SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 FOR THE QUARTERLY PERIOD ENDED May 31, 1996
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from the transition period from ____ to _____
Commission File Number 0-9987
GLOBUS GROWTH GROUP, INC.
(Exact name of registrant as specified in its charter)
New York 13-2949462
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44 West 24th Street, New York, NY 10010
(Address of principal executive offices) (zip code)
(212) 243-1000
(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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes ______ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as the latest practicable date: 2,499,000 (including 134,140
held in treasury)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBUS GROWTH GROUP, INC.
CONDENSED BALANCE SHEETS
May 31, February 29,
1996 1996
---------------- ---------------
ASSETS (Unaudited) (See Note 1)
Cash $908,000 $985,000
Investments in Securities (Note 3) $2,306,000 $1,690,000
Other Assets $15,000 $16,000
---------------- ---------------
TOTAL $3,229,000 $2,691,000
---------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $830,000 $808,000
Loans payable to officers/shareholders $615,000 $660,000
Demand loan payable to related party $398,000 $394,000
---------------- ---------------
Total Liabilities $1,843,000 $1,862,000
---------------- ---------------
Stockholders' equity (Note 2)
Preferred stock - $.10 par value, Authorized -- 450,000 shares
None Issued
Series B convertible preferred stock -- $.10 par value
Authorized - 50,000 shares, None issued
Common stock -- $.01 par value, Authorized -- 4,500,000
shares, Issued 2,499,000 shares at 5/31/96 $25,000 $25,000
Additional paid in capital $2,747,000 $2,747,000
Treasury Stock, 134,140 shares at 5/31/96 ($37,000) ($36,000)
Accumulated earnings (deficit) ($1,349,000) ($1,907,000)
---------------- ---------------
Total stockholders' equity $1,386,000 $829,000
---------------- ---------------
TOTAL $3,229,000 $2,691,000
---------------- ---------------
(See Accompanying Notes to Financial Statements)
GLOBUS GROWTH GROUP, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Three Months
Ended May 31,
1996 1995
------------- ------------
Gain (loss) on investments:
Realized $0 ($2,000)
Unrealized $616,000 ($154,000)
------------- ------------
Total $616,000 ($156,000)
Dividend Income $12,000 $1,000
Interest Income $0 $0
Consulting and other income $9,000 $2,000
------------- ------------
TOTAL $637,000 ($153,000)
Expenses:
General and administrative $69,000 $58,000
Interest $10,000 $13,000
------------- ------------
TOTAL $79,000 $71,000
Income (loss) from operations before taxes $558,000 ($224,000)
Benefit/(Provision) for taxes $0 $0
------------- ------------
Net earnings (loss) $558,000 ($224,000)
------------- ------------
Net (Loss) per share of common stock $0.24 ($0.09)
Weighted Average Number of shares of
Stock Outstanding 2,365,273 2,389,088
------------- ------------
(See Accompanying Notes to Financial Statements)
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months
Ended May
31,
1996 1995
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $558,000 ($224,000)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization $0 $1,000
Realized (gain) loss on investments $0 $2,000
Unrealized (gain) loss on investments ($616,000) $154,000
Increase in accounts payable, accrued expenses and accrued interest
on loans $21,000 $26,000
(Increase) decrease in prepaid assets $1,000 $3,000
-------------- -------------
Net cash (used in ) operating activities ($36,000) ($38,000)
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments $0 ($140,000)
Purchase of property and equipment $0 $0
Proceeds from sale of investments $0 $32,000
-------------- -------------
Net cash provided by (used in ) investing activities $0 ($108,000)
------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loans payable to officers/shareholders ($51,000) ($50,000)
Increase (decrease) in loans payable to officers/shareholders $6,000 ($17,000)
Borrowing from broker $0 $213,000
Repayment to broker $0 $0
Payment from broker $0 $0
Purchase of treasury stock $0 ($1,000)
Borrowing from related party $4,000 $0
-------------- -------------
Net cash provided by (used in) financing activities ($41,000) $145,000
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash ($77,000) ($1,000)
Cash - beginning of period $985,000 $6,000
Cash - end of period $908,000 $5,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $0 $0
Income Taxes $10,375 $730
(See Accompanying Notes to Financial Statements)
GLOBUS GROWTH GROUP, INC. May 31, 1996
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Basis of Condensed Information
In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments,
consisting of only normal recurring accruals, necessary to
present fairly the financial position as of May 31, 1996,
the results of operations for the three months ended May
31, 1996 and 1995, and statement of cash flows for the
three months ended May 31, 1996 and 1995.
