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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 12(G) OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NO. 0-24432
THE AMERICAS GROWTH FUND, INC.
MARYLAND 65-0504786
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(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
701 Brickell Avenue, Suite 2000, Miami, Florida 33131
- -------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Issuer's telephone number, including area code (305) 374-3575
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 requirement for the past 90 days.
Yes X No
---- ----
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this Form, and no disclosure will be contained, to the
best of the Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
Issuers revenues for its most recent fiscal year were $246,500.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 21, 1997 (valued at the average of the closing bid of
$ 2 3/4 and ask price of $ 2 13/16 on such date) was $ 3,518,218.25.
The number of shares of Common Stock outstanding as of March 21, 1997:
1,265,100
Traditional Small Business Disclosure Format (check one):
Yes ; No X
---- ----
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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INDEX
THE AMERICAS GROWTH FUND, INC.
PART I. GENERAL INFORMATION
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II. FINANCIAL STATEMENTS:
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III. RELATED PARTIES:
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
PART IV. EXHIBITS:
Item 13. Exhibits and Reports on Form 8-K
Signatures
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Americas Growth Fund, Inc., (the "Company") is a non-diversified,
closed-end management investment company that has elected to be treated as a
business development company ("BDC") under the Investment Company Act of 1940
(the "1940 Act"). The Company's primary investment objective is to achieve
long-term capital appreciation of its assets, rather than current income, by
investing in equity and debt securities of and providing managerial assistance
to, emerging and established companies that management believes offer
significant potential opportunities for growth (individually, "portfolio
company", collectively, "portfolio companies"). The Company plans to continue to
invest primarily in United States-based portfolio companies
"strategically-linked" to the Caribbean and Latin America. The Company considers
companies to be strategically-linked to the Caribbean and Latin America if they
derive substantial revenue (at least 50%) from operations or transactions in the
Caribbean and Latin America or, if in the Company's view, they are positioned to
do so. The Company considers "Caribbean and Latin American" countries to be
Argentina, Aruba, the Bahamas, Barbados, Belize, Bolivia, Brazil, Chile,
Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala,
Haiti, Honduras, Jamaica, Mexico, Netherlands Antilles, Nicaragua, Panama,
Paraguay, Peru, the Commonwealth of Puerto Rico, Trinidad and Tobago, Uruguay
and Venezuela. The Company seeks to identify such companies that it believes
will benefit from economic and political developments in these regions. United
States law currently prohibits investment in Cuba. Consistent with current
United States law, and, as may be permitted by changes in United States law, the
Company plans to invest in United States-based companies strategically-linked to
Cuba.
The Company considers "emerging companies" to be those companies in the
early stages of development with little or no operating history, revenue or
profits, which the Company anticipates will increase revenue and become
profitable. The Company considers "established companies" to be those with an
existing revenue and profit base. To a lesser extent, certain of the emerging
and established companies in which the Company invests may be in "turnaround" or
other restructuring situations.
The Company's investment objective is intended to provide investors
with the opportunity to participate in investments which are generally not
available to the public and which typically require substantial financial
commitment. The Company believes, although there can be no assurance, that a
favorable risk/reward ratio currently is available to investors who provide
capital and, to a certain extent, managerial assistance, to companies requiring
immediate funding at a time when a public offering of securities is not
practicable or just prior to a public offering of securities. The Company
believes that such investments often produce a relatively high rate of return
over a short period of time due to the increased risk associated with these
investments and that there are a sufficient number of potential investment
opportunities available to the Company to enable it to achieve its investment
objective.
The Company has placed and intends to place its emphasis on private
investments in restricted securities for which the Company is granted
registration rights and/or rights to participate in the sale of securities of a
portfolio company by other stockholders. Such investments may be private
investments in capital stock of privately-held companies that the Company
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anticipates will engage in a public offering within one to three years after the
investment; private investments in capital stock of publicly-held companies; or
bridge loans which are convertible into common stock or preferred stock of the
issuer or issued together with equity participations such as common stock,
preferred stock or warrants to purchase such stock or a combination thereof, or
both, for privately-held companies which the Company anticipates will complete a
public offering, other financing or a merger or acquisition transaction (other
than a leveraged buy-out) within one to three years from the date of investment.
Although there can be no assurance, the Company believes that such investments
can result in significant capital appreciation upon liquidation of the
investment.
The Company intends to a lesser extent to invest in marketable
securities of companies whose securities are traded in the over-the-counter
market, which have a total market capitalization, at the time of investment by
the Company, of less than $100 million ("Small-Cap Companies"), and which the
Company's management believes have significant potential for price appreciation.
Investments in such Small-Cap Companies may be made in the form of common stock,
preferred stock and securities convertible into or exchangeable for common stock
or preferred stock of the Small-Cap Companies.
The Company has experienced difficulty in locating quality portfolio
companies meeting the Company's investment objectives. In the opinion of the
management of the Company, the lack of such investment opportunities is
attributable to two primary causes. First, investments in a single private
issuer limited to 15% of the Company's net assets (approximately $730,000)
involves, in the opinion of the Company's management, a high degree of risk due
to: (i) the fact that the relative small size of the investment may not resolve
the capital needs of such portfolio company; and (ii) small emerging portfolio
companies usually lack professional management, audited financial statements or
adequate management information systems. The second cause relates to the
worsening of the economic and political relationship between the United States
and Cuba since the Company's initial public offering in August 1994 as a result
of, among things, the November 1994 U.S. congressional election, the downing by
the Cuban military of two "Brothers to the Rescue" airplanes and Congressional
consideration in passage of the Helms-Burton Act (formerly known as the Cuban
Liberty and Democratic Solidarity Act). As a result, there continues to be few,
if any, U.S. portfolio companies having suitable growth opportunities with
respect to Cuba in which the Company may invest. The Company does not anticipate
an improvement in the situation in the foreseeable future.
Nevertheless, since the Company's proposed merger with Advanced
Electronic Support Products, Inc. ("AESP") was terminated in the fall of 1996,
the Company has reviewed several investment opportunities which present an
acceptable degree of risk to the Company. Moreover, the Company invested in two
companies since the termination of the AESP merger. See "Present Portfolio -
Venture Capital Investments." Although management of the Company is encouraged
by the quality of the investment opportunities which have been reviewed since
the termination of the AESP merger, there can be no assurance that the Company
will be able to negotiate and complete transactions with potential portfolio
companies which meet the Company's investment objectives.
The Company has no fixed policy concerning the types of businesses or
industry groups in which it may invest or as to the amount of funds that it will
invest in any one issuer; however, the Company currently intends to limit
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its investment in marketable securities of any single Small-Cap Company to 5% of
its net assets, at the time of investment, and to limit its investment in any
single private issuer to 15% of its net assets, at the time of investment. The
foregoing is not a fundamental policy of the Company and may be changed at any
time without stockholder approval.
The Company makes its investments primarily as a result of the
recommendations of investment bankers and other professionals known to members
of the Company's management through their business dealings and professional
relationships. Leonard J. Sokolow, the Company's President and Portfolio
Manager, has principal responsibility for selecting investments for the Company
and will analyze and act upon such recommendations. The Company has one
employee, who is an officer.
Following its initial investment in a particular portfolio company, the
Company has made and may in the future make additional debt and equity
investments in the same portfolio company ("Additional Investments") in order to
protect or enhance its initial investment. The Company may, together with other
investors, including management and its affiliates, make direct or Additional
Investments in a number of other situations, including attempts to salvage
insolvent or bankrupt companies, the acquisitions of divisions of companies, the
acquisition of privately-held companies, or the acquisition of companies in
order to spin-off portions of their operations or assets into independent
entities.
