SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 -- For the fiscal year ended February 28, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-9987
GLOBUS GROWTH GROUP, INC.
(Exact name of registrant as specified in its charter)
New York 13-2949462
(State of incorporation) (I.R.S Employer Identification No.)
44 West 24th Street, New York, NY 10010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (212) 243-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such 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 (X)
The aggregate market value of the voting stock held by non-affiliates as at May
1, 1997 was approximately $65,509 (524,068 shares at $.125 per share). The
number of shares of the Registrant's Common Stock outstanding as at May 1, 1997
was 2,364,860 (excluding 134,140 shares held in the Registrant's treasury). Of
the outstanding shares, a total of 1,840,792 are deemed to be held by
affiliates. The referred to market value was computed by reference to a bid
price of $.125 per share contained in the "Pink Sheets" published by the
National Quotation Bureau dated May 1, 1997 (there being no published price at
which the stock was sold, or any published average bid and asked prices of such
stock as of such date).
DOCUMENTS INCORPORATED BY REFERENCE - None
This report consists of 27 Pages
<PAGE>
PART I
Item 1. BUSINESS
General Background
The Company, a New York corporation, was organized on August 6, 1976 under
the name of Globuscope, Inc. On August 7, 1984, its name was changed to Globus
Growth Group, Inc., which is its present name.
On February 27, 1986, the stockholders of the Company approved the
divestiture and sale of those assets of the Company as pertained to its then
camera manufacturing and photography operations as well as the sale of certain
shares of stock in a photographic related company owned by it and its interest
in the Company's then owned premises. The sale was consummated as of February
28, 1986. After such divestiture, the Company's activities consisted of the
holding of interests in various companies and the seeking out of acquisition and
joint-venture opportunities in various fields of business endeavor. On May 31,
1988, the Company filed with the Securities and Exchange Commission a
notification of election to be treated as a "Business Development Company"
("BDC") as that term is defined in the Investment Company Act of 1940 (the "1940
Act"). For a summary description of certain restrictions imposed upon a BDC by
the 1940 Act, reference should be made to "Governmental Regulation" elsewhere
herein. For a summary description of the risk factors involved in an investment
in the securities of a BDC due to the nature of such a company's investment
portfolio, reference should be made to "Risk Factors Involved In Investing In A
BDC" elsewhere herein.
Investment Portfolio
As at February 28, 1997, the Company held investments in the following
investee companies: (investments listed include only those the value of which
have not been written down to zero).
(i) Catamount Brewing Company - a privately held beer brewing company located in
White River Junction, Vermont. Operations of the brewery commenced on January
22, 1987, and the plant is presently operating at full capacity. Sales of the
product are presently being made principally in Vermont, New Hampshire and
Massachusetts. A small secondary sales market for the product also occurs in
parts of Connecticut, New York, Rhode Island, New Jersey and Washington, D.C.
Richard D. Globus, an officer and director of the Company is also a director of
Catamount, and various members of the Globus family, two of whom are Directors
of the Company, as well as one other member of the Board of Directors of the
Company are also stockholders of Catamount.
(ii) Interface Systems, Inc. - a publicly held company that provides interfacing
solutions for proprietary computer architectures (such as IBM mainframes) and
other peripheral devices such as printers, PC's, cash registers and open systems
computers. Its products consist of hardware and proprietary software; including
a laser printer product line and software that interfaces a Unix-based
workstation with an IBM mainframe. Various members of the Globus family, two of
whom are Directors of the Company, are also stockholders of Interface.
(iii) Nematron Corporation - in February, 1993, the Company received 16,925
shares of Nematron Corporation, formerly a wholly owned subsidiary of Interface
Systems, as a "spin-off" distribution from Interface. Nematron is principally
engaged in the design, manufacture and marketing of industrial products
consisting primarily of industrial computers and industrial terminals which are
used for the purpose of industrial manufacturing and process automation,
specifically as it relates to operator-machine interface applications. By reason
of the "spin-off" distribution,
<PAGE>
Nematron is presently a publicly held company. A Director of the Company as well
as various members of the Globus family, two of whom are Directors of the
Company, are also stockholders of Nematron.
(iv) Energy Research Corp. - a designer and manufacturer of various types of
energy storage, supply and generating devices and systems; including fuel cells,
which is a device that converts the energy of a fuel directly to electricity and
heat without combustion. In July, 1992 such Company completed an initial public
offering of its securities.
(v) Kimeragen, Inc. - a privately held non-affiliated development stage company
founded in 1994 for the purpose of engaging in research and development in the
field of developing gene therapy products for the treatment of hereditary and
acquired diseases.
(vi) Repligen Corporation ("Repligen") - a publicly held research and
development corporation founded in 1981. Its field of activity is primarily
focused on the development of new therapies for chronic and acute inflammation
and immunosuppression and the development of enabling technologies for discovery
of new drugs by rapid screening of combinatorial chemical libraries. In March of
1996, Repligen acquired Glycan Pharmaceuticals ( a former investee of the
Company). As a result of that transaction, Repligen acquired a majority interest
in Proscure, Inc. (another former investee of the Company). Subsequently, the
Company exchanged its interests in Proscure, Inc. and Glycan Pharmaceuticals for
an aggregate of 100,468 shares of Common Stock of Repligen. One of the Directors
of the Company, who was a stockholder of Proscure, Inc. is also a stockholder of
Repligen. For additional information concerning Proscure, Inc. reference is made
to Item 1 of the Company's Form 10-K for its fiscal year ended February 29, 1996
and to Note B of the Notes To Financial Statements contained in such Form 10-K,
which Item and Note are incorporated herein by reference.
(vii) Genitope Corporation - a privately held research and development company
that holds proprietary technology having applications in the field of cancer
therapy. It intends to initially focus upon the development and production of
custom cancer vaccines for the treatment of "B Cell" and "T Cell" Non-Hodgkin's
Lymphoma.
(viii) Woodstock Communications, Inc. - a privately held company that claims
certain trademark rights to the name "Woodstock" for radio and television
broadcasting. It presently intends to create and acquire music, talk and
information programming and to pursue three main business areas -- local radio,
the Internet and Merchandising and Licensing. One of the Directors of the
Company, (Mr. Ronald J. Frank) is a 5% stockholder of Woodstock as well as a
consultant and a lender to it. Such person is also presently Chairman of the
Board of Directors of Woodstock.
No representation is made by the Company that any or all of its investees:
(a) has, or will have in the immediate future, sufficient funds to continue to
carry on business activities; (b) will be able to achieve any of their
respective business objectives; (c) will be able to achieve or maintain
profitable operations; or (d) will not be obliged to attempt to obtain
additional funding.
