----------
Detroit Tool Metal Products Co. (a) 12% debt security, due November 18, 2009 1,371,507 1,371,507
Lebanon, Missouri 19,853.94 share Series A preferred (c) 195,231 195,231
Metal stamping 7,887.17 common shares (c) 126,742 126,742
----------- -----------
1,693,480 1,693,480
----------- -----------
Handy Industries, LLC (a) 12.5% debt security, due January 8, 2008 (c)(f) 417,927 667,327
Marshalltown, Iowa 167,171 units Class B preferred (c) --- 167,171
Manufacturer of lifts for Membership interest --- 1,357
motorcycles, trucks and 12.0% debt security, due December 31, 2011 (c) 40,127 40,127
industrial metal products ----------- -----------
458,054 875,982
----------- -----------
Kwik-Way Products, Inc. (a) 2% debt security, due January 31, 2008 (c) 1 549,049
Marion, Iowa 67,348 common shares --- 219,561
Manufacturer of automobile aftermarket ----------- -----------
engine and brake repair machinery 1 768,610
----------- -----------
Linton Truss Corporation 542.8 common shares (c) ---- ----
Delray Beach, Florida 400 shares Series 1 preferred (c) 150,000 40,000
Manufacturer of residential roof and Warrants to purchase common shares (c) 15 15
floor truss systems ----------- -----------
150,015 40,015
----------- -----------
M.A. Gedney Company (a) 648,783 shares preferred (c) 80,000 1,450,601
Chaska, Minnesota 12% debt security, due June 30, 2009 76,000 76,000
Pickle processor Warrant to purchase 83,573 preferred shares
(c) --- ---
----------- -----------
156,000 1,526,601
----------- -----------
Magnum Systems, Inc. (a) 12% debt security, due November 1, 2011 574,163 574,163
Parsons, Kansas 48,038 common shares (c) 48,038 48,038
Manufacturer of industrial bagging 292,800 shares preferred (c) 304,512 304,512
equipment Warrant to purchase 56,529 common shares (c) 580,565 565
----------- -----------
1,507,278 927,278
----------- -----------
9
MACC PRIVATE EQUITIES INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS CONTINUED (UNAUDITED)...
DECEMBER 31, 2008
Manufacturing Continued: Percent
of Net
Company Security assets Value Cost (d)
----------------------------------------- -------------------------------------------------------------------------------------------
Pratt-Read Corporation (a) 13,889 shares Series A Preferred (c) $ 421,460 750,000
Bridgeport, Connecticut 7,718 shares Services A preferred (c) 234,097 416,667
Manufacturer of screwdriver shafts 13% debt security, due July 30, 2007 (c)(e) 250,020 277,800
and handles and other hand tools Warrants to purchase common shares (c) ---- ----
----------- -----------
905,577 1,444,467
----------- -----------
Spectrum Products, LLC (b) 13% debt security, due January 1, 2011 (c)(e) 1,077,649 1,077,649
Missoula, Montana 385,000 units Series A preferred (c) --- 385,000
Manufacturer of equipment for the Membership interest (c) --- 351
swimming pool industry 17,536.75 units Class B preferred (c) --- 47,355
----------- -----------
1,077,649 1,510,355
----------- -----------
Superior Holding, Inc. (a) 6% debt security, due April 1, 2010 (c) 780,000 780,000
Wichita, Kansas Warrant to purchase 11,143 common shares (c) 1 1
Manufacturer of industrial and 6% debt security, due April 1, 2010 (c) 221,000 221,000
commercial boilers and shower 121,457 common shares (c) 121,457 121,457
doors, frames and enclosures 6% debt security, due April 1, 2010 (c) 308,880 308,880
312,000 common shares (c) 3,120 3,120
----------- -----------
1,434,458 1,434,458
----------- -----------
Total manufacturing 63.01% 9,283,293 11,326,507
========== ----------- -----------
Service:
Monitronics International, Inc. 73,214 common shares (c) 439,284 54,703
Dallas, Texas ----------- -----------
Provides home security systems
monitoring services
Morgan Ohare, Inc. (b) 0% debt security, due January 1, 2010 (c) 1,068,750 1,125,000
Addison, Illinois 10% debt security, due January 1, 2010 250,000 250,000
Fastener plating and heat treating 57 common shares (c) 1 1
----------- -----------
1,318,751 1,375,001
----------- -----------
SMWC Acquisition Co., Inc. (a) 13% debt security due September 30, 2011 82,500 82,500
Kansas City, Missouri 12% debt security due September 30, 2011 447,700 447,700
Steel warehouse distribution and 530,200 530,200
processing ----------- ------------
Warren Family Funeral Homes, Inc. Warrant to purchase 346.5 common shares (c) 200,012 12
Topeka, Kansas ----------- ------------ ----------- ------------
Provider of value priced funeral
services
Total Service 16.89% 2,488,247 1,959,916
========== ----------- -----------
10
MACC PRIVATE EQUITIES INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS CONTINUED (UNAUDITED)...