PRESENT PORTFOLIO - VENTURE CAPITAL INVESTMENTS
Set forth below is certain information concerning the Company's present
principal investments in portfolio companies, only one of which is currently a
publicly-held company. Information concerning the publicly-held company has been
derived from filings by the company with the Securities and Exchange Commission
(the "Commission"). The information below concerning the privately-held
companies has been obtained from those portfolio companies. The Company's
principal investment in portfolio companies constituted, as of December 31,
1996, 10% of the Company's total portfolio investments. Following the additional
investment in TAG in January 1997, as described below, the Company's principal
investment in portfolio companies constituted 15% of the Company's total
portfolio investments.
Although the Company has not independently verified for purposes of
this Form 10-KSB, the information set forth in the documents filed by the
portfolio companies with the Commission, or otherwise obtained information from
the portfolio companies, to the Company's knowledge, the information provided
below concerning such portfolio companies is accurate.
Reports, proxy statements and other information concerning the
publicly-held companies described below may be inspected at certain of the
Commission's offices or otherwise obtained from the Commission upon payment of
prescribed fees.
GLOBALINK, INC. ("GLOBALINK"). In December 1996, the Company invested
$500,000 in Globalink, a public company traded on the American Stock
Exchange, and received 14,953 shares of 8% convertible preferred stock
in Globalink. Each share of preferred stock is convertible into 10
shares of Globalink common stock. Globalink's common stock is traded on
the American
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Stock Exchange under the symbol "GNK." The Company also received a
Warrant to purchase 149,530 shares of common stock of Globalink at
$4.18 per share. Globalink has agreed to register the common stock
issuable upon conversion of the preferred stock and the common stock
underlying the warrants. Globalink designs, develops, markets and
supports translation software products and services. Globalink markets
bi-directional software for creating draft translations between English
and Spanish, French, German and Italian and it is just releasing
Portuguese translation products.
Globalink has incurred significant losses since its inception in 1988.
Its accumulated deficit as of September 30, 1996 was approximately $8.6
million. Globalink reported net losses for its fiscal year ended
December 31, 1995 of approximately $1.1 million. For the nine-month
period ended September 30, 1996, Globalink reported net income of
$22,731. There can be no assurance that Globalink will be profitable in
the future.
The market for software is characterized by rapid change and
improvement in computer hardware and software technology. Globalink's
success will depend in part upon its ability to enhance its current
products, to introduce new products which address technological and
market developments, and satisfy the increasingly sophisticated needs
of customers. There can be no assurance that Globalink will be
successful in developing and marketing, on a timely basis, fully
functional product enhancements or new products that respond to the
technological advances by others, or that its new products will be
accepted by customers.
Due to the nature of Globalink's business, sales to a few customers,
primarily software distributors, have accounted for a significant
percentage of Globalink's sales. During the nine months ended September
30, 1996, three customers accounted for 38% of total sales. No
assurance can be given that such customers will continue to purchase
products from Globalink. Accounts receivable at September 30, 1996
include approximately $6.5 million in amounts due from five customers.
Any failure or significant delay of any such customers to pay their
respective accounts to Globalink would have a material adverse affect
on Globalink and its financial condition.
For the nine months ended September 30, 1996, Globalink had sales
returns and allowances of approximately $3.1 million, or approximately
22.2% of product sales for the period. No assurance can be given that
Globalink will be able to reduce such percentage of returns and
allowances or, that such percentages will not increase for future
periods.
THE AMERICAS GROUP, INC. ("TAG"). In January 1997 the Company
invested $250,000 in TAG, an unaffiliated company, pursuant to a
private placement under Rule 504 of the Securities Act of 1933. In
exchange for such investment the Company received 125,000 shares of TAG
common stock. In addition, the Company also received 5,000 shares of
common stock in consideration of Leonard J. Sokolow, the Company's
Chairman, serving on TAG's Board of Advisors. TAG is a corporate
consulting, financial advisory and merchant banking firm focusing its
activities in South America, Central America and the Caribbean.
TAG was formed in January 1996 and began limited operations in March
1996. Because there are many potential entrants to the field, it is
extremely difficult to assess which companies are likely to offer
competitive services in the future. TAG expects competition to persist,
intensify and increase
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in the future. Many of TAG's current and potential competitors have
longer operating histories, greater name recognition and greater
financial, technical and marketing resources than TAG. Such competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to
businesses. There can be no assurance that TAG will be able to compete
effectively with current or future competitors or that the competitive
pressures faced by TAG will not have a material adverse effect on TAG's
business, financial condition or operating results. Furthermore,
although the common stock of TAG acquired by the Company is freely
transferable, a public market for such securities has not developed.
Consequently, the Company may not be able to readily liquidate its
investment.
THE AMERICAS GROWTH PARTNERS, INC. ("AGP"). In 1995 the Company for
an initial investment of $22,608 acquired an 80% ownership interest in
AGP, a publishing and consulting company. The only book which AGP
published is titled "Business Opportunities in a Free Cuba," the rights
to which AGP acquired. This investment has been written off and AGP has
discontinued sales of such book.
GOLF RESERVATIONS OF AMERICA, INC. ("GOLF"). In January 1995 the
Company invested $150,000 in Golf and was issued a $150,000 note and
was granted warrants to purchase 60,000 shares of Golf common stock at
$2.60 per share. Golf, a private company, had a system to make advance
golf reservations through a centralized reservations network of
participating golf courses, hotels, resorts and other lodging
properties, and provided ancillary travel services, all of which were
accessible by calling a single, toll-free phone number, 1-800-TEE TIME.
The $150,000 note was repaid in March 1995. Also in March 1995, the
Company invested an additional $50,000 and was issued a $50,000 note
due the earlier of April 1, 1996 or the closing of a firm commitment
underwritten public offering and was granted additional warrants to
acquire 20,000 shares of common stock at $2.60 per share. The common
stock underlying the 80,000 warrants have certain registration rights.
Such $50,000 note is in default and the Company has been advised that
Golf has filed for Chapter 11 bankruptcy. This investment has been
written down to $0.
COMPETITION
The Company encounters competition in its efforts to locate attractive
opportunities for the investment of its capital from other entities and
individuals having similar investment objectives. The primary competition for
desirable investments comes from investment companies, investment partnerships
and wealthy individuals. Some of the competing entities and individuals have
investment managers or advisors with significantly greater experience, resources
and managerial capabilities than the Company and are therefore in a better
position than the Company to obtain access to attractive investments. To the
extent that the Company can compete for such investments it may only be able to
do so on less favorable terms that those obtained by larger more established
investors.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains its principal executive office in Miami, Florida,
for which it pays only for administrative services and no rent.
ITEM 3. LEGAL PROCEEDINGS
On November 26, 1996, a purported derivative stockholders' suit
alleging breach of fiduciary duty under the Investment Company Act of 1940 was
filed in the Circuit Court for the Fifteenth Judicial Circuit in Palm Beach
Country, Florida against, among others, the Company and its board of directors.
