<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996.
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 0-3718
- -------------------------------------------------------------------------------
EQUITY GROWTH SYSTEMS, INC.
(Name of Small Business Registrant in its charter)
Delaware 11-2050317
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
3821-B TAMIAMI TRAIL, SUITE 201; PORT CHARLOTTE, FLORIDA 33952
---------------------------------------------------------------
(Address of principal executive offices including Zip Code)
(941) 255-9582
--------------
(Registrant's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of June 14, 1996, there
were 3,491,148 shares of the Registrant's common stock outstanding.
This report is comprised of 22 consecutive pages. The exhibit index
required by Item 601 of Regulation SB is contained at consecutively numbered
page 19.
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE NUMBER
- ---- -----------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 2
Cover Page 3
Table of Contents 4
Auditors' Report 5
Balance Sheet 6
Condensed Statement of Income and Accumulated Deficit 7
Statements of Shareholders' Deficit 8
Condensed Statements of Cash Flows 10
Notes to the Condensed Financial Statements 11 - 16
Item 2. Management's Discussion and Analysis 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 3. Default Upon Senior Securities 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
(a) Exhibits 19 - 21
(b) Reports on Form 8-K 21
SIGNATURES 21
ADDITIONAL INFORMATION 22
</TABLE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See following pages.
- -------------------------------------------------------------------------------
<PAGE> 3
EQUITY GROWTH SYSTEMS, inc.
FINANCIAL STATEMENT
SEPTEMBER 30, 1996
<PAGE> 4
EQUITY GROWTH SYSTEMS, inc.
FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
FINANCIAL STATEMENTS
<S> <C>
Accountant's Compilation Report 1
Balance Sheets 2
Statements of Income and Accumulated Deficit 3
Statements of Shareholders' Equity 4-5
Statements of Cash Flows 6
Notes to Financial Statements 7-12
</TABLE>
<PAGE> 5
LEO J. PAUL, P.A.
CERTIFIED PUBLIC ACCOUNTANT
<TABLE>
<S> <C>
SUITE 6-C
MEMBER: FINANICAL FEDERAL BLDG.
AMERICAN INSTITUTE OF 407 LINCOLN RD.
CERTIFIED PUBLIC ACCOUNTANTS MIAMI BEACH, FLORIDA 33139
----------
FLORIDA INSTITUTE OF TELEPHONE:
CERTIFIED PUBLIC ACCOUNTANTS AREA CODE 305
532-0100 (DADE)
525-9119 (BROWARD)
</TABLE>
To the Shareholders
Equity Growth Systems, inc.,
Port Charlotte, Florida 33952
I have compiled the accompanying balance sheet of Equity Growth Systems, inc.
as of September 30, 1996 and 1995 and the related statements of income and
retained earnings and cash flows for the nine months then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
/S/ Leo J. Paul
- ---------------
Leo J. Paul
October 31, 1996
1
<PAGE> 6
EQUITY GROWTH SYSTEMS, inc.
BALANCE SHEET
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1995 1996
A S S E T S
<S> <C>
CURRENT ASSETS
Cash $ 5,459 $ -
Other receivables 5,671 5,982
Mortgage receivable, current portion
(Note 6) 178,345 222,488
Promissory notes, current portion
(Note 7) 8,757 8,757
----------- -----------
TOTAL CURRENT ASSETS 198,232 237,227
OTHER ASSETS
Mortgages receivable (Note 6) 1,865,811 2,142,203
Promissory notes (Note 7) 346,964 306,523
Interest receivable 45,398 -
Patent and proprietary product
development costs - -
----------- -----------
TOTAL OTHER ASSETS 2,258,173 2,448,726
----------- -----------
TOTAL ASSETS $ 2,456,405 $ 2,685,953
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Other current liabilities (Note 2) $ 54,505 $ 52,981
Mortgage payable, current portion
(Note 6) 350,297 218,126
Loan payable (Note 9) 104,000 -
----------- -----------
TOTAL CURRENT LIABILITIES 508,802 271,107
LONG-TERM LIABILITIES
Mortgage payable (Note 6) 1,364,379 1,722,144
----------- -----------
SHAREHOLDERS' EQUITY (Note 12)
Preferred stock-no par value authoriz-
ed-5,000,000 shares; zero issued and
outstanding - -
Common stock-$.01 par value author-
ized-20,000,000 shares; issued and
outstanding-3,491,338 shares 34,914 20,391
Capital in excess of par value 2,695,178 2,918,162
Accumulated deficit (2,146,868) (2,245,851)
----------- ----------
583,224 692,702
----------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 2,456,405 $2,685,953
=========== ==========
</TABLE>
Read Accountant's Compilation Report
The accompanying notes are an integral part of these financial
statements.
