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
For the fiscal year ended December 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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.)
10 West 100 South, Ste. 450
Salt Lake City, Utah 84101
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 355-0252
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 March 31, 1998: Not Determinable.
Shares outstanding of the Issuer's common stock as of
December 31, 1997: 48,000,000 shares.
The issuer's revenues for the year ended December 31, 1997,
were nominal.
<PAGE>
PART I
Item 1. Description of Business.
(a) General Development of Business.
Capital Growth, Inc. (the "Issuer" or "Company"), was incorporated under
the laws of the State of Nevada on March 28, 1988. The Issuer was organized to
raise capital and to investigate and acquire any suitable asset, property or
other business opportunity which management might believe had good business
potential. No specific business or industry was predetermined.
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 Issuer 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 to its
shareholders a 1 for 3 basis (one Unit for every 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.
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 ? , and the "B" Warrants at $.30 per share through ? , (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
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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.
(b) Financial Information about Industry Segments.
The Issuer 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 intends
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
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discussed are extremely general and are not intended to be
restrictive upon the discretion of management.
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 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
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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 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
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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
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 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.
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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.
Item 2. Properties.
The Issuer has no material assets except cash in the approximate amount of
$996 at December 31, 1997.
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 Company's
president. 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.
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 13, 1998 was 314.
(c) Dividends.
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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 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.
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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.
Item 7. Financial Statements. See attached financial statements.
Item 8. Changes In and Disagreements with Accountants on and Financial
Disclosure.
During the two most recent fiscal years, there has not been any
change in the principal independent accountant for the registrant, and there has
been no disagreement on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
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 50 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
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Gary B. Peterson, is currently associated with the CPA firm of Smith,
Peterson & Associates, LLC and was previously functioning as the chief financial
officer of Digitran Systems, Inc., a public company. During 1995 and 1996, he
was the chief executive officer of Data Security Corporation, a public company.
From 1982 through 1995, Mr. Peterson was the 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 Issuer 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.
Other than the $100 per month being accrued to the Company's president for
use of office facilities and accounting services, during the last fiscal year
none of the registrant's officers or directors individually received any salary,
wage or other compensation. During 1996 a total of $1,200 was accrued to the
Company's president pursuant to this arrangement. During the current fiscal year
the registrant will continue this arrangement but has no present plans to pay
any other compensation to officers or directors. The Company also accrued fees
payable to the accounting firm of Peterson, Siler & Stevensen, of which the
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registrant's president was a managing partner during part of 1995, in the amount
of $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.
<TABLE>
<S> <C> <C> <C>
Name and Address Amount and Nature Percent
of Beneficial Position with of Beneficial of
Owner Company Ownership Class
- ---------------- -------------- -------------------
Gary B. Peterson President, 1,166,667 shares 2.9%
Secretary/ record & beneficial
Treasurer & (1)(2)
Director
Robert W. Mann, 37,500,000 shares 88.2%
Trustee, Robert W.
Mann Retirement
Trust
All officers and directors as
a group (1 person) 1,166,667 shares 2.9%
</TABLE>
(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.
Changes in Control.
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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.
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 Company's president. Such
services and facilities are being provided for a fee of $100 per month.
The Company received advances from Data Growth, Inc., its former
parent, which are being treated as loans. Such advances or loans are
interest-bearing at the rate of 6% per annum and are unsecured. During 1996,
Data Growth transferred the right to receive repayment to the Company's
president. The Company was also indebted for accounting services to the
accounting firm which the Company's president was formerly an officer of, which
receivable was also transferred to the Company's president when he terminated
association with such firm. At December 31, 1997, $28,124 was owed to the
Company's president with respect to these debts.
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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, 1997 and
1996 are included as part of this report.
2. Financial Statement Schedules. None.
3. Exhibits. None.
Reports on Form 8-K.
The Company filed no reports on Form 8-K during the last quarter of the
year ended December 31, 1997.
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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: May 22 , 1998 /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: May 22, 1998 /s/ Gary B. Peterson
-------------------- ----------------------
Gary B. Peterson, Director
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Index
- --------------------------------------------------------------------------------
Page
Independent auditors' report F-1
Balance sheet, December 31, 1997 and 1996 F-2
Statement of operations for the years
ended December 31, 1997 and 1996 and
cumulative amounts since inception F-3
Statement of stockholders' deficit
from inception through December 31,
1997 F-4
Statement of cash flows for the years
ended December 31, 1997 and 1996 and
cumulative amounts since inception F-6
Notes to financial statements F-7
- --------------------------------------------------------------------------------
<PAGE>
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, 1997 and 1996, and the related
statements of operations, stockholders' deficit and cash flows for the 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, 1997 and 1996 and the results of its
operations and its cash flows for the 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
stockholders' deficit. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
TANNER+Co.