For additional information concerning each of the above specified
investments, reference should be made to Note B of the Notes to Financial
Statements contained elsewhere herein.
<PAGE>
Valuation of Investments
Investment are carried at fair value, which, for readily marketable
securities, represents the last reported sales price or bid price on the
valuation date. Investments in restricted securities and securities which are
not readily marketable are carried at fair value as determined in good faith by
the Board of Directors, in the exercise of its judgment, after taking into
consideration various indications of value available to the Board. See also
Notes A and B of Notes To Financial Statements elsewhere herein.
The following table, and the footnotes thereto, set forth certain specified
information concerning the investments of the Company as at February 28, 1997,
and as to the valuations thereof, specified in dollars, ascribed to them by the
Board of Directors of the Company as at such date. For comparative purposes
only, the valuations (as applicable) ascribed as at February 29, 1996 are also
set forth. Investments listed in the table include only those the value of
which, as at February 28, 1997, had not, then or previously, been written down
to zero or disposed of. The table and notes should be read in conjunction with
Notes A and B of Notes To Financial Statements elsewhere herein. (Amounts are in
dollars and are rounded to the nearest thousand.)
Basis
2/28/97 2/29/96 Employed
------- ------- --------
Catamount Brewing Company $ 569,000(1) $ 176,000(1) Fair Value
Interface Systems, Inc. $ 4,000(2) $ 12,000(2) Market
Nematron Corporation $ 110,000(3) $ 127,000(3) Market
Energy Research Corp. $ 883,000(4) $ 891,000(4) Market
Proscure, Inc. $ 0 $ 173,000(5) Fair Value
Glycan Pharmaceuticals, Inc. $ 0 $ 17,000(6) Fair Value
Kimeragen, Inc. $ 805,000(7) $ 294,000(7) Fair Value
Repligen, Inc. $ 86,000(8) $ 0 Market
Genitope Corp. $ 130,000(9) $ 0 Fair Value
Catamount Brewing Co. Pfd. $ 150,000(10) $ 0 Fair Value
------------- ----------
$2,737,000 $1,690,000
------------- ----------
Notes to Table:
(1) Represents equity investment - 23,215 shares owned at each date.
(2) Represents equity investment - 775 shares owned at each date.
(3) Represents equity investment - 16,925 shares owned at each date.
(4) Represents equity investment - 76,000 shares owned at 2/28/97 and 81,000
owned at 2/29/96.
(5) Represents equity investment - 61,000 shares of Series A Convertible
Preferred Stock; 75,000 Common Stock Purchase Warrants exercisable until August
31, 2000 at $3.75 per share; and 53,334 shares of Series B Convertible Preferred
Stock owned at 2/29/96; exchanged for Repligen on 12/18/96.
(6) Represents equity investment - 37,500 Common Stock Purchase Warrants
exercisable until June 23, 2000 at $4.50 per share owned at 2/29/96; exchanged
for Repligen on 12/18/96.
(7) Represents equity investment - 108,827 shares of Class A Common Stock and
35,000 shares of Class B Common Stock owned at 2/28/97; and 414 Common shares,
55,000 shares of Class A Common Stock, and 113 shares of Preferred Stock owned
at 2/29/96.
(8) Represents equity investment - 100,468 shares owned at 2/28/97.
(9) Represents equity investment - 260,000 Series A Preferred shares owned at
2/28/97.
(10) Represents equity investment - 4,286 Preferred shares owned at 2/28/97.
<PAGE>
Because of valuation factors, increases or decreases in the dollar amount of any
particular investment, business judgment, and other investment decision factors,
the amount of the Company's interest in any particular investee may vary from
time to time.
The preceding table does not include the Company's investment in Woodstock
Communications, Inc., which investment consists of a Promissory Note of such
entity in the amount of $50,000 dated November 19, 1996 representing a loan to
it by the Company in such amount. The maturity date of such Note is the earlier
to occur of November 19, 1998 or the date of consummation of a corporate
financing by Woodstock in an amount exceeding $1,750,000. On the maturity date,
the Company has the right to elect to receive (by way of interest) either a cash
interest payment of 10% simple interest per annum, or, in lieu of cash interest,
a number of shares of Class A Common Stock of Woodstock equating to 1% ownership
interest in Woodstock on the date of the Note, subject to certain dilutive
effects of subsequent transactions.
Governmental Regulation
The 1940 Act imposes many and varied restrictions on the activities of a
BDC, including restrictions on the nature of its investments. Some, but not all,
of the restrictions imposed on the activities of a BDC by such Act are described
in the following three paragraphs.
Generally speaking, the 1940 Act prohibits a BDC from investing in certain
types of companies, such as brokerage firms, insurance companies, investment
banking firms and investment companies. Moreover, the 1940 Act limits the type
of assets that a BDC may acquire to "qualifying assets" and certain assets
necessary for its operations (such as office furniture, equipment and
facilities) if, at the time of acquisition, less than 70% of the value of its
assets consist of qualifying assets. Qualifying assets include: (i) securities
of companies that were eligible portfolio companies (as defined in the 1940 Act)
at the time that the BDC acquired their securities; (ii) securities of bankrupt
or insolvent companies that are not otherwise eligible portfolio companies;
(iii) securities acquired as follow-on investments in companies that were
eligible at the time of the BDC's initial acquisition of their securities but
are no longer eligible, provided that the BDC has maintained a substantial
portion of its initial investment in those companies; (iv) securities received
in exchange for or distributed in or with respect to any of the foregoing; and
(v) cash items, Government securities and high-quality short-term debt. The 1940
Act also places restrictions on the nature of the transactions in which, and the
persons from whom, securities can be purchased in order for the securities to be
considered qualifying assets.
A BDC is permitted, under specified conditions, to issue multiple classes
of senior debt and a single class of preferred stock if its asset coverage, as
defined in such Act, is at least 200% after the issuance of the debt or the
preferred stock.
A majority of the members of the Board of Directors of a BDC must not be
"interested persons" of the BDC as that term is defined in the 1940 Act. Most
transactions involving a BDC and its affiliates (as well as affiliates of those
affiliates) require the prior approval of a majority of the BDC's independent
directors and a majority of the directors having no financial interest in such
transactions. Some transactions involving certain closely affiliated persons of
the BDC, including its directors, officers and employees, still require the
prior approval of the Securities and Exchange Commission (the "Commission"). In
general, (a) any person who owns, controls, or holds with power to vote, more
than 5% of a BDC's outstanding Common Stock, (b) any director, executive officer
or general partner of that person, and (c) any person who directly or indirectly
controls, is controlled by, or is under common control with, that person, must
obtain the prior approval of the BDC's independent directors, and, in some
instances, the prior approval of the Commission, before engaging in certain
transactions involving the BDC or any company controlled by the BDC.
