SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended January 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to _________
Commission file number 33-21443
CAPITAL GROWTH HOLDINGS, LTD.
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(Name of Small Business Issuer in Its Charter)
Colorado 87-1077246
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation)
660 Steamboat Road, Greenwich, CT 06830
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(Address of Principal Executive Offices) (Zip Code)
(203) 861-7750
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(Issuer's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Exchange Act: None
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Securities Registered Pursuant to Section 12(g) of the Exchange Act: None
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Check whether the issuer (1) has 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 issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes _X_ No___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|
The issuer's revenues for the fiscal year ended January 31, 1997 were $0.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 27, 1997 was $12,753,239. Directors and officers and
ten percent or greater shareholders are considered affiliates for purposes of
this calculation but should not necessarily be deemed affiliates for any other
purpose.
The number of shares outstanding of each of the issuer's classes of common
equity as of April 30, 1997 was as follows: 3,398,496 shares of common stock and
11,349,666 shares of class B common stock.
Transitional Small Business Disclosure Format (check one): Yes___ No _X_
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INDEX
Page
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PART I
Item 1. Description of Business............................................. 1
Item 2. Description of Properties........................................... 7
Item 3. Description of Legal Proceedings.................................... 8
Item 4. Submission of Matters to a Vote of Security Holders................. 8
PART II
Item 5. Market for the Issuer's Common Equity and Related Shareholder
Matters........................................................... 8
Item 6. Plan of Operation................................................... 9
Item 7. Financial Statements................................................ 11
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.............................................. 11
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act................. 12
Item 10. Executive Compensation.............................................. 17
Item 11. Security Ownership of Certain Beneficial Owners and Management...... 18
Item 12. Certain Relationships and Related Transactions...................... 20
Item 13. Exhibits, List and Reports on Form 8-K.............................. 21
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PART I
Item 1. Description of Business.
Business Development
General
Capital Growth Holdings, Ltd. (the "Company") was incorporated in Colorado
on June 15, 1987. The Company, formerly known as Galt Financial Corporation, and
previously, Earnco, Inc., was organized to evaluate, structure and complete a
merger with, or acquisition of, an operating business. Until March 14, 1997, the
Company was generally unsuccessful in such efforts.
Acquisition of International Capital Growth, Ltd.
On March 14, 1997, the Company acquired 100% of the outstanding capital
stock of International Capital Growth, Ltd. ("ICG"), a Delaware corporation and
member of the National Association of Securities Dealers, Inc. (the "NASD"), in
a reverse acquisition consummated through a share exchange transaction (the
"Share Exchange"). The Share Exchange was not subject to the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").
The Share Exchange resulted in a change in control of the Company. The
former shareholders of the Company currently own approximately 2%, and the
former stockholders of ICG currently own approximately 98%, of the outstanding
capital stock of the Company.
Prior to and in connection with the Share Exchange, the Company adopted a
stock option plan, amended its charter to, among other things, change its name
from Galt Financial Corporation to Capital Growth Holdings, Ltd. and effected a
60 for 1 reverse split of its outstanding capital stock (the "Reverse Stock
Split"). See "Item 4. Submission of Matters to a Vote of Security Holders." Upon
effectiveness of the Reverse Stock Split, the Company had 297,094 shares of
capital stock issued and outstanding. On March 14, 1997, in accordance with the
terms and conditions of the Share Exchange, the Company issued 18,980,000 shares
of its capital stock and 1,875,000 redeemable warrants (the "Warrants") to the
former security holders of ICG in exchange for outstanding securities of ICG, in
each case of the same type and denomination.
The 18,980,000 shares of capital stock of the Company that were issued in
the Share Exchange consisted of (a) 2,549,000 shares of common stock ("Common
Stock"), (b) 11,349,666 shares of newly-authorized class B common stock ("Class
B Common Stock"), (c) 4,001,334 shares of newly-designated 5% Cumulative
Convertible Series A Preferred Stock ("Series A Preferred Stock") and (d)
1,080,000 shares of newly-designated 5% Cumulative Convertible Series B
Preferred Stock ("Series B Preferred Stock"), all of which classes of capital
stock vote together as one class. The Class B Common Stock is junior in priority
with respect to dividends to the Common Stock and the Designated Preferred Stock
(defined below) and automatically converts into Common Stock on a one-for-one
basis on December 31, 1998. The holders of the Series A Preferred Stock and
Series B Preferred Stock (collectively, the "Designated Preferred Stock") are
entitled to preferential cumulative dividends until conversion thereof into
Class B Common Stock,
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share equally with the Class B Common Stock in any dividend declared thereon,
can be converted into Class B Common Stock by the holder on a one-for-one basis
at any time and automatically convert into Class B Common Stock on a one-for-one
basis on October 12, 1997. The Warrants consist of 1,625,000 redeemable
warrants, each exercisable to purchase one share Common Stock at $4.00 per share
(subject to adjustment) at any time until October 1999 (the "Common Warrants")
and 250,000 redeemable warrants, each exercisable to purchase one share of
Class B Common Stock at $2.00 per share (subject to adjustment) at any time,
subject to an exercise schedule, until November 1999 (the "Class B Warrants").
In connection with the Share Exchange, the former officers and directors of
the Company resigned and certain of the current officers and the directors of
ICG were elected as officers and directors of the Company. See "Item 9.
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act."
Private Placement
On March 27, 1997, the Company completed a private offering (the "Private
Offering") of shares of its Common Stock at $2.25 per share pursuant to
Regulation D ("Regulation D") and Regulation S ("Regulation S"), each as
promulgated under the Securities Act, to "accredited investors" as that term is
defined in Regulation D and to non-"U.S. persons" in an "offshore transaction"
as such terms are defined in Regulation S, respectively. The Company issued a
total of 549,496 shares of Common Stock in the Private Offering which yielded
gross proceeds of $1,236,366. The Company is obligated to issue a total of
24,985 redeemable warrants as partial compensation to certain sub-placement
agents in the Private Offering (the "Sub-Placement Agent Warrants"). Each
Sub-Placement Agent Warrant is exercisable to purchase one share of Common Stock
at $4.00 per share (subject to adjustment) at any time prior to redemption
thereof until March 2000. The placement agent in the Private Offering is an
affiliate of the Company. See "Item 12--Certain Relationships and Related
Transactions."
Business of the Company
General
The Company is developing a diversified financial services firm to pursue
business opportunities in the United States and the United Kingdom. The Company
is managed by a highly experienced management team ("Management") with an
aggregate of over 100 years of investment banking experience, including the
former Chairman of the Board of Ladenburg, Thalmann & Co., Inc., a prestigious
New York Stock Exchange brokerage firm. Since 1994, Management has specialized
in raising capital from global financial markets for companies that Management
identifies as having significant opportunities for growth ("Growth Companies").
Management's goal is to create a unique financial services firm through
separate enterprises wholly- or partially-owned by the Company. To achieve this
goal, the Company's strategy is to (a) provide Growth Companies with access to
needed capital on an agency basis by using unique financing approaches and
tools, while providing the opportunity for investors to obtain above-average
market returns, and (b) expand operations by (i) building a London-based
financial services
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firm through a joint venture with experienced London-based financial
professionals; (ii) developing a merchant banking business to invest in Growth
Companies and other opportunities on a principal basis; (iii) developing a
securities brokerage firm; and (iv) developing a global money management
business.
The Company's corporate structure after the implementation of its
complete business plan is currently anticipated to appear as illustrated below.
Capital Growth
Holdings, Ltd.
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Publicly-Traded
Holding Company
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100%| 50%| 100%| 90%| 100%|
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U.S. U.K. Merchant Securities Money
Investment Corporate Banking Brokerage Manage-
Banking Finance ment
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Existing and Proposed Financial Service Enterprises
U.S. Investment Banking: International Capital Growth, Ltd.
ICG was formed in February 1996 and commenced formal operations in October
1996 when it was granted registration as a broker-dealer from the Securities and
Exchange Commission (the "SEC") and membership with the NASD.
Based upon its experience, Management believes it has the potential to be
successful through ICG in providing access to capital for its corporate clients,
offering its investor clients the potential to earn substantial returns and
earning fees for its own account consisting of both cash and equity securities.
Management believes that ICG's success will derive from combining (a)
Management's expertise in identifying Growth Companies with strong fundamentals,
skillful management and a sustainable competitive advantage in their respective
fields; (b) a long-term relationship approach to investment banking; (c) a
global distribution network; and (d) unique financing tools. There can be no
assurance, however, that ICG will be successful in its efforts.
Management has developed substantial expertise in identifying young
companies exhibiting the necessary fundamentals required for their success. In
addition, Management has developed a unique relationship oriented approach
towards both corporate clients and investors, emphasizing communication and a
common goal. By maintaining seats on, or participating in meetings of, a
portfolio company's board of directors and providing consulting services,
Management believes it will be able to provide guidance at a more sophisticated
level than is typically available to young companies. Management believes this
approach differs greatly from that used by traditional Wall
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Street firms which are predominantly transaction oriented. As a result of this
hands-on approach, Management also believes it is well equipped to communicate
portfolio company developments to the financial community.
