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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[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, 1997
COMMISSION FILE NO. 0-24432
THE AMERICAS GROWTH FUND, INC.
MARYLAND 65-0504786
(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
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
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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.[ ]
Issuers revenues for its most recent fiscal year were $232,600.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 10, 1998 (valued at the average of the closing bid of $ 2
3/4 and ask price of $ 3 1/4 on such date) was $ 3,479,000.
The number of shares of Common Stock outstanding as of March 10, 1998: 1,265,100
Traditional Small Business Disclosure Format (check one):
Yes ; No X
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DOCUMENTS INCORPORATED BY REFERENCE: NONE
INDEX
THE AMERICAS GROWTH FUND, INC.
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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
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's investments are
focused 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 may 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
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 $656,000)
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
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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, 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 three 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 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.. The information below has been
obtained from these portfolio companies, and, with respect to Globalink,, Inc.,
a review of their SEC filings.. The Company's principal investment in portfolio
companies constituted approximately 1% of the Companies total investments as of
December 31, 1997
Although the Company has not independently verified for purposes of this
Form 10-KSB, the information obtained from the portfolio companies, to the
Company's knowledge, the information provided below concerning such portfolio
companies is accurate.
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 in the
future. Many of TAG's current and potential competitors have longer operating
histories, greater name
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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. As of December 31, 1997, the Board of
Directors has deemed the common stock to have a $50,000 value.
In March 1998, the Company received an ownership interest of 4% in Latin America
Telecomunications Enterprises LLC (LATE) which was formed for the purpose of
holding 24.5% of the stock of Spectrum Telecommunications Corporation (Spectrum)
in exchange for services TAG performed on behalf of Spectrum. Spectrum is a
holding company, which currently owns several telecommunication licenses
throughout Latin America. In addition, Spectrum is applying for similar licenses
in numerous other Latin American countries. Spectrum's objective is to enhance
the value of these licenses by, among other things, either selling the licenses,
entering into joint venture arrangements, selling Spectrum or undertaking a
public offering of its securities.
GLOBALINK, INC.("GLOBALINK") - In December 1996, the Company purchased in a
private placement for an aggregate consideration of $500,000, 14,953 shares of
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 was 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 and June 1997, the Company converted and sold all of
the shares of Globalink for approximately $520,000 and realized a gain of
$20,000. At December 31, 1997, the Board of Directors has valued the warrants at
$0.
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.
JW CHARLES EXCHANGE OFFER AND POSSIBLE SHORT-FORM MERGER OR LIQUIDATION
On August 14, 1997, JW Charles Financial Services, Inc. ("JW Charles")
commenced an offer to exchange (the "Exchange Offer") shares of its common
stock, par value $.001 per share ("JW Charles Shares"), for all (but not less
than 51%) of the Company's common stock, par value $.01 per share ("Company
Shares" or "Common Stock") on the basis of .431 JW Charles Shares for each
Company Share. On September 23, 1997, JW Charles announced that the Exchange
Offer was completed on September 22, 1997. According to Amendment No. 1 to
Schedule 14D-1 of JW Charles, a total of approximately 822,938 Company Shares
(including approximately 16,380
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Company Shares tendered subject to Notices of Guaranteed Delivery) were validly
tendered and not withdrawn pursuant to the Exchange Offer and were accepted by
JW Charles for exchange in accordance with terms of the Exchange Offer.
As a result of the Exchange Offer, JW Charles has reported that it
beneficially owns 1,150,000 Company Shares, representing approximately 91% of
the outstanding Company Shares. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT". Prior to the completion of the Exchange Offer, JW
Charles reported that, as of August 14, 1997, it beneficially owned 326,550
Company Shares, representing approximately 25.8.% of the outstanding Company
Shares. As a result of the Exchange Offer, JW Charles is in a position to elect
all of the Company's directors and to control the Company.
JW Charles has announced its intention to cause the "short form" merger
(the "Merger") of the Company with a wholly-owned subsidiary of JW Charles.