The results of operations for the three months ended May
31, 1996 are not necessarily indicative of the results to
be expected for the full year.
Certain information and note disclosures normally included
in financial statements prepared in accordance with
generally accepted accounting principles have been
condensed or omitted. These condensed financial statements
should be read in conjunction with the financial statements
and notes thereto included in the Company's annual report
filed on Form 10-K for the year ended February 29, 1996.
The balance sheet at February 29, 1996 has been derived
from the Company's audited balance sheet included in its
Annual Report on Form 10-K.
Note 2 - Earnings Per Share
Per share data are based on the weighted average number of
common shares outstanding during the period. Common
equivalent shares (options and warrants) would be
anti-dilutive and are therefore excluded from the
calculations.
Note 3 - Investments
As of February 29, 1996 and May 31, 1996, investments are
carried at fair value, which, for readily marketable
securities, represents the last reported sales price or bid
price on the valuation date. Investments in restricted
securities and securities which are not readily marketable
are carried at fair value as determined in good faith by
the Board of Directors, in the exercise of its judgment,
after taking into consideration various indications of
value available to the Board.
In January 1996 the Company agreed to an exchange agreement
with Kimeragen, Inc. in conjunction with a stock split and
private placement by Kimeragen for approximately $1.6
million. In return for its 414 Common shares and 113
Preferred shares the Company received 53,827 Class A Common
and 35,000 Class B Common shares respectively. This
exchange was not dilutive to the Company. Physical delivery
of exchanged stock occurred in May 1996.
(Continued on next page)
Note 3 - (Continued)
May 31, February 29,
1996 1996
----------------------------- ------------------------------
No. No.
Shares Value Cost Shares Value Cost
------ ----- ---- ------ ----- ----
Common Stock
Catamount Brewing Co. 23,215 $176,000 $176,000 23,215 $176,000 $176,000
Interface Systems Inc. 775 $7,000 $7,000 775 $12,000 $7,000
Nematron Corp. 16,925 $161,000 $30,000 16,925 $127,000 $30,000
Energy Research, Inc. 81,000 $1,478,000 $94,000 81,000 $891,000 $94,000
Kimeragen, Inc. 414 $70,000 $70,000
Kimeragen, Inc. Cl A 53,827 $70,000 $70,000
Kimeragen, Inc. Cl A 55,000 $149,000 $149,000 55,000 $149,000 $149,000
-------- --------
Kimeragen, Inc. Cl B 35,000 $75,000 $75,000
------- -------
Total Common Stock $2,116,000 $601,000 $1,425,000 $526,000
Preferred Stock
Kimeragen, Inc. Preferred A 113 $75,000 $75,000
Proscure, Inc. Series A Conv. Pfd. 61,000 $86,000 $86,000 61,000 $86,000 $86,000
Proscure, Inc. Series B Conv. Pfd. 53,334 $80,000 $80,000 53,334 $80,000 $80,000
-------- -------- -------- --------
Total Preferred Stock $166,000 $166,000 $241,000 $241,000
Stock Purchase Warrant
Glycan Pharmaceuticals, Inc. 37,500 $17,000 $17,000 37,500 $17,000 $17,000
Proscure Inc. 75,000 $7,000 $7,000 75,000 $7,000 $7,000
------- ------- ------- -------
Total Warrants $24,000 $24,000 $24,000 $24,000
Total Investments - Fair value $2,306,000 $791,000 $1,690,000 $791,000
---------- -------- ----------- --------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Analysis of Results of Operations
Prior to fiscal 1987, the Company was engaged in the camera and photography
business. On February 28, 1986, the Company sold its operating business to an
affiliated company and since that date the Company's principal activity has been
the making of investments in other companies.