The suit was filed by Kevin King, Herbert Hill, a general partner of Double H
Investment Co. and Bargelt Investments, Bonnie Cool Hayes and Ronald Hayes, who
purportedly own an aggregate of approximately 10% of the Company's outstanding
shares of common stock. The plaintiffs seek certain equitable relief, including
enjoining the directors from acting in their capacities as directors of the
Company and from making any investments or expenditures, except for payment of
regular expenses and salaries, and an unspecified amount of damages in
connection with, among other things, the previously announced proposed merger
between the Company and Advanced Electronic Support Products, Inc. ("AESP"),
which proposed merger was terminated by mutual agreement of the Company and AESP
on November 8, 1996. The Company has removed such suit to the United States
District Court, Southern District of Florida, Miami Division. The defendants
believe that the suit is completely without merit and are vigorously contesting
the plaintiffs' claims. The Company and the other defendants have filed several
motions to dismiss this suit. Based upon information currently available, the
management of the Company does not believe that the ultimate resolution of
this litigation will have a material adverse impact on the financial position
or results of operations of the Company.
Pursuant to the Company's Articles of Incorporation, Bylaws and
applicable federal and state law, the board of directors has sought
indemnification regarding this suit and the Company has agreed to indemnify the
board of directors in connection therewith. As part of such indemnification, the
Company has agreed to advance legal fees and expenses incurred by the board of
directors in defending such suit. Each board member has affirmed in writing his
good faith belief that the standard of conduct necessary for indemnification by
the Company has been met and each board member has made a written undertaking to
repay any such advance if it should be ultimately determined that the standard
of conduct has not been met. The Company is not currently engaged in any other
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of its stockholders
during the fourth quarter 1996.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been quoted on the NASDAQ Small Cap
Market since August 22, 1994 under the symbol "AGRO". The following table sets
forth, for the periods indicated, the range of high and low bid quotations as
reported by NASDAQ. Such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and do not necessarily represent actual
transactions. There presently is a limited public market for the Common Stock.
<TABLE>
<CAPTION>
Price Per Share
High Low
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<S> <C> <C>
The period from inception (June 3, 1994)
through December 31, 1994:
Third Quarter (commencing August 22, 1994) $5 $4 7/8
Fourth Quarter 5 4 1/8
Fiscal year ended December 31, 1995:
First Quarter 4 1/2 2
Second Quarter 2 3/4 2
Third Quarter 2 5/8 2
Fourth Quarter 2 5/8 2
Fiscal year ended December 31, 1996
First Quarter 2 7/8 2 1/2
Second Quarter 2 3/4 2 7/16
Third Quarter 2 5/8 2 1/4
Fourth Quarter 2 7/8 2 1/2
Fiscal year ending December 31, 1997
First Quarter (through March 21, 1997) 3 2 11/16
</TABLE>
As of March 21, 1997, there were approximately 110 registered holders
of the Company's Common Stock with 1,265,100 shares of Common Stock outstanding.
In addition, the Company believes that there are more than 945 beneficial owners
of Common Stock whose shares are held in "street" name as of such date. On March
21, 1997, the closing bid and ask price of the Common Stock were $2 3/4 and $2
13/16, respectively.
The Company has never paid and does not currently intend to pay cash
dividends. In addition, the Company has never made, nor adopted any policies
with respect to, in-kind distributions, and has no present intention of adopting
any such policies or of making any such distributions. Furthermore, there may
also be substantial legal and contractual restrictions affecting the timing of
any such distributions by the Company or any such resales by stockholders of
distributed securities.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 ("FISCAL 1996") COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995 ("FISCAL 1995")
As a result of operations, net assets decreased approximately $314,700
(approximately 6.5% of net assets) during Fiscal 1996 compared with an increase
in net assets of approximately $25,100 during the Fiscal 1995. The net decrease
in net assets resulting from operations for Fiscal 1996 primarily resulted from
a net investment loss of $266,100, a realized loss of $21,400 primarily
resulting from the write-off of the Company's note receivable from AGP and
unrealized depreciation on investments of $29,600 as a result of the decline in
market value of the Company's note receivable from Golf as of December 31, 1996.
These results compare with a net increase in net assets resulting from
operations in Fiscal 1995 which occurred primarily from realized gains on sales
of investments of $44,700 which was offset by unrealized depreciation on
investments of $13,300 as a result in the decline in the market value of the
Company's investment in AGP as of December 31, 1995.
The Company recognized investment income (which consisted of interest
income) of approximately $246,500 for Fiscal 1996 compared with investment
income (which consisted entirely of interest income) of approximately $288,100
for Fiscal 1995.
Expenses aggregated approximately $515,900 during Fiscal 1996 which
included salaries, consulting fees, legal fees, accounting fees, consulting
fees, rent and administrative expenses as compared with expenses of $296,000
during Fiscal 1995 for salaries, consulting fees, legal fees, accounting fees,
rent and administrative expenses. Professional fees increased $192,100 and
consulting fees increased $16,900. With respect to the increase in professional
fees, approximately $110,000 was as a result of the proposed merger transaction
which the Company terminated in November 1996 and approximately $65,000 was as a
result of the purported shareholders derivative suit filed in November 1996. See
"Legal Proceedings."
LIQUIDITY AND CAPITAL RESOURCES
At of December 31, 1996, the Company had cash and cash equivalents of
approximately $415,900 and U.S. Treasury Bills of approximately $3,973,100 as
compared to approximately $601,800 in cash and cash equivalents and
approximately $4,424,800 in Treasury Bills at December 31, 1995. The decrease in
capital resources for Fiscal 1996 of approximately $637,600 was primarily due to
an operating and investment loss of $266,100 as compared to the decrease in
capital resources of $30,000 in Fiscal 1995 primarily due to a loan of $22,600
to AGP and the purchase of $9,600 in fixed assets. Also, in the fourth quarter
of 1996, the Company invested $500,000 in Globalink. In January of 1997, the
Company invested $250,000 in TAG. As of December 31, 1996, the Company had
liabilities of approximately $73,800 compared with liabilities of $33,200 as of
December 31, 1995.
As of March 21, 1997, the Company has incurred expenses of
approximately $112,600 relating to the purported shareholders derivative suit.
See "Legal Proceedings." The Company expects to incur significant additional
costs in connection with the litigation and its agreement to advance legal fees
and expenses incurred by the Board of Directors in defending such suit.
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ITEM 7. FINANCIAL STATEMENTS
See the financial statements included herein.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not had any changes in or disagreements with its independent
accountants.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following is a list of the executive officers and directors of the
Company. All directors of the Company are serving a current term of office which
continues until the next annual meeting of stockholders, and all officers are
serving a current term of office which continues until the next annual meeting
of directors:
<TABLE>
<CAPTION>
YEAR OF
NAME AND AGE OF DIRECTOR ELECTION POSITION
------------------------ -------- --------
<S> <C> <C>
Leonard J. Sokolow* 1994 President and Chairman of the
40 Board, Portfolio Manager
Hon. J. Antonio Villamil* 1994 Vice-Chairman
49 International Strategy,
Secretary and Director
Sanford B. Cohen 1994 Director
40
Martin C. Engelmann 1994 Director
55
Neil R. Winter 1995 Director
43
</TABLE>
*Indicates "interested person" of the Company within the meaning of the 1940
Act.
LEONARD J. SOKOLOW has been Chairman of the Board, President, Chief
Financial Officer and Portfolio Manager of the Company since inception. Since
August 1993, Mr. Sokolow has been President and Chief Executive Officer of
Genesis Partners, Inc. a privately-held corporation which provides domestic and
international investment banking and financial advisory services. Since
September 1996, Mr. Sokolow has been President of Union Atlantic LC a privately-
held company which provides domestic and international merchant banking and
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financial advisory services. From May 1988 to July 1993, Mr. Sokolow was
employed by Windmere Corporation, a public corporation engaged in the
manufacture and distribution of personal care products and small household
appliances, most recently as its Executive Vice President-Operations,
Administration and Finance and General Counsel. Since September 1992, Mr.
