<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended MARCH 31, 1997
--------------
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _______________
COMMISSION FILE NUMBER 0-24432
-------
THE AMERICAS GROWTH FUND, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Maryland 65-0504786
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Brickell Avenue, Suite 2000, Miami, Florida 33131
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(305) 374-3575
- --------------------------------------------------------------------------------
(Issuers's Telephone Number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchanged Act after the distribution of
securities under a plan confirmed by a court. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's common equity,
as of the latest practicable date: 1,265,100
Traditional Small Business Disclosure Format (Check one): Yes No X
--- ---
<PAGE> 2
INDEX
THE AMERICAS GROWTH FUND, INC.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
Balance Sheets as of as of March 31, 1997 and 1996. (Unaudited)
Statements of Operations for the three months ended March 31, 1997 and 1996.
(Unaudited)
Statements of Changes in Net Assets for the three months ended March 31, 1997
and 1996. (Unaudited)
Statements of Cash Flows for the three months ended March 31, 1997 and 1996.
(Unaudited)
Notes to Financial Statements. (Unaudited)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE AMERICAS GROWTH FUND, INC.
BALANCE SHEETS
MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Assets:
Investments at market or fair value:
Investment in U.S. Treasury Bills $ 3,968,900 $ 4,429,500
Investment in warrant 1,100 --
Investment in notes receivable -- 150,700
Investment in preferred stock 467,300 --
Investment in common stock 260,000 --
----------- -----------
Total investments (amortized cost of $4,785,100
and $4,494,600 for 1997 and 1996, respectively) 4,697,300 4,580,200
Cash and cash equivalents 20,600 527,800
Dividends receivable 11,200 --
Income tax refund receivable 21,000 --
Prepaid expenses 1,000 14,300
Deferred tax asset 6,000 17,000
Furniture and equipment, net 16,100 16,300
Organizational costs, net 3,800 5,300
Deposits 1,100 1,100
----------- -----------
4,778,100 5,162,000
----------- -----------
Liabilities:
Accounts payable 41,800 13,200
Accrued directors fees 2,600 4,900
Accrued profit sharing liability -- 2,700
Deferred tax liability 2,700 2,800
----------- -----------
47,100 23,600
----------- -----------
$ 4,731,000 $ 5,138,400
=========== ===========
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 (365,200) (37,400)
Realized gains on investments 25,500 43,500
Unrealized (depreciation) of investments (83,300) (21,700)
----------- -----------
Net assets applicable to outstanding common shares
(equivalent to $3.74 and $4.06 per share for 1997
and 1996, respectively, based on outstanding
common shares of 1,265,100) $ 4,731,000 $ 5,138,400
=========== ===========
</TABLE>
Read the accompanying notes.
<PAGE> 4
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Interest $ 49,500 $ 65,100
Dividend 11,200 --
Other 10,000 --
----------- -----------
70,700 65,100
----------- -----------
Expenses:
Consulting fees to affiliate -- 9,000
Salaries 24,800 23,600
Professional fees 122,700 47,600
Board of Directors fees 3,500 3,800
Other 18,500 29,300
----------- -----------
169,500 113,300
----------- -----------
Investment loss before income tax benefit (98,800) (48,200)
Less income tax benefit -- 11,100
----------- -----------
Net investment loss (98,800) (37,100)
----------- -----------
Realized gain (loss) from sales of investments 2,200 (1,500)
Less income tax benefit applicable to
realized loss on investments -- 300
----------- -----------
2,200 (1,200)
----------- -----------
Unrealized depreciation of investments (37,700) (4,400)
Less income tax benefit applicable to
unrealized depreciation of investments -- 1,100
----------- -----------
(37,700) (3,300)
----------- -----------
Net decrease in net assets resulting
from operations $ (134,300) $ (41,600)
=========== ===========
Per-share amounts:
Net investment loss $ (0.08) $ (0.03)
Net realized gains (losses) on investments -- --
Net unrealized gains (losses) on investments (0.03) --
----------- -----------
$ (0.11) $ (0.03)
=========== ===========
Weighted average number of shares used
in per-share computations 1,265,100 1,265,100
=========== ===========
</TABLE>
Read the accompanying notes
<PAGE> 5
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net investment loss $ (98,800) $ (37,100)
Net realized gain (losses) on investments 2,200 (1,200)
Net increase in unrealized depreciation of investments (37,700) (3,300)
----------- -----------
Net decrease in net assets resulting from operations (134,300) (41,600)
Net assets at beginning of period 4,865,300 5,180,000
----------- -----------
Net assets at end of period (includes undistributed
net investment loss of ($365,200) and ($37,400) at
March 31, 1997 and 1996, respectively) $ 4,731,000 5,138,400
=========== ===========
</TABLE>
Read the accompanying notes.