2
<PAGE> 7
EQUITY GROWTH SYSTEMS, inc.
CONDENSED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C>
<C> <C> <C>
Income $ 57,774 $ 61,506 $ 170,588 $ 61,506
General and Adminis-
trative Expenses 52,018 104,318 170,932 105,584
---------- ---------- ---------- ----------
Net Income (Loss)
Before Provisions
for Income Taxes 5,756 (42,812) (344) (44,078)
Provisions for Income
Taxes (Note 2) - - - 50
---------- ---------- ---------- ----------
Net Income (Loss) 5,756 (42,812) (344) (44,128)
Accumulated Deficit-
Beginning (2,152,624) (2,202,938) 2,146,524 2,201,723
Accumulated Deficit-
Ending 2,146,868 2,245,750 2,146,868 2,245,851
========== ========= ========= =========
Earnings Per Share .00 (.02) .00 (.02)
Weighted Average of
Shares Outstanding 2,411,036 2,000,000 2,411,036 2,000,000
---------- ---------- ---------- ----------
</TABLE>
Read Accountant's Compilation Report
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 8
EQUITY GROWTH SYSTEMS, inc.
STATEMENTS OF SHAREHOLDERS' EQUITY
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Capital in
No. of Common Excess of Accumulated
Shares Stock Par Value Deficit
<S> <C> <C> <C> <C>
Balances, December
31, 1991 $1,902,152 $19,022 $2,101,411 $(2,137,567)
Net (loss) for the
year ended December
31, 1992 (7,320)
---------- ------- ---------- -----------
Balances, December
31, 1992 1,902,152 19,022 2,101,411 (2,144,887)
Common stock issued
as payment for pro-
fessional fees 75,000 750
Common stock issued
in exchange for
accrued interest 22,848 228 24,126
Net (loss) for the
year ended December
31, 1993 (39,700)
---------- ------- ---------- -----------
Balances, December
31, 1993 2,000,000 20,000 2,155,537 (2,184,587)
Net (loss) for the
year ended December
31, 1994 (17,136)
---------- ------- ---------- -----------
Balances, December
31, 1994 2,000,000 20,000 2,125,537 (2,201,723)
Reverse Split (1,800,000) (18,000) 18,000
Common shares issued 2,622,072 26,221 537,711
Net income for the year
ended December 31,
1995 55,199
---------- ------- ---------- -----------
Balances, December
31, 1995 2,822,072 28,221 2,681,248 (2,146,524)
</TABLE>
Read Accountant's Compilation Report
The accompanying notes are an integral part of these financial
statements.
4
<PAGE> 9
EQUITY GROWTH SYSTEMS, inc.
STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Capital in
No. of Common Excess of Accumulated
Shares Stock Par Value Deficit
<S> <C> <C> <C> <C>
Common stock issued
in exchange for
services 669,266 6,693 - -
Additional contribution
June 30, 1996 - - 13,930 -
Net (Loss) for the
nine months ended
September 30, 1996 (344)
--------- - ------ ---------- ----------
Balances, September 30,
1996 3,491,338 $ 34,914 $2,695,178 $(2,146,868)
========= = ====== ========== ===========
</TABLE>
Read Accountant's Compilation Report
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 10
EQUITY GROWTH SYSTEMS, inc.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Cash Flow From Operating Activities:
<TABLE>
<S> <C> <C>
Net Loss $ (344) $ (44,128)
-------- ----------
Adjustments to Reconcile Income to
Net Cash Used for Operating Activities
Decrease in receivable 133,581 (2,682,161)
Increase in current liabilities 19,499 (8,048)
Decrease in notes payable (128,902) 1,940,270
Capital stock issued 6,693 391
-------- ----------
(8,127) (749,548)
-------- ----------
Net Cash (Used) for Operation (8,471) 793,676
Cash Flow From Investing Activities
Additional paid in capital contributed 13,930 792,625
-------- ----------
Net Increase in Cash 5,459 (1,051)
Cash-Beginning of Period - 1,051
-------- ----------
Cash-End of Period $ 5,459 $ -
======== ==========
</TABLE>
Read Accountant's Compilation Report
The accompanying notes are an integral part of these financial
statements.