Sokolow has been a director of The Box Worldwide, Inc. (formerly Video Jukebox
Network, Inc.), a public company in the entertainment industry. Since March
1990, Mr. Sokolow has served as a director of Catalina Lighting, Inc., a public
company engaged in the import and distribution of commercial and residential
electrical lighting. Since April of 1995 Mr. Sokolow has been a director of
Ezcony Interamerica, Inc. a distributor of electronic products and CD Rom
programing to Latin America. Mr. Sokolow received a B.A. degree with majors in
Economics and Accounting from The University of Florida in 1977, a J.D. degree
from The University of Florida School of Law in 1980 and an L.L.M. (Taxation)
degree from The New York University Graduate School of Law in 1982. Mr. Sokolow
is a Certified Public Accountant.
HON. J. ANTONIO VILLAMIL has been Vice Chairman - International
Strategy, Secretary and a director of the Company since inception. Since January
1993, Mr. Villamil has been President and Chief Executive Officer of the
Washington Economics Group, Inc., an economic, financial, and government
relations adviser. From April 1989 to January 1993, Mr. Villamil served as Chief
Economist of the United States Department of Commerce, and most recently as
Under Secretary for Economic Affairs. From January 1981 to April 1989, Mr.
Villamil was employed by Southeast Bank, N.A., most recently as Senior Vice
President and Chief Economist, Corporate Planning and Economics Department,
Office of the Chairman of the Board. From 1978 to 1981, Mr. Villamil was
employed by Crocker National Bank, most recently as its Vice President and
Economist, Economics Department. Mr. Villamil received a B.S. degree in
Economics in 1968 and a Master of Arts in Economics in 1971 from Louisiana State
University.
SANFORD B. COHEN has been a director of the Company since inception. In
1985, Mr. Cohen co-founded Prescott Valley Broadcasting Co., Inc., owner of
KIHX-FM and KQNA-AM radio stations in Prescott Valley, Arizona, and has been its
President since its inception. From 1982 to 1984, Mr. Cohen was Vice President
of National Phonecasting Co., a joint venture with Gannett Broadcasting Corp., a
private company engaged in telephone broadcasting of financial information. Mr.
Cohen received his B.A. degree in Economics in 1979 from Michigan State
University.
MARTIN C. ENGELMANN has been a director of the Company since inception.
In 1984, Mr. Engelmann co-founded Dale-Mar Associates, Inc., a management
consulting firm specializing in companies in the health care industry with
distribution in the Caribbean, and has been its President since its inception.
Since November 1988, Mr. Engelmann has been a director of Miller Industries,
Inc., a public company engaged in manufacturing and marketing of glass doors and
windows. Mr. Engelmann received a B.S. degree in Business Administration from
The University of Florida in 1963.
NEIL R. WINTER has been a director of the Company since February, 1995.
Since March 1997 Mr. Winter has been the Chief Financial Officer of Seregenti
Eyewear, Inc. From June 1985 through March 1997, Mr. Winter was a
12
<PAGE> 13
shareholder in the CPA firm of Winter, Scheifley & Associates, P.C. He received
a Bachelor of Science degree from Boston University in 1974 and is licensed as a
Certified Public Accountant in the states of Colorado and Florida. Mr. Winter is
also a member of the Colorado Society of Certified Public Accounts and the
American Institute of Certified Public Accountants.
The Board of Directors is classified into three classes, each with a
term of three years, with only one class of directors standing for election by
the stockholders in any year. Officers are elected to serve, subject to the
discretion of the Board of Directors, until their successors are appointed.
Messrs. Cohen and Engelmann serve as Class I directors, Messrs.
Villamil and Winter serve as Class II directors and Mr. Sokolow serves as a
Class III directors. The terms of the, Class II, Class III and Class I directors
will expire on the dates of the 1997, 1998 and 1999 annual stockholders meeting,
respectively, or until the next applicable stockholders meeting.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the period January 1, 1995
through December 31, 1996 of the respective compensation earned by the Chief
Executive Officer of the Company and the other executive officer who earned in
excess of $100,000 (of which there were none), (the "Named Executive") in all
capacities in which he served.
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal
Position Year Salary Bonus Plan
------------------ ---- ------ ----------
<S> <C> <C> <C>
Leonard J. Sokolow,
Chairman of the Board
President, Chief Executive
Officer & Portfolio Manager 1995 $91,500 $2,700
1996 $96,100 $ 0
</TABLE>
Mr. Sokolow is employed as the Company's Chairman of the Board,
President and Portfolio Manager, pursuant to an employment agreement (the
"Employment Agreement") with the Company, dated August 30, 1994. The term of the
Employment Agreement was for an initial three year term, which is automatically
extended one additional year on each anniversary of the Employment Agreement
beginning in August 30, 1996 unless the Board of Directors provides Mr. Sokolow
with one year prior notice that the term shall not be extended. The Employment
Agreement currently terminates on August 30, 1999, unless extended in accordance
with its terms. Under the Employment Agreement, Mr. Sokolow received a salary of
$96,100 in 1996, which amount increases annually by the percentage increase in
the consumer price index. The Employment Agreement provides for the
reimbursement of health insurance premiums, automobile expenses not to exceed
$500 per month and travel expenses related to the Company's business. Mr.
Sokolow's employment may be terminated by the Company with or without cause. If
the Employment Agreement is terminated for any reason other that cause (as
defined in the Employment Agreement), Mr. Sokolow
13
<PAGE> 14
will be entitled to receive up to 10% of the income attributable to investments
made by the Company during his employment with the Company.
The Company has implemented an employee profit sharing plan (the
"Plan") which provides for payment of a performance fee in an amount equal to
20% of net income after taxes in each fiscal year, computed from the end of the
last fiscal year in respect of which performance fees were paid ("Plan Income").
Such performance fee shall be payable regardless of the amount of net income.
Pursuant to the Employment Agreement, Mr. Sokolow will receive 10% of Plan
Income, if any; provided, however, that the amount so distributable to Mr.
Sokolow pursuant to such employment agreement in any given year shall not exceed
50% of all amounts eligible to be distributed under the Plan.
Directors, other than Mr. Sokolow, will receive an annual fee of $2,500
for serving on the Board of Directors plus $250 and out-of-pocket expenses for
each meeting attended.
Other than the Plan, the Company does not have any stock option,
annuity, retirement, pension, deferred or incentive compensation plan or
arrangement under which any executive officers or directors are entitled to
benefits, nor does the Company have any long-term incentive plan pursuant to
which performance units or other forms of compensation are paid.
In September 1995 the Company entered into a month to month consulting
agreement with the Washington Economics Group, Inc. ("WEG"), of which Hon. J.
Antonio Villamil, Vice Chairman - International Strategy and a director of the
Company, is President and Chief Executive Officer. Pursuant to the consulting
agreement, WEG was to receive a monthly retainer of $3,000 in exchange for
providing up to 20 hours of consulting services per month. As of December 31,
1996, the Company elected not to renew such consulting agreement. In its
capacity as a consultant, WEG consulted with the Portfolio Manager in analyzing
investments, assisting management in investor relations and, as requested,
preparing formal presentations to the Board of Directors on market developments
in Latin America and the Caribbean.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 12, 1997, the beneficial
ownership of the Common Stock of the Company of (i) each person who is known by
the Company to beneficially own more than 5% of the Common Stock of the Company,
(ii) each director (including the Named Executive) of the Company, and (iii) all
directors and executive officers of the Company as a group (based upon
information furnished by such persons). Under the rules of the Commission, a
person is deemed to be a beneficial owner of a security if he has or shares the
power to vote or direct the voting of such security or the power to dispose or
direct the disposition of such security. Accordingly, more than one person may
be deemed to be a beneficial owner of the same securities. A person is also
deemed to be a beneficial owner of any securities of which that person has the
right to acquire beneficial ownership within 60 days.
