U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995.
[ ] 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 No. 33-24138-D
CAPITAL GROWTH, INC.
(Name of small business issuer in its charter)
Nevada 87-0463772
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
150 Wright Brothers Drive, Ste. 570
Salt Lake City, Utah 84116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 575-6600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
The aggregate market value of the common voting stock held
by non-affiliates as of May 31, 1996: Not Determinable.
Shares outstanding of the Registrant's common stock as of
May 31, 1996: 42,500,000 shares.
The issuer's revenues for the year ended December 31,
1995, were nominal
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PART I
Item 1. Description of Business.
(a) General Development of Business.
Capital Growth, Inc. (the "Registrant" or "Company"), was
incorporated under the laws of the State of Nevada on March 28,
1988. The Registrant was organized to raise capital and to
investigate and acquire any suitable asset, property or other
business opportunity which management believes has good business
potential. No specific business or industry is presently
contemplated.
The Company was formed as a wholly-owned subsidiary of Data
Growth, Inc., a public blind pool (blank check) company, for the
purpose of allowing the shareholders of Data Growth, Inc. to
participate in another company which will seek a business
acquisition of its own. The formation of the Registrant was
intended to diversify the number and type of acquisitions which
could potentially benefit the shareholders of Data Growth, Inc.
In connection with its formation, the Company issued
5,000,000 Units comprising 5,000,000 shares of common stock,
5,000,000 A Warrants and 5,000,000 B Warrants to Data Growth,
Inc. for $50,000.
Data Growth, Inc. during 1989, distributed 4,600,640 of the
Units to its shareholders on a 1 for 3 basis (one Unit for every
three shares) and retained 399,360 Units.
The Units were distributed at no cost to Data Growth, Inc.
shareholders who were shareholders of record as of January 23,
1989, the Record Date. One Unit was distributed for each three
shares owned as of the Record Date. The stock, A Warrants and B
Warrants are evidenced by transferable certificates and are not
separable from the Units.
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The distribution of the Units and the exercise of any
Warrants was not conditioned upon the consent of shareholders of
Data Growth, Inc. or upon the subscription of any minimum number
of shares or Warrants.
The Company's outstanding Warrants are not detachable from
the Units and may not be traded separately. Each "A" Warrant is
exercisable at a price of $.20 per share through December 31,
1996, and the "B" Warrants at $.30 per share through December 31,
1996, (these dates are extensions of the original dates of
September 30, 1989 and March 31, 1990). The exercise price may
be reduced at the option of management of the Company without
changing the number of outstanding warrants.
All Unit Warrants are subject to a one-time right of
redemption by the Company at $.001 per Warrant, on 30 days
notice, at any time after the market price (based on the closing
bid price as reported by any market-maker) of the Company's
common stock for any consecutive 20 day period reaches or exceeds
the Warrant exercise price. All outstanding Warrants must be
redeemed if any are redeemed. If notice of redemption is given,
a holder of a Warrant will have a 30 day period after notice of
redemption is given in which to exercise his Warrants after which
he will be compelled to accept the redemption price. The
redemption price will be paid to the registered owner as of a
specified record date and the certificate will be considered
canceled.
The Warrants contain provisions that protect the holders
thereof against dilution by adjustment of the exercise price in
certain events, such as stock dividends and distributions,
splits, recapitalization, mergers or consolidations. The Company
is not required to issue fractional shares with respect to any
such adjustment. A holder of Warrants, as such, does not possess
any rights as a shareholder of the Company unless such Warrants
are exercised.
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(b) Financial Information about Industry Segments.
The Registrant does not presently have separate industry
segments.
(c) Narrative Description of the Business.
General Discussion
The Company's business plan is to seek one or more potential
business ventures, anywhere in the United States, which, in the
opinion of management may warrant involvement by the Company.
The Company will only acquire businesses which can generate or
provide audited financial statements. Management intend to make
acquisitions of entities for which it can obtain audited
financial statements. This will limit the types of businesses
which the Company could acquire to those firms which have
previously had audited financial statements. The Company
recognizes that because of its limited financial, managerial and
other resources, the number of suitable potential business
ventures which may be available to it will be extremely limited.
The Company's principal business objective will be to seek
long-term growth potential in the business venture in which it
participates rather than to seek immediate, short-term earnings.