At May 31, 1996, the Company had total assets of $3,229,000 compared to
total assets of $2,691,000 as at February 29, 1996. Included in total assets at
such dates were investments in securities of $2,306,000 for the three month
period ended May 31, 1996 and $1,690,000 for the year ended February 29, 1996.
Shareholders equity at such dates was $1,386,000 for the three month period
ended May 31, 1996 and $829,000 for the year ended February 29, 1996. Gain on
investments amounted to $616,000 for the three month period ended May 31, 1996
as compared to a loss of ($156,000) for the three month period ended May 31,
1995. Included in such gains (losses) were no realized gain or loss and $616,000
of unrealized gain for the three month period ended May 31, 1996 compared to
($2,000) of realized loss and ($154,000) of unrealized loss for the three month
period ended May 31, 1995. Operating expenses, including interest charges,
amounted to $79,000 for the 1996 three month period and $71,000 for the 1995
three month period. Income (loss) from operations, both before and after
provision for taxes, was $558,000 for the three month period ended May 31, 1996
compared to ($224,000) for the three month period ended May 31, 1995. Net
earnings (loss) per share were $0.24 for the 1996 three month period compared to
a loss of ($0.09) for the comparable 1995 period. The weighted average number of
shares of Common Stock outstanding at May 31, 1996 was 2,365,273 and 2,389,088
at May 31, 1995.
Analysis of Financial Condition
The near term liquidity of the Company, as well as its near term capital
resources position, are presently principally dependent upon: (i) the market
value and future ability of the Company to sell its position in Energy Research,
Inc. and Nematron Corp.; and (ii) the continued willingness, as to which there
can be no assurance whatsoever, of the members of the Globus family who have
made loans to the Company (chiefly Stephen E. Globus) to continue to make loans
to the Company. Thus, loans payable by the Company (including accrued interest)
to Messrs. Stephen E. and Richard D. Globus amounted to $615,000 at May 31,
1996, a decrease of $45,000 from $660,000 at February 29, 1996. This decrease
was due to a $40,035 loan repayment to Stephen E. and Richard D. Globus, a
$16,500 charge to the two officers/shareholders loans for general and
administrative costs and use by them of the Company's office and personnel for
the three month period (reference is made to Note G of Form 10K for the year
ended February 29, 1996); which decrease was somewhat offset by an increase of
$5,500 in such loans, plus accrued interest of approximately $5,600. As at May
31, 1996, loans payable to another member of the Globus family, to wit: Ms. Jane
Globus (the mother of Stephen E. and Richard D. Globus), amounted to
approximately $398,000, including accrued interest. As at May 31, 1996, unpaid
salaries owing to Messrs. Stephen E. and Richard D. Globus aggregated $787,000;
so that at such date the total of monies owed to Messrs. Stephen E. Globus,
Richard D. Globus and Ms. Jane Globus aggregated approximately $1,8000,000.
There are in fact presently no known events that can be considered
reasonably certain to occur which would materially change favorably either the
short term or long term liquidity (i.e., ability of the Company to generate
adequate amounts of cash to meet its needs for cash) or capital resources
position (i.e., source of funds) of the Company from that in which it presently
finds itself, and, absent possible sales of stock of Energy Research, Inc. and
of Nematron Corporation and continuation of the presently existing loans without
call for payment, or additional loans, from the Globus family, the present
liquidity and capital resources position of the Company necessarily adversely
affects the financial condition of the Company and its ability to make new
investments. In such connection it must be noted that: the profitability of a
BDC, like the Company, is largely dependent upon its ability to make investments
and upon increases in the value of its investments; and a BDC is also subject to
a number of risks which are not generally present in an operating company, and
which are discussed generally in Item 1 of the Company's 10K Report for its
fiscal year ended February 29, 1996 to which Item reference is hereby made.
Reference is also hereby made to Item 1 and Item 7 of such Report and to the
Financial Statements and notes thereto contained in such Report for information
concerning the Company's investments and its financial condition.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8K
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this Report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 15, 1996
GLOBUS GROWTH GROUP, INC.
(Registrant)
STEPHEN E. GLOBUS
Chairman of the Board,
(Principal Executive Officer)
RICHARD D. GLOBUS
President, Director