-----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, J0AVq+IyCdtwoJRD0cnFfnq/0N5zbpyHCWIaPN6EjQKs41wPk24DhCa9Wy1SlsDC SGn1ai5WodZHWmIXoZVsTA== 0001005477-99-005586.txt : 19991130 0001005477-99-005586.hdr.sgml : 19991130 ACCESSION NUMBER: 0001005477-99-005586 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENGEX INC CENTRAL INDEX KEY: 0000032598 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132620543 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01639 FILM NUMBER: 99765764 BUSINESS ADDRESS: STREET 1: 44 WALL ST 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2124954519 MAIL ADDRESS: STREET 1: 44 WALL ST 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 FORMER COMPANY: FORMER CONFORMED NAME: EMERGING SECURITIES FUND DATE OF NAME CHANGE: 19770906 N-30D 1 ANNUAL REPORT Engex, Inc. FINANCIAL STATEMENTS and ANNUAL REPORT YEAR ENDED SEPTEMBER 30, 1999 ENGEX, INC. is listed on the American Stock Exchange (AMEX) Symbol EGX. November 29, 1999 Dear Engex Stockholder, We are pleased to submit our annual report for your Fund. Our immediate investment philosophy is to continue to invest in emerging growth companies and other undervalued or turnaround situations. We seek opportunities that can appreciate in value and generate capital gains. Our long-term goal is to seek majority stakes in new and small companies in order to ultimately permit Engex to deregister as an investment company. As always, we appreciate the confidence of our loyal stockholders and will continue to work to achieve the results you deserve and that we ourselves as major stockholders would hope to produce. Sincerely, J. MORTON DAVIS Chairman of the Board President REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Engex, Inc. We have audited the accompanying statement of assets and liabilities of Engex, Inc., including the schedule of portfolio investments, as of September 30, 1999, the related statement of operations for the year ended September 30, 1999, the statements of changes in net assets and selected per share data and ratios for the years ended September 30, 1999 and September 30, 1998. These financial statements and selected per share data and ratios are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and selected per share data and ratios based on our audits. The selected per share data and ratios for the years ending September 30, 1995 to September 30, 1997 were audited by other auditors whose report, dated October 23, 1997, expressed an unqualified opinion on those statements. 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 and per share data and ratios 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 confirmation of securities owned as of September 30, 1999 by correspondence with the custodian. 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 and selected per share data and ratios referred to above present fairly, in all material respects, the financial position of Engex, Inc. as of September 30, 1999, and the results of its operations for the year ended September 30, 1999, the changes in its net assets and selected per share data and ratios for the years ended September 30, 1999 and 1998, presented in conformity with generally accepted accounting principles. GRANT THORNTON, LLP New York, New York November 5, 1999 ENGEX, INC. STATEMENT OF ASSETS AND LIABILITIES September 30, 1999 Assets: Investment in securities at value (identified cost--$7,137,300) $ 15,511,199 Receivable from Broker Dealer ................................. 1,502,395 Other assets .................................................. 31,426 ------------- TOTAL ASSETS .............................................. $ 17,045,020 Liabilities: Accrued expenses .............................................. 89,427 Income taxes .................................................. 3,081,237 ------------ TOTAL LIABILITIES ......................................... 3,170,664 ------------ NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL SHARES ............. $ 13,874,356 ============ NET ASSETS VALUE PER SHARE ...................................... $ 14.20 ============ NET ASSETS APPLICABLE TO OUTSTANDING SHARES: Common stock--$.10 par value: Authorized--2,500,000 shares, Issued--977,223 shares ........ $ 97,722 Additional paid-in capital .................................... 9,669,680 Unrealized depreciation on investments ........................ (428,907) Undistributed net realized gain from investment transactions .. 2,932,832 Undistributed net investment income ........................... 1,603,029 ------------ NET ASSETS ...................................................... $ 13,874,356 ============
The accompanying notes are an integral part of this statement. ENGEX, INC. SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 1999