A critical element in ICG's approach to its business is the strong,
personal relationships maintained between Management and the international,
independent network of sales representatives ("Sub-Placement Agents") that are
anticipated to distribute securities for ICG sponsored transactions. This
network of Sub-Placement Agents currently encompasses in excess of 30 agents 7
in countries and is anticipated to be expanded by Management. As a result of
these relationships and Management's experience, ICG believes it has the
potential to effectively raise capital for its sponsored transactions.
As part of ICG's on-going program of communicating with its Sub-Placement
Agents and the financial community at large, ICG has acquired the rights to the
name Everglades Research. Further, Robert Zelinka, Publisher of Everglades
Research, has joined ICG as Director of Research. Mr. Zelinka's responsibilities
include (i) providing research under the Everglades Research name on
ICG-sponsored companies; (ii) coordinating with investment banking firms to
receive additional research coverage; (iii) coordinating with financial public
relations firms; and (iv) planning annual ICG conferences and "road shows" to
increase after-market awareness of sponsored companies. There can be no
assurance that Everglades' efforts on behalf of ICG will be successful.
U.K. Corporate Finance: Capital Growth Europe, Limited
Capital Growth Europe ("CGE") was formed in May 1996 as a 50/50 joint
venture between ICG and an experienced group of financial professionals in
London led by Mr. John D. Booth, a Director of the Company and ICG. CGE is
anticipated to become a partially-owned subsidiary of the Company. Mr. Booth has
worked in the international equity markets for the last 14 years with Bankers
Trust International, Merrill Lynch, Pierce, Fenner & Smith Incorporated, E.F.
Hutton International Associates, and Prudential Bache Securities. CGE became
licensed with the Securities Futures Authority of the United Kingdom in November
1996, which enables CGE to carry out corporate finance business in United
Kingdom.
It is envisioned that CGE will undertake sales and distribution functions
for ICG-sponsored transactions in the United Kingdom. Further, CGE plans to
operate as an originator of European transactions and as a corporate finance
business in the small-cap sector of the European equity markets.
In addition, it is intended that CGE will also carry out corporate finance
advisory work for its clients. It is anticipated that CGE's target client is a
business with sales of less than 500 million pounds sterling, net assets of less
than 100 million pounds sterling and/or profits of under 50 million pounds
sterling.
The Company believes there are substantial synergies between ICG and CGE.
Management believes that by applying its U.S. investment banking expertise to
the United Kingdom and European financial markets, it will benefit by
diversifying its efforts and widening the regions from which its potential
investment banking transactions may be generated. Further, ICG will seek to
capitalize
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upon the synergies in terms of personnel and knowledge of products, industry and
markets between the United States and the United Kingdom corporate financing
activities.
Merchant Banking: Capital Growth Investments
Management plans to form a separate entity ("Capital Growth Investments")
to invest in business opportunities on a principal basis, which, to date, has
been accomplished through ICG. In its capacity as agent, ICG anticipates
encountering many opportunities that are more appropriate for a principal
investment than an agency fundraising due to the nature, size or timing of a
subject company's capital requirements. Management believes that opportunities
for principal investments will include investments through both debt and equity
securities in both public and private companies in a variety of industries and
at various stages of development.
To the extent permitted by applicable regulators, ICG anticipates raising
capital on an agency basis for companies in which Capital Growth Investments has
made a principal investment. Management believes that the ability to invest on a
principal basis offers a significant competitive advantage in attracting
companies that require agency financing in those cases in which the financing
structure requires an initial or "bridge" component (i.e., a relatively small
short-term financing which typically includes an equity "kicker" and is re-paid
from the proceeds of a subsequent, larger financing). Thus, investing on a
principal basis is a logical extension of ICG's agency financing. Management
believes the volume of ICG's agency business may increase due to the Company's
ability to offer potential corporate clients a prior principal investment from
Capital Growth Investments. In such event, the Company may also benefit directly
from Capital Growth Investments' principal investments in such Company.
Management is also independently organizing a public "blind pool" company
to be used in connection with an ICG sponsored or other reverse merger
transaction. Assuming the successful regulatory approval of the aforementioned
transaction, the merchant banking operation may organize several similar blind
pool companies. Management believes substantial value may be created by merging
a blind pool company with an active operating company. The merchant banking
operation may also acquire control of inactive public companies for such
purpose.
As part of its merchant banking business, management is also considering
the organization of a small business investment company (the "SBIC") which would
allow for participation in a Federal loan program providing significant leverage
for a qualified investment portfolio. The SBIC would be formed to take advantage
of the opportunities that exist in the small company investment market.
Traditionally, companies in this market segment have relied upon commercial
banks and the savings and loan industry to provide financing to fund growth. As
a result of structural and regulatory changes in the market, a significant
opportunity has developed for non-traditional lenders to provide financing to
small companies in a manner that creates the potential to achieve attractive
risk-adjusted returns.
Securities Brokerage: Capital Growth Securities
The Company plans to develop a securities brokerage operation through a
wholly- or partially-owned subsidiary. Management has applied to the NASD to
amend the restriction letter
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of an NASD member affiliate of the Company, Capital Growth International, L.L.C.
("CGI"), to conduct securities brokerage activities. The Company anticipates
receiving such approval by September 1997. There can be no assurance, however,
that such regulatory approval will be received by such time or at all. If
Management is successful in its efforts to amend CGI's restriction letter, it is
anticipated that the Company would substantially all of the ownership interest
in CGI.
To date, CGI has engaged Schroeder Wertheim & Co. Incorporated to act as
its clearing agent and is searching for office space suitable for a retail
brokerage operation. The Company is also currently pursuing a small number of
experienced brokers and a financial and support staff to begin the Company's
brokerage operation. The Company believes the retail brokerage industry is
typically characterized by high employee turnover and little commitment by
employees to a firm's success or a common goal. The Company's objective is to
develop a successful retail brokerage business based on experienced brokers
committed to the firm.
Money Management: Capital Growth Asset Management
The Company is seeking alternatives to develop a money management business.
Management's goals in entering this business would be to (a) diversify the
Company's revenues and earnings by earning potentially more consistent fees from
assets under management; and (b) capitalize on potential synergies between its
money management, investment banking and securities brokerage businesses. These
synergies include earning brokerage commissions generated by money managers for
the securities brokerage business and cross-selling to additional investors
identified through money management for its investment banking products.
The Company's intention is to enter the money management business by
acquiring an existing money management firm in exchange for capital stock of the
Company. Management is seeking money management firms that would be willing to
exchange all or a portion of the ownership interest in their business for shares
of the Company's publicly-traded stock. Management believes that such an
arrangement would be advantageous to money management firms based on the
synergies described above and the potential for the owners of such firms to
capitalize on the advantages of becoming part of a larger, publicly-traded
entity.
Competition
All aspects of the Company's anticipated business are highly competitive.
The Company expects to compete in domestic and international markets with
numerous financial services companies for potential financing transactions and
investment capital.
The securities industry is highly capital-intensive, and the ability of a
company to expand its business is closely related to its ability to raise
additional capital. Large brokerage firms and brokerage subsidiaries of large
financial services firms may have the ability to raise substantially more
capital than the Company can raise on terms more favorable than those available
to the Company. In addition, several small and specialized securities firms have
been successful in raising significant amounts of capital for their merger and
acquisition activities and merchant banking investment vehicles and for their
own accounts.
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The Company also expects to compete with large commercial banking
institutions, certain of which are attempting to enlarge the scope of their
legally-permitted investment banking activities. Commercial banking
organizations, in general, are expanding their securities, investment advisory
and commodities activities, as well as other activities related to the provision
of financial services. These developments may lead to the creation of integrated
financial services firms that are able to compete more effectively than the
Company in certain of its businesses. Furthermore, competition with
well-capitalized foreign firms is intense in international capital markets and
is increasing in domestic markets. To the extent that the Company can compete
for such investments it may only be able to do so on terms less favorable than
those obtained by larger, more established financial services firms.
Employees
As of April 30, 1997, the Company, including ICG, had a total of 10
full-time employees. The Company believes its relations with its employees is
satisfactory.
Item 2. Description of Properties.