Salt Lake City, Utah
March 13, 1998
F-1
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Balance Sheet
December 31,
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets 1997 1996
------
-----------------------------------
Current assets -
cash $ 996 $ 310
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
-----------------------------------
Liabilities and Stockholders' Deficit
Current liabilities:
Related party payable $ 30,898 $ 28,124
Accounts payable 850 -
-----------------------------------
Total current liabilities 31,748 28,124
-----------------------------------
Stockholders' deficit:
Common stock; $.001 par value; 50,000,000 shares authorized, 48,000,000 and
44,500,000 shares issued and outstanding as of December 31, 1997 and
1996,
respectively 48,000 44,500
Additional paid-in capital 18,102 18,102
Accumulated deficit (96,854) (90,416)
-----------------------------------
Total stockholders' deficit (30,752) (27,814)
-----------------------------------
Total liabilities and stockholders' deficit $ 996 $ 310
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Operations
Years Ended December 31, and Cumulative Amounts
- ----------------------------------------------------------------------------------------------------------
Cumulative
Amounts
Since
1997 1996 Inception
-----------------------------------------------------
Revenue - interest income $ - $ - $ 2,471
-----------------------------------------------------
Expenses:
Professional fees 3,153 389 64,168
Administrative expenses 3,285 4,370 31,671
Amortization of organization costs - - 2,136
-----------------------------------------------------
Total expenses 6,438 4,759 97,975
-----------------------------------------------------
Loss before income taxes (6,438) (4,759) (95,504)
Income taxes - current - - (600)
-----------------------------------------------------
Net loss $ (6,438) $ (4,759) $ (96,104)
-----------------------------------------------------
Loss per share $ (.00) $ (.00) $ (.00)
-----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Stockholders' Deficit
From Inception on March 28, 1988
Through December 31, 1997
- ----------------------------------------------------------------------------------------------------------
Additional
Common Stock Paid-In Accumulated
-----------------------------------
Shares Amount Capital Deficit
----------------------------------------------------------------------
Balance, March 28, 1988 - $ - $ - $ -
Shares issued to initial
stockholder 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)
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 - -
See accompanying notes to financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Stockholders' Deficit
Continued
- -------------------------------------------------------------------------------------------------------------------
Additional
Common Stock Paid-In Accumulated
-----------------------------------
Shares Amount Capital Deficit
----------------------------------------------------------------------
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)
Stock issued in private
placement for cash August
1996 at $.001 per share 2,000,000 2,000 - -
Net loss for the year ended
December 31, 1996 - - - (4,759)
----------------------------------------------------------------------
Balance, December 31, 1996 44,500,000 44,500 18,102 (90,416)
Stock issued in private
placement for cash February
1997 at $.001 per share 3,500,000 3,500 - -
Net loss for the year ended
December 31, 1997 - - - (6,438)
----------------------------------------------------------------------
Balance, December 31, 1997 48,000,000 $ 48,000 $ 18,102 $ (96,854)
----------------------------------------------------------------------
See accompanying notes to financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Statement of Cash Flows
Years Ended December 31, and Cumulative Amounts
- ----------------------------------------------------------------------------------------------------------
Cumulative
Amounts
Since
1997 1996 Inception
-----------------------------------------------------
Cash flows from operating activities:
Net loss $ (6,438) $ (4,759) $ (96,854)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization expense - - 2,136
Increase in organization costs - - (2,136)
Increase in:
Accounts payable 750 - 10,782
Income taxes payable 100 - 200
-----------------------------------------------------
Net cash used in
operating activities (5,588) (4,759) (85,872)
-----------------------------------------------------
Cash flows from investing activities -
related party payable 2,774 2,268 20,766
-----------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,500 2,000 93,000
Public offering costs - - (26,898)
-----------------------------------------------------
Net cash provided by
financing activities 3,500 2,000 66,102
-----------------------------------------------------
Net increase (decrease) in cash 686 (491) 996
Cash, beginning of period 310 801 -
-----------------------------------------------------
Cash, end of period $ 996 $ 310 $ 996
-----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-6
</TABLE>
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
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.
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, 1997 and 1996,
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.
- --------------------------------------------------------------------------------
F-7
<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 has had no revenues from operations, reported a net loss of $6,438 for
the year ended December 31, 1997 and as of December 31, 1997, has a
stockholders' deficit of $30,752.
