-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pre1iRKQYZ2yUww0T/en1g0rDdQcshc2NLu9ZDwli5yh2IQRvMz9MtdvqIKD5/Le VWseaRgyh1JtrTAYHf8GYg== 0000050471-99-000007.txt : 19990519 0000050471-99-000007.hdr.sgml : 19990519 ACCESSION NUMBER: 0000050471-99-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITY GROWTH SYSTEMS INC /DE/ CENTRAL INDEX KEY: 0000050471 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 112050317 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-03718 FILM NUMBER: 99628993 BUSINESS ADDRESS: STREET 1: 8001 DESOTO WOODS DRIVE CITY: SARASOTA STATE: FL ZIP: 34243 BUSINESS PHONE: 9412559582 MAIL ADDRESS: STREET 1: 8001 DESOTO WOODS DRIVE CITY: SARASOTA STATE: FL ZIP: 34243 FORMER COMPANY: FORMER CONFORMED NAME: INFOTEC INC DATE OF NAME CHANGE: 19930506 10QSB 1 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 205490. FORM 10-QSB (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from_________ to_____________ Commission file number 0-3718 Equity Growth Systems, inc. ------------------------ (Exact name of registrant as specified in its charter) Delaware 11-2050317 -------- ---------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 8001 DeSoto Woods Drive; Sarasota, Florida 34243 ---------------------------------------- (Address of principal executive offices) (941) 358-8182 ------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes No X As of March 31, 1999, the registrant had outstanding 5,991,148 shares of Common Stock, par value $0.01. Transitional Small Business Disclosure Format: Yes No X EQUITY GROWTH SYSTEMS, inc. Index Page ---- Part I - Financial Information Item 1. Financial Statements Management's Compilation Report .......................... 2 Balance Sheets ............................................3 Statements Income and Accumulated Deficit.......... 4 Statements of Shareholders' Equity............. 5 Statements of Cash Flows...................................6 Notes to Financial Statements..............................7-14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 15 Signatures................................................... 16 1 Management's Compilation Report To the Shareholders Equity Growth Systems, inc. Management has compiled the accompanying balance sheet of Equity Growth Systems, inc. as of March 31, 1999 and 1998 and the related statements of income and retained earnings and cash flows for the three months ended. The compilation is limited to presenting information in the form of financial statements that is solely the representation of management. These statements have not been audited or reviewed and do not carry the opinion of an auditor or any other form of assurance. Signed, /s/ Charles J. Scimeca /s/ - ------------------------- Charles J. Scimeca, President May 14, 1999 2 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) BALANCE SHEET March 31, 1999 AND 1998 1999 1998 A S S E T S CURRENT ASSETS Cash and cash equivalents ........... $ 5,526 $ 7 Mortgage receivable, current portion (Note 7) ......................... -- 98,000 Promissory notes, current portion ...... -- 5,480 (Note 8) ----------- ----------- TOTAL CURRENT ASSETS ................... 5,526 223,960 OTHER ASSETS Mortgages receivable (Note 7) ....... -- 113,573 Promissory notes (Note 8) ........... -- 251,831 Interest receivable ................. -- 49,031 ----------- ----------- TOTAL OTHER ASSETS ................ -- 1,414,435 ----------- ----------- TOTAL ASSETS .......................$ 5,526 $ 638,395 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities (Note 3) .............. $ 10,401 $ 17,012 Mortgage payable, current portion ... -- 173,095 (Note 7) Note payable ........................ -- 138,874 ----------- ----------- TOTAL CURRENT LIABILITIES ............ 10,401 328,981 LONG-TERM LIABILITIES Mortgage payable (Note 7) .......... -- 950,530 ----------- ----------- TOTAL LIABILITIES ................... 10,401 1,279,511 ----------- ----------- SHAREHOLDERS' EQUITY (Note 13) Preferred stock-no par value authoriz- ed-5,000,000 shares; zero issued and outstanding .......................... -- -- Common stock-$.01 par value author- ized-20,000,000 shares; issued and outstanding-5,911,148 shares in 1999 and 3,826,148 in 1998 ................ 59,911 38,261 Capital in excess of par value ........ 