Number of Shares Market Value ----------- ----------------------------- COMMON STOCK (110.59%): Biotechnology (105.94%): Enzo Biochemical, Inc.* ....................................................... 509,662 shs. $ 14,461,669 Interneuron Pharmaceuticals, Inc.* ............................................ 189,300 shs. 236,625 ------------ $ 14,698,294 Environmental (3.54%) U.S. Home & Garden, Inc.* ..................................................... 194,500 shs. 492,318 Manufacturing (0.49%): Leisure Planet Holdings* ...................................................... 11,000 shs. 43,312 Alyn Corp.* ................................................................... 9,000 shs. 24,750 ------------ 68,062 Gaming Industry (0.32%) American Vantage Company* ..................................................... 54,000 shs. 43,875 Media and Entertainment (0.18%): Avenue Entertainment Group* ................................................... 16,800 shs. 25,200 Technology (0.12%) Nhancement Technologies* ...................................................... 11,000 shs. 16,500 ------------ TOTAL INVESTMENT IN COMMON STOCK (IDENTIFIED COST--$6,855,217) ....................................... 15,344,249 UNITS (0.91%): Manufacturing (0.91%) Leisure Planet Units* ......................................................... 18,000 shs. TOTAL UNITS (IDENTIFIED COST--$163,914) ..................................... 126,000 ------------ WARRANTS (0.30%) Technology (0.30%) Advanced Aerodynamics and Structures Wts. A* .................................. 56,400 shs. 24,675 Advanced Aerodynamics & Structures Wts. B* .................................... 86,800 shs. 16,275 ------------ TOTAL WARRANTS (IDENTIFIED COST--$118,169) ................................... 40,950 ------------ TOTAL MARKETABLE SECURITIES (IDENTIFIED COST--$7,137,300) (111.80%) .................................... 15,511,199 OTHER LIABILITIES, LESS ASSETS, (-11.80%) ....................................... (1,636,843) ------------ NET INVESTMENT ASSETS (100.00%) ................................................. $ 13,874,356 ============
* Non-income-producing securities The accompanying notes are an integral part of this statement.
ENGEX, INC. STATEMENT OF OPERATIONS For The Year Ended September 30, 1999 INVESTMENT LOSS: Income: Dividends ........................................ $ 794 Interest ......................................... 40,558 ------------ Total income .................................. $ 41,352 Expenses: Custodian and transfer fees ...................... 16,900 Professional fees ................................ 138,417 Shareholders' reports and printing ............... 16,843 Directors' fees and expenses ..................... 9,000 Other taxes ...................................... 117,154 Insurance ........................................ 44,584 Management fees .................................. 101,336 Interest Expense ................................. 4,278 ------------ Total Expenses ................................ 448,512 ------------ INVESTMENT LOSS BEFORE BENEFIT FOR INCOME TAXES .... (407,160) DEFERRED INCOME TAX BENEFIT ........................ 138,434 ------------ NET INVESTMENT LOSS ................................ (268,726) ------------ REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Realized gain from security transactions: Proceeds from sales .............................. 4,373,772 Cost of securities sold .......................... 5,002,089 ------------ (628,317) Income tax benefit ................................. 213,628 ------------ Net realized loss .................................. (414,689) Unrealized appreciation on investments: Beginning of period .............................. (2,123,019) End of period .................................... 8,373,899 ------------ 10,496,918 Deferred income tax provision ...................... (3,433,299) ------------ NET INCREASE IN UNREALIZED APPRECIATION ............ 7,063,619 ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .... 6,648,930 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,380,204 ------------
The accompanying notes are an integral part of this statement. ENGEX, INC. STATEMENT OF CHANGES IN NET ASSETS For The Years Ended September 30, 1999 and 1998
1999 1998 ---- ---- From Investment Activities: Net investment loss ............................... $ (268,726) $ (375,578) Net realized gain (loss) on securities transactions (on average cost basis $(404,584) and $1,132,744 respectively) ................................... (414,689) 520,038 Net Increase (Decrease) in unrealized appreciation from investment activities ...................... 7,063,619 (6,914,884) ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS ............... 6,380,204 (6,770,424) NET ASSETS--BEGINNING OF PERIOD ..................... 7,494,152 14,264,576 ------------ ------------ NET ASSETS--END OF PERIOD (including undistributed net investment income of $1,603,029 and $1,871,755 respectively) ..................................... $ 13,874,356 $ 7,494,152 ============ ============
The accompanying notes are an integral part of these statements. ENGEX, INC. NOTES TO FINANCIAL STATEMENTS Note 1. Significant Accounting Policies The Fund is registered under the Investment Company Act of 1940, as a nondiversified, closed-end investment company (see Note 7(a)). The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements: (a) Security Valuation--Investments in securities traded on a national securities exchange are valued at the last reported sales price on September 30, 1999. Securities traded on the over-the-counter market and listed securities for which no sale was reported on that date are valued at the last reported bid price. Securities sold, but not yet purchased, represent obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security at prevailing future market prices. Accordingly, these transactions result in off-balance sheet risk, as the Company's ultimate obligation