In seeking to attain the Company's business objective, it will
not restrict its search to any particular business or industry,
but may participate in business ventures of essentially any kind
or nature, including, but not limited to, finance, high
technology, manufacturing, natural resources, service, research
and development, communications, insurance, brokerage,
transportation and others. Management's discretion is
unrestricted and it may participate in any business venture
whatsoever, which may meet the business objectives discussed
herein. It is emphasized that the business objectives discussed
are extremely general and are not intended to be restrictive upon
the discretion of management.
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The Company will seek one or more potential business
ventures from its known sources, but will rely heavily on
personal contacts of its officers and directors as well as
indirect associations between them and other business and
professional people. It is not anticipated that the Company will
engage professional firms specializing in business acquisitions
or reorganizations. In some instances, the Company may publish
notices or advertisements seeking a potential business venture in
financial or trade publications.
The Company will not restrict its search for any specific
kind of firms, but may acquire a venture in its preliminary or
development stage, may participate in a business which is already
in operation or in a business in various stages of its corporate
existence. It is impossible to predict at this stage the status
of any venture in which the Company may participate, in that the
venture may need additional capital, may merely desire to have
its shares publicly traded, or may seek other perceived
advantages which the Company may offer. In some instances, the
business endeavors may involve the acquisition of or merger with
a corporation which does not need substantial additional cash but
which desires to establish a public trading market for its common
stock.
Firms which seek the Company's participation in their
operations through a reorganization, asset acquisition, or some
other means may desire to do so to avoid what such firms may deem
to be adverse factors related to undertaking a public offering.
Such factors include substantial time requirements and legal
costs, along with other conditions or requirements imposed by
various state laws.
To a large extent, a decision to participate in a specific
business endeavor may be made upon management's analysis of the
quality of the other firm's management and personnel, the
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anticipated acceptability of new products or marketing concepts,
the merit of technological changes, and numerous other factors
which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is
anticipated that the results of a specific firm to date may not
necessarily be indicative of the potential for the future because
of the requirement to substantially shift marketing approaches,
expand significantly, change product emphasis, change or
substantially augment management, and other factors. Because the
Company may participate in business endeavors with newly
organized firms or with firms which are entering a new phase of
their growth, it should be emphasized that the Company will incur
further risks since management in many instances will not have
proved its abilities or effectiveness, the eventual market of
such firm's product or services will likely not be established,
and the profitability of the firm will be unproved and cannot be
predicted.
The analysis of new business endeavors will be undertaken by
or under the supervision of the officers and directors, none of
whom is a professional business analyst. No member of management
has any significant business experience or expertise in any type
of business which is likely to be investigated by the Company.
Thus, management will have to rely on their own common sense and
business judgment as well as upon the advice of consultants to
examine the factors described herein. The mention of various
factors to be looked at by management with regard to potential
business endeavors should not be read as implying any experience
or expertise on behalf of management. These are merely
guidelines which stockholders should know that management will go
by as they attempt to examine potential business ventures. In
analyzing prospective business endeavors, management will
consider such matters as the available technical, financial and
managerial resources, the working capital and other financial
requirements, the history of operations, if any; prospects for
the future; the nature of present and expected competition; the
quality and experience of management services which may be
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available and the depth of that management; the potential for
further research, development or exploration; risk factors; the
potential for growth and expansion; the potential for profit, the
perceived public recognition or acceptance of products, services,
trade or service marks; name identification; and other relevant
factors.
Generally, the Company will analyze all available factors in
the circumstances and make a determination based upon a composite
of available facts, without reliance upon any single factor as
controlling.
It is anticipated that business endeavors will be available
to the Company from various sources, including its officers and
directors, professional advisors, securities broker-dealers,
venture capitalists, members of the financial community, and
other who may present unsolicited proposals. In certain
circumstances, the Company may agree to pay a finder's fee or to
otherwise compensate investment banking or other services
provided by persons who are unaffiliated with the Company but who
submit a potential business endeavor in which the Company
participates. No such finder's or other fees will be paid to any
person who is an officer, director, owner of record or, to the
knowledge of the Company the owner beneficially of 10% or more of
the Company's issued and outstanding stock, unless approval is
received by majority vote of disinterested shareholders.