6
<PAGE> 11
EQUITY GROWTH SYSTEMS, inc.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Organization
The Company (formerly known as InfoTech, Inc.) was organized under
the laws of the State of Delaware on December 8, 1964. The principal business
of the Company is specializing in structuring and marketing mortgaged backed
securities as well as, the acquisition of select commercial real estate for its
own account.
Fixed Assets
Fixed assets are stated at cost and expenses pursuant to IRS Code
sec 179. The taxpayer has elected to accelerate the depreciation expense.
Income Taxes
Due to the loss carry forward, no provision for income taxes is
required.
NOTE 2 - SETTLEMENT WITH CREDITORS
In March of 1995, the Company issued 20,000 shares of the Company's
$.01 par value of common stock after the reverse split in payment of legal
bills of $45,734, and 6,072 shares $.01 par value stock in payment of
accounting bill of $15,360. The balance of $67,832 was written off as Company
was not able to locate creditors.
On August 15, 1995, the Company has issued 200,000 shares of the
Company's $.01 par value of common stock for significant services to the
corporation at the request of its President with a value of $2,000.
NOTE 3 - EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Edward
Granville-Smith, a chief executive officer for an initial term of five years
commencing June 1, 1995. The Company registered with the Securities and
Exchange Commission to issue 110,000 shares of common stock to Edward
Granville-Smith for compensation for services prior to June 1, 1995. In
addition, annual salary is a sum equal to the lesser of 5% of the Company's
annual gross income on a calendar basis or 15% of its net pre-tax profit as
determined for federal income tax purposes, without taking depreciation or tax
credits into account to be paid on or before March 30, following the calendar
for which salary is due; subject
7
<PAGE> 12
EQUITY GROWTH SYSTEMS, inc.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 3- EMPLOYMENT AGREEMENT (CONTINUED)
to availability of cash flow. Edward Granville-Smith would also be entitled to
an annual bonus payable in shares of the Company's common stock, determined by
dividing 5% of the Company's pre-tax profits for the subject calendar year by
the average bid price for the Company's common stock during the last five
trading days prior to the end of the last day of each year and the first days
of the new year.
NOTE 4 - CONSULTING AGREEMENTS
The Company entered into two consulting agreements. One with Bolina
Trading Company, S.A., a Panamanian Corporation and the second one with Warren
A. McFadden. Each consultant shall serve as a special advisor to Mr.
Granville-Smith, in conjunction with Mr. Granville-Smith's role as an officer
and director of the Company, with special responsibilities in the areas of
strategic planning and raising debt on equity capital required to implement the
Company's strategic plans. Bolina Trading Company, S.A. will receive as
compensation 84,000 shares of the Company's common stock plus $100 per hour
after 520 hours of service per year. Warren A. McFadden will receive as
compensation 110,000 shares of the Company's common stock plus $100 per hour
after 520 hours of service per year.
NOTE 5 - INDENTURE OF TRUST AND WRAP AROUND MORTGAGES RECEIVABLE
On June 30, 1995, the Company issued 1,616,000 shares of common
stock in payment of an indenture of trust and wrap around mortgages subject to
the underlying mortgages, from the following partnerships: Pay-West
Associates, Montco Associates, San-Safe Associates and San-Ten Associates.
The indenture of trust consists of (4) four demand notes bearing
interest at prime plus 4%. These notes are payable from the rental of the
various properties less payment on the wrap around mortgages. The payment does
not cover the accrued interest which is added back to the notes.