<PAGE>
Risk Factors Involved In Investing In A BDC
Due to the nature of the usual investment portfolio of a BDC similar to the
limited size and scope of the Company, an investment in the securities of such a
BDC involves a degree of risk that exceeds the risks involved in investing in an
operating company. Since the Company has elected to become a BDC, such risks are
now applicable to the securities of the Company. The following, generally
speaking, includes some, but not all, of such risks:
(a) The usual principal business objective of a BDC is to seek long-term
capital appreciation by making venture capital investments primarily in new and
developing companies which management of the BDC believes offer significant long
term potential for capital appreciation.
(b) An investment in a development stage company or in a new and developing
company subjects the BDC to a number of the same risks to which such investee
entity is subject, namely: (i) the problems, expenses, difficulties,
complications and delays that can be expected to be encountered by such an
entity in connection with the attempted development of a commercially viable
product and bringing such product to market, (ii) possible need by such entity
of additional financing, (iii) competition encountered by such entity, including
competition from companies with greater financial resources, more extensive
development, manufacturing, marketing and service capabilities and a larger
number of qualified managerial and technical personnel.
(c) Many of the securities acquired by a BDC are "restricted securities"
within the meaning of the Securities Act of 1933 ("Securities Act") and cannot
be resold without compliance with the Securities Act. Such restrictions on
resale will most likely adversely affect the liquidity and marketability of such
securities. Registration for sale of restricted securities under the Securities
Act is within the sole province of the issuer concerned. Such registration is
likely to be a time-consuming and expensive process and the BDC in certain cases
may have to bear the expense of such registration. In addition, a BDC always
bears the risk, because of the delays inherent in the registration process, that
it will be unable to resell the securities held by it, or that it will not be
able to obtain an attractive price for them. In the event the BDC is unable to
cause the securities to be registered for resale, it will have to seek to rely
upon an exemption from registration. Among other exemptions, Rule 144
promulgated under the Securities Act imposes a one-year holding period prior to
the sale of restricted securities and establishes volume limitations on the
amount of any restricted securities that can be sold within certain defined time
periods. Furthermore, there cannot be any assurance that there ever will be a
market for the securities held by a BDC; or if a market should develop, that
such market will be an established market and able to absorb the sale of a
sizable amount of securities.
(d) It may become necessary to make additional investments in investee
companies so as to protect a prior investment. Such follow-on investments may
limit the number of companies in which a small size BDC has the financial
ability to invest. Furthermore, a BDC with limited funds available may not have
sufficient funds to make as many follow-on investments as it deems necessary and
any follow-on investments which it makes may not be sufficient to protect its
prior investments in such entity, with the result that it may experience
significant losses in such investments. A decision not to make a particular
follow-on investment, or the financial inability to make it, may have a material
adverse impact on the investee.
(e) A BDC similar in size and scope to the Company is a "closed-end
non-diversified company" as that term is defined in the 1940 Act. Such small
size prevents it from being able to commit its funds to the acquisition of
securities of a large number of companies and prevents it from being able to
achieve the same type of diversification as larger entities engaged in venture
capital activities. Furthermore, such small size places it at a competitive
disadvantage with other venture capital investing entities that have far greater
financial resources available.
<PAGE>
(f) The investment objective of a BDC similar in size and scope to the
Company is long-term capital appreciation. To the extent that any income is
derived from operations, it is likely that it will be used entirely to fund
additional investments and continuing working capital needs rather than be
distributed to stockholders.
(g) In order to increase its ability to invest in eligible portfolio
companies, a BDC similar in size and scope to the Company may borrow monies and
pay interest on such borrowings. Any investment gains made with the additional
monies in excess of interest paid will cause the net asset value of the BDC's
stock to rise faster than would otherwise be the case. On the other hand, if the
investment performance of the additional securities purchased fails to cover
their cost (including any interest paid on the money borrowed), the net asset
value of the BDC will decrease faster than would otherwise be the case. This is
known as "leveraging."
For further details concerning the financial condition of the Company and
its ability to make investments, reference should be made to "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
elsewhere herein.
Personnel
The Company presently employs three persons (including Messrs. Stephen and
Richard Globus) on a full-time basis and one person on a part-time basis.
Item 2. PROPERTIES
The Company continues to occupy office space at the premises formerly owned
by it (44 West 24th Street, New York, New York). While no formal lease was ever
entered into with Idex (now Globus Studios, Inc.) the Company is presently
paying a charge of $1,185 per month; which charge includes office space and
electricity.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS.
(a) Market information. The Company's Common Stock is traded in the
over-the-counter market. Prior to February 11, 1991, such Common Stock was
quoted by the National Association of Securities Dealers Automated Quotation
System (NASDAQ), but such quotation was discontinued on February 11, 1991. While
quotations are presently available from a dealer upon request, the market for
the Company's Common Stock would not appear to qualify as an "established public
trading market" as such term is defined in Securities and Exchange Commission
regulations. High and low bid prices for the Common Stock of the Company have
not been published by recognized sources since quotations on NASDAQ terminated
and Management of the Company is not aware of such prices for the quarterly
periods within the past two fiscal years except that: (i) the
<PAGE>
National Stock Summary Guide, published by the National Quotation Bureau, has
published quotations for the Company's Common Stock on a monthly and semi-annual
basis to the extent that same are available; (ii) the "Pink Sheets" published by
the National Quotation Bureau publishes quotations for the Company's Common
Stock on a daily basis to the extent that same are available; (iii) such "Pink
Sheets" dated May 1, 1997, indicate a bid price of $.125 per share but no asked
price; (iv) in April 1996, the Company acquired in the open market 1,000 shares
of Common Stock for its treasury at a cost of approximately $.17 per share; (v)
such "Pink Sheets" dated February 29, 1996, indicate a bid price of $.25 per
share but no asked price; and (vi) such "Pink Sheets" dated March 10, 1997,
indicate a bid price of $.125 per share but no asked price. Generally speaking,
the "Pink Sheets" published by the National Quotation Bureau, Inc. reflect
inter-dealer prices, without retail mark-up, mark-down or commissions, and,
unless otherwise specified, do not represent actual transactions.
(b) Holders. The number of holders of record of the Common Stock of the
Company as of May 7, 1997, was approximately 218.
(c) Dividends. No dividends on the Common Stock have been paid since the
organization of the Company.