The Company may acquire a business venture by conducting a
reorganization involving the issuance of securities in the
Company. Due to the requirements of certain provisions of the
Internal Revenue Code of 1986 (as amended) in order to obtain
certain beneficial tax consequences in such reorganizations, the
number of shares held by all of the present shareholders of the
Company prior to such transaction or reorganization, including
persons purchasing shares in this offering, may be substantially
less than the total outstanding shares held by such shareholders
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in any reorganized entity. As noted above, such a transaction
may be based upon the sole determination of management without
any vote or approval by the shareholders of the Company. The
result of any such reorganization could be additional dilution to
the shareholders of the Company prior to such reorganization. If
the Company were to issue substantial additional securities in
any such reorganization, or otherwise, such issuance may have an
adverse effect on any trading market which may develop in the
Company's securities in the future.
It is anticipated that the investigation of specific
business endeavors and the negotiation, drafting and execution of
relevant agreements, disclosure documents and other instruments
will require substantial management time and attention and
substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business
endeavor, the costs theretofore incurred in the related
investigation would not be recoverable. Furthermore, even if an
agreement is reached for the participation in a specific business
venture, the failure to consummate that transaction may result in
the loss to the Company of the related costs incurred.
The Issuer has not yet engaged in any business activities.
The Company has no formal business plan or any particular area of
business in which it intends to engage. Management of the
Company will attempt to acquire on behalf of the Company assets,
properties and/or ongoing businesses which it believes have
potential for successful development. This may include
businesses or assets related to manufacturing, retail and
wholesale sales, industrial development, and natural resource
development or any other field of business or endeavor which
Management of the Company may encounter. Management of the
Company have not adopted any formal business plan or conducted
any market studies with respect to any business or industry. No
representation is made that Management of the Company have any
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particular expertise in connection with the proposed activities
of the Company or any particular industry or business field.
Management of the Company may rely on independent experts or
consultants in any business field in connection with their
examination and investigation of potential acquisitions.
Management intends to send a letter to its stockholders
every time the Company is involved in a transaction or which
relates to an event deemed by management to be material to the
Company. This would include a change in management, acquisition
of substantial assets, or other similar matters such as would
also be disclosed by the Company on Form 8-K and/or 10-QSB filed
with the Securities and Exchange Commission.
Management of the Company presently have no specific assets,
properties or business operation which it has in mind for
potential acquisition nor does it have any particular areas of
business or industry in which it intends to look for such
business acquisitions.
In the acquisition of any given business the Company may
incur substantial indebtedness which will substantially change
the capital structure of the Company and would most likely expose
the Company's stockholders to a greater risk of loss in the event
of financial difficulty.
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Item 2. Properties.
The Registrant has no material assets except cash in the
approximate amount of $800 at December 31, 1995.
Office Facilities and Employees
The Company has no office facilities of its own or
employees. The Company uses the offices and various office and
accounting services of the firm of Peterson, Siler & Stevenson.
The Company's president was an officer and shareholder of such
firm during 1994 and part of 1995. Such services and facilities
are being provided for a fee of $100 per month.
Item 3. Legal Proceedings.
There are not currently any material pending legal
proceedings, to which the registrant is a party or of which any
of its property is subject and no such proceedings are known to
the registrant to be threatened or contemplated by or against it.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of the security holders,
through solicitation of proxies or otherwise during the 4th
quarter of the fiscal year covered by this report.
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PART II
Item 5. Market for Common Equity and Related Stockholder
Matters.
(a) Market Information.
The registrant's common stock has never been actively
traded, however the common stock is eligible for quotation on the
electronic bulletin board.
(b) Holders.
The approximate number of holders of the registrant's common
stock as of May 31, 1996 is 319.
(c) Dividends.
The registrant has not paid any cash dividends to date and
does not anticipate or contemplate paying dividends in the
foreseeable future. It is the present intention of management to
utilize all available funds for the development of the Company's
business.
The Company is authorized by its certificate of
incorporation to issue up to 50,000,000 shares of common stock,
$.001 par value.
One-third of the outstanding shares of the Company's common
stock must be present at a duly called shareholders' meeting in
order to have a quorum. However, under Nevada law, amendments to
the Company's articles of incorporation and certain other matters
require an affirmative vote of at least a majority of all
outstanding shares.