DECEMBER 31, 2008
Service Continued: Percent
of Net
Company Security assets Value Cost (d)
----------------------------------------- -------------------------------------------------------------------------------------------
Technology and Communications:
Feed Management Systems, Inc. (a) 540,551 common shares (c) 1,327,186 1,327,186
Brooklyn Center, Minnesota 674,309 shares Series A preferred (c) 674,309 674,309
Batch feed software and systems Warrants to purchase 166,500 Series A --- ---
and B2B internet services preferred (c) ----------- -----------
2,001,495 2,001,495
----------- -----------
MainStream Data, Inc. (a) 322,763 shares Series A preferred (c) 200,049 200,049
Salt Lake City, Utah ----------- -----------
Content delivery solutions
provider
Phonex Broadband Corporation 1,855,302 shares Series A preferred (c) 1 1,155,000
Midvale, Utah ----------- ------------
Power line communications
Portrait Displays, Inc. 8% debt security, due April 1, 2009 9,604 9,604
Pleasanton, California 8% debt security, due April 1, 2012 (c) 750,001 750,001
Designs and markets pivot Warrant to purchase 39,400 common shares (c) --- ---
enabling software for LCD ----------- -----------
computer monitors 759,605 759,605
----------- -----------
Total technology and communications 20.10% 2,961,150 4,116,149
========== ----------- -----------
$ 14,732,690 17,402,572
=========== ===========
(a) Affiliated company. Represents ownership of greater than 5% to 25% of the
outstanding voting securities of the issuer, and is or was an affiliate of MACC
as defined in the Investment Company Act of 1940 at or during the period ended
December 31, 2008.
(b) Controlled company. Represents ownership of greater than 25% of the
outstanding voting securities of the issuer, and is or was a controlled
affiliate of MACC as defined in the Investment Company Act of 1940 at or during
the period ended December 31, 2008.
(c) Non-income producing. Presently nonincome producing.
(d) For all debt securities presented, the cost is equal to the principal
balance.
(e) Subsequent to December 31, 2008, debt security has been restructured to
extend the due date.
(f) MACC is currently working with the company to restructure the terms of the
debt security.
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This section of the Quarterly Report on Form 10-Q for MACC Private Equities
Inc. ("MACC" or "we" or "us" or the "Company") contains forward-looking
statements. All statements in this Quarterly Report on Form 10-Q, including
those made by MACC's management, other than statements of historical fact, are
forward-looking statements. These forward-looking statements are based on
current management expectations that involve substantial risks and uncertainties
that could cause actual results to differ materially from the results expressed
in, or implied by, these forward-looking statements. Forward-looking statements
relate to future events or our future financial performance. We generally
identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "would," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "intends," "targets," "potential," and "continue," or
the negative of these terms, or other similar words. Examples of forward-looking
statements contained in this Quarterly Report on Form 10-Q include statements
regarding MACC's:
• future financial and operating results;
• business strategies, prospects and prospects of its portfolio
companies;
• ability to operate as a business development company;
• regulatory structure;
• adequacy of cash resources and working capital;
• projected costs;
• competitive positions;
• management's plans and objectives for future operations; and
• industry trends.
These forward-looking statements are based on management's estimates,
projections and assumptions as of the date hereof and include the assumptions
that underlie such statements. Any expectations based on these forward-looking
statements are subject to risks and uncertainties and other important factors,
as disclosed in MACC's prior Securities and Exchange Commission ("SEC") filings.
These and many other factors could affect MACC's future financial condition and
operating results and could cause actual results to differ materially from
expectations based on forward-looking statements made in this document or
elsewhere by MACC or on its behalf. MACC undertakes no obligation to revise or
update any forward-looking statements. The forward-looking statements contained
in this Form 10-Q are excluded from the safe harbor protection provided by
Section 27A of the Securities Act of 1933, as amended (the "1933 Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All references to fiscal year apply to MACC's respective fiscal years
which end on September 30 of each year.