2,914,395 2,891,645 Accumulated deficit prior to December 31, 1998 ............................... (2,965,785) (571,022) Accumulated deficit from inception of Development stage on December 31, 1998 .. (13,396) -- ----------- ----------- TOTAL SHAREHOLDERS' EQUITY ........... (4,875) 358,884 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..............................$ 5,526 $ 638,395 =========== =========== Read Management's Compilation Report The accompanying notes are an integral part of these financial statements. 3 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) CONDENSED STATEMENT OF INCOME AND ACCUMULATED DEFICIT (Discontinued Operations) Three Months Ended Three Months Ended March 31, 1999 March 31,1998 -------------------- ------------------ Income .............................. $ -0- $ 40,357 General and Adminis- trative Expenses ................... 8,396 46,109 ----------- ----------- Net Income (Loss) Before Provisions for Income Taxes ....................... (8,396) (5,752) Provisions for Income Taxes Note (10) ...................... -0- -0- ----------- ----------- Net Income (Loss) from Continuing Operations ........... (8,936) (5,752) Discontinued Operations: Settlement/Consulting Fee ... (5,000) -0- Net Loss ......................... (13,396) (5,752) Accumulated Deficit- Beginning ......................... -0- (2,565,270) =========== =========== Accumulated Deficit- Ending ............................ (13,396) (2,571,022) =========== =========== Basic Loss Per Share ............. (0.0032) (0.002) Weighted Average of Shares Outstanding ............... 4,174,778 3,826,148 Fully Diluted Loss Per Share ..... (0.0032) -0- Fully Diluted Average Shares Outstanding ............... 4,222,191 -0- Read Management's Compilation Report The accompanying notes are an integral part of these financial statements. 4 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) STATEMENTS OF SHAREHOLDERS' EQUITY March 31, 1999 Capital in No. of Common Excess of Accumulated Shares Stock Par Value Deficit Balances January 1, 1997 ...... 3,771,148 37,711 2,892,195 (2,492,327) Common Stock Issued ... 55,000 550 550 Net (loss) for the year ended December 31, 1997 ............ (72,043) ----------- ----------- ----------- ----------- Balances, December 3,826,148 38,261 2,892,745 (2,566,370) 31, 1997 Common Stock Issued ...415,000 4,150 4,150 -0- (Services) at $0.02 Per Share Common Stock Issued (Cash) at $0.02 Per Share 1,750,000 17,500 17,500 -0- Net (loss) for the year ended December 31, 1998 .................. (399,415) ----------- ----------- ----------- ----------- Balances, December 31, 1998 ............. 5,991,148 $ 59,911 $ 2,914,395 $(2,965,785) Common Stock Issued .... -0- Net income for the three months ended March 31, 1999 ......... (13,396) ----------- ----------- ----------- ------------ Balances March 31, 1999 ....... 5,991,148 $ 59,911 $ 2,914,395 $(2,979,181) =========== =========== =========== =========== Read Management's Compilation Report The accompanying notes are an integral part of these financial statements. 5 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED March 31, 1999 AND 1998 1999 1998 Cash Flows From Operating Activities: Net Profit (Loss) ....................... $(13,396) $ (5,752) Adjustments to Reconcile Net Profit (Loss) to Net Cash Used for Operating Depreciation ........................... -- -- Decrease in other receivable ........... -- 580 Decrease in mortgages and notes receivable ............................ -- 30,500 Increase (decrease) in accounts payable and current liabilities ....... 5,740 12,012 Increase (decrease) in mortgage and notes payable ..................... -- (37,333) -------- -------- Net Cash Provided (Used) by Operations . (7,656) 7 -------- -------- Cash Flows From Financial Activities Capital stock issued - - Additional paid in capital - - -------- -------- Net Cash Provided by Financial Activities - - -------- -------- Net Increase (Decrease) in Cash (7,656) 7 Cash-Beginning of Year ................. 13,182 -- -------- -------- Cash-End of Period ..................... $ 5,526 $ 7 ======== ======== Supplemental Cash Flows Information Cash paid for interest .................. $ -- $ 33,138 ======== ======== Read Management's Compilation Report The accompanying notes are an integral part of these financial statements. 6 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 A copy of the audited financial statements and footnotes for the period ending December 31, 1998 was included in the 10-KSB filed by the Registrant with the Commission on May 17, 1999 and are incorporated by reference as exhibits to this report, as permitted by SEC Rule 12b-23. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Organization The Company (formerly known as InfoTech, Inc.) was organized under the laws of the State of Delaware on December 8, 1964. The principal business of the Company was specializing in structuring and marketing mortgaged backed securities as well as, the acquisition of select commercial real estate for its own account. Effective December 31, 1998 the Company discontinued the mortgage business and was reclassified as a development stage company. 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 reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and any highly liquid investments with a maturity of three months or less at the time of purchase. The Company maintains cash and cash equivalent balances at a financial institution which is insured by the Federal Deposit Insurance Corporation up to $100,000. At March 31, 1999 there is no concentration of credit risk from uninsured bank balances. Fixed Assets The fixed assets are depreciated over their estimated allowable useful lives, primarily over five to seven years utilizing the modified acceleration cost recovery system. Expenditures for major renewals and betterments that extend the useful lives of fixed assets are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. Income Taxes In February 1992, the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards 109 of "Accounting for Income Taxes". Under Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective bases. 7 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company has net operating loss carryovers in excess of $2,000,000 which expire by the year 2013. There is no reasonable expectation that the carryover will be utilizable in the future. Basic Loss Per Shares Primary basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the year. The number of shares used for the three months ended March 31, 1999 and 1998 were 4,174,778 and 3,826,148, respectively. Fully Diluted Loss Per Shares Fully diluted loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding plus the shares that would be outstanding if all stock options were exercised. The number of shares used for the three months ended March 31, 1999 was 4,222,191. No fully diluted loss per common share was calculated for March 31, 1998. NOTE 2 - PROPERTY, PLANT AND EQUIPMENT 1998 Equipment $ 2,022 ------- Less: Accumulated depreciation (2,022) - ======= Depreciation expense charged during 1999 and 1998 was $-0- and $-0-, respectively. NOTE 3 - SETTLEMENT WITH CREDITORS On November 28, 1998, the Company offered 150,000 shares of its common stock in consideration for cancellation of debt for legal an advisory services. The settlement was based on a stock valuation of $1.00 per share; however, in light of Mr. Granville-Smith's termination of the Registrant's business operations, the settlement agreement was amended, writing off consulting fees and resulting in reduction in the valuation of the payment to only $3,000.00 (the cost associated therewith). The stock transfer is expected to be completed early in the second quarter of 1999. 8 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 NOTE 4 - SETTLEMENT AGREEMENT Granville-Smith Jr. Recission Settlement Agreement On March 22, 1999 the Registrant's former president, Edward Granville-Smith, rescinded by agreement all employment, consulting and creditor agreements and the following transactions described in previous reports on 10-KSB by the Registrant and on previous filing with the Securities and Exchange Commission as follows: "During March of 1995, the Registrant's Board of Directors elected Edward Granville-Smith, then president of KSG (then operating as EGSI), to the Registrant's Board of Directors, after which, all directors other than Mr. Granville-Smith resigned. Mr. Granville-Smith, as the sole director, elected himself as president, chief executive officer and chairman of the Registrant's Board of Directors. Thereafter, Mr. Granville-Smith, as the sole stockholder, officer and director of Milpitas Investors, Inc., a Delaware corporation ("Milpitas"), caused Milpitas to assign interests of four leases involving five separate leased parcels of real estate (one lease covers two parcels), four promissory notes secured by mortgages on real estate leased to third parties, in each case subject to mortgages to third parties