All shares of stock, when issued, will be fully-paid and
nonassessable. All shares are equal to each other with respect
to voting, liquidation and dividend rights. Holders of shares of
common stock are entitled to one vote for each share they own at
any stockholders' meeting. Holders of shares of common stock are
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entitled to receive such dividends as may be declared by the
Board of Directors out of funds legally available therefor, and
upon liquidation are entitled to participate pro-rata in a
distribution of assets available for such a distribution to
stockholders. There are no conversion, pre-emptive or other
subscription rights or privileges with respect to any shares.
Reference is made to the Company's Articles of Incorporation
together with the Amendments thereto and its By-Laws as well as
to the applicable statutes of the State of Nevada for a more
complete description of the rights and liabilities of holders of
common stock. The common stock of the Company does not have
cumulative voting rights which means that the holders of more
than 50% of the shares voting for the election of directors may
elect all of the directors if they choose to do so. In such
event, the holders of the remaining shares aggregating less than
50% will not be able to elect any directors.
Item 6. Management's Discussion and Analysis or Plan of
Operation.
The Company was incorporated March 28, 1988, for the purpose
of investing in any and all types of assets, properties, and
businesses. The Company has completed a public stock
distribution on behalf of its sole shareholder, Data Growth, Inc.
with 4,600,460 shares being distributed to the shareholders of
Data Growth, Inc. Distribution expenses of $26,989 were offset
against the amount paid by Data Growth, Inc. for the stock. The
distribution was registered on Form S-18 with the Securities and
Exchange Commission. The Company's only business activity, to
date, has been its formation, the registration of its securities
and the preliminary investigation of potential investments and
acquisitions.
The Company's plan of operation is to actively pursue a
business combination with an existing business operation. The
Company presently has no business combination contemplated but
intend to actively seek such a combination.
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Item 7. Financial Statements.
See attached financial statements.
Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.
As reported in a Form 8-K dated May 3, 1994, the
registrant changed auditors in May 1994. The information set
forth in said Form 8-K is incorporated herein by reference. The
change in auditors was brought about by the decision of prior
auditors to limit or eliminate the auditing of public companies
and was approved by the registrants' board of directors.
No adverse opinion, disclaimer of opinion, qualification
or modification as to uncertainly, audit scope or accounting
principles exists in any report of any prior auditors on the
financial statements of the registrant.
The registrant is not aware, and has not been advised by
any former accountants, of any disagreement on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. The registrant has
not consulted its current auditors regarding either the
application of accounting principles to any specified transaction
or any disagreement with any former accountants.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
(a) Identification of Directors.
The current sole director of the registrant, who will serve
until the next annual meeting, or until his successors are
elected or appointed and qualified, is set forth below:
YEAR FIRST ELECTED
NAME AGE AS DIRECTOR POSITION
Gary B. Peterson 48 Since Inception President,
Secretary/
Treasurer and
Director
(b) Identification of Executive Officers.
Same as above.
(c) Significant Employees.
The registrant has no significant employees.
(d) Family Relationships.
None.
(e) Business Experience.
(1) Background
Gary B. Peterson, is currently the chief executive officer
of Data Security Corporation, a public company, and is also
functioning as the chief financial officer of Digitran Systems,
Inc., a public company. From 1982 through 1995, Mr. Peterson was
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a shareholder/officer in the Utah C.P.A. firm of Peterson,
Siler & Stevenson. Mr. Peterson is qualified to practice as a CPA
in California and Utah and is a member of the Utah Society of
Certified Public Accountants and the American Institute of CPA's.
Prior to starting his own practice in 1982 he worked as a tax
senior and manager with Price Waterhouse & Company from 1972 to
1976, Touche Ross & Company from 1976 to 1977 and Charles Huber &
Associates from 1977 to 1978. Mr. Peterson worked as a controller
for Newbery Engineering and Construction Company from 1978 to 1982,
where he was responsible for all of the company's financial
matters. Mr. Peterson graduated with honors from Brigham Young
University in Provo, Utah in 1972. Mr. Peterson has served as
President of Data Growth, Inc., the parent company of the
Registrant since its inception in January 1986. Mr. Peterson has
served as a Director and Secretary-Treasurer of Maxi Group, Inc.,
a public blank-check company since its inception in June, 1986.