Results of Operations
Our 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.
First Quarter Ended December 31, 2008 Compared to First Quarter Ended December 31, 2007
For the three months ended
December 31,
--------------------------------------
2008 2007 Change
-------------------------------------- --------------
Total investment income $ 211,379 260,004 (48,625)
Net operating and income tax expense (293,399) (307,563) 14,164
------------- ---------------- --------------
Investment expense, net (82,020) (47,559) (34,461)
------------- ---------------- --------------
Net change in unrealized appreciation/
12
depreciation on investments and other assets 269,100 (721,354) 990,454
------------- ---------------- --------------
Net (loss) gain on investments 269,100 (721,354) 990,454
------------- ---------------- --------------
Net change in net assets from operations $ 187,080 (768,913) 955,993
================= ================ ==============
Net asset value per share:
Beginning of period $ 4.23 4.67
================ ================
End of period $ 4.31 4.36
================= ================
Total Investment Income
During the current fiscal year first quarter, total investment income was
$211,379, a decrease of $48,625, or 19%, from total investment income of
$260,004 for the prior year first quarter. In the current year first quarter as
compared to the prior year first quarter, interest income decreased $72,986, or
42%, and dividend income increased $24,361, or 29%. The decrease in interest
income is the net result of (i) repayments of principal on debt portfolio
securities issued to us by three portfolio companies, (ii) an increase in
interest income due to one debt portfolio security which had been on non-accrual
of interest status during the prior year first quarter but which is currently
making interest payments and accordingly interest is being accrued as earned,
and (iii) a decrease in interest income on four debt portfolio securities which
have been placed on non-accrual of interest status. In both the current year
first quarter and the prior year first quarter, MACC received a dividend on one
existing portfolio investment, however the current year dividend was larger.
MACC does not anticipate that its dividend income will continue to increase in
future periods.
Net Operating Expenses
Net operating expenses for the first quarter of the current year were
$293,399, a decrease of $14,164 or 5%, as compared to net operating expenses for
the prior year first quarter of $307,563. Interest expense decreased $55,608, or
43%, in the current year first quarter due a combination of the decrease in the
interest rate and principal balance of the Note Payable to Cedar Rapids Bank and
Trust Company as discussed below under Financial Condition, Liquidity and
Capital Resources.
Management fees increased $7,979, or 12%, in the current year first quarter
due to the change of investment advisers and concurrent increase in the
management fee from 1.5% to 2.0%. Professional fees increased $1,508, or 3%, in
the current year first quarter as compared to the prior year first quarter.
Other expenses increased $31,957, or 56%, in the current year first quarter as
compared to the prior year first quarter. The increase in other expenses a
result of (i) fees accrued for regulatory compliance consulting, and (ii) fees
paid for investor related services associated with our proposed rights offering
and the preparation of a registration statement.
Investment Expense, Net
For the current year first quarter, MACC recorded investment expense, net
of $82,020, as compared to investment expense, net of $47,559 during the prior
year first quarter, an increase of $34,461, or 72%. The increase in investment
expense, net is primarily the result of the decrease in interest income
described above.
Net Realized Gain on Investments
During the current year first quarter and the prior year first quarter, we
had no net realized gain or loss on investments. 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. Under the Investment Advisory Agreements
between us and our prior sole investment adviser, InvestAmerica Investment
Advisors, Inc. ("InvestAmerica"), and between MorAm and InvestAmerica (together,
the "InvestAmerica Advisory Agreements"), both of which were in effect prior to
their termination during the third quarter of fiscal 2008, InvestAmerica earned
an incentive fee calculated as a percentage of the excess of our realized gains
in a particular period, over the sum of net realized losses and unrealized
depreciation during the same period.
13
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
InvestAmerica under the InvestAmerica Advisory Agreements.
Effective April 29, 2008, the InvestAmerica Advisory Agreements were
terminated and we entered into an Investment Advisory Agreement (the "EAM
Advisory Agreement") with Eudaimonia Asset Management, LLC ("EAM"). Under the
EAM Advisory Agreement, EAM earns an incentive fee which is calculated as
percentage of the excess of our 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
EAM under the EAM Advisory Agreement.
Also Effective April, 29, 2008, we entered into an Investment Subadvisory
Agreement (the "Subadvisory Agreement") with EAM and InvestAmerica, pursuant to
which InvestAmerica will continue to manage our portfolio of investment which
existed on the effective date of the Subadvisory Agreement (the "Existing
Portfolio"). Under the terms of the Subadvisory Agreement, EAM pays
InvestAmerica an incentive fee based on a portion of the incentive fees paid to
EAM by us under the EAM Advisory Agreement attributable to the Existing
Portfolio.