Item 6. SELECTED FINANCIAL DATA
The following selected financial information was abstracted from the
financial statements of the Company appearing elsewhere herein and reference
should be made to such statements for more details: (All figures are in dollars
and are rounded)
<TABLE>
<CAPTION>
Year Ended
2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Gain (loss)
on investments 819,000 1,304,000 225,000 (423,000) 747,000
Interest and Dividend
Income 42,000 8,000 8,000 0 0
Consulting and other
income 50,000 68,000 25,000 27,000 22,000
Earnings (loss) 647,000 1,130,000 (29,000) (672,000) 549,000
Per share:
Earnings (loss) .27 .47 (.01) (.28) .23
Cash dividends -0- -0- -0- -0- -0-
Balance sheet:
Total assets 3,318,000 2,691,000 1,568,000 1,581,000 1,956,000
Shareholders' equity
(capital deficiency) 1,475,000 829,000 (299,000) (270,000) 402,000
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations --- Prior to fiscal 1987, the Company was engaged in the
camera and photography business. On February 28, 1986, the Company sold its
operating business to an affiliated company and
<PAGE>
since that date the Company's principal activity has been the making of
investments in other companies.
At February 28, 1997, the Company had total assets of $3,318,000, compared
to $2,691,000 as at February 29, 1996 and $1,568,000 as at February 28, 1995.
Included in total assets at such dates were investments of $2,787,000 (1997),
$1,690,000 (1996) and $1,489,000 (1995). Shareholders' equity at such dates was
$1,475,000 (1997), $829,000 (1996) and ($299,000) (1995). Gain on investments
for such periods amounted to $819,000 (1997), $1,304,000 (1996) and $225,000
(1995). Included in such gains were $46,000 of realized gains and $773,000 of
unrealized gains for 1997; $859,000 of realized gains and $445,000 of unrealized
gains for 1996; and $203,000 of realized gains and $22,000 of unrealized gains
for 1995. Operating expenses, including interest charges, amounted to $264,000
for 1997; $250,000 for 1996 and $287,000 for 1995. Included in operating
expenses were interest charges of $35,000 for 1997, $53,000 for 1996 and $50,000
for 1995. Income (loss) from operations, both before and after provision for
taxes, was $647,000 for 1997; $1,130,000 for 1996 and ($29,000) for 1995. Net
earnings (loss) per share were $. 27 for 1997; $.47 for 1996 and ($.01) for
1995. The weighted average number of shares of Common Stock outstanding at such
dates was 2, 364,964 for 1997, 2,380,208 for 1996 and 2,395,477 for 1995.
Liquidity, Capital Resources and Other Matters Affecting Financial Condition
The Company's cash position as at February 28, 1997 (i.e., $512,000) is
offsetable by approximately $ 1,793,000 owing to members of the Globus family as
follows: (i) the amount of loans payable at such date (including accrued
interest) to Messrs. Stephen E. and Richard D. Globus (i.e., approximately
$528,000); (ii) the amount of loans payable at such date (including accrued
interest) to Ms. Jane Globus, the mother of Stephen and Richard Globus (i.e.,
approximately $405,000); and (iii) the amount of accrued salary owing at such
date to Stephen and Richard Globus, aggregating approximately $860,000. During
the past fiscal year Mr. Stephen Globus' loan account was reduced by payments to
him of $35,200 and Mr. Richard Globus' loan account was reduced by payments to
him of $45,200. Subsequent to February 28, 1997, the loan payable account for
Mr. Stephen E. Globus and Mr. Richard D. Globus was reduced by payments to them
of $35,000 and $25,000, respectively.
The near term liquidity of the Company, as well as its near term capital
resources position, are presently principally dependent upon: (i) the market
value and future ability of the Company to sell its position in Nematron
Corporation; (ii) the market value and future ability of the Company to sell its
position in Energy Research Corporation (which position is also subject to the
provisions of Rule 144 (k) under the Securities Act of 1933); (iii) the
continued willingness, as to which there can be no assurance whatsoever, of the
members of the Globus family who have made loans to the Company not to demand
full or substantially full repayment of such loans; and (iv) the continued
willingness, as to which there can be no assurance whatsoever, of the members of
the Globus family who have made loans to the Company to continue to make loans
to the Company if necessary. See also Note A (1) of Notes to Financial
Statements elsewhere herein.
In connection with Interface Systems, Inc. and Energy Research Corporation,
it should be noted that during the past fiscal year, the Company sold 5,000
shares of its holdings in Energy Research Corporation (realizing net proceeds of
approximately $52,184). Such proceeds, aggregating approximately $52,184, were
principally applied by the Company as follows: $50,000 Promissory Note in
Woodstock Communications. Reference should also be made to the Statements of
Cash Flows contained in the Financial Statements appearing elsewhere herein.
In connection with loans payable by the Company, including accrued
interest, to Messrs. Stephen E. and Richard D. Globus, such indebtedness
aggregated: approximately $762,000 at February 28, 1995; approximately $660,000
at February 29, 1996 and approximately $528,000 at February 28, 1997. As at May
7, 1997, such indebtedness aggregated approximately $456,000, of
<PAGE>
which amount approximately $364,000 was owed to Stephen E. Globus. As at May 7,
1997 the indebtedness owing by the Company to Ms. Jane Globus aggregated
approximately $409,000. As at May 7, 1997, unpaid salaries owing to Messrs.
Stephen E. and Richard D. Globus aggregated approximately $872,500; so that as
at such date the total of monies owed to Messrs. Stephen E. Globus, Richard D.
Globus and Ms. Jane Globus aggregated approximately $1,737,500.
There are in fact presently no known events that can be considered
reasonably certain to occur which would materially change favorably either the
short term or long term liquidity (i.e., ability of the Company to generate
adequate amounts of cash to meet its needs for cash) or capital resources
position (i.e., source of funds) of the Company from that in which it presently
finds itself, and, absent possible sales of stock of Energy Research Corporation
and of Nematron Corporation and continuation of the presently existing loans
without call for full or substantially full repayment, or additional loans from
the Globus family, the present liquidity and capital resources position of the
Company necessarily adversely affects the financial condition of the Company and
its ability to make new investments. (In such connection it must be noted that:
the profitability of a BDC, like the Company, is largely dependent upon its
ability to make investments and upon increases in the value of its investments;
and a BDC is also subject to a number of risks which are not generally present
in an operating company, and which are discussed generally in Item 1 of this
Report to which Item reference should be made.)
