<PAGE> 1
FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Last amended by 34-32231, eff 6/3/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period _____________ to _________________
Commission File Number 0-24432
THE AMERICAS GROWTH FUND, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
MARYLAND 65-0604786
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
701 BRICKELL AVENUE, SUITE 2000, MIAMI, FLORIDA 33131
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(305)374-3575
- --------------------------------------------------------------------------------
(Issuer'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 of 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,265,100
Transitional 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 - September 30, 1997 and 1996. (Unaudited)
Statements of Operations for the three months and nine months ended
September 30, 1997 and 1996. (Unaudited)
Statements of Changes in Net Assets for the nine months ended
September 30, 1997 and 1996. (Unaudited)
Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996. (Unaudited)
Notes to Financial Statements. (Unaudited)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Signature
<PAGE> 3
THE AMERICAS GROWTH FUND,INC.
BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Assets:
Investments at market or fair value:
Investment in U.S. Treasury Bills $ 3,474,800 $ 4,466,500
Investment in common stock 260,000 --
----------- -----------
Total investments (amortized cost of $3,806,700
and $4,496,900 for 1997 and 1996, respectively) 3,734,800 4,466,500
Cash and cash equivalents 913,900 466,700
Prepaid expenses 9,300 16,100
Deferred tax asset 4,900 87,400
Furniture and equipment, net 10,100 15,500
Organizational costs, net 3,100 4,500
Deposits 1,100 1,100
----------- -----------
4,677,200 5,057,800
----------- -----------
Liabilities:
Accounts payable 22,900 9,700
Accrued directors fees 6,900 8,900
Deferred tax liability 1,600 2,700
----------- -----------
31,400 21,300
----------- -----------
$ 4,645,800 $ 5,036,500
----------- -----------
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 (479,000) (111,100)
Realized gains on investments 38,300 45,600
Unrealized (depreciation) of investments (67,500) (52,000)
----------- -----------
Net assets applicable to outstanding common shares
(equivalent to $3.67 and $3.98 per share for 1997
and 1996, respectively, based on outstanding
common shares of 1,265,100) $ 4,645,800 $ 5,036,500
=========== ===========
</TABLE>
Read the accompanying notes.
<PAGE> 4
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Interest $ 53,600 $ 60,500 $ 151,100 $ 187,200
Dividend -- -- 17,200 --
Other -- -- 10,000 --
----------- ----------- ----------- -----------
53,600 60,500 178,300 187,200
----------- ----------- ---------- -----------
Expenses:
Consulting fees, principally to affiliates 3,200 19,200 5,700 47,400
Salaries 25,200 24,000 74,800 71,300
Professional fees 66,900 56,100 227,700 156,500
Board of Directors fees 3,500 3,500 10,500 10,800
Other 28,300 20,500 72,300 73,900
----------- ----------- ----------- -----------
127,100 123,300 391,000 359,900
----------- ----------- ----------- -----------
Investment loss before income tax benefit (73,500) (62,800) (212,700) (172,700)
Less income tax benefit -- 26,200 -- 61,900
----------- ----------- ----------- -----------
Net investment loss (73,500) (36,600) (212,700) (110,800)
----------- ----------- ----------- -----------
Realized gains (losses) from sales on investments (5,400) 2,700 15,100 2,000
Less income tax expense applicable to
realized gains (losses) from sale on investments -- (1,100) -- (1,000)
----------- ----------- ----------- -----------
(5,400) 1,600 15,100 1,000
----------- ----------- ----------- -----------
Unrealized depreciation on investments (7,700) (27,500) (21,900) (55,800)
Less income tax benefit applicable to
unrealized depreciation on investments -- 11,500 -- 22,100
----------- ----------- ----------- -----------
(7,700) (16,000) (21,900) (33,700)
----------- ----------- ----------- -----------
Net decrease in net assets resulting
from operations $ (86,600) $ (51,000) $ (219,500) $ (143,500)
=========== =========== =========== ===========
Per-share amounts:
Net investment loss $ (0.06) $ (0.03) $ (0.16) $ (0.09)
Net realized gains on investments -- -- 0.01 --
Net unrealized depreciation on investments (0.01) (0.01) (0.02) (0.03)
----------- ----------- ----------- -----------
$ (0.07) $ (0.04) $ (0.17) $ (0.12)
=========== =========== =========== ===========
Weighted average number of shares used
in per-share computations 1,265,100 1,265,100 1,265,100 1,265,100
=========== =========== =========== ===========
</TABLE>
Read the accompanying notes.