Net Change in Unrealized Appreciation/Depreciation of Investments and Other
Assets
Net change in unrealized appreciation/depreciation on investments
represents the change for the period in the unrealized appreciation, net of
unrealized depreciation, on our total investment portfolio based on the
valuation method described under "Critical Accounting Policy".
We recorded a net change in unrealized appreciation/depreciation on
investments of $269,100 during the current year first quarter, as compared to
($721,354) during the prior year first quarter. This net change resulted from:
• Unrealized appreciation in the fair value of two portfolio companies
totaling $334,050 during the current year first quarter, as compared to
unrealized appreciation in the fair value of one portfolio company
totaling $175,869 during the prior year first quarter. The balance of
unrealized appreciation during the quarter was primarily the result of
the write-up to cost of a note receivable due from a portfolio company
whose prospects for repayment of the note in full have become
favorable.
• Unrealized depreciation in the fair value of two portfolio companies
totaling $64,950 during the current year first quarter, as compared to
unrealized depreciation in the fair value of five portfolio companies
of $897,223 during the prior year first quarter.
Net Change in Net Assets from Operations
We experienced an increase of $187,080 in net assets for the first quarter
of fiscal year 2009, and the resulting net asset value per share was $4.31 as of
December 31, 2008, as compared to $4.23 as of September 30, 2008. The increase
in net asset value during the current year first quarter was primarily the
result of the net change in unrealized appreciation/depreciation on investments,
as described above.
As of December 31, 2008, we had seven portfolio investments valued at cost,
had recorded unrealized appreciation on five portfolio investments, and have
recorded unrealized depreciation on seven portfolio investments. Quarterly
valuations can be affected by a portfolio company's short term performance that
results in increases or decreases in unrealized depreciation and unrealized
appreciation for the quarter. Changes in the fair value of a portfolio security
may or may not be indicative of the long term performance of the portfolio
company.
Although we are not currently making investments in new portfolio companies
(but may periodically make follow-on investments in Existing Portfolio
companies), as previously announced, our investment strategy under the EAM
Advisory Agreement going forward is to make new equity investments in small-cap
and micro-cap companies which qualify for investment by business development
companies ("BDCs") under the Investment Company Act of 1940, as amended (the
"1940 Act"). Under the Subadvisory Agreement, InvestAmerica will continue to
oversee the Existing Portfolio. We will continue to prudently sell Existing
Portfolio investments and use the resulting proceeds to pay down the Note
Payable, as further described below. The ability to exit the Existing Portfolio
investments is
14
affected by company performance and external factors unrelated to the portfolio
companies. These factors include sub prime lending, credit contraction,
inflationary pressures, high commodity prices, recessional pressures, and a
slowing economy.
We have initiated the process of raising additional capital by filing a
registration statement to effect a rights offering, which was approved by
shareholder vote on April 28, 2008, but which we would not anticipate effecting
until our stock price increases sufficiently enough to yield at least $1 million
in new capital. We further believe that future capital raises will be necessary
and that they should be done at prices that are not dilutive to current
shareholders.
Financial Condition, Liquidity and Capital Resources
We believe global capital markets entered into a period of significant
disruption in 2008 as evidenced by a lack of liquidity in debt capital markets,
significant write-offs in the financial services sector, the re-pricing of
credit risk and the failure of certain major financial institutions. Despite
actions of the United States federal government and foreign governments, these
events have contributed to worsening general economic conditions that are
materially and adversely impacting the broader financial and credit markets and
reducing the availability of debt and equity capital for the market as a whole
and financial services firms in particular. These conditions could continue for
a prolonged period of time or worsen in the future. While these conditions
persist, we and other companies in the financial services sector may need to, or
may choose to access alternative markets for debt and equity capital which may
only be available at a higher cost, and or on less favorable terms and
conditions. In addition, equity capital may be difficult to raise because,
subject to some limited exceptions, we are not generally able to issue and sell
our common stock at a price below net asset value per share. Conversely, our
portfolio companies may not be able to service or refinance their debt which
could materially and adversely affect our financial condition as we would
experience reduced income or even losses. The inability to raise capital and the
risk of portfolio company defaults may have a negative effect on our business,
financial condition and results of operations.