The nature and extent of the Company's investments as at February 28, 1997
are more fully discussed in Item 1 of this Report and in Note A of Notes to
Financial Statements elsewhere herein and reference should be made to such Item
and such Note.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 appears at pages F-1 through F-11
(inclusive) of this Report, which pages follow Item 14 of this Report. The
following is an Index to the referred to Financial Statements and Supplementary
Data:
Report of Independent Auditors
((Richard A. Eisner & Company LLP) F-1
Balance Sheets as at February 28, 1997 and February 29, 1996 F-3
Statements of Operations
For the Three Years Ended February 28, 1997 F-4
Statement of Changes in Shareholders' Equity
For the Three Years Ended February 28, 1997 F-5
Statement of Cash Flows
For the Three Years Ended February 28, 1997 F-6
Notes to Financial Statements F-7
Financial Data Schedule Page 27
All schedules supporting financial statements are omitted because they are
not applicable or the required information is included in the financial
statements or notes thereto.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Stephen E. Globus Chairman of the Board
Richard D. Globus President and Director
Stanley Wunderlich Director
Ronald J. Frank Director
Joseph Mancuso Director
Lisa Vislocky Vice President and Treasurer
Note: The office of Secretary of the Company does not have any policy-making
function, and accordingly, Mr. Harry Balterman, who is the Secretary, is not an
Executive Officer of the Company.
STEPHEN E. GLOBUS, age 50, has been an officer and director of the Company
since its organization in 1973, and is currently its Chairman of the Board and
Chief Executive Officer. He is also a director of Tinsley Laboratories, Inc. and
Plasmaco, Inc.
RICHARD D. GLOBUS, age 50, as well as his brother referred to above, has
also been an officer and director of the Company since its organization in 1973,
and is currently its President and Chief Operating Officer. He is also a
director of Globus Studios, Inc. (formerly Idex, Inc.) and Catamount Brewing
Company.
STANLEY WUNDERLICH, age 51, holds a BS degree from Brooklyn College and an
LL.B. degree from LaSalle Law School. He is presently, and has been since the
beginning of 1995, engaged in investment banking and financial consulting
activities for various organizations. From 1991 until 1994 he was the Managing
Director of the Institutional Services Department of Robert Todd Financial Corp.
(an investment banking firm). From 1977 until 1987, he was Managing Director of
Krieger, Wunderlich, Fialkov, Scheinman & Co. (a broker-dealer); and from 1972
until 1977 he was a Vice President of Blyth, Eastman, Dillon Union Securities (a
broker-dealer). He is a former member of the Arbitration Committee of the
American Stock Exchange and a former Vice President of the Long Island Forum of
Technology. Mr. Wunderlich is a director of C.P.I. Aerostructures Corp. and has
been a director of the Company since his election as such on December 3, 1992.
RONALD J. FRANK, age 47, is presently, and has been since June 1990, a
private investor. From January 1989 to June 1990, he was associated with Profit
Concepts, Ltd., which was a general partner of an investment partnership and
from March 1987 to January 1989 he was a private financial consultant. Mr. Frank
has been a director of the Company since his election as such on December 3,
1992.
JOSEPH MANCUSO, age 57, holds an Electrical Engineering degree from
Worcester Polytechnic Institute in Massachusetts, an MBA from the Harvard
Business School and a Ph.D. in Educational Administration from Boston
University. He has been Chairman of the Management Department in Educational
Administration at Worcester Polytechnic Institute and is presently the head of
the Center for Entrepreneurial Management, Inc. and of the Chief Executive
Officers Club in New York City. Mr. Mancuso is the author of a number of
business plan books which have been published by Simon & Schuster. Mr. Mancuso
is a director of Interscience Corp. and has been a director of the Company since
his election as such on December 3, 1992.
<PAGE>
LISA VISLOCKY, age 39, is a Certified Public Accountant and has been
employed by the Company, on a full-time basis, since March 1986. From September
1983 until February 1986, she was employed by Weiner and Company, Certified
Public Accountants and from 1979 to May 1983 she was an internal auditor for
International Telephone & Telegraph Co., Inc.
Messrs. Wunderlich, Frank and Mancuso are considered to be the members of
the Board of Directors of the Company who are the "independent directors" as
required by the Investment Company Act of 1940. (See the caption "Governmental
Regulation" in Item 1 above.)
Directors are elected at the annual meeting of stockholders and hold office
until the following annual meeting. The most recent annual meeting of
stockholders was held on December 3, 1992. The terms of all officers expire at
the annual meeting of directors following the annual stockholders meeting.
Subject to their contract rights to compensation, if any, officers may be
removed at any time by the Board of Directors.
Item 11. EXECUTIVE COMPENSATION
(a) (b) Summary Compensation Table:
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities All
Annual Stock underlying other
Name and Compen- Award(s) Options/ LTIP Compen-
Principal Year Salary Bonus sation SAR's Payouts sation
Position Ended ($) ($) ($) ($) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen E.
Globus,
CEO 2/28/97 50,000 -- -- -- -- -- --
2/29/96 50,000 -- -- -- -- -- --
2/28/95 50,000 -- -- -- -- -- --
</TABLE>
(c) Option/SAR Grants Table -- Not Applicable.
(d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
-- Not Applicable.
(e) Long-Term Incentive Plan ("LTIP") Awards Table -- Not Applicable.
(f) Defined Benefit or Actuarial Plan Disclosure -- Not Applicable.
(g) Compensation of Directors -- There are presently no arrangements pursuant to
which Directors of the Company are compensated for any services provided as a
director, including any amounts payable for committee participation or special
assignments.
(h) Employment Contracts and Termination of Employment and Change-In-Control
Arrangements -- Not Applicable.
(i) Report on Repricing of Options/SAR's -- Not Applicable.
(j) Compensation Committee Interlocks and Insider Participation -- The Board of
Directors of the Company did not have any compensation committee or board
committee performing equivalent functions during the last completed fiscal year.
Messrs. Stephen E. and Richard D. Globus participated in all deliberations and
decisions of the Board of Directors of the Company during its last completed
fiscal year.
(k) Board Compensation Committee Report on Executive Compensation
-- Not Applicable.
(l) Performance Graph -- Not Applicable.
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 7, 1997, regarding
each person known by the Company to own beneficially more than 5% of the
Company's Common Stock, each director of the Company who owns shares of Common
Stock, and all directors and officers as a group.
Approximate
Amount and Nature of Percent
Name Beneficial Ownership (1) of Class (2)
---- ------------------------ ------------
Stephen E. Globus* 514,750(3) 22
Richard D. Globus* 513,750 22
Ronald P. Globus* 500,000 22
Ronald J. Frank 1,000 (4)
Stanley Wunderlich none --
Joseph Mancuso none --
All Directors and Officers
as a Group (7 persons) 1,048,200 44(2)
Jane Globus
201 Crandon Blvd
Key Biscayne, FL 33149 312,292(5) 13
* 44 West 24th Street, New York, NY 10010
(1) Unless otherwise indicated, all shares are directly owned, and the sole
investment and voting power is held, by the persons named. Information in table
has been supplied by the persons concerned or has been obtained from Company
records.