The Company, its subsidiary and affiliates share the use of office space as
described below:
1. Approximately 855 square feet at 660 Steamboat Road, Greenwich,
Connecticut 06830 for use as the principal executive offices of the
Company, ICG and CGI pursuant to a lease held by CGI expiring on
March 31, 1998 for monthly rent of $5,833.33 payable entirely by
ICG for the benefit of the Company, ICG and CGI;
2. Approximately 700 square feet at 777 South Flagler Drive, 8th
Floor, West Tower, West Palm Beach, Florida, 33401 for use by the
Company, ICG and CGI pursuant to a lease held by CGI expiring on
June 30, 1997 for monthly rent of $3,150 payable entirely by ICG
for the benefit of the Company, ICG and CGI;
3. Approximately 2,040 square feet at 2425 Olympic Boulevard, #660E,
Santa Monica, California 90404 for use by the Company, ICG and CGI
pursuant to a lease held by CGI expiring on November 27, 1997 for
monthly rent of $4,590 payable entirely by ICG for the benefit of
the Company, ICG and CGI; and
4. Approximately 1,200 square feet of office space at 4 Hill Street,
London, England WIX 7FU consisting of two separate offices for use
by the Company, ICG and CGI and CGE, respectively, pursuant to a
sub-lease from an entity controlled by ICG and a director of the
Company and ICG held by CGI and CGE expiring in October 2111 for
monthly rent of $10,633 until October 1997, and $16,666 thereafter,
which is payable by ICG and CGE, for the benefit of the Company,
ICG, CGI and CGE. See "Item 12. Certain Relationships and Related
Transactions."
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Item 3. Description of Legal Proceedings.
The Company is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
On January 7, 1997, the Company held a special meeting of its shareholders
(the "Special Meeting") to vote on the Share Exchange and the transactions
contemplated thereby. The following actions were approved at the Special Meeting
by 10,102,850 votes (pre-Reverse Stock Split) (56.7% of voting stock) cast in
favor of such actions and no votes cast against, abstained or withheld from
voting on such actions:
1. Change the Company's name to Capital Growth Holdings, Ltd.;
2. Reverse split the Common Stock on the basis of issuing one share for
each 60 shares currently outstanding;
3. Approve the terms of that certain Agreement Concerning the Exchange of
Securities of International Capital Growth, Ltd. for Securities of
Galt Financial Corporation;
4. Authorize the issuance of up to 25,000,000 shares of Class B Common
Stock; and
5. Approve the establishment of a stock option plan on behalf of the
Company's officers, directors, employees and consultants.
PART II
Item 5. Market for the Issuer's Common Equity and Related Shareholder Matters.
Market Information
There is presently no public trading market for any class of the Company's
securities. The Company has a pending application for listing of the Common
Stock under the symbol CGHS on the OTC Bulletin Board.
Holders of Common Equity
As of April 30, 1997, there were approximately 390 holders of record of the
Common Stock and 7 holders of record of the Class B Common Stock.
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Dividends
The Company's Board of Directors did not declare any cash dividend on the
Company's common equity in either of the fiscal year ended January 31, 1996 or
the fiscal year ended January 31, 1997.
The Designated Preferred Stock is entitled to annual cumulative per share
dividends of 5% of the respective liquidation preferences thereof, payable
quarterly, until optional conversion thereof into Class B Common Stock at any
time or automatic conversion thereof into Class B Common Stock on October 12,
1997. No dividend may be paid on any class of capital stock of the Company
ranking junior in priority with respect to dividends to the Designated Preferred
Stock until all dividends on the Designated Preferred Stock are paid in full.
The liquidation preference of the Series A Preferred Stock and Series B
Preferred Stock are $.14 and $.21 per share, respectively.
As of March 25, 1997, the Company's Board of Directors declared an annual
cumulative dividend of $.225 per share on the Common Stock, subject to (i) the
payment of dividends on all classes of capital stock with priority over the
Common Stock (currently the Series A Preferred Stock and Series B Preferred
Stock) and (ii) restrictions under applicable law (the "Common Stock Dividend").
The Common Stock Dividend, which began accruing as of January 1, 1997, is
payable on a quarterly basis, commencing June 30, 1997 and ending on December
31, 1998.
The Company's ability to pay dividends on its common equity is limited by
State law and the Company's ability to pay dividends on classes of capital stock
with priority over a given class of common equity with respect to dividends. No
dividend may be paid on any class of capital stock of the Company ranking junior
in priority with respect to dividends to the Designated Preferred Stock until
all dividends on the Designated Preferred Stock are paid in full. The Common
Stock and the Class B Common Stock are junior in priority to the Designated
Preferred Stock with respect to dividends. The Class B Common Stock is junior in
priority to the Common Stock with respect to dividends.
Section 7-106-401 of the Colorado Business Corporation Act requires that no
distribution may be made to a corporation's shareholders if, after giving it
effect, the corporation would not be able to pay its debts as they become due in
the usual course of business or the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution.
Item 6. Plan of Operation.
General
ICG, the Company's only operating subsidiary, was formed in February 1996
to develop a diversified financial services company to pursue business
opportunities in investment banking in the United States and the United Kingdom
and merchant banking, money management and securities brokerage in the United
States. ICG commenced formal operations in October 1996 when it became
registered as a broker-dealer with the SEC and obtained membership with the
NASD. On March 14, 1997, ICG consummated the Share Exchange with the Company and
became the Company's
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wholly-owned subsidiary. See "Item 1. Description of Business--Business
Development--Acquisition of International Capital Growth, Ltd."
Since inception, ICG has focused on the registration process with the SEC,
obtaining membership with the NASD, developing and implementing the initial
stages of its business plan and raising capital. To this end, ICG commenced
marketing efforts to attract investment banking clients. Further, ICG entered
into a joint venture (CGE) to build a London-based financial services firm with
an experienced group of London-based financial professionals. CGE received its
license to conduct corporate financing activities from the Securities Futures
Authority of the United Kingdom in November 1996. In addition, ICG acquired the
rights to the name Everglades Research and Robert Zelinka, publisher of
Everglades Research, joined ICG as the Director of Research.
During the next fiscal year, the Company anticipates that it will generate
revenues from ICG's investment banking activities. ICG has been retained to act
as placement agent for up to $10 million in financing for a publicly-traded
company. However, the Company anticipates that its operating expenses will
increase in connection with the commencement of its securities brokerage
activities and any other material expansion of the Company's business, which may
result in losses from operations, at least in the short term. The Company
believes, however, that it will attain profitability during 1997. There can be
no assurance, however, that the Company will be able to generate revenue or
attain profitability, during the next fiscal year, or at any time. To attain
profitability, the Company must generate revenues in excess of operating
expenses anticipated to be incurred in connection with ICG's business, the
commencement of its securities brokerage activities, and the expansion of its
business.
From time to time the Company may publish forward-looking statements,
including statements regarding, among other things, (i) the Company's growth
strategy or potential, (ii) anticipated trends in the Company's businesses,
(iii) the Company's ability to compete with its competitors and (iv) the
Company's profitability and projected financial condition. These statements are
based upon Management's beliefs at the time they are made as well as assumptions
made by Management based upon information available to it. The current
assumptions regarding the Company's operations, performance, development and
results of its business include (i) the accuracy of estimates of anticipated
increases in the Company's expenses due to implementation of the Company's
business plan, (ii) successful completion of securities offerings anticipated to
be consummated through ICG, (iii) maintenance of market conditions affecting the
Company's services and (iv) appropriate regulatory approvals. Forward-looking
statements are inherently subject to various risks and uncertainties, including
those described above, as well as potential changes in economic or regulatory
conditions that are largely beyond the Company's control. Should one or more of
these risks materialize or changes occur, or should Management's assumptions
prove to be incorrect, the Company's actual results may materially vary from
those anticipated or projected.
Liquidity and Capital Resources
The following discussion gives pro forma effect to the Share Exchange as if
it occurred on February 1, 1996.
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Capital for the Company has been provided by the investments made by the
initial shareholder group and through private placements of ICG's and the
Company's securities. In March 1996, ICG's founders invested approximately
$1,039,000.
In October 1996, ICG raised gross proceeds of approximately $3.25 million
in a private placement through the sale of 1,625,000 common shares and 1,625,000
three-year warrants to purchase common stock of ICG exercisable at $4.00 per
share (subject to adjustment under certain circumstances). Further, in March
1997, the Company raised gross proceeds of approximately $1.24 million in a
private placement of 549,496 shares of its Common Stock. To date, the Company's
capital has been primarily used for working capital and general corporate
purposes. The Company has no material capital commitments other than annual
salaries to its executive officers and employees of approximately $1,236,900.
The Company believes that its current cash resources and anticipated cash flow
from operations will be adequate to satisfy it capital requirements during 1997.
The Company's stockholders' equity and working capital as at January 31,
1997 was ($43,853).
Item 7. Financial Statements.
The financial statements required by this Item, the accompanying notes
thereto and the reports of independent accountants are included as part of this
Form 10-KSB and immediately follow the signature page of this Form 10-KSB.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
As of March 25, 1997, the Company's Board of Directors voted to engage
Richard A. Eisner & Company, LLP, independent certified public accountant to
ICG, to act as the Company's independent certified public accountant effective
immediately, thereby dismissing and replacing Angell & Deering, which resigned
effective March 25, 1997. The former accountant's reports for the Company's two
most recent fiscal years did not contain any adverse opinion or disclaimer of
opinion, nor were any such reports modified as to uncertainty, audit scope or
accounting principles. There have been no disagreements between the Company and
the former accountant with regard to any matters which would have caused such
accountant to make reference to the subject matter thereof with their report.