Under applicable state law, a parent corporation that owns substantially all of
the outstanding shares of a subsidiary corporation may effectuate a short form
merger with a subsidiary without the requirement of shareholder approval of the
merger by either corporation, subject to any appraisal rights afforded to the
shareholders under applicable state law. On December 9, 1997, JW Charles and the
Company filed an application ("Application") with the Securities and Exchange
Commission ("SEC") seeking exemptive relief from certain provisions of the
Investment Company Act of 1940 in order to permit to consummation of the Merger.
The Application in currently pending before the SEC. On March 12, 1998, the
Company (with the concurrence of JW Charles) requested the SEC to review the
Application on an expedited basis in order to protect the interest of the
approximately 100 Company shareholders that did not tender their Company Shares
in the Exchange Offer. The Company believes that the expedited review of the
Application is necessary because JW Charles has entered into an unrelated
acquisition transaction with a third party. If the Application is not granted
prior to the consummation of this unrelated acquisition. JW Charles is (to the
best of the Company's knowledge) contemplating liquidating the Company at its
net asset value rather than completing the Merger. Based upon the Company's
calculations as of March 12, 199, the Company believes that the value of the
liquidation proceeds compares unfavorably to the anticipated value to be
received by the remaining shareholders of the Company if the Merger were
consummated instead. The Company has therefore requested that the Application be
approved by the SEC prior to April 24, 1998 in order to complete the Merger.
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 which is not material
to the Company's operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any 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 1997.
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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". On February, 17, 1998, the
Company informed The Nasdaq Stock Market, Inc.(NASDAQ) that the Company did not
meet the listing requirements under the Nasdaq SmallCap Lisiting Agreement due
to, among other things, the fact that the Company had less than 300 beneficial
shareholders (Marketplace Rule 4310c(02)) and the public float is less than
500,000 shares (Marketplace Rule 4310c(07)). In addition, on February 26, 1998,
NASDAQ notified the Company that it is not in compliance with the new
independent audit committee requirements pursuant to Marketplace Rule 4310c(25)c
which became effective on February 23, 1998. Since the Company had less than 300
beneficial shareholders and securities and the public float is less than 500,000
shares, the Company determined that forming a new independent audit committee
would not in and of itself prevent delisting. As a result of these violations,
the Company expects that the Common Stock will be delisted from the NASDAQ
SmallCap market in 1998. 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.
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PRICE PER SHARE
HIGH LOW
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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 ended December 31, 1997
First Quarter 2 15/16 2 3/4
Second Quarter 3 1/4 2 3/4
Third Quarter 3 1/4 2 3/4
Fourth Quarter 3 3/8 2 3/4
Fiscal Year ending December 31, 1998
First Quarter (through March 10, 1998) 2 3/4 2 3/4
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As of March 10, 1998, there were approximately 100 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 109 beneficial owners of Common
Stock whose shares are held in "street" name as of such date. On March 10, 1998,
the closing bid and ask price of the Common Stock were $2 3/4 and $3 1/4,
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
YEAR ENDED DECEMBER 31, 1997 ("FISCAL 1997") COMPARED TO THE YEAR ENDED
DECEMBER 31, 1996 ("FISCAL 1996")
As a result of operations, net assets decreased approximately $492,700
(approximately 11.3% of net assets) during Fiscal 1997 compared with a decrease
in net assets of approximately $314,700 during Fiscal 1996. The decrease in net
assets resulting from operations for Fiscal 1997 primarily resulted from: (i) a
net investment loss of $277,100, (ii) a realized loss of $34,900, and (iii)
unrealized depreciation on investments of $180,700 as a result of the decline in
market value of the Company's shares of TAG, the warrants from Globalink, and
the realized loss on the Golf notes, which were recorded as unrealized loss in
prior years. These results compare with a net decrease in net assets during
Fiscal 1996 resulting from a net investment loss of $266,100 and 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.
The Company recognized investment income (which principally consisted of
interest income) of approximately $232,600 for Fiscal 1997 compared with
investment income of approximately $246,500 for Fiscal 1996.