14
<PAGE> 15
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Percentage
of Beneficial Owner (1) Owned (2) of Class
- ----------------------- --------- --------
<S> <C> <C>
Leonard J. Sokolow 100 *
Hon. J. Antonio Villamil 0 *
Neil R. Winter 0 *
Sanford B. Cohen 0 *
Martin C. Engelmann 0 *
Kevin C.King(3) 88,600 7%
JW Charles Clearing Corp. (4) 262,000 21%
All directors and executive
officers as a group
(5 persons) 100 *
</TABLE>
- -------------------
* Less than 1%
(1) The business address for purposes hereof of all of the Company's directors
and executive officers is in care of the Company.
(2) Unless otherwise noted, the Company believes that all persons in the table
have sole voting and disposition power with respect to all shares of Common
Stock beneficially owned by them.
(3) The address of such person is 10200 Old Katy Road, Suite 300, Houston, Texas
77043.
(4) The address of such person is 980 N. Federal Highway, Suite 310, Boca Raton,
Florida 33432.
The information contained in the preceding table and the footnotes thereto is
derived in part from Statements on Schedule 13D filed with the Securities and
Exchange Commission. The Company expresses no opinion as to the completeness or
accuracy of the information contained in such documents or as to such reporting
persons' compliance with The Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1995 the Company entered into a month to month consulting
agreement with the Washington Economics Group, Inc. ("WEG"), of which Hon. J.
Antonio Villamil, Vice Chairman - International Strategy and a director of the
Company, is President and Chief Executive Officer. Pursuant to the consulting
agreement, WEG received a monthly retainer of $3,000 in exchange for providing
up to 20 hours of consulting services per month. This agreement was terminated
as of December 31, 1996. In its capacity as a consultant, WEG consulted with the
Portfolio Manager in analyzing investments, assisted management in investor
relations and, as requested, prepared a formal presentations to the Board of
Directors on market developments and economic conditions in Latin America and
the Caribbean. See "Executive Compensation".
15
<PAGE> 16
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Articles of Incorporation - incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on Form N-2 (No. 33-80424) filed
with the Securities and Exchange Commission on June 17, 1994.
3.2 By-laws - incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form N-2 (No. 33-80424) filed with the Securities and
Exchange Commission on June 17, 1994.
10.1 Employment Agreement dated August 30, 1994, between the Company
and Leonard J. Sokolow incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form N-2 (No. 33-80424) filed with the
Securities and Exchange Commission on July 28, 1994.*
10.2 Profit Sharing Plan - incorporated by reference to Exhibit 10.2 to
the Company's Registration Statement on Form N-2 (No. 33-80424) filed with the
Securities and Exchange Commission on July 28, 1994.*
10.4 Consulting Agreement between the Company and The Washington
Economics Group, Inc. dated June 2, 1994 - incorporated by reference to Exhibit
10.4 to the Company's Registration Statement on Form N-2 (No. 33-80424) filed
with the Securities and Exchange Commission on July 28, 1994.*
27. Financial Data Schedule (for SEC use only).
* Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed with the Securities and
Exchange Commission during the fourth quarter of 1996.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
The Americas Growth Fund, Inc.
Dated: March 28, 1997 By: Leonard J. Sokolow
------------------
Leonard J. Sokolow, President
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Leonard J. Sokolow Chairman of the Board March 28, 1997
- ---------------------- and President
Leonard J. Sokolow (Principal Executive
Financial and
Accounting Officer)
/s/ Hon. J. Antonio Villamil Vice Chairman of the March 28, 1997
- ---------------------------- Board and Director
Hon. J. Antonio Villamil
/s/ Sanford B. Cohen Director March 28, 1997
- --------------------
Sanford B. Cohen
/s/ Martin C. Engelmann Director March 28, 1997
- -----------------------
Martin C. Engelmann
/s/ Neil R. Winter Director March 28, 1997
- ------------------
Neil R. Winter
</TABLE>
17
<PAGE> 18
FORM 10-KSB
THE AMERICAS GROWTH FUND, INC.
LIST OF FINANCIAL STATEMENTS
The following financial statements of The Americas Growth Fund, Inc. are
included in Item 7:
Report of Independent Certified Public Accountants
Balance Sheets - December 31, 1996 and 1995
Statements of Operations - Years ended December 31, 1996 and 1995
Statements of Changes in Net Assets - Years ended December 31, 1996 and 1995
Statements of Cash Flows - Years ended December 1996 and 1995
Notes to Financial Statements
F-1
<PAGE> 19
Report of Independent Certified Public Accountants
Board of Directors and Shareholders
The Americas Growth Fund, Inc.
We have audited the accompanying balance sheets of The Americas Growth Fund,
Inc. as of December 31, 1996 and 1995 and the related statements of operations,
changes in net assets and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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. Our
procedures included observation of securities held by the Company or
confirmation of other securities owned by correspondence with the custodian and
broker as of December 31, 1996 and 1995. 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 The Americas Growth Fund, Inc.
at December 31, 1996 and 1995, the results of its operations, the changes in its
net assets and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Jacksonville, Florida /s/ Ernst & Young LLP
March 7, 1997 -------------------------
Ernst & Young LLP
<PAGE> 20
THE AMERICAS GROWTH FUND, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Assets:
Investments at market or fair value:
Investments in U.S. Treasury Bills $ 3,973,100 $ 4,424,800
Investment in preferred stock 480,000 --
Investment in warrant 20,000 --
Investments in notes receivable -- 150,700
----------- -----------
Total investments (amortized cost of $4,525,300 4,473,100 4,575,500
and $4,597,400 for 1996 and 1995, respectively)
Cash and cash equivalents 415,900 601,800
Prepaid expenses 1,200 8,000
Income tax refund receivable 21,000 --
Deferred tax asset 6,000 4,400
Furniture and equipment, net 16,600 16,700
Organizational costs, net 4,200 5,700
Deposits 1,100 1,100
----------- -----------
4,939,100 5,213,200
----------- -----------
Liabilities:
Accounts payable 67,500 15,000
Accrued directors fees 3,600 4,600
Accrued profit sharing liability -- 2,700
Income taxes payable -- 7,700
Deferred tax liability 2,700 3,200
----------- -----------
73,800 33,200
----------- -----------
$ 4,865,300 $ 5,180,000
=========== ===========
Net assets:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued $ -- $ --
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,265,100 shares issued and outstanding 12,700 12,700
Capital in excess of par 5,141,300 5,141,300
Undistributed operating income (loss) and investment
gains (losses):
Accumulated operating (losses) income (266,400) (300)
Realized gains on investments 23,300 44,700
Unrealized depreciation of investments (45,600) (18,400)
----------- -----------
(288,700) 26,000
----------- -----------
Net assets applicable to outstanding common shares
(equivalent to $3.85 and $4.09 per share for 1996
and 1995, respectively, based on outstanding
common shares of 1,265,100) $ 4,865,300 $ 5,180,000
=========== ===========
</TABLE>
Read the accompanying notes.