11
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Directors and Executive Officers Until March 14, 1997
Identification of Directors and Executive Officers
Name Age Position(s) Period Served
- ---- --- ----------- -------------
Earnest Mathis 37 President and From March 31,
Director 1994 to March 14, 1997
Kenneth J. Wolf 46 Secretary, From March 31, 1994 to
Treasurer and March 14, 1997
Director
Gary J. McAdam 45 Director From March 31, 1994 to
March 14, 1997
Earnest Mathis. From January 1987 to the present, Mr. Mathis has owned
Inverness Investments, a firm specializing in mergers and acquisitions and
investments in privately and publicly-held companies. From May 1988 to the
present, Mr. Mathis has served as President and a Director of Express Capital
Concepts, Inc., a publicly-held, blind pool, non-reporting company. From 1994 to
present, Mr. Mathis has served as Secretary, Treasurer and a Director of
Landmark Reclamation, Inc., an environmental remediation company. From November
1996 to present, Mr. Mathis has served as President and Chief Executive Officer
of Integrated Medical Services, Inc., a company that provides medical-related
services to healthcare organizations. From April 1996 to present, he has served
as President of Cancun Acquisitions, Inc., a publicly-held non-reporting blind
pool company. From August 1993 to the present, Mr. Mathis has served as
Secretary and a Director of Creative Business Concepts, Inc., a firm
specializing in venture capital and mergers and acquisitions that ceased
operations in May 1995. From March 1991 to January 1996, Mr. Mathis served as
President and a Director of Jefferson Capital, Inc. From December 1991 to March
1997, Mr. Mathis served as President and a Director of the Company. From May
1994 to September 1996, Mr. Mathis served as President and a Director of Dynasty
Capital Corporation.
Kenneth J. Wolf. Since July 1989, Mr. Wolf has been President of
Topographic Chocolate Company, a company located in Denver, Colorado which
designs and manufactures custom chocolates. From January 1989 to January 1996,
Mr. Wolf served as President and a Director of Sage Resources, Inc., a
blank-check company which completed its public offering in October 1990.
Gary J. McAdam. From February 1993 to December 1996, Mr. McAdam served as
President and a Director of Creative Business Concepts, Inc., a firm
specializing in venture capital
12
<PAGE>
and mergers and acquisitions. From 1979 to present, Mr. McAdam has served as
President and a Director of Growth Ventures, Inc. (formerly known as Creative
Investments Services, Inc.), a firm specializing in mergers and acquisition and
investments in privately and publicly-held companies. From March 1994 to
March 1997, Mr. McAdam served as a Director of the Company. From May 1994 to
September 1996, Mr. McAdam served as Vice President, Secretary and a Director of
Dynasty Capital Corporation.
Identification of Significant Employees
None.
Family Relationships
None.
Involvement in Certain Legal Proceedings
None.
13
<PAGE>
Directors and Executive Officers Since March 14, 1997
Identification of Directors and Executive Officers
Name Age Position(s) Period Served
- ---- --- ----------- -------------
Ronald B. Koenig 63 Chairman of the Board March 14, 1997
of Directors, President to present
and Chief Executive
Officer
Alan L. Jacobs(1) 55 Executive Vice March 14, 1997
President and Director to present
Stanley Hollander(2) 59 Senior Vice President March 14, 1997
and Director to present
Michael S. Jacobs 32 Senior Vice President, March 14, 1997
Secretary and Treasurer to present
Jay J. Matulich(3) 41 Senior Vice President March 14, 1997
to present
Emanuel Arbib 29 Director March 14, 1997
to present
John D. Booth 38 Director March 14, 1997
to present
N. Bulent Gultekin 49 Director March 14, 1997
to present
- --------------------
(1) Alan L. Jacobs is also a Director of Boca Raton Capital Corporation, a
publicly-held reporting company.
(2) Stanley Hollander is also a Director of Capital Media Group, Ltd., a
publicly-held company.
(3) Jay J. Matulich is also a Director of BioSafe International, Inc., a
publicly-held company.
Each officer and director listed above holds the same respective
position(s) with ICG, except that Alan L. Jacobs is also Senior Managing
Director of ICG, and Stanley Hollander and Jay J. Matulich are Vice Presidents
of ICG. Stanley Hollander is also a Director of ICG.
Each director of the Company listed in the above table holds office until
the next annual meeting of shareholders and until their respective successors
have been elected and qualified. Each officer of the Company listed in the table
above serves at the discretion of the Company's Board of Directors.
14
<PAGE>
Ronald B. Koenig. Mr. Koenig has been Chairman of the Board of Directors,
President and Chief Executive Officer of International Capital Growth, Ltd.
since March 1996. Mr. Koenig has been Chairman, from October 1994 to July 1995,
and co-founder of U.S. Sachem Financial Consultants, L.P. and, since July 1995,
of its successor Capital Growth International, L.L.C. From 1989 to 1993, Mr.
Koenig was a Senior Managing Director and department head of corporate finance
at Gruntal & Co., Incorporated. From 1974 to 1985, Mr. Koenig was a Managing
Director, and from 1985 to 1989, Chairman of the Board, of Ladenburg Thalmann &
Co., Inc. From 1972 to 1974, he served as Vice President, Institutional Sales at
Jas. H. Oliphant & Co., an institutional research boutique. From 1968 to 1972,
he held a position in sales with Leif Werle & Co., an NYSE specialist firm. Mr.
Koenig was educated at the University of Pennsylvania (The Wharton School) and
holds a B.S. in economics. Mr. Koenig presently serves on The Wharton School
Undergraduate Executive Board and is on the business advisory board to Sterling
National Bank & Trust Company of New York.
Alan L. Jacobs. Mr. Jacobs has served as Executive Vice President and a Director
of the Company since March 1997. Since March 1996, Mr. Jacobs has served as
Senior Managing Director, Executive Vice President and a Director of
International Capital Growth, Ltd. and, since January 1995, of Capital Growth
International, L.L.C. From February 1995 to present and from July 1993 to
September 1994, Mr. Jacobs has served as a Director of Boca Raton Capital
Corporation, a publicly-held Florida corporation ("BRCC"). He was Chairman of
the Board of Directors of BRCC from November 1993 to September 1994 and has
served as Chief Executive Officer of BRCC since November 1993. From January 1992
to December 1995, Mr. Jacobs served as Associate Director of Investment Banking
at Josephthal Lyon & Ross Incorporated. From May 1985 to December 1991, Mr.
Jacobs served as Managing Director of Investment Banking with Ladenburg Thalmann
& Co., Inc., an investment banking firm. Mr. Jacobs earned an A.B. in liberal
arts in 1963 from Franklin & Marshall College and a J.D. from Columbia Law
School in 1966.
Stanley Hollander. Mr. Hollander has served as Senior Vice President and a
Director of the Company since March 1997 and Vice President and a Director of
International Capital Growth, Ltd. since March 1996. Since 1993, Mr. Hollander
has served as President, Chief Executive Officer and co-founder of U.S. Sachem
Financial Consultants, L.P. and, since July, 1995, its successor Capital Growth
International, L.L.C. From December 1995 to present, Mr. Hollander has been a
Director of Capital Media Group, Ltd., a publicly-held company. From 1989 to
1993 he served as a Managing Director and joint head of corporate finance at
Gruntal & Co., Incorporated. From 1985 to 1989 he served as a Managing Director
of Investment Banking at Ladenburg Thalmann & Co., Inc. From 1979 to 1985 he was
co-owner and Vice President of Zemex Electronics-Stanlee, distributors of
consumer electronics. From 1959 to 1979, Mr. Hollander was president of All
Brand Appliances Brandmart, distributors of consumer electronics. Mr. Hollander
was educated at the University of Alabama.
Michael S. Jacobs. Mr. Jacobs has served as Senior Vice President, Secretary and
Treasurer of the Company since March 1997 and of International Capital Growth,
Ltd. since March 1996. Since February 1995, Mr. Jacobs has been a Senior Vice
President of U.S. Sachem Financial Consultants, L.P. and, since July 1995, its
successor Capital Growth International, L.L.C. From 1993 to 1995 he was a Vice
President of Investment Banking at Josephthal Lyon & Ross Incorporated, and from
1990 to 1993, Mr. Jacobs was an associate in corporate finance at Gruntal & Co.,
Incorporated.
15
<PAGE>
From 1989 to 1990, Mr. Jacobs was a financial analyst at Ladenburg Thalmann &
Co., Inc. Educated at New York University's Stern School of Business and Emory
University, he holds an M.B.A. in finance and a B.B.A. degree.