<PAGE> 5
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Net investment loss $ (212,700) $ (110,800)
Net realized gain from sale on investments 15,100 1,000
Net increase in unrealized depreciation on investments (21,900) (33,700)
------------ -------------
Net decrease in net assets resulting from operations (219,500) (143,500)
Net assets at beginning of period 4,865,300 5,180,000
------------ -------------
Net assets at end of period $ 4,645,800 $ 5,036,500
============ =============
</TABLE>
Read the accompanying notes.
<PAGE> 6
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Sources of cash:
Interest $ 17,100 $ 24,100
Income taxes 13,900 --
------------ ------------
31,000 24,100
------------ ------------
Uses of cash:
Payroll 74,800 71,300
Consulting fees to affiliate 5,700 47,400
Operating expenses 350,600 235,200
Income taxes -- 23,600
------------ ------------
431,100 377,500
------------ ------------
Cash (used in) operating activities (400,100) (353,400)
------------ ------------
Cash flows from investing activities:
Sources of cash:
Proceeds from sale of U.S. Treasury Bills 11,500,000 8,000,000
Proceeds from note receivable -- 100,000
Proceeds from sale of common stock 515,400 --
------------ ------------
12,015,400 8,100,000
------------ ------------
Uses of cash:
Purchase of U.S. Treasury Bills 10,867,300 7,881,700
Purchase of common stock 250,000 --
------------ ------------
11,117,300 7,881,700
------------ ------------
Cash provided by investing activities 898,100 218,300
------------ ------------
Increase (decrease) in cash and cash equivalents 498,000 (135,100)
Cash and cash equivalents at beginning of period 415,900 601,800
------------ ------------
Cash and cash equivalents at end of period $ 913,900 $ 466,700
============ ============
</TABLE>
Read the accompanying notes.
<PAGE> 7
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
------------ ------------
Reconciliation of net (decrease) in net assets
resulting from operations to cash used in
operating activities:
Net (decrease) in net assets resulting
from operations $ (219,500) $ (143,500)
------------ ------------
Adjustments to reconcile net (decrease) in net
assets resulting from operations to cash used
in operating activities:
Accretion of discount on U.S. Treasury Bills (134,000) (163,900)
Realized (gain) loss from sale on investments (20,500) (2,000)
Loss on abandonment of equipment 5,400 --
Amortization and depreciation 2,200 2,400
Unrealized depreciation on investments 21,900 55,800
Provision for deferred income taxes (benefit) -- (83,000)
Stock dividends and stock compensation (27,200) --
Changes in assets and liabilities:
Interest receivable -- 800
Prepaid expenses 12,900 7,300
Accounts payable (44,600) (5,300)
Accrued directors fees 3,300 1,600
Income taxes payable -- (23,600)
------------ ------------
Total adjustments (180,600) (209,900)
------------ ------------
Cash (used in) operating activities $ (400,000) $ (353,400)
============ ============
Schedule of non-cash investing activities:
Acquisition of common stock $ 10,000 $ --
Less amount received in exchange for consulting (10,000) --
------------ ------------
$ -- $ --
============ ============
Acquisition of common stock $ 17,200 --
Less amount received as stock dividends (17,200) --
------------ ------------
$ -- $ --
============ ============
Read the accompanying notes.
<PAGE> 8
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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.
<PAGE> 9
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1. ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED):
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 participation 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.