The wrap around notes bear interest of 9.08% to 13.50%. The
underlying mortgages bear interest at 9.625 to 9.75%. The difference between
payments on the wrap around mortgages and underlying mortgages are applied to
debt service of the demand notes.
8
<PAGE> 13
EQUITY GROWTH SYSTEMS, inc.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 6 - MORTGAGES
<TABLE>
<CAPTION>
Mortgages consist of the following:
<S> <C> <C>
Subordinate "wrap" mortgage receivables:
(a) Nevada/California Property 12.940% $ 793,089
(b) Tennessee Property 13.500% 268,455
(c) Kansas Property (see Note 13) 12.320% 330,593
(d) Oregon Property 9.080% 652,019
----------
2,044,156
Less: Current Portion 178,345
----------
$1,865,811
==========
Original Mortgages Payable:
(a) Nevada/California Property 9.750% $ 777,250
(b) Tennessee Property 9.625% 193,580
(c) Kansas Property (see Note 13) 9.750% 129,619
(d) Oregon Property 9.750% 614,227
----------
1,714,676
Less: Current Portion 350,297
----------
$1,364,379
==========
</TABLE>
(a) The mortgage secures a promissory note and is payable in equal
quarterly installments of $42,701.69 with a final payment of $291,096.92,
maturing January 1, 2001. There is also an underlying "wrap mortgage that is
payable in equal quarterly installments of $42,826.50, maturing July 1, 2005,
with quarterly payments decreasing to $9,314.75 for the last five years.
(b) The mortgage secures a promissory note and is payable in
equal quarterly installments of $23,437.01, with a final payment of $198,238.33
maturing December 31, 1996. There is also an underlying "wrap" mortgage that
is payable in equal quarterly installments of $23,562.25 maturing December
2006, with quarterly payments decreasing to $7,329 for the last 10 years.
(c) The mortgage secures a promissory note and is payable in
equal quarterly installments of $18,508.87 maturing December 31, 1995. There
is also an underlying "wrap" mortgage that is payable in annual installments of
$74,482, maturing October 1, 2005, with annual payments decreasing to $22,962
the last 10 years. (See Note 13)
(d) The mortgage secures a promissory note and is payable in
equal quarterly installments of $26,409.87 with a final payment of $232,199.50,
maturing January 1, 2003. There is also an underlying "wrap" mortgage that
is payable in equal annual payments of $106,640 maturing December 1, 2002.
9
<PAGE> 14
EQUITY GROWTH SYSTEMS, inc.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
NOTE 7 - NOTES RECEIVABLE
<S> <C>
Nevada/California Property
Quarterly payments of $868.55
4% above prime, currently 12.62%
original amount $63,000 $135,371
Tennessee
Quarterly payment of $477.90
4% above prime, currently 12.62%
original amount $40,000 91,333
Kansas
Quarterly payments of $341.73
4% above prime, currently 12.62%
original amount $21,073 (See Note 13) 43,667
Oregon
Quarterly payments of $501.13
4% above prime, currently 12.62%
original amount $38,742 85,350
--------
355,721
Less: Current Portion (8,757)
--------
$346,964
========
</TABLE>
NOTE 8 - LEASE COMMITMENTS
The various operating leases were acquired with the various
mortgages. The income generated under these operating leases is used to pay
the underlying mortgages. The future minimum rental commitment receivable by
year for the non-cancelable lease, as of December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Nevada
Years Ending California Tennessee Kansas Oregon
<S> <C> <C> <C> <C>
December 31, 1996 $174,423 $95,660 $ 75,555 $107,964
December 31, 1997 174,423 - 75,555 107,964
December 31, 1998 174,423 - 18,889 107,964
December 31, 1999 174,423 - - 107,964
December 31, 2000 174,423 - - 107,964
-------- ------- -------- --------
Total $872,115 $95,660 $169,999 $539,820
======== ======= ======== ========
Total Minimum Payments $1,677,594
==========
</TABLE>
10
<PAGE> 15
EQUITY GROWTH SYSTEMS, inc.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 8 - LEASE COMMITMENTS (CONTINUED)
The Company only recognizes as Interest income those amounts
collected in excess of the profits from the wrap mortgages and the interest
income which were $170,588 and $61,506 respectively.