Jay J. Matulich. Mr. Matulich has served as Senior Vice President of the Company
since March 1997 and Vice President of International Capital Growth, Ltd. since
March 1996. Since October 1994, Mr. Matulich has been a Senior Vice President of
U.S. Sachem Financial Consultants, L.P. and, since July 1995, of its successor
Capital Growth International, L.L.C. Since April 1995, Mr. Matulich has served
as a Director of BioSafe International, Inc., a publicly-held company. From May
1990 to October 1994, Mr. Matulich was a Vice President of Gruntal & Co.,
Incorporated. From 1989 to May 1990, Mr. Matulich served as an associate in the
Shansby Group, a San Francisco-based leveraged buy-out firm. From 1986 to 1989,
Mr. Matulich was a Senior Manager at Arthur Young & Co., accountants in the
merger and acquisitions group. Educated at Brigham Young University, Mr.
Matulich has a B.A. degree.
Emanuel M. Arbib. Mr. Arbib has been a Director of the Company since March 1997
and of International Capital Growth, Ltd. since March 1996. Since January 1996,
Mr. Arbib has been Managing Director of BioSafe Europe plc. Since 1991, he has
been Managing Director of Capital Management Limited. In 1991, Mr. Arbib founded
Global Investment Advisors Limited, a London- based fixed income advisory firm.
From 1990 to 1991 he was head of the Italian Marketing Desk at Prudential Bache
Securities (U.K.). Educated at Bocconi University in Milan and the American
University in Rome, he holds a Laureate in Economics and A.B.A. degree.
John D. Booth. Mr. Booth has been a Director of the Company since March 1997 and
of International Capital Growth, Ltd. since March 1996. He has been Chairman of
Maintel Europe Limited and Luther Pendragon Limited since 1996 and 1991,
respectively. From 1993 to 1996, Mr. Booth was Managing Director at Bankers
Trust International. From 1988 to 1993, he was Senior Vice President at
Prudential Bache Securities. From 1986 to 1988, Mr. Booth was a partner at E.F.
Hutton International Associates. From 1980 to 1983, he was Vice President at
Merrill Lynch, Pierce, Fenner & Smith Incorporated. From 1980 to 1983, Mr. Booth
was an Account Executive at J. Walter Thompson Company. Educated at Oxford
University, he holds an M.A. and a B.A. in modern languages.
N. Bulent Gultekin. Mr. Gultekin has been a Director of the Company since March
1997 and of International Capital Growth, Ltd. since March 1996. Since 1981, Mr.
Gultekin has been an Associate Professor of Finance at The Wharton School of the
University of Pennsylvania. From 1993 to 1994, he served as the Governor of the
Central Bank of the Republic of Turkey. From 1989 to 1991, Mr. Gultekin served
as Chief Advisor to Prime Minister Mesut Yilmaz of the Republic of Turkey. From
1990 to 1992, Mr. Gultekin was a director of The Bell Atlantic Mutual Funds. Mr.
Gultekin earned a BSC in 1965 and an MBA in 1973 from Turkish universities and a
Ph.D. in finance and statistics in 1976 from The Wharton School of the
University of Pennsylvania.
16
<PAGE>
Identification of Significant Employees
None.
Family Relationships
There is no family relationship among any of the directors or executive
officers of the Company or ICG except that Alan L. Jacobs is the father of
Michael S. Jacobs.
Involvement in Certain Legal Proceedings
None.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent of a class of the
Company's equity securities registered pursuant to Section 12 of the Exchange
Act to file with the Commission initial reports of ownership and reports of
changes in ownership of equity securities of the Company. The Company has no
class of equity securities registered pursuant to Section 12 of the Exchange
Act. Accordingly, no such reports have been filed with the Commission.
Item 10. Executive Compensation.
None of the Company's officers or directors received any salary or wages or
other compensation from the Company during the last three completed fiscal
years. During the fiscal year ended January 31, 1997, the Company had no active
retirement, stock option or other plans or arrangements pursuant to which cash
or non-cash compensation was paid to its officers or directors. As of March 14,
1997, in connection with the Share Exchange, the Company put into effect the
Capital Growth Holdings, Ltd. 1997 Stock Option Plan pursuant to which the
Company granted options to purchase 635,000 shares of Class B Common Stock to
certain directors and employees of ICG in exchange for previously granted
options of the same tenor to purchase an equal number of shares of common stock
of ICG.
The following table sets forth the compensation of the chief executive
officer of ICG for services in all capacities to ICG for the period from
inception of ICG (February 26, 1996) through January 31, 1997, the Company's
fiscal year-end. ICG's chief executive officer was the highest compensated
employee of ICG during such period.
17
<PAGE>
SUMMARY COMPENSATION TABLE
--------------------------
Name and Principal
Position with ICG Fiscal Year(1) Salary
---------------------------------------------------------------------
Ronald B. Koenig 1997 $67,306.66
President,
Chief Executive
Officer and Director
------------------
(1) Covers the period from ICG's inception (February 26, 1996) through
January 31, 1997, the Company's fiscal year end.
Compensation of Directors
The directors of the Company and ICG are reimbursed for their expenses in
connection with their activities as directors and members of committees of such
entities. Mr. N. Bulent Gultekin will be paid a fee of $2,500 for his
participation in each meeting of the Company's Board of Directors.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements pursuant to which any
executive officer will be paid compensation as a result of his termination or
change of employment with, or control of, the Company or ICG.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the number of shares and percentage owned of
the Company's voting securities beneficially owned as of April 30, 1997 by (i)
each person known by the Company to be the beneficial owner of more than five
percent of the Company's voting securities, (ii) each director of the Company,
(iii) the Company's chief executive officer at the end of the last fiscal year,
and (iv) all executive officers and directors of the Company as a group.
18
<PAGE>
Amount and
Name and Address of Nature of Percent of
Beneficial Owner(1) Beneficial Ownership Class(2)
- ----------------------------- --------------------- ------------
Rush & Co. 3,586,334(3)(4)(5) 18.06%
Swiss American Securities
100 Wall Street
4th Floor
New York, NY 10005
Emanuel Arbib 3,336,334(4) 16.83%
Ronald B. Koenig 3,336,333 16.83%
Stanley Hollander 3,336,333(6) 16.83%
Hollander Family 3,336,333(6) 16.83%
Partnership LP
Alan L. Jacobs 2,925,000 14.75%
Tigris Holdings, Ltd. 1,200,000(7) 6.05%
6-7 St. John's Lane
London EC1M 4BH England
John D. Booth 250,000(5) 1.26%
Earnest Mathis 81,218(8) .41%
26 West Dry Creek Circle
Suite 600
Littleton, CO 80120
N. Bulent Gultekin 25,000(9) .13%
All current directors and 15,201,000(10) 74.59%
executive officers as a group
- --------------------
(1) Each beneficial owner for which an address is not listed has an address
c/o Capital Growth Holdings, Ltd., 660 Steamboat Road, Greenwich,
CT 06830.
(2) Based on a total of 19,829,496 shares of capital stock outstanding, all of
which vote together as one class.
(3) Consists of 3,336,334 shares of Series A Preferred Stock, 25,000 shares of
Common Stock, 200,000 shares of Class B Common Stock and 25,000 Common
Warrants.
(4) Rush & Co. holds 3,336,334 shares of Series A Preferred Stock for the
benefit of Capital Growth Holdings, Limited, a Turks & Caicos Islands
corporation. Fifty percent of Capital Growth Holdings, Limited is owned by
entities which may be deemed to be in the control of Emanuel Arbib, a
director of the Company. As such, Mr. Arbib may be deemed to be the
beneficial owner of the shares of Common Stock beneficially owned by
Capital Growth Holdings, Limited. Other than such holdings, Mr. Arbib owns
no capital stock of the Company.
(5) Rush & Co. holds 200,000 shares of Class B Common Stock, 25,000 shares of
Common Stock and 25,000 Common Warrants for the benefit of John D. Booth,
a director of the Company. Other than such holdings, Mr. Booth owns no
capital stock of the Company.
(6) Stanley Hollander, Senior Vice President and Director of the Company, may
be deemed to be the beneficial owner of the shares of the Company held by
Hollander Family Partnership LP. Other than such holdings, Mr. Hollander
owns no capital stock of the Company.
(7) Consists of 1,080,000 shares of Series B Preferred Stock and 120,000
shares of Common Stock.
(8) Includes 81,250 shares of Common Stock owned by entities that may be
deemed to be in the control of Mr. Mathis. As such, Mr. Mathis may be
deemed to be the beneficial owner of such shares. Other than such
holdings, Mr. Mathis owns 968 shares of Common Stock.
(9) Consists of stock options exercisable to purchase 25,000 shares of Class B
Common Stock.
(10) Consists of 3,336,334 shares of Series A Preferred Stock, 25,000 shares of
Common Stock, 11,289,666 shares of Class B Common Stock, 25,000 Common
Warrants and stock options exercisable to purchase 525,000 shares of Class
B Common Stock.