(2) Directorships
Except as described herein none of the registrant's
directors, nor any person nominated or chosen to become a
director holds any other directorships in any other company with
class of securities registered pursuant to Section 12 of the
Exchange Act or subject to the requirements of Section 15(d) of
such Act or any company registered as an investment company under
the Investment Company Act of 1940.
(f) Involvement in Certain Legal Proceedings.
None of the officers or directors have been involved in any
material legal proceedings which occurred within the last five
years of any type as described in Section 401(f) of Regulation S-K.
Item 10. Executive Compensation.
(a) Cash Compensation.
During the last fiscal year, none of the registrant's
officers or directors individually received any salary, wage or
other compensation. During the current fiscal year the
registrant has no present plans to pay compensation to officers
or directors.
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However, the Company accrued fees payable to the accounting
firm of Peterson, Siler & Stevensen, of which the registrant's
president was a managing partner during 1994 and part of 1995, in
the amount of $6,394 for 1994, and $3,310.00 for 1995, for
accounting services rendered by such firm to the registrant.
(b) Compensation Pursuant to Plans.
There are presently no ongoing pension or other plans or
arrangements pursuant to which remuneration is proposed to be
paid in the future to any of the officers and directors of the
registrant.
(c) Other Compensation.
None.
(d) Compensation to Directors.
None.
Item 11. Security Ownership of Certain Beneficial Owners &
Management.
The following table sets forth the beneficial stock
ownership of all persons known by the registrant to own more than
5% of the outstanding common stock, and the officers and
directors, both individually and as a group.
Name and Amount and Nature Percent
Address Position of Beneficial of
of Beneficial with Ownership Class
Owner Company
Gary B. President, 1,166,667l 2.9%
Peterson Secretary/ record &
Treasurer & (1)(2)
Director
Robert W. Mann, 37,500,000 88.2%
Trustee, Robert
W. Mann
Retirement
Trust
All officers and directors as
a group (1 person) 1,166,667 shares 2.9%
(1) Mr. Peterson could also be deemed to beneficially own
76,667 shares owned by two partnerships of which he is an
affiliate.
(2) Mr. Peterson has granted an option with respect to
1,000,000 of these shares. See "Certain Relationships and
Related Transactions" below.
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Changes in Control.
There are no arrangements including pledges by any person
of securities of the Company, the operation of which may at a
subsequent date result in a change in control of the Company.
Item 12. Certain Relationships & Related Transactions.
On or about March 31, 1993, the Robert W. Mann Retirement
Trust, Robert W. Mann, Trustee (of Los Angeles, California)
acquired 35,000,000 Units from the Company for $35,000. The
Units comprise 35,000,000 restricted shares of common stock,
35,000,000 A Warrants exercisable at $.20 per share until
December 31, 1993 and 35,000,000 B Warrants exercisable at $.30
per share until December 31, 1993. This transaction resulted in
a shift in voting control to the Robert W. Mann Retirement Trust.
The funds will be used to pay current liabilities and to maintain
the corporation.
In September 1995, the Robert W. Mann Retirement Trust
purchased 2,500,000 shares of common stock from the Company for
$2500. This was not an arms-length transaction.
In connection with the foregoing, Gary B. Peterson, the sole
officer and director of the Company has granted an option to the
Robert W. Mann Retirement Trust, wherein said Trust has the right
to purchase 1,000,000 shares of the Company's common stock from
Mr. Peterson for $50,000 within seven years of March 31, 1993, or
within two years of any acquisition by the Company.
The founding stockholder of the Company, Data Growth, Inc.,
purchased from the Company, 5,000,000 Units comprising an
aggregate of 5,000,000 shares, 5,000,000 A Warrants, and
5,000,000 B Warrants for $50,000 in August, 1988.
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No officer, director, promoter or affiliate of the Issuer
has any direct or indirect material interest by security
holdings, contracts, or otherwise in the Issuer or any asset
proposed to be acquired by the Is suer other than as described
herein.
The Company has no office facilities of its own or
employees. The Company uses the offices and various office
services of the firm of Peterson, Siler & Stevenson. The
Company's president is the managing partner of such firm. Such
services and facilities are being provided for a fee of $100 per
month. Such firm also provides accounting services, for which it
also received compensation as disclosed previously.