<TABLE>
<CAPTION>
NOTE 9 - LOAN PAYABLE 1996 1995
<S> <C> <C>
A secured loan payable due on
demand with interest payable
quarterly at a rate of 10% per
annum. This loan was assumed
by the Company as part of the
asset acquisition, subsequent
to the year end a formal note
is to be executed. $104,000 $ -
======== ========
</TABLE>
NOTE 10 - RELATED PARTY TRANSACTION
The chief executive officer of the Company is also an officer
of the general partner in all the partnership involved in the wrap around
mortgages subject to the underlying mortgages and promissory notes.
NOTE 11 - COMPENSATION
No officer or director has received any compensation to date.
NOTE 12 - STOCKHOLDERS' EQUITY
On May 18, 1995, the Company adopted a resolution to change the
authorized capitalization as follows:
(a) The 2,000,000 shares of common stock, $.01 par value then
authorized, all of which were currently outstanding, were reverse split into
200,000 shares, $0.01 par value; and immediately thereafter;
(b) The Company's authorized common stock was increased from 200,000
shares, $0.01 par value, to 20,000,000 shares of common stock, without par
value, and
(c) The Company was authorized to issue 5,000,000 shares of
preferred stock, the attributes of which are to be determined by the Company's
Board of Directors from time to time, prior to issuance, in conformity with the
requirements of Sections 151 of the Delaware General Corporation Law.
11
<PAGE> 16
EQUITY GROWTH SYSTEMS, inc.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 13 - LEGAL MATTERS
The Company is currently in default on a property in Kansas City.
The tenant submitted an irrevocable offer to purchase the property. A formal
contract is being prepared and will be executed shortly. The Company's legal
counsel has confirmed that the first mortgage holder has withheld any action to
foreclose the mortgage due to the pending sale which will satisfy all pending
liabilities. At the time the sale is consummated the wrap mortgage asset will
be eliminated as well as the underlying liability.
12
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operation
During the nine months ended September 30, 1996, the Registrant
reported interest income of approximately $170,000 as compared to income from
all sources of $61,000 during the prior nine months ended September 30, 1995.
This increase was attributable to the Registrant's exchanging 1,616,000 shares
of common stock in payment of an indenture to trust and various wrap around
mortgages subject to the underlying mortgages. Also, the leases were similarly
acquired in the same transaction.
During the nine months ended September 30, 1996, the Registrant's cost
of revenue increased by approximately $64,000 over the prior nine months ended
representing costs associates with increased total revenues. The Registrant's
cost of revenue increased primarily as a result of the increased cost of
managing the mortgages, mostly consisting of interest expenses incurred in
satisfying the underlying mortgages. During the 1996 nine months ended, the
Registrant recognized an approximate 168% increase in its general and
administrative expenses primarily resulted by the advent of the interest
expenses.
During the nine months ended September 30, 1996, the Registrant
reported a net loss of approximately $300 or $.0 per share as compared to a net
loss of approximately $44,000 or $.0 per share during the prior year end.
Liquidity and Capital Resource
As of September 30, 1996, the Registrant had a working capital
position of approximately ($310,000) as compared to a working capital position
of approximately ($34,000) as of September 30, 1995. This increase reflects
the Registrant's acquisition of the previously discussed mortgages and leases.
To date, the cash flow generated from operations have been adequate to meet the
Registrant's mortgage obligations. A shareholder has been contributing funds
to meet various general and administrative expenses required to fulfill all of
the Registrant's obligations. No officer of the Registrant has been receiving
or accruing compensation at this time.
<PAGE> 18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant is currently not a party to any legal proceedings. Based
on information available to the Registrant, it believes that there is a
potential for litigation involving:
San Safe Associates limited partners (who have retained counsel to assist
them in removing an affiliate of the Registrant as general partner).
Management has retained legal counsel who is negotiating with counsel for the
limited partners on behalf of the Registrant and the general partner. See Item
2, Description of Properties - Investment Property - A. Leases - Associated
Wholesale Grocers, Inc., Lease.