Expenses aggregated approximately $509,700 during Fiscal 1997 which
included salaries, consulting fees, legal fees, accounting fees and
administrative expenses. Expenses during Fiscal 1996 were $515,900. During
Fiscal 1997 professional fees increased $40,900 related primarily to expenses
incurred related to certain regulatory items and consulting fees decreased
$47,200 related primarily to the nonrenewal of a certain consulting agreement.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997 the Company had cash and cash equivalents of $827,000
and investments in U.S. Treasury Bills of $3,494,800 for total available cash
sources of approximately $4,322,000. The Company believes these cash sources are
adequate to fund the uses of cash from operations and investing activities for
at least the next 12 months.
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.
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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.
YEAR OF
NAME AND AGE OF DIRECTOR ELECTION POSITION
------------------------ --------- --------
Leonard J. Sokolow* 1994 President and Chairman
41 Board, Portfolio Manager
Sanford B. Cohen 1994 Secretary and Director
41
Martin C. Engelmann 1994 Director
56
Neil R. Winter 1995 Director
44
*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
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 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.
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,
<PAGE> 10
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 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 and any applicable employment agreement,
until their successors are appointed.
Messrs. Cohen and Engelmann serve as Class I directors, Mr. Winter serves as
a Class II director and Mr. Sokolow serves as a Class III director. The terms of
the, Class III, Class I and Class II directors will expire on the dates of the
1998, 1999 and 2000 annual stockholders meeting, respectively, or until the next
applicable stockholders meeting.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Act of 1934 requires the Company's
directors, executive officers and persons who own more than 10% of a registered
class of the Company's equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership in the Company's Common Stock and
other equity securities of the Company. Executive officers, directors and
persons who owns more than 10% of a registered class of the Company's equity
securities are required by the SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file with the SEC.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representation that no other
reports were required, during the fiscal year ended December 31, 1997, all of
such executive officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities complied with all Section
16(a) filing requirements, with the exception of JW Charles Clearing Corp.,
which filed late one report on Form 3, with respect to its initial holdings and
one report on Form 4 with respect to one transaction.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the period January 1, 1995
through December 31, 1997 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, (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
1997 $100,900 $ 0
</TABLE>
<PAGE> 11
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, 1997 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, 2000, unless extended in accordance with its
terms. Under the Employment Agreement, Mr. Sokolow receives a base salary of
$96,100 to be adjusted by the consumer price index on a annual basis. Mr.
Sokolow received $100,900 in salary in 1997. 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 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.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 10, 1998, 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.
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENTAGE
OF BENEFICIAL OWNER (1) OWNED (2) OF CLASS
----------------------- --------------- ----------
Leonard J. Sokolow 0 *
Neil R. Winter 0 *
Sanford B. Cohen 0 *
Martin C. Engelmann 0 *
JW Charles Clearing Corp.(3) 1,150,000 91%
All directors and executive
officers as a group
(4 persons) 0 *
* Less than 1%
<PAGE> 12
(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 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, a former 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 formal presentations to the Board of Directors on market
developments and economic conditions in Latin America and the Caribbean. See
"Executive Compensation".
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.*
27. Financial Data Schedule (for SEC use only).
* Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
On October 7, 1997, the Company filed a Current Report on Form 8-K, dated
September 23, 1997, regarding a change in control of the Company.
<PAGE> 13
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 25, 1998 By: /s/ 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Leonard J. Sokolow Chairman of the Board
------------------------- and President March 25, 1998
Leonard J. Sokolow (Principal Executive
Officer and Principal
Accounting Officer)
/s/ Sanford B. Cohen Secretary and March 25, 1998
------------------------- Director
Sanford B. Cohen
/s/ Martin C. Engelmann Director March 25, 1998
-------------------------
Martin C. Engelmann
/s/ Neil R. Winter Director March 25, 1998
-------------------------
Neil R. Winter
<PAGE> 14
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, 1997 and 1996.