As of December 31, 2008, our cash and money market accounts totaled
$143,836. As reported elsewhere, MorAm had entered into (i) a term loan to
refinance the outstanding debt under the Small Business Administration debenture
program ("SBA Debentures"), which was assumed by us on April 30, 2008 as a
result of the Merger, and which now has a balance of $4,702,084 (the "Note
Payable"), and (ii) a revolving loan permitting MorAm (now us) to borrow up to
$500,000, with Cedar Rapids Bank & Trust Company ("CRB&T"). The Note Payable has
a stated maturity of August 28, 2009. The revolving loan will terminate on
August 29, 2009. We have not begun negotiations to refinance the Note Payable or
line of credit with CRB&T.
Although, we currently believe we will be able refinance the Note Payable
and line of credit with CRB&T during the year, failure to do so or find
alternative financing could pose significant financial risks to the company
given the relatively illiquid nature of the Existing Portfolio. Assuming the
successful refinancing of the Note Payable, and the line of credit with CRB&T,
we believe, as of December 31, 2008, that our existing cash, money market
accounts, and other anticipated cash flows will provide adequate funds for our
anticipated cash requirements during fiscal year 2009.
The following table shows our significant contractual obligations for the
repayment of the Note Payable and other contractual obligations as of December
31, 2008:
Payments due by period
----------------------
Contractual Obligations
Less than 1-3 3-5 More than
Total 1 Year Years Years 5 Years
-------------- ------------ --------- --------- ------------
Note Payable $ 4,702,084 4,702,084 --- --- ---
Incentive Fees Payable $ 16,361 16,361 --- --- ---
15
With respect to the Existing Portfolio, we are not making new investments,
are prudently disposing of Existing Portfolio assets and are using the resulting
proceeds to pay down the Note Payable.
With respect to our investment strategy under the EAM Advisory Agreement,
our Board of Directors sought and received approval by the shareholders for a
proposal to issue rights to acquire shares of our Common Stock as a means by
which we may raise additional equity capital. We anticipate commencing our new
investment strategy under the EAM Advisory Agreement when we raise additional
capital. In light of challenging market conditions as previously discussed
however, the Board of Directors is continuing to review alternatives, including
seeking shareholder approval to liquidate should additional capital raising
prospects prove unlikely or inadequate to effectively execute on the new
strategy.
Portfolio Activity
With respect to the Existing Portfolio, we have invested in and lended to
businesses through investments in subordinated debt (generally with detachable
equity warrants), preferred stock and common stock. We, however, are not
currently making investments in new portfolio companies. As of December 31,
2008, certain debt investments have or were near expiration. Since the quarter
end, we have either restructured or continue to work toward restructuring these
investments. The total portfolio value of our investments in non-publicly traded
securities was $14,732,690 at December 31, 2008 and $14,501,851 at September 30,
2008. During the three months ended December 31, 2008, we made one follow-on
investment in the amount of $40,127 in one Existing Portfolio company. This
follow-on investment also represented a co-investment with other funds managed
by our Sub-adviser InvestAmerica. As noted above, we intend to pursue an
investment strategy consisting of new equity investments in very small public
companies that qualify for investment by BDCs under the 1940 Act, and may
continue to make follow-on investments in our Existing Portfolio.
With respect to the Existing Portfolio, we have frequently co-invested with
other funds managed by InvestAmerica. When we make any co-investment with these
related funds, we follow certain procedures consistent with orders of the SEC
for related party co-investments to reduce or eliminate conflict of interest
issues. During the current year first quarter, we made no such co-investments
with another fund managed by InvestAmerica.
Critical Accounting Policy
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements".
This statement defines fair value, establishes a framework for measuring fair
value in GAAP, and expands disclosures about fair value measurements. The
provisions of SFAS No. 157 are effective as of the beginning of the first fiscal
year that begins after November 15, 2007. MACC adopted SFAS No. 157 effective
October 1, 2008.
Investments in securities that are traded in the over-the-counter market or on a
stock exchange are valued by taking the average of the close (or bid price in
the case of over-the-counter equity securities) for the valuation date.
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; overall market conditions and other
factors generally pertinent to the valuation of investments. 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, we use financial information received monthly,
quarterly, and annually from our 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.
16
The preparation of financial statements in conformity with GAAP requires
management to estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
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
We are subject to market risk from changes in market prices of publicly
traded equity securities held from time to time in our consolidated investment
portfolio. At December 31, 2008, we had no publicly traded equity securities in
the Existing Portfolio, but, as noted elsewhere, we intend to pursue an
investment strategy consisting of new equity investments in very small public
companies that qualify for investment by BDCs under the 1940 Act.