<PAGE> 6
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Sources of cash:
Interest $ 2,100 $ 8,300
----------- -----------
Uses of cash:
Payroll 24,600 23,600
Consulting fees to affiliate -- 9,000
Operating expenses 170,500 95,900
----------- -----------
195,100 128,500
----------- -----------
Cash (used in) operating activities (193,000) (120,200)
----------- -----------
Cash flows from investing activities:
Source of cash:
Proceeds from sale of U.S. Treasury Bills 4,000,000 2,000,000
----------- -----------
Uses of cash:
Purchase of common stock 250,000 --
Purchase of U.S. Treasury Bills 3,952,300 1,953,800
----------- -----------
4,202,300 1,953,800
----------- -----------
Cash provided by (used in) investing
activities (202,300) 46,200
----------- -----------
(Decrease) in cash and cash equivalents (395,300) (74,000)
Cash and cash equivalents at beginning of period 415,900 601,800
----------- -----------
Cash and cash equivalents at end of period $ 20,600 $ 527,800
=========== ===========
</TABLE>
Read the accompanying notes.
<PAGE> 7
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Reconciliation of net decrease in net assets
resulting from operations to cash used in
operating activities:
Net decrease in net assets resulting from
operations $(134,300) $ (41,600)
--------- ---------
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 (47,400) (56,800)
Realized loss (gain) from sale of investments (2,200) 1,500
Amortization and depreciation 900 800
Unrealized depreciation of investments 37,700 4,400
Deferred income tax benefits -- (13,000)
Changes in assets and liabilities:
Investments (10,000) --
Dividend receivable (11,200) --
Prepaid expenses 200 7,600
Accounts payable (25,700) (1,800)
Accrued directors fees (1,000) 300
Income taxes payable -- (21,600)
--------- ---------
Total adjustments (58,700) (78,600)
--------- ---------
$(193,000) $(120,200)
========= =========
Cash (used in) operating activities
Schedule of non-cash investing activities:
Acquisition of common stock $ 10,000
Less amount received in exchange for consulting (10,000)
---------
$ --
=========
</TABLE>
Read the accompanying notes.
<PAGE> 8
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(UNAUDITED)
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 has and 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. During 1997 and
1996 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 revenues 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.
<PAGE> 9
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
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 period. U.S. Treasury bills are valued at market value.
Restricted securities and securities of non-public companies are valued at
fair value as determined by the Board of Directors. Because of the inherent
uncertainty of such valuations, the 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 $3,700
and $2,200 at March 31, 1997 and 1996, 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 March 31,
1997 and 1996 for federal income tax purposes and financial reporting
purposes was the same. The aggregate gross unrealized depreciation for all
securities held at March 31, 1997 and 1996 is $37,700 and $4,400,
respectively.
PER SHARE AMOUNTS:
Per share amounts are computed by dividing the net investment income (loss)
and net realized and unrealized gains (losses) on investments by the
weighted average number of shares outstanding throughout the year.
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.
<PAGE> 10
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
4. INVESTMENTS:
Investments include the following at March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Value Value
Principal Type of Issue and March 31, March 31,
Amount Name of Issuer 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury bills (83.9%
and 86.2% of net assets at
March 31, 1997 and 1996,
respectively)
$ 1,949,545 U.S. Treasury bill,
$2,000,000 face value,
matures June 6, 1996 -- $ 1,980,700
$ 487,890 U.S. Treasury bill,
$500,000 face value,
matures July 11, 1996 -- 492,700
$ 1,465,940 U.S. Treasury bill,
$1,500,000 face value,
matures August 8, 1996 -- 1,472,300
$ 476,030 U.S. Treasury bill,
$500,000 face value,
matures November 14, 1996 -- 483,800
$ 1,976,325 U.S. Treasury bill,
$2,000,000 face value,
matures May 8, 1997 1,987,700 --
$ 494,102 U.S. Treasury bill,
$500,000 face value,
matures May 15, 1997 496,400 --
$ 1,481,892 U.S. Treasury bill,
$1,500,000 face value,
matures June 5, 1997 1,484,800 --
----------- -----------
Total U.S. Treasury bills $ 3,968,900 $ 4,429,500
=========== ===========
</TABLE>
<PAGE> 11
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
4. INVESTMENTS (continued):
<TABLE>
<CAPTION>
Number of Number of
Shares Shares Value Value
March 31, March 31, Type of Issue and March 31, March 31,
1997 1996 Name of Issuer 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks (5.5% and
0.0% of net assets at
March 31, 1997 and
1996, respectively:
130,000 -- The Americas Group, Inc.