Statements of Operations - Years ended December 31, 1997 and 1996
Statements of Changes in Net Assets - Years ended December 31, 1997 and 1996
Statements of Cash Flows - Years ended December 1997 and 1996
Notes to Financial Statements
<PAGE> 15
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, 1997 and 1996 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, 1997. 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, 1997 and 1996. 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, 1997 and 1996, 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, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young, LLP
Jacksonville, Florida
March 4, 1998
<PAGE> 16
THE AMERICAS GROWTH FUND, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Assets:
Investments at market or fair value:
Investments in U.S. Treasury Bills $ 3,494,800 $ 3,973,100
Investment in preferred stock 50,000 480,000
Investment in warrant -- 20,000
----------- -----------
Total investments (amortized cost of $3,775,500 3,544,800 4,473,100
and $4,525,300 for 1997 and 1996, respectively)
Cash and cash equivalents 827,400 415,900
Prepaid expenses 1,800 1,200
Income tax refund receivable -- 21,000
Deferred tax asset 1,500 6,000
Furniture and equipment, net 9,700 16,600
Organizational costs, net 2,700 4,200
Deposits 1,100 1,100
----------- -----------
4,389,000 4,939,100
----------- -----------
Liabilities:
Accounts payable 7,300 67,500
Accrued directors fees 7,600 3,600
Deferred tax liability 1,500 2,700
----------- -----------
16,400 73,800
----------- -----------
$ 4,372,600 $ 4,865,300
=========== ===========
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 (543,500) (266,400)
Realized gains (losses) on investments (11,600) 23,300
Unrealized depreciation of investments (226,300) (45,600)
----------- -----------
(781,400) (288,700)
----------- -----------
Net assets applicable to outstanding common shares
(equivalent to $3.46 and $3.85 per share for 1997
and 1996, respectively, based on outstanding
common shares of 1,265,100) $ 4,372,600 $ 4,865,300
=========== ===========
</TABLE>
See notes to the financial statements.
F-3
<PAGE> 17
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Interest $ 205,400 $ 222,500
Dividends 17,200 24,000
Other 10,000 --
----------- -----------
232,600 246,500
----------- -----------
Expenses:
Consulting fees to affiliate -- 30,000
Consulting fees 5,700 22,900
Salaries 100,900 96,100
Professional fees 295,800 254,900
Board of Directors fees 14,000 14,000
Other 93,300 98,000
----------- -----------
509,700 515,900
----------- -----------
Investment loss before income tax (benefit) (277,100) (269,400)
Less income tax (benefit) -- (3,300)
----------- -----------
Net investment loss (277,100) (266,100)
----------- -----------
Realized (loss) on investments (34,900) (23,300)
Less income tax (benefit) applicable to
realized (loss) on investments -- (1,900)
----------- -----------
(34,900) (21,400)
----------- -----------
Unrealized depreciation of investments (180,700) (29,600)
Less income tax (benefit) applicable
to unrealized depreciation of investments -- (2,400)
----------- -----------
(180,700) (27,200)
----------- -----------
Net (decrease) in net assets
resulting from operations $ (492,700) $ (314,700)
=========== ===========
Per-share amounts:
Net investment loss $ (0.22) $ (0.21)
Net realized losses on investments (0.03) (0.02)
Net unrealized losses on investments (0.14) (0.02)
----------- -----------
$ (0.39) $ (0.25)
=========== ===========
Weighted average number of shares used
in per-share computations 1,265,100 1,265,100
=========== ===========
</TABLE>
See notes to the financial statements
F-4
<PAGE> 18
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net investment loss $ (277,100) $ (266,100)
Net realized (losses) on investments (34,900) (21,400)
Net increase in unrealized (depreciation)
of investments (180,700) (27,200)
----------- -----------
Net (decrease) in net assets resulting
from operations (492,700) (314,700)
Net assets at beginning of period 4,865,300 5,180,000
----------- -----------
Net assets at end of period
(includes accumulated net investment
loss of ($543,500) and ($266,400) at
December 31, 1997 and 1996, respectively) $ 4,372,600 $ 4,865,300
=========== ===========
</TABLE>
See notes to the financial statements.