19
<PAGE>
Changes in Control
A change in control of the Company took place on March 14, 1997. See
"Item 1. Description of Business--Business Development--Acquisition of
International Capital Growth, Ltd." There are currently no arrangements that
would result in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions.
On March 27, 1997, the Company completed a private offering (the "Private
Offering") of its Common Stock at $2.25 per share pursuant to Regulation D and
Regulation S, each as promulgated under the Securities Act. The Private
Offering, which yielded gross proceeds to the Company of $1,236,366, was offered
and sold through Capital Growth International, L.L.C. ("CGI"), as placement
agent, which was paid $74,181.96 in commissions in connection therewith. CGI is
an affiliate of the Company and ICG, a portion of which will be used to
compensate certain sub-placement agents. Several of the officers and directors
of the Company and ICG are also officers and directors of CGI. Additionally, the
beneficial holders of 100% of the membership interests in CGI beneficially hold
56.53% of the outstanding capital stock of the Company, which holds 100% of the
outstanding capital stock of ICG. Messrs. Ronald B. Koenig, Chairman of the
Board of Directors, President and Chief Executive Officer of the Company and
ICG, and Stanley Hollander, Senior Vice President and a Director of the Company
and ICG, each own a 50% interest in Sachem Financial Consultants, L.P., which
holds a 60% membership interest in CGI. Messrs. Koenig and Hollander each
beneficially own, 16.83% of the outstanding capital stock of the Company. Mr.
Emanuel Arbib, a Director of the Company and ICG, may be deemed to beneficially
own a 30% membership interest in CGI and 16.83% of the outstanding capital stock
of the Company. Tigris Holdings, Ltd. holds a 10% membership interest in CGI and
owns 6.05% of the outstanding capital stock of the Company.
The Company, ICG and CGI share the use of approximately 855 square feet of
office space at 660 Steamboat Road, Greenwich, Connecticut 06830. The lease on
such property, which expires on March 31, 1998, is held by CGI. Rent for use of
such property, which is $5,833 per month, is paid by ICG at no cost to the
Company or CGI.
The Company, ICG and CGI share the use of approximately 700 square feet of
office space at 777 South Flagler Drive, 8th Floor, West Tower, West Palm Beach,
Florida 33401. The lease on such property, which expires on June 30, 1997, is
held by CGI. Rent for use of such property, which is $3,150 per month, is paid
by ICG at no cost to the Company or CGI.
The Company, ICG and CGI share the use of approximately 2,040 square feet
of office space at 2425 Olympic Boulevard, #660E, Santa Monica, California
90404. The lease on such property, which expires on November 27, 1997, is held
by CGI. Rent for use of such property, which is $4,590 per month, is paid by ICG
at no cost to the Company or CGI.
The Company, ICG, CGI and CGE occupy a total of 1200 square feet of office
space at 4 Hill Street, London, England WIX 7FU; the Company, ICG and CGI have
use of approximately 600 square feet and CGE has use of approximately 600 square
feet. The sub-lease on such property, which expires in October 2111, is held by
CGI and CGE. ICG, for its own account and
20
<PAGE>
on behalf of the Company and CGI, pays monthly rent of $2,300 until October
1997, and $8,333 thereafter. CGE pays monthly rent of $8,333. The lease on the
premises is held by an entity that may be deemed to be beneficially owned by ICG
and/or Emanuel Arbib, a Director of the Company and ICG.
It is currently contemplated by management of the Company, ICG and CGI that
CGI will assign all rights and obligations in connection with two Financial
Advisory and Consulting Agreements (the "Consulting Agreements") each of which
are between CGI and a separate publicly-held company. The Consulting Agreements,
which were entered into in connection with CGI's investment banking business,
are anticipated to be assigned to ICG for nominal consideration. One Consulting
Agreement, which expires on July 30, 1998, currently provides for monthly
payments to CGI of $2,500 and compensation rights in favor of CGI if certain
business transactions introduced by CGI to such public company are consummated.
The other Consulting Agreement currently grants to CGI a right of first refusal,
exercisable until April 26, 1998, to offer securities of such public company and
provides for certain compensation rights in favor of CGI if certain business
transactions introduced by CGI to such public company are consummated.
Item 13. Exhibits, List and Reports on Form 8-K.
Exhibits and List
Exhibit No. Description
----------- ------------
2.1 Agreement Concerning the Exchange of Securities of
International Capital Growth, Ltd. for Securities
of Capital Growth Holdings, Ltd. dated January 7,
1997 without schedules or exhibits thereto*
3(i).1 Restated Articles of Incorporation of Galt
Financial Corporation*
3(i).2 Certificate of Designation of 5% Cumulative
Convertible Series A Preferred Stock*
3(i).3 Certificate of Designation of 5% Cumulative
Convertible Series B Preferred Stock*
10 Capital Growth Holdings, Ltd. 1997 Stock Option
Plan*
16 Letter, dated March 25, 1997, of Angell & Deering*
21 List of Subsidiaries
27 Financial Data Schedule
--------------------
* Incorporated by reference from the same respective exhibit
numbers as contained in the Company's Form 8-K dated March 14,
1997 as filed with the Securities and Exchange Commission on
March 28, 1997.
21
<PAGE>
Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended January 31, 1997. On March 28, 1997, the Company filed a report on
Form 8-K dated March 14, 1997 in connection with the Share Exchange covering
Items 1 (Change in Control of the Company); 2 (Acquisition or Disposition of
Assets); 4 (Change in Company's Certifying Accountant); 5 (Other Events); 7
(Financial Statements and Exhibits); 8 (Change in Fiscal Year); and 9 (Sales of
Equity Securities Pursuant to Regulation S).
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Exchange Act by Non-Reporting Issuers
No proxy material or annual report covering the Company's last fiscal year
has been sent to the Company's security holders.
22
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on May 1, 1997.
CAPITAL GROWTH HOLDINGS, LTD.
By: /s/ Ronald B. Koenig
-------------------------------------
Ronald B. Koenig
President and Chief Executive Officer
In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Company and in the capacities indicated
on May 1, 1997.
Signatures Title
- ---------- -----
/s/Ronald B. Koenig President, Chief Executive Officer
- ------------------- and Director (Principal Executive Officer)
Ronald B. Koenig
/s/Michael S. Jacobs Senior Vice President
- -------------------- Secretary and Treasurer (Principal Financial and
Michael S. Jacobs Accounting Officer)
/s/Stanley Hollander Director
- --------------------
Stanley Hollander
/s/Alan L. Jacobs Director
- -----------------
Alan L. Jacobs
/s/John D. Booth Director
- ----------------
John D. Booth
23
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
------
REPORTS OF INDEPENDENT AUDITORS F-2
BALANCE SHEET AS AT JANUARY 31, 1997 F-4
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
JANUARY 31, 1997 AND JANUARY 31, 1996 F-5
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
FOR THE YEARS ENDED JANUARY 31, 1997 AND
JANUARY 31, 1996 F-6
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
JANUARY 31, 1997 AND JANUARY 31, 1996 F-7
NOTES TO FINANCIAL STATEMENTS F-8
PRO FORMA CONDENSED FINANCIAL INFORMATION F-12
PRO FORMA CONDENSED BALANCE SHEET F-13
PRO FORMA CONDENSED STATEMENT OF OPERATIONS F-14
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION F-15
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Capital Growth Holdings, Ltd.
We have audited the accompanying balance sheet of Capital Growth
Holdings, Ltd. (formerly Galt Financial Corporation) as at January 31, 1997, and
the related statements of operations, changes in stockholders' (deficit) and
cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Capital Growth
Holdings, Ltd. as at January 31, 1997 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Richard A. Eisner & Company, LLP
- ------------------------------------
Richard A. Eisner & Company, LLP
New York, New York
April 17, 1997
F-2
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Capital Growth Holdings, Ltd.
We have audited the accompanying statements of operations, changes in
stockholders' (deficit) and cash flows of Capital Growth Holdings, Ltd.
(formerly Galt Financial Corporation)for the year ended January 31, 1996. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Capital
Growth Holdings, Ltd. (formerly Galt Financial Corporation) for the year ended
January 31, 1996, in conformity with generally accepted accounting principles.
The financial statements for the year ended January 31, 1996 have been prepared
assuming that the Company will continue as a going concern. The Company's
ability to establish itself as a going concern is dependent upon the Company
obtaining sufficient financing to continue its activities and, ultimately, to
achieve profitable operations. These items raise substantial doubt about the
Company's ability to continue as a going concern.