During the year ended December 31, 1993, the Company
received advances of $17,200 from Data Growth, Inc., which
currently holds a minority interest in the Company. Such
advances are non interest-bearing and unsecured. During 1995 and
1994, the Company repaid $1,021 and $395, respectively, to Data
Growth (a company who owned the majority of the outstanding
company stock prior to the distribution described herein). At
December 31, 1995, $15,724 was owning to Data Growth.
Item 13. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as a part of this
report:
1. Audited Financial Statements for the year ended December
31, 1994 and 1995 are included as part of this report.
2. Financial Statement Schedules.
None.
3. Exhibits.
None
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Reports on Form 8-K.
The Company filed no reports on Form 8-K during the last
quarter of the year ended December 31, 1995.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAPITAL GROWTH, INC.
Date: June 28, 1996 /s/ Gary B. Peterson
Gary B. Peterson, President,
Chief Executive Officer, and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: June 28, 1996 /s/ Gary B. Peterson
Gary B. Peterson, Director
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CAPITAL GROWTH, INC.
(A Development Stage Company)
INDEX
Page
Independent auditors' report 1
Balance sheet, December 31, 1995 3
Statement of operations for the years
ended December 31, 1995 and 1994 and
for the period from March 28, 1988
(date of inception) through December 31,
1995 4
Statement of stockholders' equity for
the period from March 28, 1988 (date
of inception) through December 31,
1995 5
Statement of cash flows for the years
ended December 31, 1995 and 1994 and
for the period from March 28, 1988 (date
of inception) through December 31, 1995 7
Notes to financial statements 8
<PAGE?
TANNER+CO.
675 East 500 South, Suite 640
Salt Lake City, Utah 84102
Telephone (801) 532-7444
Fax (801) 532-4911
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Capital Growth, Inc.
We have audited the accompanying balance sheet of Capital
Growth, Inc., (a development stage Company) as of December 31,
1995, and the related statements of operations, stockholders'
deficit and cash flows for the two years then ended and the
cumulative amounts from March 28, 1988 (date of inception).
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Capital Growth, Inc., (a development stage Company) at
December 31, 1995 and the results of its operations and its cash
flows for the two years then ended and cumulative amounts from
March 28, 1988 (date of inception) in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in note 2 to the financial statements, the Company has
suffered recurring losses and has a net capital deficiency that
raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in note 2. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/ TANNER + CO.
Salt Lake City, Utah
May 8, 1996
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CAPITAL GROWTH, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1995
ASSETS
Current assets -
cash $ 801
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable to related entity $ 10,132
Advances payable to related entity 15,724
-------
Total liabilities 25,856
Stockholders' deficit:
Common stock; $.001 par value; 50,000,000
shares authorized, 42,500,000 shares
issued and outstandin 42,500
Additional paid-in capital 18,102
Deficit accumulated during the development
stage (85,657)
--------
Total stockholders' deficit (25,055)
--------
Total liabilities and stockholders' deficit $ 801
--------
See accompanying notes to financial statements.
-3-
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Operations
Cumulative
Years Ended Amounts
December 31, Since
1995 1994 Inception
----- ----- ---------
Revenue - interest income $ 51 207 2,471
----- ----- ---------
Expenses:
Professional fees 3,310 9,394 61,376
Administrative expenses 4,760 4,263 24,016
Amortization of organization costs - - 2,136
----- ----- ---------
Total expenses 8,070 13,657 87,528
----- ------ ---------
Loss before income taxes (8,019) (13,450) (85,057)
------- -------- ---------
Income taxes - current (100) (100) (600)
-------- -------- ----------
Net loss $(8,119) (13,550) (85,657)
-------- -------- ----------
Loss per share $(.00) (.00) (.01)
-------- -------- ----------
Weighted average shares 40,625,000 40,000,000 17,418,478
---------- ---------- ------------
See the accompanying notes to financial statements.