F-5
<PAGE> 19
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Sources of cash:
Interest $ 29,000 $ 31,600
Income tax refund 20,000 --
------------ ------------
49,000 31,600
------------ ------------
Uses of cash:
Payroll 100,900 96,100
Consulting fees to affiliates -- 30,000
Consulting fees 5,700 22,900
Operating expenses 452,600 307,700
Income taxes -- 23,700
------------ ------------
559,200 480,400
------------ ------------
Cash (used-in) operating activities (510,200) (448,800)
------------ ------------
Cash flows from investing activities:
Sources of cash:
Proceeds from sale of U.S. Treasury Bills 17,000,000 12,498,900
Proceeds from sale of common stock 515,400 --
Proceeds from notes receivable -- 100,000
------------ ------------
17,515,400 12,598,900
------------ ------------
Uses of cash:
Purchase of furniture and equipment -- 1,500
Purchase of U.S. Treasury Bills 16,343,700 11,834,500
Purchase of preferred stock -- 480,000
Purchase of warrant -- 20,000
Purchase of common stock 250,000 --
------------ ------------
16,593,700 12,336,000
------------ ------------
Cash provided by investing activities 921,700 262,900
------------ ------------
Increase (decrease) in cash and cash equivalents 411,500 (185,900)
Cash and cash equivalents at beginning of period 415,900 601,800
------------ ------------
Cash and cash equivalents at end of period $ 827,400 $ 415,900
============ ============
</TABLE>
See notes to the financial statements.
F-6
<PAGE> 20
THE AMERICAS GROWTH FUND, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997 AND 1996
<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 $(492,700) $(314,700)
--------- ---------
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 (176,400) (215,700)
Realized loss on investments 34,900 23,300
Amortization and depreciation 3,000 3,100
Unrealized depreciation (appreciation) of investments 180,700 29,600
Deferred income tax (benefits) 3,300 (2,100)
Stock dividends and stock compensation (27,200) --
Changes in assets and liabilities:
Income tax refund 21,000 (21,000)
Prepaid expenses -- 6,800
Interest receivable -- 800
Accounts payable (60,200) 52,500
Accrued payroll taxes (600) --
Accrued profit sharing liability -- (2,700)
Accrued directors fees 4,000 (1,000)
Income taxes payable -- (7,700)
--------- ---------
Total adjustments (17,500) (134,100)
--------- ---------
Cash (used-in) operating activities $(510,200) $(448,800)
========= =========
Schedule of non-cash investing activities:
Value of Common Stock received
in exchange for consulting services provided $ 10,000
---------
Value of common stock dividend received $ 17,000
=========
</TABLE>
See notes to the financial statements
F-7
<PAGE> 21
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
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> 22
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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.
<PAGE> 23
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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
$4,800 and $3,300 at December 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 December 31, 1997 and 1996 for
federal income tax purposes and financial reporting purposes was
the same. The aggregate net unrealized (depreciation) for the years
ended December 31, 1997 and 1996 is ($180,700) and ($27,200)
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> 24
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
4. INVESTMENTS: Investments include the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
VALUE VALUE
PRINCIPAL TYPE OF ISSUE AND DECEMBER 31, DECEMBER 31,
AMOUNT NAME OF ISSUER 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury bills (79.9%
and 81.7% of net assets at
December 31, 1997 and 1996,
respectively)
$ 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
$ 2,986,500 U.S. Treasury bill,
$3,000,000 face value,
matures January 8, 1998 $ 2,996,300 --
$ 497,025 U.S. Treasury bill,
$500,000 face value,
matures January 22, 1998 498,500 --
----------- -----------
Total U.S. Treasury bills $ 3,494,800 $ 3,973,100
=========== ===========
</TABLE>
<PAGE> 25
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES SHARES TYPE OF ISSUE VALUE VALUE
DECEMBER 31, DECEMBER 31, AND NAME OF DECEMBER 31, DECEMBER 31,
1997 1996 ISSUER 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks (1.1% and 0.0%
of net assets at
December 31, 1997 and
1996, respectively:
130,000 -- The Americas Group, Inc.