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 based on the circumstances of
each individual case. Such valuations of restricted securities
could be based upon a multiple of earnings, a discount from market
of a similar freely traded security, yield to maturity with respect
to debt issues, or a combination of these and other methods
determined to be appropriate in good faith by the Board of
Directors. Restricted convertible securities are valued based on
the closing bid price on the last day of the year of the underlying
securities, for which quoted market prices are available, taking
into account any appropriate adjustments for dividend features,
registration rights, market discounts or other factors as deemed
appropriate by the Board of Directors. Warrants and options to
acquire equity securities are valued using an option pricing model.
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.
<PAGE> 10
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
ORGANIZATIONAL COSTS:
Organizational costs are stated net of accumulated amortization of
$4,500 and $2,600 at September 30, 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 September 30, 1997 and 1996 for
federal income tax purposes and financial reporting purposes was
the same. The aggregate net unrealized (appreciation) depreciation
for the nine months ended September 30, 1997 and 1996 is $21,900
and ($1,700) 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> 11
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
4. INVESTMENTS:
Investments include the following at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
VALUE VALUE
PRINCIPAL TYPE OF ISSUE AND SEPTEMBER 30, SEPTEMBER 30,
AMOUNT NAME OF ISSUER 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury bills (74.8%
and 88.7% of net assets at
September 30, 1997 and 1996,
respectively)
$ 1,976,400 U.S. Treasury bill,
$2,000,000 face value,
matures November 7, 1996 -- $1,988,800
$ 1,975,500 U.S. Treasury bill,
$2,000,000 face value,
matures December 5, 1996 -- 1,981,000
$ 476,030 U.S. Treasury bill,
$500,000 face value,
matures November 14, 1996 -- 496,700
$ 1,481,400 U.S. Treasury bill,
$1,500,000 face value,
matures November 6, 1997 $ 1,491,900 --
$ 493,900 U.S. Treasury bill,
$500,000 face value,
matures November 13, 1997 496,800 --
$ 1,481,900 U.S. Treasury bill,
$1,500,000 face value,
matures December 4, 1997 1,486,100 --
------------ -----------
Total U.S. Treasury bills $ 3,474,800 $ 4,466,500
============ ===========
</TABLE>
<PAGE> 12
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES SHARES TYPE OF ISSUE VALUE VALUE
SEPTEMBER 30, SEPTEMBER 30, AND NAME OF SEPTEMBER 30, SEPTEMBER 30,
1997 1996 ISSUER 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks (5.6% and
0.0% of net assets at
September 30, 1997 and
1996, respectively:
130,000 -- The Americas Group, Inc.
(unrestricted) $ 260,000 $ --
Majority owned (restricted):
-- 80 Americas Growth
Partners, Inc. -- --
------------ -------------
$ 260,000 $ --
============ =============
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
WARRANTS WARRANTS TYPE OF ISSUE VALUE VALUE
SEPTEMBER 30, SEPTEMBER 30, AND NAME OF SEPTEMBER 30, SEPTEMBER 30,
1997 1996 ISSUER 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks warrants:
(0.0% and 0.0% of net
assets at September 30, 1997
and 1996, respectively)
Restricted:
-- 1 Greg Manning
Auctions, Inc. $ -- $ --
1 -- Globalink $ -- $ --
====== ======
Golf Reservations
of America, Inc.
2 2 Class A $ -- $ --
2 2 Class B $ -- $ --
====== ======
</TABLE>
<PAGE> 13
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
OF NOTES OF NOTES TYPE OF ISSUE VALUE VALUE
SEPTEMBER 30, SEPTEMBER 30, AND NAME OF SEPTEMBER 30, SEPTEMBER 30,
1997 1996 ISSUER 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes (0.0% and 0.0% of
net assets at September 30,
1997 and 1996, respectively)
$ -- $ 50,000 Golf Reservations of
America, Inc. $ -- $ --
$ -- $ -- Approved Financial
Corporation -- --
----------- -----------
$ -- $ --
=========== ===========
</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 192,894 shares of Globalink common
stock at a revised price of $3.24 per share through December 20, 2001.