-4-
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Stockholders' Deficit
From Inception on March 28, 1988
Through December 31, 1995
Deficit
Accumulated
Number Common Additional During the
of Stock at Paid-In Development
Shares Par Value Capital Stage
------- ---------- ---------- ------------
Balance, March 28, 1988 - $ - - -
Shares issued to initial stock-
holder for cash, August, 1988
at $.001 per share 5,000,000 5,000 21,266 -
Net loss for the period ended
December 31, 1988 - - - (649)
--------- ---------- ----------- ----------
Balance, December 31, 1988 5,000,000 5,000 21,266 (649)
Offering costs incurred during 1989 - - (3,164) -
Net loss for the year ended
December 31, 1989 - - - (16,406)
--------- ----------- ----------- ---------
Balance, December 31, 1989 5,000,000 5,000 18,102 (17,055)
Net loss for the year ended
December 31, 1990 - - - (11,228)
--------- ----------- ----------- ---------
Balance, December 31, 1990 5,000,000 5,000 18,102 (28,283)
-5-
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Stockholders' Deficit - Continued
Deficit
Accumulated
Number Common Additional During the
of Stock at Paid-In Development
Shares Par Value Capital Stage
-------- --------- ---------- -----------
Net loss for the year ended
December 31, 1991 - - - (13,188)
--------- -------- ---------- -----------
Balance, December 31, 1991 5,000,000 5,000 18,102 (41,471)
Net loss for the year ended
December 31, 1992 - - - (8,448)
--------- --------- --------- -----------
Balance, December 31, 1992 5,000,000 5,000 18,102 (49,919)
Stock issued in private
placement for cash March, 1993
at $.001 per share 35,000,000 35,000 - -
Net loss for the year ended
December 31, 1993 - - - (14,069)
---------- --------- --------- -----------
Balance, December 31, 1993 40,000,000 40,000 18,102 (63,988)
Net loss for the year ended
December 31, 1994 - - - (13,550)
---------- --------- --------- -----------
Balance, December 31, 1994 40,000,000 40,000 18,102 (77,538)
Stock issued in private placement
for cash September, 1995 at $.001
per share 2,500,000 2,500 - -
Net loss for the year ended
December 31, 1995 - - - (8,119)
---------- --------- --------- -----------
Balance, December 31, 1995 42,500,000 $42,500 18,102 (85,657)
---------- --------- --------- -----------
See accompanying notes to financial statements.
-6-
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Cash Flows
Cumulative
Years Ended Amounts
December 31, Since
1995 1994 Inception
----- ---- ---------
Cash flows from operating activities:
Net loss $(8,119) (13,550) (85,657)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization expense - - 2,136
Increase in organization costs - - (2,136)
Increase (decrease) in:
Accounts payable 1,860 3,506 10,032
Income taxes payable - - 100
------- -------- ---------
Net cash used in
operating activities (6,259) (10,044) (75,525)
------- -------- ----------
Cash flows from investing activities - - -
------- -------- -----------
Cash flows from financing activities:
Advances (to) from related entity (1,081) (395) 15,724
Proceeds from issuance of common stock 2,500 - 87,500
Public offering costs - - (26,898)
------- --------- ------------
Net cash provided by (used in)
financing activities 1,419 (395) 76,326
------- --------- -------------
Net increase (decrease) in cash (4,840) (10,439) 801
Cash, beginning of period 5,641 16,080 -
------- ---------- ------------
Cash, end of period $ 801 5,641 801
------- ---------- ------------
See accompanying notes to financial statements.
-7-
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies
The Company was organized under the laws of the state of
Nevada on March 28, 1988 and has designated December 31 as its
fiscal year end. The Company has not commenced planned
principal operations and purposes to seek business ventures
which will allow for long-term growth. Further, the Company
is considered a development stage company as defined in SFAS
No. 7 and has not, thus far, engaged in business activities of
any kind. Its principal activities since inception have
consisted of the offer and sale of common stock and the
engagement of legal counsel and other professionals in
connection with a proposed public offering of additional
common shares. The Company has, at the present time, not paid
any dividends and any dividends that may be paid in the future
will depend upon the financial requirements of the Company and
other relevant factors.
Cash and Cash Equivalents
Cash equivalents are generally comprised of certain highly
liquid investments with maturities of less than three months.
Organization Costs
The Company amortized its organization costs, which reflect
amounts expended to organize the Company, over sixty (60)
months using the straight-line method. The organization costs
were fully amortized by December 31, 1993.