(unrestricted) $ 50,000 $ --
Majority owned (restricted):
-- 80 Americas Growth
Partners, Inc. -- --
---------- ----------
$ 50,000 $ --
========== ==========
8% Convertible, redeemable
preferred stocks (0.0% and
9.9% of net assets at
December 31, 1997 and
1996, respectively)
(restricted):
-- 14,953 Globalink, Inc. $ -- $ 480,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
WARRANTS WARRANTS TYPE OF ISSUE VALUE VALUE
DECEMBER 31, DECEMBER 31, AND NAME OF DECEMBER 31, DECEMBER 31,
1997 1996 ISSUER 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks warrants:
(0.0% and 0.4% of net
assets at September 30, 1997
and 1996, respectively)
Restricted:
1 1 Globalink, Inc $ - $ 20,000
====== ==========
Golf Reservations
of America, Inc.
-- 2 Class A $ - $ --
-- 2 Class B $ - $ --
====== ==========
</TABLE>
<PAGE> 26
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
4. INVESTMENTS (CONTINUED):
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
OF NOTES OF NOTES TYPE OF ISSUE VALUE VALUE
DECEMBER 31, DECEMBER 31, AND NAME OF DECEMBER 31, DECEMBER 31,
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. $ -- $ --
--------- --------
$ -- $ --
========= ========
</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. As of
December 31, 1997, the Board of Directors has valued the common stock
at $50,000.
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
December 31, 1997, the Board of Directors has valued the warrants 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 December 31, 1997, the were deemed worthless by
the Board. 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, 1997, the Board
of Directors has also deemed the warrants as worthless.
<PAGE> 27
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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 has 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
5. CASH AND CASH EQUIVALENTS:
<TABLE>
<CAPTION>
Number of Number of Cost and Cost and
Shares Shares Type of Issue Value Value
December 31, December 31, and Name of December 31, December 31,
1997 1996 Issuer 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
817,200 415,000 Money market fund,
Cortland Trust, Inc. $ 817,200 $ 415,000
-- -- Checking account
with bank 10,200 900
--------- ----------
Total cash and cash
equivalents (18.9%
and 8.5% of net
assets at December
31, 1997 and 1996,
respectively) $ 827,400 $ 415,900
========= ===========
</TABLE>
<PAGE> 28
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
6. FURNITURE AND EQUIPMENT:
Furniture and equipment are comprised of the following at December 31, 1997
and 1996:
1997 1996
-------- --------
Furniture and fixtures $ 1,500 $ 1,500
Computer equipment 10,900 17,900
-------- --------
12,400 19,400
Less accumulated depreciation (2,700) (2,800)
-------- --------
$ 9,700 $ 16,600
======== ========
<PAGE> 29
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
7. INCOME TAXES:
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) (66,600) (46,500)
State (benefit) (27,100) (15,800)
-------- --------
(93,700) (62,300)
Increase in valuation allowance 93,700 54,700
-------- --------
Provision for income taxes
(benefit) $ -- $ (7,600)
======== ========
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 $(73,900) $(48,300)
State tax, net of federal effect (23,000) (16,200)
Valuation allowance 93,700 54,700
Other 3,200 2,200
-------- --------
$ -- $ (7,600)
======== ========
<PAGE> 30
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 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 December 31, 1997 and 1996 are:
<TABLE>
<S> <C> <C>
Deferred tax assets:
Net operating loss $104,600 $ 51,400
Unrealized depreciation of investments 45,300 9,300
-------- --------
149,900 60,700
Less valuation allowance 148,400 54,700
-------- --------
1,500 6,000
Deferred tax liability:
Depreciation 1,500 2,700
-------- --------
Net deferred tax asset $ -- $ 3,300
======== ========
</TABLE>
SFAS 109, ACCOUNTING FOR INCOME TAXES, requires a valuation allowance
to reduce the deferred tax assets reported if, based on the weight of
the evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. After consideration of
all the evidence, both positive and negative, management has determined
that a $148,400 valuation allowance at December 31, 1997 is necessary
to reduce the deferred tax assets to the amount that will more likely
than not be realized. The change in the valuation allowance for the
current year is $93,700. At December 31,1997, the Company has available
net operating loss carryfowards of $532,400 which expire in the years
2010 through 2012.