(unrestricted) $ 260,000 $ --
Majority owned (restricted):
-- 80 Americas Growth
Partners, Inc. -- --
----------- ------------
$ 260,000 $ --
=========== ============
8% Convertible, redeemable
preferred stocks (9.9%
and 0.0% of net assets at
March 31, 1997 and 1996,
respectively) (restricted):
14,953 -- Globalink $ 467,300 $ --
=========== ============
</TABLE>
<TABLE>
<CAPTION>
Number of Number of
Warrants Warrants Value Value
March 31, March 31, Type of Issue and March 31, March 31,
1997 1996 Name of Issuer 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks warrants:
(0.0% and 0.0% of net
assets at March 31, 1997
and 1996, respectively)
Restricted:
-- 1 Greg Manning
Auctions, Inc. $ -- $ --
1 -- Globalink $ 1,100 $ --
========= =======
Golf Reservations
of America, Inc.
2 2 Class A $ -- $ --
2 2 Class B $ -- $ --
========= =======
</TABLE>
<PAGE> 12
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
4. INVESTMENTS (continued):
<TABLE>
<CAPTION>
Principal Amount Value Value
of Notes Type of Issue and March 31, March 31,
March 31, 1997 Name of Issuer 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Notes (0.0% and 2.9% of
net assets at March 31,
1997 and 1996, respectively)
$ - Golf Reservations of
America, Inc. $ -- $ 50,000
$ - Approved Financial
Corporation (including
accrued interest of
$700) -- 100,700
------- -----------
$ -- $ 150,700
======= ===========
</TABLE>
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.
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 March 31, 1997,
the Board of Directors has valued the preferred stock and the warrant at
$467,300 and $1,100, respectively.
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 March 31, 1997 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 March 31, 1997
and 1996, the Board of Directors has valued the warrants at $0.
<PAGE> 13
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
4. INVESTMENTS (continued):
On July 6, 1995, the Company entered into 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 and 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 and currently as
ceased operations. 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 March 31, 1997. AGP's operating results for 1997 and 1996 were not
significant.
5. CASH AND CASH EQUIVALENTS:
<TABLE>
<CAPTION>
Number of Number of Cost and Cost and
Shares Shares Value Value
March 31, March 31, Type of Issue and March 31, March 31,
1997 1996 Name of Issuer 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
19,600 516,600 Money market fund,
Cortland Trust, Inc. $ 19,600 $ 516,600
-- -- Checking account
with bank 1,000 11,200
--------- ----------
Total cash and cash
equivalents (0.04 %
and 10.3% of net
assets at March 31,
1997 and 1996,
respectively) $ 20,600 $ 527,800
========= ==========
</TABLE>
<PAGE> 14
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
6. FURNITURE AND EQUIPMENT:
Furniture and equipment are comprised of the following at March 31, 1997
and 1996:
1997 1996
-------- --------
Furniture and fixtures $ 1,500 $ 1,500
Computer equipment 17,900 16,400
-------- --------
19,400 17,900
Less accumulated depreciation (3,300) (1,600)
-------- --------
$ 16,100 $ 16,300
======== ========
7. INCOME TAXES:
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
deferred tax liability is the result of unrealized appreciation
(depreciation) on investments and the use of accelerated depreciation
methods for income tax purposes.
The significant components of deferred tax assets and liabilities on the
balance sheet at March 31, 1997 and 1996 are:
<TABLE>
<S> <C> <C>
Deferred tax assets:
Net operating loss $75,900 $15,400
Unrealized depreciation of investments 17,300 1,600
------- -------
93,200 17,000
Less valuation allowance 87,200 --
------- -------
6,000 17,000
Deferred tax liability:
Depreciation 2,700 2,800
------- -------
Net deferred tax asset $ 3,300 $14,200
======= =======
</TABLE>
<PAGE> 15
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
7. INCOME TAXES (continued):
Significant components of the provision for income taxes (benefits)
attributable to continuing operations in 1997 and 1996 are as follows:
1997 1996
-------- --------
Current:
Federal $ -- $ --
State -- --
-------- --------
-- --
-------- --------
Deferred:
Federal (benefit) (26,200) (11,700)
State (benefit) (6,300) (800)
-------- --------
(32,500) (12,500)
Increase in valuation allowance 32,500 --
-------- --------
Provision for income tax benefits $ -- $(12,500)
======== ========
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:
Computed tax expense (benefit)
at the expected statutory rate $(20,500) $ (8,100)
State tax, net of federal effect (6,800) (2,700)
Valuation allowance 32,500 --
Other (5,200) (1,700)
-------- --------
$ -- $(12,500)
======== ========
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.
8. RELATED PARTY TRANSACTIONS:
The Company has entered into one year renewable consulting agreements with
an entity of which a director of the Company was Chairman and President. The
agreement terminated in July, 1996. The Company paid $9,000 during the
period ended March 31, 1996.