The Registrant's predecessors in interest (the Milpitas partnerships)
entered into negotiations with Exten Ventures, Inc., a Delaware corporation,
during 1990, for sale of the assets subsequently assigned to the Registrant.
The Milpitas Partnerships have advised the Registrant's management that the
transactions were never concluded due to the inability or refusal of Exten
Ventures, Inc., to comply with its commitments. While management notes that
applicable status of limitation on any alleged transactions with Exten Ventures,
Inc., have probably expired, management cannot provide any assurances that Exten
Ventures, Inc., will not initiate litigation in the future
The Registrant has not made the final payments required under the mortgage
for its Kansas City property. The tenant had a conditional right to purchase
such property and submitted an irrevocable offer to purchase, which was to
have been rejected by counsel representing the Registrant, however, such
counsel may have failed to take the steps required to effect such rejection.
Consequently, the Registrant and the tenant are currently in negotiation to
formalize terms of sale. Legal counsel to the Registrant has advised management
that the mortgage holder has not initiated action to enforce the mortgage based
on its acknowledgment that the pending sale will generate sufficient income to
discharge the mortgage obligation.
The Registrant has used its best efforts to obtain information concerning
the assets it obtained from Milpitas; however, much of the information was
under the control of Charles Schnepfe, Milpitas' accountant, who served for
material periods as its chief executive officer and as the chairman of its
board of directors. Mr. Schnepfe refuses to provide any information with
respect to activities by Milpitas during the time it was under his control, to
the Registrant. It is possible that the Registrant is unaware of matters
performed or ignored by Mr. Schnepfe which could prove material in the future.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Registrant has no senior securities.
- -------------------------------------------------------------------------------
<PAGE> 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the first
quarter of 1996.
ITEM 5. OTHER INFORMATION.
The Registrant's reports disclosed under Item 6, if any, are incorporated
by reference as material subsequent events.
Diversified Corporate Consulting Group, LLC, a Delaware limited liability
company which acts as a consultant to the Registrant, has acquired all of the
Registrant's common stock heretofore held by Mr. Warren A. McFadden, in
consideration for assumption of approximately $30,000 in obligations of Mr.
Mcfadden to the Registrant. In conjunction with the terms of its consulting
agreement with Diversified Corporate Consulting Group, LLC, the Registrant will
shortly file a registration statement on Form S-8, registering an option
permitting Diversified Corporate Consulting Group, LLC to purchase 200,000
shares of the Registrant's common stock, at an aggregate exercise price of
$80,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
2.1 Plan and Agreement of Merger dated April 7, 1993 between the
Registrant and Mercantile Realty Investors, Inc. (1)
2.2 Amendment dated May 25, 1993 to Plan and Agreement of Merger.
(3)
2.3 Agreement pertaining to cancellation of the merger between the
Registrant and Equity Growth Systems, Inc. (5)
2.4 Stock Exchange Agreement re Homan Equities, Inc. (7)
2.5 Stock Exchange Agreement re Moffitt Properties, Ltd. (7)
2.6 Stock Exchange Agreement re Equity Growth Realty, inc. (7)
</TABLE>
- -------------------------------------------------------------------------------
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
3.1 Certificate of Incorporation of the Registrant. (2)
3.11 Certificate of Amendment to Certificate of Incorporation (May,
1995). (5)
3.2 By-laws of the Registrant. (2)
10.1 Agreement for settlement of outstanding claims with the
Registrant's attorneys. (5)
10.2 Agreement for settlement of outstanding claims with the
Registrant's accountants. (5)
10.3 Employment Agreement with Edward Granville-Smith. (5)
10.4 Consultant Agreement with Bolina Trading Co., S.A. (5)
10.5 Settlement Agreement between Registrant and Equity Growth
Systems, inc., a Maryland corporation. (6)
10.6 Assignment of Indenture of Trust by Milpitas, Inc., including
Indenture of Trust. (7)
10.7 Engagement agreement with Diversified Corporate Consulting
Group, LLC. (7)