(2) Approximate percent of class has been computed on the basis of the number of
shares of Common Stock outstanding as of May 1, 1997, (2,364,860).
(3) Includes 1,000 shares held for benefit of minor son.
(4) Less than 1%.
(5) 16,500 shares are held of record and beneficially and the remainder are
beneficially owned. Mrs. Globus is the mother of the three Globus brothers who
disclaim any beneficial ownership of the shares owned by her.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(i) From time to time Messrs. Stephen E. and Richard D. Globus have made loans
to the Company. During the past fiscal year of the Company they made loans of
$11,000. For details as to amounts owed to them by the Company, reference should
be made to the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" elsewhere herein. Commencing March 1, 1988,
loans owing to Mr. Stephen E. Globus (the principal amount of which was
approximately $215,000 at such date) accrued interest at the rate of 5% per
annum (which is the same rate of interest paid on loans owing to Mr. Richard D.
Globus). The Company is also indebted to Messrs. Stephen E. and Richard D.
Globus for unpaid salaries owed to them and is indebted to Ms. Jane Globus for
monies loaned to it by her. For details as to amounts owed reference should be
made to the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" elsewhere herein.
<PAGE>
(ii) During the past fiscal year Messrs. Stephen E. and Richard D. Globus, as
applicable, agreed to offset a total of $66,000 of monies owed to one or both of
them by the Company in return for the personal use by one or both of such two
persons of facilities, personnel and other services of the Company.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) (2) Financial Statements and Financial Statement Schedules
A list of the Financial Statements and Financial Statement Schedules filed
as a part of this Report is set forth in Item 8 of this Report, which list is
incorporated herein by reference.
(a) (3) Exhibits
3(a) Articles of Incorporation and Amendments Thereto (Incorporated by
reference to Exhibits 2(a), 2(b) and 2(c) filed with Registrant's Form
S-18 Registration Statement, File # 2-72220 NY and to Exhibit 3-1
filed with Registrant's Form 8-K for event of August 7, 1984, File
#0-9987.
3(b) By-Laws (Incorporated by reference to Exhibit 2(d) filed with
Registrant's Form S-18 Registration Statement, File # 2-72220 NY.
10 Sale of Assets Agreement between Registrant and Idex, Inc. dated
December 11, 1985 (Incorporated by reference to Exhibit 1 to
Registrant's Form 8-K for event of February 27, 1986).
11 Statement re computation of per share earnings. (Included in Note F of
Notes To Financial Statements filed as part of this Report).
(b) Reports on Form 8-K
During the last quarter of the period covered by this Report, no reports on
Form 8-K were filed.
<PAGE>
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.
GLOBUS GROWTH GROUP, INC.
By /s/ Stephen E. Globus
---------------------
Stephen E. Globus
Chairman of the Board
Dated: New York, NY
May 29, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dated indicated:
Signature Title Date
--------- ----- ----
s/Stephen E. Globus Chairman of the Board,
- ----------------------- (Principal Executive Officer) May 29, 1997
Stephen E. Globus
s/Richard D. Globus President, Director May 29, 1997
- -----------------------
Richard D. Globus
s/Lisa Vislocky Treasurer (Principal Financial &
- ----------------------- Accounting Officer) May 29, 1997
Lisa Vislocky
s/Stanley Wunderlich Director May 29, 1997
- -----------------------
Stanley Wunderlich
s/Ronald J. Frank Director May 29, 1997
- -----------------------
Ronald J. Frank
s/Joseph Mancuso Director May 29, 1997
- -----------------------
Joseph Mancuso
S-1
<PAGE>
Richard A. Eisner & Company, LLP
- --------------------------------------------------------------------------------
Accountants and Consultants
[LOGO]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Globus Growth Group, Inc.
New York, New York
We have audited the accompanying balance sheets of Globus Growth Group,
Inc. as at February 28, 1997 and February 29, 1996, and the related statements
of operations, changes in shareholders' equity and cash flows for each of the
years in the three-year period ended February 28, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Globus Growth Group, Inc. at
February 28, 1997 and February 29, 1996, and the results of its operations and
its cash flows for each of the years in the three-year period ended February 28,
1997 in conformity with generally accepted accounting principles.
F-1
575 Madison Avenue, New York, N.Y. 10022-2597
Member of Summit International Associates, Inc.
New York, NY o Melville, NY o Cambridge, MA o Florham Park, NJ
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
As explained in Note B, the financial statements include securities valued
at $1,654,000 at February 28, 1997 (50% of assets) and $660,000 at February 29,
1996 (25% of assets), whose values have been estimated by the Board of Directors
in the absence of readily ascertainable market values. We have reviewed the
procedures used by the Board of Directors in arriving at its estimate of value
of such securities and have inspected underlying documentation, and, in the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that would have been
used had a ready market for the securities existed, and the differences could be
material.
/s/ Richard A. Eisner & Company, LLP
New York, New York
May 5, 1997
F-2
<PAGE>
GLOBUS GROWTH GROUP, INC.
BALANCE SHEETS
(Note A)
February 28, February 29,
1997 1996
----------- -----------
A S S E T S
-----------
Cash ............................................. $ 512,000 $ 985,000
Investments in securities (Notes A[2] and B) .... 2,737,000 1,690,000
Promissory note receivable (Note C) .............. 50,000
Other assets ..................................... 19,000 16,000
----------- -----------
T O T A L .............................. $ 3,318,000 $ 2,691,000
=========== ===========
L I A B I L I T I E S
---------------------
Accounts payable and accrued expenses,
including salary due to officer/
shareholders of $860,000 in 1997 and
$760,000 in 1996 .............................. $ 910,000 $ 808,000
Loans payable to officer/shareholders,
including accrued interest of $205,000 in
1997 and $186,000 in 1996 (Note D) ............ 528,000 660,000
Loan payable to related party, including
accrued interest of $93,000 in 1997 and
$77,000 in 1996 (Note D) ...................... 405,000 394,000
----------- -----------
Total liabilities ...................... 1,843,000 1,862,000
----------- -----------
SHAREHOLDERS' EQUITY
--------------------
(Note F)
Preferred stock - $.10 par value; authorized
450,000 shares; none issued
Series B convertible preferred stock - $.10
par value; authorized 50,000 shares;
none issued
Common stock - $.01 par value; authorized
4,500,000 shares; issued 2,499,000 shares ..... 25,000 25,000
Additional paid-in capital ....................... 2,747,000 2,747,000
Accumulated deficit .............................. (1,260,000) (1,907,000)
Treasury stock, at cost - 134,140 shares
in 1997 and 133,140 shares in 1996 ............ (37,000) (36,000)
----------- -----------
Total shareholders' equity ............. 1,475,000 829,000
----------- -----------
T O T A L .............................. $ 3,318,000 $ 2,691,000
=========== ===========
The accompanying notes to financial statements
are an integral part hereof.