8. RELATED PARTY TRANSACTIONS:
The Company had entered into one year renewable consulting agreements
with an entity of which a director of the Company was Chairman and
President. The Company paid $30,000 related to this agreement during
the year ended December 31, 1996 at which time the agreement was
terminated.
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 $112,900 and $102,100 in the years ended
December 31, 1997 and 1996, respectively.
<PAGE> 31
THE AMERICAS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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 $100,900 and $96,100 pursuant to this agreement for the years
ended December 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. For the year ended December 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
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. The Company incurred
approximately $136,700 of legal costs associated with the merger. These
costs have been charged to current operations for the year ended
December 31, 1996.
On September 23, 1997, the shareholders of the Company consummated an
exchange of the Company's shares of common stock for shares of JW
Charles Financial Services, Inc. (JW Charles) (the Exchange Offer). As
a result of the Exchange Offer JW Charles beneficially owns 1,149,488
Company shares representing approximately 90.9% of the outstanding
Company shares at December 31, 1997.
<PAGE> 32
As a result of the Exchange Offer, JW Charles is in a position to elect
all of the Company's directors and to control the Company. JW Charles
notified the Board of Directors that it has filed a short-form merger
under applicable State laws (the Proposed Merger) with the SEC under
the Investment Company Act of 1940 (the 1940 Act). The Proposed Merger
would exchange all the remaining Company's minority shareholders
interest for shares of JW Charles. At December 31, 1997, the Proposed
Merger had not been approved by the SEC and there is no guarantee that
the Proposed Merger will be finalized prior to December 31, 1998.
11. YEAR 2000 ISSUES - UNAUDITED
Some older computer programs were written using two digits rather than
four to define the applicable year. As a result, those computer programs have
time-sensitive software that recognize a date using "00" as the year 1900 rather
than the year 2000. This could cause a system failure or miscalculation causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company has completed an assessment of its software and has determined that
its computer systems will function properly with respect to dates in the year
2000 and thereafter and, accordingly, the Year 2000 issue will not pose
significant operational problems for its computer systems.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,770,000
<INVESTMENTS-AT-VALUE> 3,544,800
<RECEIVABLES> 0
<ASSETS-OTHER> 844,200
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,389,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,400
<TOTAL-LIABILITIES> 16,400
<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> (543,500)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11,600)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (226,300)
<NET-ASSETS> 4,372,600
<DIVIDEND-INCOME> 17,200
<INTEREST-INCOME> 205,400
<OTHER-INCOME> 10,000
<EXPENSES-NET> 509,700
<NET-INVESTMENT-INCOME> (277,100)
<REALIZED-GAINS-CURRENT> (34,900)
<APPREC-INCREASE-CURRENT> (180,700)
<NET-CHANGE-FROM-OPS> (492,700)
<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> (492,700)
<ACCUMULATED-NII-PRIOR> (266,100)
<ACCUMULATED-GAINS-PRIOR> (21,400)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,700
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 509,700
<AVERAGE-NET-ASSETS> 4,618,950
<PER-SHARE-NAV-BEGIN> 3.85
<PER-SHARE-NII> (.22)
<PER-SHARE-GAIN-APPREC> (.14)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.45
<EXPENSE-RATIO> .11
<AVG-DEBT-OUTSTANDING> 45,100
<AVG-DEBT-PER-SHARE> .04
</TABLE>