F-3
<PAGE> 21
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Interest income $ 246,500 $ 288,100
----------- -----------
Expenses:
Consulting fees to affiliate 30,000 36,000
Consulting fees 22,900 --
Salaries 96,100 99,700
Professional fees 254,900 62,800
Board of Directors fees 14,000 13,400
Rent 500 16,400
Other 97,500 67,700
----------- -----------
515,900 296,000
----------- -----------
Investment loss before income tax benefit (269,400) (7,900)
Less income tax benefit (3,300) (1,600)
----------- -----------
Net investment loss (266,100) (6,300)
----------- -----------
Realized (loss) gain on investments (23,300) 55,800
Less income tax (benefit) expense applicable to
realized (loss) gain on investments (1,900) 11,100
----------- -----------
(21,400) 44,700
----------- -----------
Unrealized depreciation of investments (29,600) (16,600)
Less income tax benefit applicable
to unrealized depreciation of investments (2,400) (3,300)
----------- -----------
(27,200) (13,300)
----------- -----------
Net (decrease) increase in net assets
resulting from operations $ (314,700) $ 25,100
=========== ===========
Per-share amounts:
Net investment loss $ (0.21) $ (0.01)
Net realized (losses) gains on investments (0.02) 0.04
Net unrealized losses on investments (0.02) (0.01)
----------- -----------
$ (0.25) $ 0.02
=========== ===========
Weighted average number of shares used
in per-share computations 1,265,100 1,265,100
=========== ===========
</TABLE>
Read the accompanying notes.
F-4
<PAGE> 22
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net investment loss $ (266,100) $ (6,300)
Net realized (losses) gains on investments (21,400) 44,700
Net increase in unrealized depreciation
of investments (27,200) (13,300)
----------- -----------
Net (decrease) increase in net assets
resulting from operations (314,700) 25,100
Net assets at beginning of period 5,180,000 5,154,900
----------- -----------
Net assets at end of period
(includes undistributed net investment
loss of ($266,400) and ($300) at
December 31, 1996 and 1995, respectively) $ 4,865,300 $ 5,180,000
=========== ===========
</TABLE>
Read the accompanying notes.
F-5
<PAGE> 23
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Sources of cash:
Interest $ 31,600 $ 34,300
------------ ------------
Uses of cash:
Payroll 96,100 105,900
Consulting fees to affiliates 30,000 36,000
Consulting fees 22,900 --
Operating expenses 307,700 153,900
Income taxes 23,700 --
------------ ------------
480,400 295,800
------------ ------------
Cash (used-in) operating activities (448,800) (261,500)
------------ ------------
Cash flows from investing activities:
Sources of cash:
Proceeds from sale of U.S. Treasury Bills 12,498,900 9,000,000
Proceeds from notes receivable 100,000 100,000
Proceeds from sale of common stock -- 242,800
------------ ------------
12,598,900 9,342,800
------------ ------------
Uses of cash:
Purchase of furniture and equipment 1,500 9,600
Purchase of U.S. Treasury Bills 11,834,500 9,239,500
Purchase of preferred stock 480,000 --
Purchase of warrant 20,000 --
Purchase of common stock -- 87,700
Purchase of notes receivable:
Related party -- 22,600
Other -- 250,000
------------ ------------
12,336,000 9,609,400
------------ ------------
Cash provided by (used-in) investing activities 262,900 (266,600)
------------ ------------
(Decrease) in cash and cash equivalents (185,900) (528,100)
Cash and cash equivalents at beginning of period 601,800 1,129,900
------------ ------------
Cash and cash equivalents at end of period $ 415,900 $ 601,800
============ ============
</TABLE>
Read the accompanying notes.
F-6
<PAGE> 24
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Reconciliation of net (decrease) increase in net assets resulting
from operations to cash used-in operating activities:
Net (decrease) increase in net assets
resulting from operations $(314,700) $ 25,100
--------- ---------
Adjustments to reconcile net (decrease)
increase in net assets resulting from
operations to cash (used-in) operating activities:
Accretion of discount on U.S.
Treasury Bills (215,700) (251,900)
Realized loss (gain) on investments 23,300 (55,800)
Amortization and depreciation 3,100 2,500
Unrealized depreciation of investments 29,600 16,600
Deferred income tax benefits (2,100) (1,400)
Changes in assets and liabilities:
Income tax refund (21,000) --
Prepaid expenses 6,800 (7,200)
Interest receivable 800 (700)
Accounts payable 52,500 7,700
Accrued payroll taxes -- (8,900)
Accrued profit sharing liability (2,700) 2,700
Accrued directors fees (1,000) 2,100
Income taxes payable (7,700) 7,700
--------- ---------
Total adjustments (134,100) (286,600)
--------- ---------
Cash (used-in) operating activities $(448,800) $(261,500)
</TABLE>
Read the accompanying notes.
F-7
<PAGE> 25
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND NATURE OF OPERATIONS:
The Americas Growth Fund, Inc. (the "Company") was incorporated under
the laws of the State of Maryland on June 3, 1994. The Company is a
non-diversified, closed-end management investment company and has filed
with the Securities and Exchange Commission ("SEC") a notification of
election to be treated as a "business development company" as that term
is defined in the Investment Company Act of 1940, as amended.
The Company's primary investment objective is to achieve long-term
capital appreciation of its assets, rather than current income, by
investing in equity and debt securities of and providing managerial
assistance to, emerging and established companies that management
believes offer significant potential opportunities for growth
(individually, "portfolio company", collectively, "portfolio
companies"). The Company plans to invest primarily in United States
based portfolio companies "strategically-linked" to the Caribbean and
Latin America. The Company considers companies to be
strategically-linked to the Caribbean and Latin America if they derive
substantial revenue (at least 50%) from operations or transactions in
the Caribbean and Latin America or, if in the Company's view, they are
positioned to do so. The Company considers "Caribbean and Latin
American" countries to be Argentina, Aruba, the Bahamas, Barbados,
Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican
Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica,
Mexico, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, the
Commonwealth of Puerto Rico, Trinidad and Tobago, Uruguay and
Venezuela. During 1996 and 1995, due to difficulties in locating
quality portfolio companies meeting the Company's investment
objectives, the Company's assets were primarily invested in U.S.
Treasury bills. There can be no assurance that the Company will be able
to negotiate and complete transactions with potential portfolio
companies which meet the Company's investment objectives.
The Company considers "emerging companies" to be those companies in the
early stages of development with little or no operating history, and
minimal revenue or profits, which the Company anticipates will increase
revenue and become profitable. The Company considers "established
companies" to be those with an existing revenue and profit base. To a
lesser extent, certain of the emerging and established companies in
which the Company invests may be in "turnaround" or other restructuring
situations.
The Company has placed and intends to place its emphasis on private
investments in restricted securities for which the Company is granted
registration rights and/or rights to participate in the sale of
securities of a portfolio company by other stockholders.
Such investments may be private investments in capital stock of
privately-held companies that the Company anticipates will engage in a
public offering within one to three years after the investment; private
investments in capital stock of publicly-held companies; or bridge
loans which are convertible into common stock or preferred stock of the
issuer or issued together with equity participations such as common
stock, preferred stock or warrants to purchase such stock or a
combination thereof, or both, for privately-held companies which the
Company anticipates will complete a public offering, other financing or
a merger or acquisition transaction (other than a leveraged buy-out)
within one to three years from the date of investment.