F-3
<PAGE>
GLOBUS GROWTH GROUP, INC.
STATEMENTS OF OPERATIONS
(Note A)
Year Ended
----------------------------------------
February 28, February 29, February 28,
1997 1996 1995
----------- ----------- ------------
Gain on investments:
Realized ......................... $ 46,000 $ 859,000 $ 203,000
Unrealized ....................... 773,000 445,000 22,000
----------- ----------- -----------
T o t a l ................. 819,000 1,304,000 225,000
Interest and dividend income ........ 42,000 8,000 8,000
Consulting and other income
(including approximately
$14,000 in 1997, $25,000 in
1996 and $11,000 in 1995
from related parties) ........... 50,000 68,000 25,000
----------- ----------- -----------
T o t a l ................. 911,000 1,380,000 258,000
----------- ----------- -----------
Expenses:
General and administrative
(Note H) ....................... 229,000 197,000 237,000
Interest ......................... 35,000 53,000 50,000
----------- ----------- -----------
T o t a l ................. 264,000 250,000 287,000
----------- ----------- -----------
NET INCOME (LOSS) ................... $ 647,000 $ 1,130,000 $ (29,000)
=========== =========== ===========
NET INCOME (LOSS) PER SHARE
(NOTE G) ......................... $ .27 $ .47 $ (.01)
=========== =========== ===========
Weighted average number of
common shares .................... 2,364,964 2,380,208 2,395,477
=========== =========== ===========
The accompanying notes to financial statements
are an integral part hereof.
F-4
<PAGE>
<TABLE>
<CAPTION>
GLOBUS GROWTH GROUP, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Common Stock Treasury Stock
----------------------- Additional ----------------------
Number of Paid-in Accumulated Number of
Shares Amount Capital Deficit Shares Cost
--------- ----------- ----------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance - February 28, 1994 ................... 2,499,000 $ 25,000 $ 2,747,000 $(3,008,000) 101,190 $ 34,000
Net (loss) .................................... (29,000)
Acquisition of treasury shares, $.06 per
share ...................................... 3,300
--------- ----------- ----------- ----------- ------- -----------
Balance - February 28, 1995 ................... 2,499,000 25,000 2,747,000 (3,037,000) 104,490 34,000
Net income .................................... 1,130,000
Acquisition of treasury shares, $.05 per
share ...................................... 17,200 1,000
Exchange for treasury shares, $.10 per share .. 11,450 1,000
--------- ----------- ----------- ----------- ------- -----------
Balance - February 29, 1996 ................... 2,499,000 25,000 2,747,000 (1,907,000) 133,140 36,000
Net income .................................... 647,000
Acquisition of treasury shares, $.16 per
share 1,000 1,000
.............................................. --------- ----------- ----------- ----------- ------- -----------
BALANCE - FEBRUARY 28, 1997 .................. 2,499,000 $ 25,000 $ 2,747,000 $(1,260,000) 134,140 $ 37,000
========= =========== =========== =========== ======= ===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-5
<PAGE>
GLOBUS GROWTH GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
February 28, February 29, February 28,
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................................... $ 647,000 $ 1,130,000 $ (29,000)
Adjustments to reconcile net income (loss) to net cash (used in)
operating activities:
Depreciation and amortization ............................................... 1,000 2,000 2,000
Realized (gain) on investments .............................................. (46,000) (859,000) (203,000)
Unrealized (gain) on investments ............................................ (773,000) (445,000) (22,000)
(Increase) in other assets .................................................. (3,000) (5,000)
Increase in accounts payable, accrued expenses and accrued
interest on loans ......................................................... 137,000 87,000 103,000
----------- ----------- -----------
Net cash (used in) operating activities ................................. (37,000) (90,000) (149,000)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of investments ......................................................... (280,000) (335,000) (190,000)
Proceeds from sale of investments ............................................... 52,000 1,498,000 433,000
Promissory note receivable ...................................................... (50,000)
----------- ----------- -----------
Net cash provided by (used in) investing activities ..................... (278,000) 1,163,000 243,000
----------- ----------- -----------
Cash flows from financing activities:
Purchase of treasury stock ...................................................... (1,000) (2,000)
Borrowings from (repayments to) related party ................................... (5,000) 9,000 (4,000)
Increase in loans payable to officer/shareholders ............................... 11,000 26,000 33,000
Repayment of loans payable to officer/shareholders .............................. (163,000) (127,000) (117,000)
----------- ----------- -----------
Net cash (used in) financing activities ................................. (158,000) (94,000) (88,000)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH .................................................... (473,000) 979,000 6,000
Cash - beginning of year ........................................................... 985,000 6,000 - 0 -
----------- ----------- -----------
CASH - END OF YEAR ................................................................. $ 512,000 $ 985,000 $ 6,000
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes .................................................................. $ 11,000 $ 700 $ 700
Interest ...................................................................... 11,000 600
Noncash investing activity:
Securities sold for which cash was not received ................................. $-0- $ 1,000 $ 62,000
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-6
<PAGE>
GLOBUS GROWTH GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company and Its Significant Accounting Policies:
[1] The Company:
The Company's principal activity is investing in other companies. Effective
May 27, 1988, the Company elected to be treated as a Business Development
Company.
The Company's principal assets are its investments which, unless sold, do
not generate any cash flow. As a result, the Company has been dependent upon
advances from its officer/shareholders in order to meet its obligations. The
Company's ability to continue to meet its obligations is dependent upon a ready
market for its investments or upon the continued financial support of the
officer/shareholders including their willingness to refrain from demanding
amounts due them.
[2] Security valuation:
Investments are carried at fair value, which, for readily marketable
securities, represents the last reported sales price or bid price on the
valuation date. Investments in restricted securities and securities which are
not readily marketable are carried at fair value as determined in good faith by
the Board of Directors, in the exercise of its judgment, after taking into
consideration various indications of value available to the Board.