and four demand notes with an aggregate original principal balance of approximately $160,000, to the Registrant in exchange for 1,616,000 shares of the Registrant's common stock $0.01 par value. The demand notes are subject to an arrangement with Mr. Jerry C. Spellman (which the Registrant has agreed to honor) whereby payments thereon are used to repay a $100,000 loan by Mr. Spellman to a former holder. Milpitas thereafter distributed such stock to Granville-Smith Trust, which thereafter transferred to K. Walker, Ltd., a Bahamian corporation (affiliated with Mr. Granville-Smith) and Bolina Trading Registrant, A Panamanian Corporation and/or the WEFT Trust, (affiliated with Jerry C. Spellman)." Spellman General Release On March 22, 1999, Mr. Jerry C. Spellman, on his own behalf and on behalf of Bolina Trading Registrant, A Panamanian Corporation, also known as Bolina Trading Registrant, A Panamanian Corporation, and Bolena Trading Corporation, S.A., Panamanian Corporation, and WEFT Trust signed and executed for the protection of the Company a general release. 9 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 NOTE 5 - CONSULTING AGREEMENTS In 1998 a consulting agreement with Yankee Companies, Inc.(Yankee) a Florida corporation was executed to corporate structure, organization and reorganization; mergers, acquisitions and divestitures; strategic corporate development; corporate financial and equity analysis; market strategy planning and implementation; corporate communication, financial public relations and stockholder relations consulting; business plan development and implementation; marketing sales and analysis; executive and professional recruitment; coordination and supervision of professional services; development and implementation of regulatory compliance procedures. In consideration for Yankee's assistance, Yankee received options for common stock equal to 10% of the outstanding shares of the Company measured as of the time of final exercise. 10 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 NOTE 6 - MORTGAGES March 31 March 31 1999 1998 ------- ------- Mortgages consist of the following: Subordinate "wrap" mortgage receivables: (a) Nevada/California Property 12.9041 .... -0- $ 657,333 (b) Oregon Propert 9.080% .... -0- 576,713 ---------- ---------- -0- 1,234,046 Less: Current Portion ....................... -0- 120,473 ---------- ---------- -0- $1,113,573 ========== ========== Original Mortgages Payable: (a) Nevada/California Property 9.750% .. -0- $598,325 (b) Oregon Property 9.750% .. -0- 525,300 --------- ---------- -0- 1,123,625 Less: Current Portion ...................... -0- 173,095 ---------- ---------- -0- $ 950,530 ========== ========== 11 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 NOTE 6 - MORTGAGES (Continued) Effective December 31, 1998, the Company discontinued the mortgage business. NOTE 7 - NOTES RECEIVABLE 1999 1998 Nevada/California Property Quarterly payments of $868.55 4% above prime, currently 12.40% original amount $63,000 -0- $157,702 Oregon Quarterly payments of $501.13 4% above prime, currently 12.40% original amount $38,742 -0- 99,609 -------- -------- -0- 257,311 Less Current Portion -0- 5,480 -------- -------- -0- $251,831 ======== ======== 12 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 NOTE 8 - INCOME TAXES As discussed in Note 1, the Company has applied the provisions of Statement 109. The significant components of deferred income tax expense benefit for the periods ended March 31, 1999 and 1998 arising from net operating losses are as follows: 1999 1998 Deferred tax benefit -0- $36,664 Valuation allowance -0- (36,664) ------- -------- $-0- $ -0- ======= ======= The Company has operating loss carry forwards in excess of $2,000,000. There is no reasonable expectation that any tax benefits can be utilized in the future. NOTE 9 - STOCKHOLDERS' EQUITY On May 18, 1995, the Company adopted a resolution to change the authorized capitalization as follows: (a) The 2,000,000 shares of common stock, $0.01 par value then authorized, all of which were currently outstanding, were reverse split into 200,000 shares, $0.01 par value; and immediately thereafter; (b) The Company's authorized common stock was increased from 200,000 shares, $0.01 par value, to 20,000,000 shares of common stock, $0.01 par value, and (c) The Company was authorized to issue 5,000,000 shares of preferred stock, the attributes of which are to be determined