F-8
<PAGE> 26
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
2. SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION:
Investments in unrestricted securities that are traded in the
over-the-counter market are generally valued at the closing bid
price on the last day of the year. U.S. Treasury bills are valued at
market value. Restricted securities are valued at fair value as
determined by the Board of Directors. Because of the inherent
uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be
material.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
FURNITURE AND EQUIPMENT:
Furniture and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets.
ORGANIZATIONAL COSTS:
Organizational costs are stated net of accumulated amortization of
$3,300 and $1,800 at December 31, 1996 and 1995, respectively, and
are being amortized using the straight-line method over five years.
INCOME TAXES:
The Company is not entitled to the special treatment available to
regulated investment companies and is taxed as a regular corporation
for federal and state income tax purposes. The aggregate cost of
securities at December 31, 1996 and 1995 for federal income tax
purposes and financial reporting purposes was the same. The
aggregate gross unrealized depreciation for all securities held at
December 31, 1996 and 1995 is $52,200 and $22,600, respectively.
PER SHARE AMOUNTS:
Per share amounts are computed by dividing the net investment (loss)
and net realized and unrealized gains (losses) on investments by the
weighted average number of shares outstanding throughout the year.
F-9
<PAGE> 27
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
3. CONCENTRATION OF CREDIT RISK:
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and cash
equivalents. During the year the Company had deposits with financial
institutions which were not covered by the Federal Deposit Insurance
Corporation. Management regularly monitors their balances and attempts
to keep this potential risk to a minimum by maintaining their accounts
with financial institutions they believe are of good quality.
4. INVESTMENTS:
INVESTMENTS INCLUDE THE FOLLOWING AT DECEMBER 31, 1996 AND 1995:
<TABLE>
<CAPTION>
VALUE VALUE
PRINCIPAL TYPE OF ISSUE AND DECEMBER 31, DECEMBER 31,
AMOUNT NAME OF ISSUER 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury bills (81.7%
and 85.4% of net assets at
December 31, 1996 and 1995,
respectively)
$ 471,030 U.S. Treasury bill,
$500,000 face value,
matures January 11, 1996 $ -- $ 499,300
$ 1,415,780 U.S. Treasury bill,
$1,500,000 face value,
matures February 8, 1996 -- 1,492,000
$ 1,949,545 U.S. Treasury bill,
$2,000,000 face value,
matures June 6, 1996 -- 1,955,600
$ 476,030 U.S. Treasury bill,
$500,000 face value,
matures November 14, 1996 -- 477,900
$ 1,976,055 U.S. Treasury bill,
$2,000,000 face value,
matures February 6, 1997 1,989,700 --
$ 494,065 U.S. Treasury bill,
$500,000 face value,
matures February 13, 1997 496,900 --
$ 1,482,807 U.S. Treasury bill
$1,500,000 face value,
matures March 6, 1997 1,486,500 --
----------- -----------
Total U.S. Treasury bills $ 3,973,100 $ 4,424,800
=========== ===========
</TABLE>
F-10
<PAGE> 28
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES SHARES VALUE VALUE
DECEMBER 31, DECEMBER 31, TYPE OF ISSUE AND DECEMBER 31, DECEMBER 31,
1996 1995 NAME OF ISSUER 1996 1995
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks (0.0% of net
assets at December 31, 1996
and 1995)
Majority owned (restricted):
- 80 Americas Growth
Partners, Inc. $ - $ -
=========== ===========
8% Convertible, redeemable preferred
stocks (9.9% and 0.0% of net assets
at December 31, 1996 and 1995,
respectively) (restricted)
14,953 - Globalink, Inc. $ 480,000 $ -
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
WARRANTS WARRANTS VALUE VALUE
DECEMBER 31, DECEMBER 31, TYPE OF ISSUE AND DECEMBER 31, DECEMBER 31,
1996 1995 NAME OF ISSUER 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks warrants
(0.4% and 0.0% of net
assets at December 31, 1996
and 1995, respectively)
Golf Reservations
of America, Inc.
2 2 Class A -- --
2 2 Class B -- --
========== ==========
Restricted:
1 -- Globalink, Inc. $ 20,000 $ --
========== ==========
</TABLE>
F-11
<PAGE> 29
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE VALUE
OF NOTES TYPE OF ISSUE AND DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 NAME OF ISSUER 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Notes (2.9% net assets
at December 31, 1995)
$ 50,000 Golf Reservations of
America, Inc. $ - $ 50,000
$ - Approved Financial
Corporation (including
accrued interest of
$700 at December 31,
1995) - 100,700
------------ -----------
$ - $ 150,700
============ ===========
</TABLE>
In December 1996, the Company purchased in a private placement for an
aggregate consideration of $500,000, 14,953 shares of Globalink, Inc.
(Globalink), 8% convertible, redeemable preferred stock and a warrant
entitling the holder to purchase 149,530 shares of Globalink common
stock at $4.18 per share through December 20, 2001. Globalink has the
right to redeem the preferred stock at the original purchase price plus
accrued dividends upon the occurrence of certain events. Each share of
preferred stock is convertible into ten shares of Globalink common
stock at the original purchase price of the preferred stock, subject to
adjustment should certain events occur. On January 1, 2002, any
outstanding shares of the preferred stock will be automatically
converted into common stock at the lesser of the original purchase
price or the average bid price for the ten trading days ending five
business days prior to the automatic conversion date. Globalink has
agreed to register the common stock issuable upon conversion of the
preferred stock and upon the exercise of the warrants. As of December
31, 1996, the Board of Directors has valued the preferred stock and the
warrant at $480,000 and $20,000, respectively.
In November 1994, the Company purchased in a private placement for an
aggregate consideration of $100,000, 50,000 shares of Greg Manning
Auctions, Inc. ("Manning") restricted common stock and a warrant
entitling the holder to purchase 50,000 shares of Manning restricted
common stock at $2.25 per share through November 3, 1995. Subsequently,
the number of common shares obtainable upon exercise was increased to
56,500 and the exercise price was decreased to $1.55. The Company
received certain registration rights with respect to the common stock
and the common stock underlying the warrant. The Company exercised the
warrant and purchased the common stock on November 1, 1995. On November
16, 1995 the Company sold the common stock of Greg Manning Auctions,
Inc. for $141,200 which resulted in a realized gain of approximately
$53,500.
F-12
<PAGE> 30
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
4. INVESTMENTS (CONTINUED):
The Company agreed to loan up to $200,000 to Golf Reservations of
America, Inc. ("Golf") pursuant to two 10% promissory notes in January
and March, 1995. As of December 31, 1996 and 1995, the outstanding
balance was $50,000. The note is in default as of December 31, 1996 and
the Board of Directors has valued the note at $0 as of that date. In
connection with the notes, the Company received warrants to purchase an
aggregate 110,906 shares of Golf's common stock at an exercise price of
$1.88 per share. As of December 31, 1996 and 1995, the Board of
Directors has valued the warrants at $0.
On July 6, 1995, the Company entered in to a joint venture agreement
with Approved Financial Corporation (Approved) to market commercial
loans to businesses that derive, or are in a position to derive, a
substantial portion of their revenue from the Caribbean or Latin
America. The loans were to be secured by qualified first or second
mortgages. On August 1, 1995, the Company provided Approved with a
$200,000 credit facility bearing interest at prime. On July 24, 1996,
the outstanding credit facility was repaid in full and the joint
venture was terminated.
During 1995, the Company advanced funds to Americas Growth Partners,
Inc. (AGP) aggregating $22,608 pursuant to a 10% promissory note. In
addition, the Company received 80 shares of AGP common stock,
representing an 80% interest, in connection with the promissory note.