(continued)
F-7
<PAGE>
GLOBUS GROWTH GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE B) - Investments:
<TABLE>
<CAPTION>
February 28, 1997 February 29, 1996
--------------------------------- ---------------------------------
Number Fair Number Fair
Security of Shares Value Cost of Shares Value Cost
- ------------------------------------------------------------ --------- ---------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Common stock - 89.8% in 1997 and 84.3% in 1996:
Catamount Brewing Co. (1) ............................... 23,215 $ 569,000 $ 176,000 23,215 $ 176,000 $176,000
Interface Systems Inc. .................................. 775 4,000 7,000 775 12,000 7,000
Nematron Corporation .................................... 16,925 110,000 30,000 16,925 127,000 30,000
Energy Research, Inc. (2) ............................... 76,000 883,000 88,000 81,000 891,000 94,000
Kimeragen, Inc. (3) ..................................... 414 70,000 70,000
Kimeragen, Inc. C1ass A (3) ............................. 108,827 609,000 219,000 55,000 149,000 149,000
Kimeragen, Inc. C1ass B (3) ............................. 35,000 196,000 75,000
Repligen Corporation (4) ................................ 100,468 86,000 190,000
---------- ---------- ---------- --------
Total common stock ............................... 2,457,000 785,000 1,425,000 526,000
---------- ---------- ---------- --------
Preferred shares - 10.2% in 1997 and 14.2% in 1996:
Kimeragen, Inc. - Preferred (3) ......................... 113 75,000 75,000
Proscure Inc. - Series A convertible preferred (4) ...... 61,000 86,000 86,000
Proscure Inc. - Series B convertible preferred (4) ...... 53,334 80,000 80,000
Catamount Brewing Co. - Preferred ....................... 260,000 150,000 150,000
Genitope Corp. - Series A preferred ..................... 4,286 130,000 130,000
---------- ---------- ---------- --------
Total preferred stock ............................ 280,000 280,000 241,000 241,000
---------- ---------- ---------- --------
Stock purchase warrants - 0% in 1997 and 1.5% in 1996:
Glycan Pharmaceuticals Inc. (4) ......................... 37,500 17,000 17,000
Proscure Inc. (4) ....................................... 75,000 7,000 7,000
---------- ---------- ---------- --------
- 0 - - 0 - 24,000 24,000
---------- ---------- ---------- --------
Total investments - fair value ................... $2,737,000 $1,065,000 $1,690,000 $791,000
========== ========== ========== ========
</TABLE>
Restricted and not readily marketable securities were valued at a total fair
value of $1,654,000 and $660,000 at February 28, 1997 and February 29, 1996,
respectively, as determined by the Board of Directors. Such investments
consisted of all securities except Interface Systems Inc., Nematron
Corporation, Energy Research, Inc. and Repligen Corp. in 1997 and in 1996 for
which values are based on quoted market values.
The Company invests in energy technology, biotechnology, beverage company and
computer technology, 33%, 37%, 26% and 4%, respectively, at February 28, 1997
and 53%, 29%, 10% and 8%, respectively, at February 29, 1996. All investments
are in U.S. companies.
All investments are nonincome producing except Interface Systems Inc. in 1996.
(continued)
F-8
<PAGE>
GLOBUS GROWTH GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE B) - Investments: (continued)
(1) Represents in excess of 5% of outstanding voting securities of
investee.
(2) Subject to the provisions of Rule 144(k) under the Securities Act of
1933.
(3) During the year ended February 28, 1997 113 shares of preferred stock
were exchanged for 35,000 shares of Class B common stock and 414 shares of
common stock were exchanged for 53,827 shares of Class A common stock.
(4) During the year ended February 28, 1997 all of the preferred stock was
exchanged for 91,468 shares of Repligen Corporation common stock and all of the
Proscure Inc. and Glycan Pharmaceuticals Inc. warrants were exchanged for 9,000
shares of Repligen Corporation common stock.
Cost indicated above is tax cost. The unrealized appreciation and
depreciation is as follows:
February 28, February 29,
1997 1996
----------- -----------
Unrealized appreciation ................. $ 1,779,000 $ 899,000
Unrealized (depreciation) ............... (107,000)
----------- -----------
Net appreciation .............. $ 1,672,000 $ 899,000
=========== ===========
(NOTE C) - Promissory Note Receivable:
In November 1996 the Company loaned $50,000 to Woodstock Communications
Inc. The loan matures on the earlier of the date of consummation of a financing,
as defined, on November 19, 1998. The loan bears interest, determinable at the
option of the Company, either at 10% per annum or the issuance of Class A common
stock of the borrower equaling a 1% ownership interest, as defined.
(NOTE D) - Loans Payable:
Loans from officer/shareholders and a relative of theirs are due on demand
and bear annual interest at 5%.
The estimated fair value of these financial instruments is not readily
determinable due to the nature of the relationship of the parties. The amounts
presented are not necessarily indicative of the amounts that could be realized
in a current market exchange.
(continued)
F-9
<PAGE>
GLOBUS GROWTH GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE E) - Income Taxes:
The current provision for income taxes for the year ended February 28, 1997
in the amount of approximately $295,000 equals the amount of the reduction in
the valuation allowance on the deferred tax asset. As of February 28, 1997, the
Company has approximately $871,000 of net operating loss carryforwards to reduce
taxable income. Such carryforwards expire in fiscal years ending in February
2000 through February 2011.
Temporary differences and carryforwards which give rise to the net deferred
tax asset are as follows:
February 28, February 29,
1997 1996
------------ ------------
Net operating loss
carryovers ..................................... $ 401,000 $ 402,000
Unrealized gain on
investments .................................... (769,000) (414,000)
Accrued expenses not yet
deductible for income tax
purposes ....................................... 533,000 472,000
--------- ---------
165,000 460,000
Less valuation allowance
thereon ........................................ 165,000 460,000
--------- ---------
$ - 0 - $ - 0 -
========= =========
(NOTE F) - Shareholders' Equity:
The Board of Directors has authorized the future sale of up to 300,000
shares of the Company's authorized, but unissued, common stock at a price of
$.50 per share to individuals to be determined at the discretion of the Board.
No such shares have been issued.
(NOTE G) - Per Share Data:
Per share data are based on the weighted average number of shares of common
stock outstanding.
(continued)
F-10
<PAGE>
GLOBUS GROWTH GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE H) - Related Party Transactions:
The Company paid approximately $14,000 for rent to a related party for the
year ended February 28, 1997 and approximately $13,000 for each of the years
ended February 29, 1996 and February 28, 1995.
The Company charged two officer/shareholders $66,000 as reimbursement for
general and administrative costs and for their use of the Company's office and
personnel during each of the years ended February 28, 1997, February 29, 1996,
and February 28, 1995.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form
10K at February 28, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> Feb-28-1997
<CASH> 512,000
<SECURITIES> 2,737,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 24,000
<DEPRECIATION> 22,000
<TOTAL-ASSETS> 3,318,000
<CURRENT-LIABILITIES> 1,843,000
<BONDS> 0
0
0
<COMMON> 25,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,475,000
<SALES> 0
<TOTAL-REVENUES> 911,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 229,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,000
<INCOME-PRETAX> 647,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 647,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 647,000
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