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. During May
1997, the Company converted and sold all of its shares of Globalink. At
September 30, 1997, the Company holds a warrant which the Board of
Directors has valued at $0.
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 September 30, 1997 and 1996, the outstanding
balance was $50,000. The note is in default as of September 30, 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 September 30, 1997 and 1996, the Board of
Directors has valued the warrants at $0.
<PAGE> 14
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 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
September 30, 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 Type of Issue Value Value
September 30, September 30, and Name of September 30, September 30,
1997 1996 Issuer 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
907,700 465,900 Money market fund,
Cortland Trust, Inc. $ 907,700 $ 465,900
-- -- Checking account
with bank 6,200 800
--------- ------------
Total cash and cash
equivalents (19.7% and
9.3% of net assets at
December 30, 1997 and
1996, respectively) $ 913,900 $ 466,700
========= ============
</TABLE>
<PAGE> 15
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
(UNAUDITED)
6. FURNITURE AND EQUIPMENT:
Furniture and equipment are comprised of the following at September 30,
1997 and 1996:
1997 1996
---------- ----------
Furniture and fixtures $ 1,500 $ 1,500
Computer equipment 10,900 16,400
---------- ----------
12,400 17,900
Less accumulated depreciation (2,300) (2,400)
---------- ----------
$ 10,100 $ 15,500
========== ==========
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 September 30, 1997 and 1996 are:
Deferred tax assets:
Net operating loss $ 87,000 $ 68,600
Unrealized depreciation of investments 14,100 18,800
---------- ----------
101,100 87,400
Less valuation allowance 96,200 --
---------- ----------
4,900 87,400
Deferred tax liability:
Depreciation 1,600 2,700
---------- ----------
Net deferred tax asset $ 3,300 $ 84,700
========== ==========
<PAGE> 16
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 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) (27,700) (70,500)
State (benefit) (10,700) (12,500)
----------- ----------
(38,400) (83,000)
Increase in valuation allowance 38,400 --
----------- ---------
Provision for income taxes
(benefit) $ -- $ (83,000)
=========== ==========
The provision for income taxes at the Company's effective tax rate
differed from the provision for income taxes at the statutory rate
(1997, 15%; 1996, 35%) as follows:
Computed tax expense (benefit)
at the expected statutory rate $ (32,900) $ (50,200)
State tax, net of federal effect (10,300) (5,100)
Valuation allowance 41,500 --
Other 1,700 27,700
----------- ----------
$ -- $ (83,000)
=========== ==========
The Company generated net federal operating losses in the amount of
approximately $483,900 of which approximately $40,800 has been carried
back to prior years resulting in a net operating loss carryforward of
approximately $443,100 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
$18,000 during the period ended September 30, 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 $67,100 and $63,500 in the nine
months ended September 30, 1997 and 1996, respectively.
<PAGE> 17
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
8. RELATED PARTY TRANSACTIONS (CONTINUED):
The Company entered into an employment agreement with the president of
the Company. The agreement currently terminates on August 30, 2000,
unless extended in accordance with its terms. Compensation is $90,000
per year with cost of living increases each year. The Company paid the
president $74,800 and $71,300 pursuant to this agreement for the nine
months ended September 30, 1997 and 1996, respectively.
9. PROFIT SHARING PLAN:
The Company has an employee profit sharing plan (the Plan) which
provides for a performance fee equal to twenty percent (20%) of net
income. As of September 30, 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
September 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.
<PAGE> 18
PART I - FINANCIAL INFORMATION (continued)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997
As a result of operations, net assets decreased approximately $86,600
(or approximately 1.9% of net assets) during the quarter ended September 30,
1997. For the comparable period in 1996, net assets decreased approximately
$51,000 during the quarter. The net decrease in net assets resulting from
operations for the quarter ended September 30, 1997 primarily resulted from a
net investment loss of $73,500 and an increase in unrealized depreciation of
investments of $7,700.