AGP is a publishing and consulting business which began operations in
January 1995. The Board of Directors deemed the note receivable to be
uncollectible and the Company recognized a realized loss on the
outstanding balance during 1996. The Board of Directors has valued the
common stock at $0 as of December 31, 1996. AGP's operating results for
1996 and 1995 were not significant.
5. CASH AND CASH EQUIVALENTS:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF COST AND COST AND
SHARES SHARES VALUE VALUE
DECEMBER 31, DECEMBER 31, TYPE OF ISSUE AND DECEMBER 31, DECEMBER 31,
1996 1995 NAME OF ISSUER 1996 1995
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
415,000 600,600 Money market fund,
Cortland Trust, Inc. $ 415,000 $ 600,600
-- -- Checking account
with bank 900 1,200
---------- -----------
Total cash and cash equivalents
(8.5% and 11.6% of net assets at
December 31, 1996 and 1995,
respectively) $ 415,900 $ 601,800
========== ==========
</TABLE>
F-13
<PAGE> 31
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
6. FURNITURE AND EQUIPMENT:
Furniture and equipment are comprised of the following at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Furniture and fixtures $ 1,500 $ 1,500
Computer equipment 17,900 16,400
-------- --------
19,400 17,900
Less accumulated depreciation (2,800) (1,200)
-------- --------
$ 16,600 $ 16,700
======== ========
</TABLE>
7. INCOME TAXES:
Significant components of the provision for income taxes attributable
to continuing operations in 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Current:
Federal $ -- $ 5,800
State -- 1,900
-------- --------
-- 7,700
-------- --------
Deferred:
Federal (benefit) (46,500) (1,100)
State (benefit) (15,800) (400)
-------- --------
(62,300) (1,500)
Increase in valuation allowance 54,700 --
-------- --------
(7,600) (1,500)
-------- --------
Provision for income
taxes (benefit) $ (7,600) $ 6,200
======== ========
</TABLE>
F-14
<PAGE> 32
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
7. INCOME TAXES (CONTINUED):
The provision for income taxes at the Company's effective tax rate
differed from the provision for income taxes at the statutory rate
(15%) as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Computed tax expense (benefit)
at the expected statutory rate $(48,300) $ 4,700
State tax, net of federal effect (16,200) 1,200
Valuation allowance 54,700 --
Other 2,200 300
-------- --------
$ (7,600) $ 6,200
======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
The significant components of deferred tax assets and liabilities on
the balance sheet at December 31, 1996 and 1995 are:
Deferred tax assets:
Unrealized depreciation of
investments $ 9,300 $ 4,300
Section 179 expense carryover -- 100
Net operating loss 51,400 --
------- -------
60,700 4,400
Valuation allowance 54,700 --
------- -------
6,000 4,400
Deferred tax liability:
Depreciation 2,700 3,200
------- -------
Net deferred tax asset $ 3,300 $ 1,200
======= =======
The Company generated net federal operating losses in the amount of
approximately $288,700 of which approximately $40,800 has been carried
back to prior years resulting in a net operating loss carryforward of
approximately $247,900 which will expire in the year 2011.
F-15
<PAGE> 33
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
8. RELATED PARTY TRANSACTIONS:
The Company entered into one year renewable consulting agreements with
an entity of which a director of the Company was Chairman and
President. The agreement was terminated as of December, 1996. During
1996 and 1995, the Company paid $30,000 and $36,000, respectively,
related to the agreement.
The Company leased its office space pursuant to a noncancelable
operating lease which expired in September, 1995. Commencing in October
1995, the Company is provided with free office space by a law firm with
which the Chairman is "of counsel". Rent expense for the periods ended
December 31, 1996 and 1995 amounted to approximately $0 and $16,400,
respectively. In addition, the Company paid the law firm legal fees of
approximately $102,100 in 1996.
The Company entered into an employment agreement with the president of
the Company. The agreement is for three years expiring in July, 1997.
Compensation is $90,000 per year with cost of living increases each
year. The Company paid the president $96,100 and $91,500 pursuant to
this agreement during 1996 and 1995, respectively.
9. PROFIT SHARING PLAN:
The Company provides an employee profit sharing plan (the Plan) which
provides for a performance fee equal to twenty percent (20%) of net
income. As of December 31, 1996 and 1995, approximately $0 and $2,700
respectively, was accrued in connection with the Plan.
10. MERGER ACTIVITY:
On November 25, 1995, the Company entered into a non-binding letter of
intent to merge with Tallard Technologies B.V. (Tallard), a
privately-held company. The contemplated merger with Tallard was
terminated prior to June 30, 1996.
On June 15, 1996, the Company entered into an Agreement and Plan of
Merger with Advanced Electronic Support Products, Inc. (AESP), a
privately held company engaged in the manufacturing and international
distribution of computer connectivity and networking products. Prior to
December 31, 1996 the contemplated merger with Advanced Electronics
Support Products, Inc. was terminated. The Company incurred
approximately $136,700 of legal costs associated with the merger. These
costs have been charged to current operations.
F-16
<PAGE> 34
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
11. CONTINGENCY:
On November 26, 1996, a derivative stockholders' suit alleging breach
of fiduciary duty under the Investment Company Act of 1940 was filed
against the Company and its board of directors. The plaintiffs seek a
permanent injunction pursuant to Section 36(a) of the Investment
Company Act of 1940 to enjoin the Company's board of directors from
making any investments or expenditures, except for payment of regular
expenses and salaries and from acting in their fiduciary capacities as
directors and officers of the Company. The plaintiffs also seek an
unspecified amount of damages. Based on information currently
available, the management of the Company does not believe that the
ultimate resolution of this litigation will have a material
adverse impact on the financial position or results of operations of
the Company.
12. SUBSEQUENT EVENTS:
In January, 1997, the Company invested $250,000 in The Americas Group,
Inc. (TAG), an unaffiliated company, pursuant to a private placement
under Rule 504 of Regulation D of the Securities Act of 1933. The
Company received 125,000 shares of TAG common stock. In addition, the
Company also received 5,000 shares of common stock in consideration of
the Company's chairman serving on TAG's board of advisors.
F-17
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,525,300
<INVESTMENTS-AT-VALUE> 4,473,100
<RECEIVABLES> 0
<ASSETS-OTHER> 466,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,939,100
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,800
<TOTAL-LIABILITIES> 73,800
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,141,300
<SHARES-COMMON-STOCK> 1,265,100
<SHARES-COMMON-PRIOR> 1,265,100
<ACCUMULATED-NII-CURRENT> (266,400)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,300
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (45,600)
<NET-ASSETS> 4,865,300
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 246,500
<OTHER-INCOME> 0
<EXPENSES-NET> 508,300
<NET-INVESTMENT-INCOME> (266,100)
<REALIZED-GAINS-CURRENT> 21,400
<APPREC-INCREASE-CURRENT> (27,200)
<NET-CHANGE-FROM-OPS> (314,700)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (314,700)
<ACCUMULATED-NII-PRIOR> (6,300)
<ACCUMULATED-GAINS-PRIOR> 44,700
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52,900
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 508,300
<AVERAGE-NET-ASSETS> 5,022,650
<PER-SHARE-NAV-BEGIN> 4.09
<PER-SHARE-NII> (.21)
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.85
<EXPENSE-RATIO> .10
<AVG-DEBT-OUTSTANDING> 53,500
<AVG-DEBT-PER-SHARE> .04
</TABLE>