by the Company's Board of Directors from time to time, prior to issuance, in conformity with the requirements of Sections 151 of the Delaware General Corporation Law. 13 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS March 31, 1999 During the year ended December 31, 1998, the Company also issued stock options for 200,000 shares to the president of the corporation. The options are exercisable at $0.02 per share and accordingly no compensation expense has been recorded or will be incurred with the issuance. During the year ended December 31, 1998, the Company entered into a consulting agreement that requires issuance, for an aggregate of $60,000, of stock equal to 10% of the Company's outstanding stock, at the time exercise is completed. Such obligation is of indeterminate duration since it expires 45 days after warrants and their underlying common stock are registered with the Securities and Exchange Commission. The agreement was valued by the parties at $20,000. NOTE 10 - GOING CONCERN The accompanying financial statements have been prepared assuming that the organization will continue as a going concern. Management entered into agreements (Note 4) that reduced current revenues to zero. This is in preparation for new business opportunities currently being sought out by the Company. The Company's continued existence as a going concern will require the infusion of new businesses. It is anticipated that the Company will effect this transition through the acquisition of companies that will operate as subsidiaries. The Company's continuation is dependent upon its ability to acquire profitable businesses, control costs, and attain a satisfactory level of profitability with sufficient financing capabilities or equity investment. NOTE 11 - LOSS FROM DISCONTINUED OPERATIONS On March 22, 1999, the Company entered into an agreement (Note 4) that results in the discontinued operations of the mortgage finance business. A summary of losses from operations of the discontinued business is incorporated into the audited financial statements included in the filing of the 10-KSB (Note 9). 14 EQUITY GROWTH SYSTEMS, inc. (A Development Stage Company) Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The response to this item is incorporated by reference to the Registrant's report on Form 10-KSB for the year ended December, 31, 1998. The following discussion should be read in conjunction with the Registrant's financial statements. The Registrant historically engaged in the business of acquiring and operating interests in income producing commercial real estate. During March 1999, the Board of Directors took steps to divest the Registrant of past agreements and liabilities related to real estate activity, thus positioning the Registrant to undertake new business endeavors or become a more attractive acquisition candidate. Overview The Registrant has completed the first quarter of operations following the decision to discontinue operations related to the mortgage finance business. During this period the Registrant has begun to actively seek non-start up acquisition candidates and potential clients who can benefit from the services and expertise of the Board in starting and operating a public company. No definitive arrangements have been entered into, nor can there be any assurances that definitive arrangement will ever take place. Interim Periods During the three months ended March 31, 1999 the Registrant experienced losses due to ongoing general and administrative expense in the amount of $8,396. An additional $5,000 was posted as a loss due to the conclusion of business related to discontinued operations. No revenues were realized during this period, resulting in a net loss of $13,396. At this time it is not possible to project what arrangements will result from the consulting or acquisition activities that are currently underway or the financial benefits to be gained from these activities. 15 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant had duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized. Equity Growth Systems, inc. Dated: May 17, 1998 /s/ Charles J. Scimeca -------------------------- Charles J. Scimeca, President 16 EX-27 2 FDS
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 5526 0 0 0 0 5526 0 0 5526 10,401 0 0 0 2,974,306 (2,979,181) 5526 0 0 0 8,396 0 0 0 (8,396) 0 (8,396) (5,000) 0 0 (13,396) (0.032) (0.032)
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