/s/ Angell & Deering
---------------------------
Angell & Deering
Certified Public Accountant
Denver, Colorado
April 17, 1996
F-3
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
BALANCE SHEET
AS AT JANUARY 31, 1997
A S S E T S
-----------
Current assets - cash .......................................... $ 2,490
=========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current liabilities:
Accrued interest - related parties .......................... $ 4,343
Notes payable - related parties (12% unsecured,
payable on demand) ........................................ 42,000
---------
Total current liabilities ....................... 46,343
---------
Stockholders' (deficit):
Preferred stock: $.001 par value, 20,000,000 shares
authorized, none issued or outstanding
Class B common stock: 25,000,000 shares authorized,
none issued or outstanding
Common stock: $.0001 par value, 100,000,000 shares
authorized, 297,094 shares issued and outstanding ......... 30
Additional paid-in capital .................................. 249,051
Accumulated deficit ......................................... (292,934)
---------
Total stockholders' (deficit) ................... (43,853)
---------
T O T A L ....................................... $ 2,490
=========
The accompanying notes to financial statements
are an integral part hereof.
F-4
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
STATEMENTS OF OPERATIONS
Year Ended
January 31,
----------------------
1997 1996
-------- --------
Operating expenses .................................... $ 22,298 $ 18,003
-------- --------
Loss from operations .................................. (22,298) (18,003)
-------- --------
Other income (expense):
Gain on disposal of subsidiary ..................... 68,663
Interest expense ................................... (3,430) (914)
-------- --------
Total other income (expense) ................ (3,430) 67,749
-------- --------
NET INCOME (LOSS) ..................................... $(25,728) $ 49,746
======== ========
Net income (loss) per share of common stock ........... $ (.09) $ .17
======== ========
Weighted average number of common shares outstanding .. 297,094 297,094
======== ========
The accompanying notes to financial statements
are an integral part hereof.
F-5
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
Common Stock Additional
----------------- Paid-in Accumulated
Shares Amount Capital Deficit
------- ------ ---------- -----------
Balance - January 31, 1995 ... 297,094 $30 $249,051 $(316,952)
Net income for the year ...... 49,746
------- --- -------- ---------
Balance - January 31, 1996 ... 297,094 30 249,051 (267,206)
Net (loss) for the year ...... (25,728)
------- --- -------- ---------
BALANCE - JANUARY 31, 1997 ... 297,094 $30 $249,051 $(292,934)
======= === ======== =========
The accompanying notes to financial statements
are an integral part hereof.
F-6
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
STATEMENTS OF CASH FLOWS
Year Ended
January 31,
---------------------
1997 1996
-------- --------
Cash flows from operating activities:
Net income (loss) ................................. $(25,728) $ 49,746
-------- --------
Adjustments to reconcile net income (loss) to
net cash (used in) operating activities:
Gain on disposal of subsidiary ................ (68,663)
Changes in assets and liabilities:
Increase (decrease) in accounts payable ..... (78) 78
Increase in accrued interest ................ 3,429 914
-------- --------
Net cash (used in) operating activities .... (22,377) (17,925)
-------- --------
Cash flows from investing activities:
Disposal of subsidiary ............................ (1,000)
--------
Cash flows from financing activities:
Proceeds from related party loans ................. 21,700 20,300
-------- --------
NET INCREASE (DECREASE) IN CASH ...................... (677) 1,375
Cash at beginning of year ............................ 3,167 1,792
-------- --------
CASH AT END OF YEAR .................................. $ 2,490 $ 3,167
======== ========
The accompanying notes to financial statements
are an integral part hereof.
F-7
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Corporation:
- ---------------------------
Capital Growth Holdings, Ltd. (formerly Galt Financial Corporation) (the
"Company") was incorporated in the State of Colorado on June 15, 1987. On March
14, 1997, the Company acquired 100% of the outstanding capital stock of
International Capital Growth, Ltd. (a development stage company) ("ICG"), a
Delaware corporation and member of the National Association of Securities
Dealers, Inc., in a reverse acquisition consummated through a share exchange
transaction that resulted in a change in control of the Company (see Note B for
further discussion). Information included herein with respect to the Company
prior to March 14, 1997 refers to the Company as constituted prior to the share
exchange transaction. The Company is developing a diversified financial service
firm to pursue business opportunities in the United States and the United
Kingdom.
On March 24, 1995, the Company sold its wholly owned subsidiary,
Metropolitan Golf Club, Inc. ("MGC"), inactive since December 1990, to an
unrelated third party. The Company paid $1,000 to the buyer to complete the
sale. At the time of sale, MGC had no assets and had liabilities of $69,663. The
sale resulted in a gain of $68,663 recognized by the Company for the year ended
January 31, 1996.
(NOTE B) - Acquisition:
- -----------------------
As discussed in Note A, the Company acquired 100% of the outstanding
capital stock of ICG in a reverse acquisition consummated through a share
exchange transaction (the "Share Exchange"). In accordance with the Share
Exchange, the Company issued 18,980,000 shares of its capital stock and
1,625,000 redeemable warrants to the shareholders of ICG in exchange for the
outstanding common and convertible preferred shares and warrants of ICG. In
addition, warrants to obtain 250,000 shares of Class B common stock issued to a
consultant were exchanged.
The 18,980,000 shares of capital stock of the Company that were issued
in the Share Exchange consisted of (a) 2,549,000 shares of common stock, (b)
11,349,666 shares of Class B common stock, (c) 4,001,334 shares of 5% Cumulative
Convertible Series A Preferred Stock and (d) 1,080,000 shares of 5% Cumulative
Convertible Series B Preferred Stock. The warrants consist of 1,625,000
redeemable warrants, each exercisable to purchase one share common stock at
$4.00 per share (subject to adjustment) at any time until October 1999 and
250,000 redeemable warrants, each exercisable to purchase one share of Class B
common stock at $2.00 per share (subject to adjustment) at any time, subject to
an exercise schedule, until November 1999. The issuance of warrants exercisable
at $2.00 per share will result in a charge to operations based on their fair
value over the number of months that such consulting services are provided.
(continued)
F-8
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
NOTES TO FINANCIAL STATEMENTS
(NOTE C) - Summary of Significant Accounting Policies:
- ------------------------------------------------------
[1] Use of estimates:
-----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
[2] Net income (loss) per common share:
-----------------------------------
The net income (loss) per common share is based on the weighted
average number of shares outstanding during the year.
[3] Income taxes:
-------------
As of January 31, 1997, the Company had net operating loss and
capital loss carryforwards of approximately $163,000 and $161,000, respectively.
The net operating loss and capital loss can be carried forward fifteen years and
five years, respectively, to offset future taxable income. The net operating
loss carryforward expires in 2012 and the capital loss carryforward expires in
2001.
At January 31, 1997 and January 31, 1996, the Company had a
deferred tax asset of approximately $121,000 and $27,500, respectively,
resulting from net operating loss and capital loss carryforwards, which has been
offset in its entirety by a valuation allowance. The net change in the valuation
allowance for deferred tax assets was an increase of $93,500 related to benefits
from net operating loss carryforwards.
As a result of the transaction referred to in Note B, the net
operating loss carryforwards will not be available to offset income generated by
ICG.
(NOTE D) - Stockholders' (Deficit):
- -----------------------------------
[1] Preferred stock:
----------------
The authorized preferred stock of the Company consists of
20,000,000 shares, $.001 par value. The preferred stock may be issued in one or
more series at the discretion of the Board of Directors. In establishing a
series, the Board of Directors shall fix the number of shares in such series,
and the preferences, rights and restrictions thereof.
(continued)
F-9
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
NOTES TO FINANCIAL STATEMENTS
(NOTE D) - Stockholders' (Deficit): (continued)
- ----------------------------------- -----------
[1] Preferred stock: (continued)
----------------
On March 14, 1997, the Board of Directors designated 4,365,000
shares of preferred stock as 5% Cumulative Series A Preferred Stock and
1,200,000 shares of preferred stock as 5% Cumulative Convertible Series B
Preferred Stock.
The holders of Series A and B preferred stock are entitled to
preferential cumulative dividends beginning October 12, 1996 equal to 5% of the
liquidation preference per annum and share equally with the Class B common stock
in any dividends declared thereon. The shares are convertible at the option of
the holder and automatically convert into Class B common stock on a one-for-one
basis on October 12, 1997. The Series A and B have a liquidation preference of
$.14 and $.21 per share, respectively.
[2] Class B common stock:
---------------------
Each Class B common stock is entitled to one vote per share. The
Class B common stock is junior in priority with respect to dividends to the
common stock and the Series A and B preferred stock and automatically converts
into common stock on a one-for-one basis on December 31, 1998.
[3] Stock split:
------------
On January 7, 1997, the Stockholders approved a 60 for 1 reverse
stock split of its common and preferred stock. All per share and share amounts
in the accompanying financial statements have been retroactively adjusted to
reflect the stock split.