We currently have a portfolio of debt and equity securities for which no
regular trading market exists. The fair value of these investments may not be
readily determinable. We value these investments quarterly at fair value as
determined in good faith under the direction of our board of directors pursuant
to a valuation policy and consistently applied valuation process utilizing the
input of our investment advisers and audit committee. The types of factors that
may be considered in fair value pricing of these investments include the nature
and realizable value of any collateral, the portfolio company's ability to make
payments and its earnings, the markets in which the portfolio company does
business, comparison to more liquid securities, indices and other market related
inputs, discounted cash flow and other relevant factors. Because such valuations
and particularly valuations of private securities and private companies, are
inherently uncertain, may fluctuate over short periods of time and may be based
on estimates, our determinations of fair value may differ materially from the
values that would have been used if a readily available market for these
investments existed and may differ materially from the amounts we realize on any
disposition of such investments. Our net asset value could be adversely affected
if our determinations regarding the fair value of these investments were
materially higher than the values that we ultimately realize upon the disposal
of such investments. In addition, decreases in the market values or fair values
of our investments are recorded as unrealized depreciation. Continued declines
in prices and liquidity in the debt markets could result in substantial
unrealized/realized losses, which could have a material adverse impact on our
business, financial condition and results of operations.
In order to realize the full value of a security, the market must trade in
an orderly fashion or a willing purchaser must be available when a sale is to be
made. In addition our debt securities are reliant on the ability of the
underlying portfolio company to make payment on the debt. We are therefore
subject to financial market risk from the general economy and the macro and
micro markets in which our portfolio companies operate. Should an economic or
other event occur that would not allow the markets to operate in an orderly
fashion, we may not be able to realize the fair value of our investments in debt
and equity securities.
We are also subject to financial market risks from changes in market
interest rates. The Note Payable and our revolving line of credit is subject to
a variable interest rate that is based on an independent index. Therefore
general interest rate fluctuations may have a materially adverse effect on our
net investment income.
We are also subject to financial market risk from the short term nature of
our credit facilities in combination with current market conditions and the
relatively illiquid nature of our Existing Portfolio. Our Note Payable and
revolving line of credit are due or terminate in August 2009. Given the
currently challenging market environment as discussed elsewhere, we may have
difficultly refinancing our Note Payable and revolving line of credit, or
finding alternative sources of financing. Failure to refinance the Note Payable
could result in significant financial difficulties for the company including the
seizure and sale of Existing Portfolio assets at prices which would likely be as
prices significantly less than fair value. In addition the failure to refinance
our revolving line of credit could result in the company having insufficient
funds to fund operating activities. Further the cost of financing could be
significantly more costly which could have a material impact to the company's
financial condition.
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,
our Chief Executive Officer and Chief Financial Officer (the "Certifying
Officers") have conducted evaluations of our 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 SEC'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 our disclosure controls and procedures and have concluded that
those disclosure controls and procedures were effective as of December 31, 2008.
In compliance with Section 302 of the Sarbanes-Oxley Act of 2002, each of the
Certifying Officers has executed an Officer's Certification included in this
Quarterly Report on Form 10-Q.
17
As of December 31, 2008, there have not been any significant changes in our
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 II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no items to report.
Item 1A. Risk Factors.
There are no material changes to report from the risk factors disclosed in
MACC's Annual Report on Form 10-K for the year ended September 30, 2008.
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.
There are no items to report.
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 Travis T. Prentice (CEO)
31.2 Section 302 Certification of Derek J. Gaertner (CFO)
32.1 Section 1350 Certification of Travis T. Prentice (CEO)
32.2 Section 1350 Certification of Derek J. Gaertner (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: February 17, 2009 By: /s/ Travis T. Prentice
----------------------------- --------------------------------------------
Travis T. Prentice,
President and CEO
18
Date: February 17, 2009 By: /s/ Derek J. Gaertner
----------------------------- ---------------------------------------------
Derek J. Gaertner,
Chief Financial Officer
19
EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
31.1 Section 302 Certification of Travis T. Prentice (CEO) 23
31.2 Section 302 Certification of Derek J. Gaertner (CFO) 25
32.1 Section 1350 Certification of Travis T. Prentice (CEO) 27
32.2 Section 1350 Certification of Derek J. Gaertner (CFO) 28
20