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". The Company paid and accrued the law firm legal
fees of approximately $20,300 and $17,900 in the three months ended March
31, 1997 and 1996, respectively.
<PAGE> 16
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997 AND 1996
(UNAUDITED)
8. RELATED PARTY TRANSACTIONS (CONTINUED):
On August 10, 1994, the Company entered into an Employment Agreement with
it's President who also serves as the Company's Chairman of the Board and
Portfolio Manager. 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 Company paid the president $24,800 and $23,600
pursuant to this agreement for the three months ended March 31, 1997 and
1996, 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 March 31, 1997 and 1996, there was no accrual in connection with the
Plan.
10. MERGER ACTIVITY:
On November 21, 1995, the Company entered into a non-binding letter of
intent 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 and other
costs associated with the merger. These costs have been charged to current
operations.
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.
<PAGE> 17
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND LIQUIDITY
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
As a result of operations, net assets decreased approximately $134,300
(or approximately 2.8% of net assets) during the quarter ended March 31, 1997.
For the comparable period in 1996, net assets decreased approximately $41,600
during the quarter. The net decrease in net assets resulting from operations for
the quarter ended March 31, 1997 primarily resulted from a net investment loss
of approximately $98,800 and an increase in unrealized depreciation of
investments of approximately $37,700 less a realized gain from sales of
investments of approximately $2,200. These results compare with a net decrease
in net assets resulting from operations for the quarter ended March 31, 1996
which occurred primarily from a net investment loss of $37,100, an increase in
unrealized depreciation of investments of $3,300 and a realized loss from sales
of investments of approximately $1,200.
The Company recognized investment income of approximately $70,700
(which consisted of interest income of $49,500, dividend income of $11,200 and
other income of $10,000) for the quarter ended March 31, 1997 as compared to
$65,100 in investment income (which consisted of entirely interest income) for
the quarter ended March 31, 1996. The lower interest investment income resulted
primarily from a lesser amount of capital invested in Treasury Bills.
Expenses aggregated approximately $169,500 during the quarter ended
March 31, 1997 which included salaries, accounting fees, consulting fees, legal
fees, rent and administrative expenses as compared with expenses of $113,300 for
the quarter ended March 31, 1996. Professional fees increased to $122,700 as
compared to 47,600 for the comparable quarter in 1996. With respect to the
increase in professional fees for the quarter ending March 31, 1997,
approximately $88,200 was as a result of the purported shareholders derivative
suit filed in November 1996. See "Legal Proceedings."
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company had cash and cash equivalents of
approximately $20,600 and US Treasury Bills of approximately $3,968,900 as
compared to approximately $527,800 in cash and cash equivalents and
approximately $4,429,500 in Treasury Bills at March 31, 1996. The decrease in
capital resources for the three months ended March 31, 1997 was primarily due to
an investment of $250,000 in The Americas Group, Inc. and a net investment loss
of approximately $98,800 as compared to the decrease in capital resources for
the quarter ending March 31, 1996 primarily due to a net investment loss of
approximately $37,100. As of March 31, 1997, the Company had liabilities of
approximately $47,100 compared with liabilities of $23,600 as of March 31, 1996.
From November 1996 to March 31, 1997, the Company has incurred expenses
(consisting primarily of legal fees and associated litigation expenses) of
approximately $153,200 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.
<PAGE> 18
PART II - OTHER INFORMATION
Item 1. 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 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.2 Amendment to By-Laws, dated July 9, 1996.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None
<PAGE> 19
SIGNATURES
----------
Pursuant to the requirements 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.
By: /s/ LEONARD J. SOKOLOW
------------------------------------
Leonard J. Sokolow
Chairman of the Board, President and
Chief Financial Officer
(Principal Executive, Financial and
Accounting Officer)
Date: May 14, 1997
<PAGE> 1
AMENDMENT TO BY-LAWS
OF
THE AMERICAS GROWTH FUND, INC.
(As Amended July 9, 1996)
The Corporation's By-Laws have been amended by adding a new Article
XXIII and renumbering existing Articles XXIII and XXIV as Articles XXIV and
XXV. All other provisions of the Corporation's By-Laws remain in full force and
effect.
ARTICLE XXIII
CONTROL SHARE ACQUISITIONS
The voting rights of any shares of stock of the Corporation acquired by
existing or future stockholders or their affiliates or associates shall be
exempt from the provisions of Title 3, Subtitle 7 of the Maryland General
Corporation Law.
ARTICLE XXIV
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal" and
"Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
ARTICLE XXV
AMENDMENTS
The Board of Directors shall have the power at any regular meeting, or
at any special meeting if notice thereof be included in the notice of such
special meeting, to alter or repeal any By-Law of the Corporation and to make
new By-Laws.
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<ARTICLE> 6
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