Loss Per Share
The computation of loss per share of common stock is based
on the weighted average number of shares outstanding as of
December 31, 1995 and 1994, respectively. Common shares
issuable upon exercise of stock purchase warrants and stock
options are not included in the per share computation when
their effect would be antidilutive.
Use of Estimates in the Preparation of Financial Statements
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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
-8-
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(2) Going Concern
The accompanying financial statements of Capital
Growth, Inc., have been prepared on a going-concern basis,
which contemplates profitable operations and the
satisfaction of liabilities in the normal course of
business. There are uncertainties that raise substantial
doubt about the ability of the Company to continue as a
going concern. As shown in the statement of operations,
the Company reported a net loss of $8,119 for the year
ended December 31, 1995 and as of December 31, 1995, and
has a deficit in equity of $25,055.
The Company's continuation as a going concern is
dependent upon its ability to satisfactorily meet its debt
obligations, secure adequate new financing and generate
sufficient cash flows for operations to meet its
obligations. The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
Management has entered into a plan where it is pursuing
other financing and searching for additional business
opportunities. It is not known if the Company will be
successful.
(3) Income Taxes
The difference between income taxes at statutory rates
for 1995 and 1994 and the amount presented in the financial
statements is the increase in the tax valuation allowance,
which offsets the income tax benefit of the operating loss.
Deferred tax assets at December 31, 1995 and 1994 are
as follows:
1995 1994
---- -----
Operating loss carryforwards $25,000 23,000
Valuation allowance (25,000) (23,000)
-------- --------
$ - -
-------- --------
The Company has net operating loss carryforwards of
approximately $85,000, which begin to expire in the year
2003. The amount of net operating loss carryforward that
can be used in any one year will be limited by significant
changes in the ownership of the Company and by the
applicable tax laws which are in effect at the time such
carryforward can be utilized.
-9-
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements - Continued
(4) Related Party Transactions
The Company uses the offices and various office and
accounting services of the firm of Peterson, Siler &
Stevenson. The Company's president was an officer and
shareholder of such firm during 1994 and part of 1995.
Such services and facilities are being provided for a
rental fee of $100 per month. Also, during the years ended
December 31, 1995 and 1994, the Company recorded
professional fees of $3,310 and $6,394 to such firm of
which $10,132 was due as of December 31, 1995.
During the year ended December 31, 1995, a principal
shareholder purchased additional stock at par value for
$2,500.
During the year ended December 31, 1993, the Company
had received advances of $17,200 from Data Growth, Inc.,
which currently holds a minority interest in the Company.
Such advances are non interest-bearing and unsecured.
During 1995 and 1994, the Company repaid $1,081 and $395 to
Data Growth (a company who owned the majority of the
outstanding company stock prior to the distribution
described in note 5 below, respectively). At December 31,
1995, $15,724 was owing to Data Growth.
(5) Public Stock Distribution
The initial issuance of the Company's common stock
occurred in August, 1988. Such shares are a component of
5,000,000 units issued. Each unit consists of one (1)
share of the aforementioned common stock and two (2)
warrants to purchase shares of common stock. Each class A
warrant entitles the holder thereof to purchase one share
of common stock at a price of $.20 per share during the
period up to and including December 31, 1996. Each class B
warrant entitles the holder thereof to purchase one share
of common stock at a price of $.30 per share during the
period up to and including December 31, 1996.
In 1988, the Company prepared a registration statement
through which it registered, for distribution to the
shareholders of Data Growth, Inc., 4,600,640 of the
aforementioned units of common stock and warrants. The
Company registered the units on Form S-18 in accordance
with the Securities Act of 1933. Such registration became
effective on December 15, 1988. Subsequently, 4,372,229
shares of the Company's stock were distributed to the
shareholders of Data Growth, Inc. Costs of the public
distribution, amounting to $26,898 were charged against
capital in excess of par value.
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 801
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 801
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 801
<CURRENT-LIABILITIES> 25,856
<BONDS> 0
<COMMON> 42,500
0
0
<OTHER-SE> (67,555)
<TOTAL-LIABILITY-AND-EQUITY> 801
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,070
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,019)
<INCOME-TAX> 100
<INCOME-CONTINUING> (8,119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,119)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