10.8 Corrective Bill of Sale. (7)
10.9 Employment Agreement with Gene R. Moffitt. (7)
10.10 Employment Agreement with Donald E. Homan. (7)
10.11 Employment Agreement with Charles J. Scimeca. (7)
10.12 Repayment Agreement with WEFT Trust. (7)
16 Letter re: Change in Certifying Accountant. (7)
21 Subsidiaries. (7)
27 Financial Data Schedule (for SEC use only).
99.1 Notifications to National Association of Securities Dealers,
Inc., pursuant to Securities and Exchange Commission Rule
10b-17. (5)
</TABLE>
- -------------------------------------------------------------------------------
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
99.2 Real Estate Title Reports for Nevada/California, Tennessee,
Kansas and Oregon properties subject to Wrap Mortgages and
Leases. (7)
99.3 Diversified Corporate Consulting Group, LLC, Agreements,
sequentially numbered page .
---
- ------
(1) Filed as exhibit 2 to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1992; incorporated by reference herein as
an Exhibit hereto.
(2) Filed as an exhibit to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1991, bearing the exhibit designation
number shown above; incorporated by reference herein as an exhibit
hereto.
(3) Filed as an exhibit to the Registrant's registration statement on Form
S-4, filed together with Mercantile Realty Investors, registration
number 33-64526, declared effective by the Securities and Exchange Com-
mission on June 24, 1994, at the identical exhibit designation numbers;
and, incorporated by reference herein as an exhibit hereto.
(4) Filed as an exhibit to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1993, bearing the exhibit designation
number shown above; incorporated by reference herein as an exhibit
hereto.
(5) Filed as an exhibit to the Registrant's Report on Form 10-KSB for the
fiscal year ended December 31, 1994, bearing the exhibit designation
number shown above; incorporated by reference herein as an exhibit
hereto.
(6) Filed as an exhibit to the Registrant's Report on Form 8-K designation
number shown above; incorporated by reference herein as an exhibit
hereto.
(7) Filed as an exhibit to the Registrant's Report on Form 10-KSB for the
fiscal year ended December 31, 1995, bearing the exhibit designation
number shown above; incorporated by reference herein as an exhibit
hereto.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EQUITY GROWTH SYSTEMS, INC.
Date: August 12, 1996
By: /s/Edward Granville-Smith
----------------------------------
Edward Granville-Smith
Chairman and Chief Executive Officer
- -------------------------------------------------------------------------------
<PAGE> 23
ADDITIONAL INFORMATION
CORPORATE HEADQUARTERS:
3821-B Tamiami Trail, Suite 201, Port Charlotte, Florida, 33952
Telephone Number (941) 255-9582
Fax Number (941) 625-4491
DIRECTOR
Edward Granville-Smith
EXECUTIVE OFFICERS
Edward Granville-Smith, Jr.; Chairman, President and Chief Executive Officer
Gene R. Moffitt; Executive Vice President, Asset Management
and Chief Operating Officer
Rafi Weiss; Senior Vice President, Acquisitions
Donald E. Homan; Vice President & Chief Financial Officer
Charles J. Scimeca; Secretary & Treasurer
INDEPENDENT PUBLIC ACCOUNTANT:
JOEL S. BAUM, P.A., CPA
1515 University Drive, Suite 222; Coral Springs, Florida 33071
Telephone Number (945) 752-1712
TRANSFER AGENT:
Liberty Transfer Company
191 New York Avenue; Huntington, New York 11743
- -------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EQUITY GROWTH SYSTEMS, INC. FOR THE PERIOD ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 5,459
<SECURITIES> 0
<RECEIVABLES> 2,450,946
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,456,405
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,456,405
<CURRENT-LIABILITIES> 508,802
<BONDS> 1,364,379
0
0
<COMMON> 34,914
<OTHER-SE> 548,310
<TOTAL-LIABILITY-AND-EQUITY> 2,456,405
<SALES> 170,588
<TOTAL-REVENUES> 170,588
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 29,534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,398
<INCOME-PRETAX> (344)
<INCOME-TAX> 0
<INCOME-CONTINUING> (344)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (344)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