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 from 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 and the amount presented
in the financial statements is a result of the following:
Years Ended
December 31, Cumulative
-------------------------
1997 1996 Amounts
---------------------------------------
Income tax benefit at statutory
rate $ 1,000 $ 1,000 $ 32,000
Change in valuation allowance (1,000) (1,000) (32,000)
---------------------------------------
$ $ $ -
---------------------------------------
- --------------------------------------------------------------------------------
F-8
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
3. Income Taxes Continued
Deferred tax assets are as follows:
December 31,
1997 1996
-----------------------------------
Operating loss carryforwards $ 32,000 $ 31,000
Valuation allowance (32,000) (31,000)
-----------------------------------
$ - $ -
-----------------------------------
The Company has net operating loss carryforwards of approximately $95,000, 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 carryforwards can be utilized.
4. Related Party Transactions
Commencing January 1, 1996, the Company agreed to pay $100 per month to a
shareholder, officer and director of the Company for accounting and office
expenses. For the year ended December 31, 1997 and 1996, the Company incurred
expenses under the agreement of $1,200 and $1,200, respectively. In addition, on
January 1, 1996, the Company owed $10,132 to an accounting firm whose managing
partner was an officer and director of the company. On January 1, 1996, the
officer terminated his employment with the accounting firm and at the time of
termination the firm agreed to transfer the outstanding obligation to the
officer. At December 31, 1997 and 1996, the Company owed $12,532 and $11,332,
respectively to the individual.
The Company has agreed to pay interest expense at 6% to its former parent
company, Data Growth, Inc. The loans, on which interest was charged, were
advances to the Company by its former parent. On September 17, 1996, the amount
owing to the former parent was transferred to an officer, director, and
shareholder of the Company. In addition, during 1997, the officer advanced
approximately $538 to the Company. At December 31, 1997 and 1996, the Company
owed $18,366 and $16,792, respectively, to the officer.
- --------------------------------------------------------------------------------
F-9
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
4. Related Party Transactions Continued
During the year ended December 31, 1997 and 1996, a principal shareholder
purchased additional stock at par value for $3,500 and $2,000, respectively.
5. Supplemental Cash Flow Information
The Company has not paid any amounts for interest or income taxes during the
years ended December 31, 1997 and 1996, and since inception.
6. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share," which
requires companies to present basic earnings per share (EPS) and diluted
earnings per share, instead of the primary and fully diluted EPS as previously
required. The new standard also requires additional informational disclosures,
and makes certain modifications to the previously applicable EPS calculations
defined in Accounting Principles Board No. 15. The new standard is required to
be adopted by all public companies for reporting periods ending after December
15, 1997, and requires restatement of EPS for all prior periods reported. During
the year ended December 31, 1997, the Company adopted this standard.
- --------------------------------------------------------------------------------
F-10
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Earnings Per Share Continued
Earnings per share information in accordance with SFAS 128 is as follows:
Year Ended December 31, 1997
-----------------------------------------------
Loss Shares Per-Share
(Numerator) (Denominator) Amount
-----------------------------------------------
Net loss $ (6,438)
Less preferred stock
dividends -
----------------
Basic EPS
Loss available to
common stockholders (6,438) 47,708,000 $ (.00)
--------------
Effect of Dilutive Securities
Stock options - -
-------------------------------
Diluted EPS
Loss available to common
stockholders plus assumed
conversions $ (6,438) 47,708,000 $ (.00)
-----------------------------------------------
Year Ended December 31, 1996
-----------------------------------------------
Loss Shares Per-Share
(Numerator) (Denominator) Amount
-----------------------------------------------
Net loss $ (4,759)
Less preferred stock
dividends -
----------------
Basic EPS
Loss available to
common stockholders (4,759) 43,166,000 $ (.00)
--------------
Effect of Dilutive Securities
Stock options - -
-------------------------------
Diluted EPS
Loss available to common
stockholders plus assumed
conversions $ (4,759) 43,166,000 $ (.00)
-----------------------------------------------
- --------------------------------------------------------------------------------
F-11
<PAGE>
CAPITAL GROWTH, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Earnings Per Share Continued
Cumulative Amounts
-----------------------------------------------
Loss Shares Per-Share
(Numerator) (Denominator) Amount
-----------------------------------------------
Net loss $ (96,854)
Less preferred stock
dividends -
----------------
Basic EPS
Loss available to
common stockholders (96,854) 24,045,000 $ (.00)
--------------
Effect of Dilutive Securities
Stock options - -
-------------------------------
Diluted EPS
Loss available to common
stockholders plus assumed
conversions $ (96,854) 24,045,000 $ (.00)
-----------------------------------------------
- --------------------------------------------------------------------------------
F-12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CAPITAL
GROWTH, INC. DECEMBER 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 996
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 996
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 996
<CURRENT-LIABILITIES> 31,748
<BONDS> 0
0
0
<COMMON> 48,000
<OTHER-SE> (78,752)
<TOTAL-LIABILITY-AND-EQUITY> 996
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 6,438
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,438)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,438)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,438)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