The Company recognized investment income (which consisted entirely of
interest income) of approximately $53,600 for the quarter ended September 30,
1997 as compared to $60,500 for the quarter ended September 30, 1996. The lower
investment income resulted primarily from lower interest rates.
Expenses aggregated approximately $127,100 during the quarter ended
September 30, 1997 which included salaries, accounting fees, consulting fees,
legal fees, rent and administrative expenses. Expenses for the quarter ended
September 30, 1996 were approximately $123,300.
Nine Months Ended September 30, 1997
As a result of operations, net assets decreased approximately 219,500 (or
approximately 4.7% of net assets) during the nine months ended September 30,
1997. For the comparable period in 1996, net assets decreased $143,500. The
decrease in net assets resulting from operations for the nine months ended
September 30, 1997 primarily resulted from a net investment loss of $212,700 and
an increase in unrealized depreciation of investments of $21,900 and further
offset by realized gains of 15,100.
The Company recognized investment income of $178,300 (which consisted primarily
of interest income) for the nine months ended September 30, 1997 as compared to
$187,200 for the nine months ended September 30, 1996. The lower investment
income resulted primarily from lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had cash and cash equivalents of
approximately $913,900 and US Treasury Bills of approximately $3,474,800. The
decrease in capital resources for the nine months ended September 30, 1997 was
primarily due to a net investment loss of $212,700 and unrealized depreciation
of $21,900. As of September 30, 1997, the Company had liabilities of
approximately $31,400.
<PAGE> 19
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 the Company and its board of directors and JW Charles Securities, Inc.
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 owned an aggregate of approximately 10% of the Company's outstanding
shares of common stock. The plaintiffs sought 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 had removed such suit to the United States
District Court, Southern District of Florida, Miami Division. The Company and
the other defendants had filed several motions to dismiss this suit.
On August 26, 1997 the Company settled the lawsuit. In the settlement
documents, the plaintiffs stated that based upon information received and
investigation made following the filing of their suit there was no evidence to
indicate that the Board's approval of the terms of the never-consummated merger
between the Company and Advanced Electronics Support Products, Inc. was not a
valid exercise of their business judgment as directors. The plaintiffs further
stated that based upon information received and investigation made following the
filing of their suit there was no evidence to indicate that the Board did not
exercise due diligence or that the Board did not possess the good faith belief
that the merger would benefit the Company's stockholders.
As part of the settlement, the plaintiffs acknowledged that they will sell their
155,800 shares of the Company's common stock to persons unaffiliated with any of
the defendants for $3.125 per share. JW Charles Securities, Inc. agreed to pay
$25,000 to the law firm representing the plaintiffs in the litigation. All
parties to the litigation agreed to exchange general releases. The settlement
did not require the Company or its directors to pay any money to the plaintiffs
to settle the litigation.
The settlement of the litigation was subject to federal court approval. However,
the plaintiffs had agreed that they would sell their shares to the buyers
whether or not the court approves the settlement. By selling their shares to the
buyers, the plaintiffs acknowledged that they will no longer have standing to
pursue the litigation, even if the court did not approve the settlement.
On October 9, 1997 the United States District Court for the Southern District of
Florida, Miami Division (the "Court") approved the settlement of the lawsuit
against the Company, its board of directors and JW Charles Securities, Inc. and
dismissed the suit with prejudice. Upon the parties' receipt of a certified copy
of the Court order approving the settlement and dismissing the suit with
prejudice, the law firm representing the plaintiffs in the litigation was paid
$25,000 by JW Charles Securities, Inc.
Item 2. CHANGES IN SECURITIES.
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
<PAGE> 20
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the quarter covered
by this report.
Item 5. OTHER INFORMATION.
Not applicable.
.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Financial Data Schedule (for SEC purposes only)
(b) Reports on Form 8-K
One report on Form 8-K was filed on October 7, 1997 with the Securities and
Exchange Commission reporting information pursuant to Item 1 of the Form.
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