[4] Dividend:
---------
On March 25, 1997, the Board of Directors declared an annual
dividend of $.225 per share of common stock, accruing as of January 1, 1997
payable commencing June 30, 1997 and on a quarterly basis thereafter. The
dividend will be paid after payment of any dividends due on all classes of stock
with priority over common stock (currently Series A and B preferred stock),
subject to any operating restrictions. In addition, the Board of Directors
determined that any dividend declared on Class B common stock will be subject to
a $.15 and $.20 per share limitation on annual dividends in 1997 and 1998,
respectively.
(continued)
F-10
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
NOTES TO FINANCIAL STATEMENTS
(NOTE D) - Stockholders' (Deficit): (continued)
- -----------------------------------
[5] Private placement:
------------------
On March 27, 1997, the Company completed a private offering of its common
stock at $2.25 per share. The Company issued a total of 549,496 shares of common
stock which yielded net proceeds of approximately $1,069,000. A placement fee of
$74,182 was paid to Capital Growth International, L.L.C an affiliate of the
Company. In connection therewith, the Company agreed to issue warrants to
purchase 24,985 shares of common stock as partial compensation to certain
non-affiliated sub-placement agents. Each warrant is exercisable to purchase one
share of common stock at $4.00 per share (subject to adjustment) through March
2000.
(NOTE E) - Stock Option Plan:
- -----------------------------
On January 7, 1997, the Company adopted a stock option plan (the "1997
Plan") for granting of options to purchase up to 1,500,000 shares of Class B
common stock, pursuant to which employees, directors and consultants are
eligible to receive incentive and/or nonqualified stock options. Options granted
under the 1997 Plan are exercisable for a period of up to 10 years from date of
grant at an exercise price which is not less than the fair value on date of
grant, except that the exercise price of options granted to a stockholder owning
more than 10% of the outstanding capital stock may not be less than 110% of the
fair value of the common stock at date of grant. On March 14, 1997, the Company
granted 635,000 options at an exercise price of $2.00 per share.
(NOTE F) - Related Party Transactions:
- --------------------------------------
During the year ended January 31, 1997, the Company maintained its offices
in space provided by the Company's former president on a rent free basis.
At January 31, 1997 notes payable to related parties are due to
stockholders - former officers/directors or their affiliated companies. On March
14, 1997, an aggregate of $46,343 of these notes payable and accrued interest
thereon were exchanged for 2,906 shares of common stock.
F-11
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
PRO FORMA CONDENSED FINANCIAL INFORMATION
(Unaudited)
On March 14, 1997 Capital Growth Holdings, Ltd. (formerly Galt Financial
Corporation) (the "Company") acquired 100% of the outstanding capital stock of
International Capital Growth, Ltd. (a development stage company) ("ICG"), a
Delaware Corporation and member of the National Association of Securities
Dealers, Inc. in a reverse acquisition consummated through a share exchange
transaction (the "Share Exchange").
The accompanying unaudited pro forma condensed balance sheet combines the
balance sheets of the Company and ICG as at January 31, 1997 and December 31,
1996, respectively and reflects the (1) share exchange, (2) sale of common stock
in a private placement completed on March 27, 1997 and (3) conversion of certain
notes into common stock on March 13, 1997.
The accompanying unaudited pro forma condensed statement of operations
combines the historical operations of the Company for the year ended January 31,
1997 with the historical results of ICG for the period February 1, 1996
(inception) to December 31, 1996; assuming the share exchange occurred at the
beginning of the periods presented.
The pro forma condensed balance sheet and pro forma condensed statement of
operations is not necessarily indicative of what the financial position and
results of operations would have been had the transaction occurred earlier, nor
do they purport to represent the future financial position or results of
operations of the Company. The pro forma information should be read in
conjunction with the notes thereto and the financial statements of the Company
at January 31, 1997.
F-12
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
Historical
-----------------------------
The Company
at ICG at Pro forma
January 31, December 31, Pro forma Balance
A S S E T S 1997 1996 Adjustments Sheet
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cash ................................ $ 2,490 $3,060,255 $ 1,069,172(3) $4,131,917
Customer lists ...................... 120,000 120,000
Other assets ........................ 306,579 306,579
----------- ---------- ----------- ----------
T O T A L ................. $ 2,490 $3,486,834 $ 1,069,172 $4,558,496
----------- ---------- ----------- ----------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
- -----------------------------
Accrued expenses .................... $ 51,000 $ 51,000
Accrued interest .................... $ 4,343 $ (4,343)(1) - 0 -
Notes payable ....................... 42,000 (42,000)(1) - 0 -
----------- ---------- ----------- ----------
Total liabilities ................... 46,343 51,000 (46,343) 51,000
----------- ---------- ----------- ----------
Stockholders' equity (deficit):
Series A convertible
preferred (at liquidation
value) ......................... 611,100 (611,100)(2) - 0 -
Series B convertible
preferred (at liquidation
value) ......................... 252,000 (252,000)(2) - 0 -
Newly-designated:
5% Series A convertible
preferred (4,001,334
shares, par $.001, at
liquidation value) ......... 560,187(2) 560,187
5% Series B convertible
preferred (1,080,000
shares, par $.001,
at liquidation value) ...... 226,800(2) 226,800
Common stock (3,398,496
shares at no par) .............. 30 13,415 6,539(1)
3,323,896(2)
1,069,172(3) 4,413,052
Class B common stock
(11,349,666 shares at
no par) ........................ 334,803(2) 334,803
Additional paid-in capital ....... 249,051 3,333,535 (3,582,586)(2) - 0 -
Accumulated deficit .............. (292,934) (718,616) 39,804(1) (971,746)
Subscription receivable .......... (55,600) (55,600)
----------- ---------- ----------- ----------
Total stockholders'
equity (deficit) ........ (43,853) 3,435,834 1,115,515 4,507,496
----------- ---------- ----------- ----------
T O T A L ................. $ 2,490 $3,486,834 $ 1,069,172 $4,558,496
=========== ========== =========== ==========
</TABLE>
F-13
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Historical
---------------------------
ICG for
the Period
The Company February 1,
for the Year 1996
Ended (Inception) to
January 31, December 31, Pro forma Pro forma
1997 1996 Adjustments Operations
------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Expenses:
General and administration .. $ 22,298 $740,649 $ 762,947
Interest .................... 3,430 3,430
-------- --------- -----------
Total expenses ....... 25,728 740,649 766,377
Interest income ................ 22,033 22,033
-------- --------- -----------
NET LOSS ....................... $(25,728) $(718,616) $ (744,344)
======== ========= ===========
PRO FORMA LOSS PER SHARE ....... $ (0.05)
===========
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING .......... 14,195,760
===========
</TABLE>
F-14
<PAGE>
CAPITAL GROWTH HOLDINGS, LTD.
(formerly Galt Financial Corporation)
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION
(Unaudited)
1. Reflects the conversion of $46,343 of notes payable and accrued interest
thereon into 2,906 shares (valued at $2.25 per share) of common stock
resulting in a gain of $39,804.
2. Reflects the exchange of 18,980,000 shares of the Company in exchange for
all the outstanding shares of ICG.
Common stock .................................. 2,549,000
Class B common stock .......................... 11,349,666
5% cumulative convertible
preferred stock:
- Series A ............................... 4,001,334
- Series B ............................... 1,080,000
----------
T o t a l ........................... 18,980,000
==========
3. Reflects the issuance of 549,496 shares of common stock at $2.25 per share,
yielding net proceeds of $1,069,172.
F-15
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement Concerning the Exchange of Securities of
International Capital Growth, Ltd. for Securities of Capital
Growth Holdings, Ltd. dated January 7, 1997 without schedules
or exhibits thereto*
3(i).1 Restated Articles of Incorporation of Galt Financial
Corporation*
3(i).2 Certificate of Designation of 5% Cumulative Convertible Series
A Preferred Stock*
3(i).3 Certificate of Designation of 5% Cumulative Convertible Series
B Preferred Stock*
10 Capital Growth Holdings, Ltd. 1997 Stock Option Plan*
16 Letter, dated March 25, 1997, of Angell & Deering*
21 List of Subsidiaries
27 Financial Data Schedule
- ------------------------
* Incorporated by reference from the same respective exhibit numbers as
contained in the Company's Form 8-K dated March 14, 1997 as filed with the
Securities and Exchange Commission on March 28, 1997.
EXHIBIT 21
List of Subsidiaries
--------------------
Name Under Which
Subsidiary
Name of Subsidiary Jurisdiction of Incorporation Conducts Business
- ----------------- ----------------------------- -----------------
International Capital State of Delaware International Capital
Growth, Ltd. Growth, Ltd.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE COMPANY'S
FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS INCLUDED AS A PART
OF THIS FORM 10-KSB
</LEGEND>
<CIK> 0000832324
<NAME> Capital Growth Holdings, Ltd.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,490
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 2,490
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 46,343
<LONG-TERM> 0
0
0
<COMMON> 30
<OTHER-SE> (43,853)
<TOTAL-LIABILITIES-AND-EQUITY> 2,490
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 3,430
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 22,298
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,728)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