to satisfy the sale of securities sold, but not yet purchased, may exceed the amount recognized in the financial statements. Investments for which quotations are not readily available are valued at fair value, as determined by the Board of Directors. (b) Federal Income Taxes--Commencing with the fiscal year ending September 30, 1993, the Fund no longer qualified under Subchapter M of the Internal Revenue Code as a regulated investment company, and, accordingly, is taxed as a regular corporation. (c) OTHER--As is common in the industry, security transactions are accounted for on the trade date the securities are purchased or sold. Dividend income and distributions to shareholders are recorded on the ex-dividend date. (d) USE OF ACCOUNTING 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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2. Investment Advisor and Transactions with Affiliated Persons The Fund has entered into an investment advisory agreement (the "Agreement") with American Investors Advisors, Inc. ("Advisors"), which is wholly owned by an officer of the Fund. Certain officers of Advisors are also officers of the Fund. Under this agreement, Advisors will serve as an investment advisor of the Fund for a fee computed at an annual rate of 1.0% of the Fund's average weekly net assets. For the year ended September 30, 1999, Advisors earned a management fee of $101,336, of which $33,096 was due to Advisors at September 30, 1999 and is included in accrued expenses in the accompanying statement of assets and liabilities. Note 3. Portfolio Transactions The following summarizes the securities transactions by the Fund for the year ended September 30, 1999: Purchases $3,099,307 ========== Sales $4,373,772 ========== The Fund uses the specific identification method of accounting for the cost of securities sold for both federal income tax and reporting purposes. Therefore, for federal income tax purposes, the identified cost of investments owned at September 30, 1999 and September 30, 1998 was the same as the total cost of investments. Had the average cost basis been used for financial statement purposes, net realized (loss) gain from securities transactions would have been decreased by $10,105 and increased by $612,706 and net unrealized appreciation would have been increased by $10,105 and decreased by $612,706 for the periods ended September 30, 1999 and September 30, 1998 respectively. ENGEX, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) Note 4. Income Taxes Deferred tax reflects the impact of temporary differences between amount of assets and liabilities recordedfor financial reporting purposes and such amounts as measured in accordance with tax laws. The Fund provides deferred federal, state and local income taxes on unrealized appreciation on investments, based on the regular corporate tax rates. The following is a summary of the components of the Fund's income tax provision (benefit) at September 30, 1999: Current: Federal $ (352,062) ------------ $ (352,062) ============ Deferred: Federal $ 2,847,126 State and local 586,173 ------------ Total Deferred tax liability $ 3,433,299 ============ The effective tax rate for the Fund is reconcilable to the federal statutory tax rate, as follows: Statutory rate 34% State and local income taxes 7% ------------ 41% ============ Note 5. Borrowings Loans during the year were made at a negotiated rate between the Fund and the Fund's custodian broker. The interest paid during the year was 6.10% per annum. The maximum loan outstanding and the weighted average amount of loans (computed on a daily basis) during the twelve-month period were $1,042,475 and $328,942, respectively. The loans were collateralized by the Fund's investment portfolio. As of September 30, 1999 the Fund has no outstanding balance due to the Custodian. Note 6. Fair Value of Financial Instruments Fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. Settlement of the Fund's debt obligations at fair value may not be possible and may not be a prudent management decision to enter. Note 7. Concentrations of Credit Risk (a) The Fund presently intends to seek investment opportunities in one or more additional companies in which it would acquire a controlling interest. While any such further acquisitions are likely to bring the Fund closer to its expressed intention of seeking to deregister under the Investment Company Act of 1940, they are likely to require a substantial investment of the Fund's assets, and a further concentration of the Fund's investments in particular companies or industries, which will increase the risk of loss that may be experienced by the Fund from the negative results or financial condition of any particular company and/or industry. The Fund has borrowed funds in connection with its investment portfolio, and plans to continue to do so, and to consider various alternative means of doing so which may be available to it. Such borrowings are presently limited by certain asset coverage requirements under the Investment Company Act of 1940. By increasing the amount of such leverage utilized by the Fund, opportunities may be enhanced, but certain risks are created, including a higher volatility of the net asset value of the Fund's common stock and a potentially higher volatility in its market value. When monies are borrowed by the Fund, creditors have a fixed dollar claim on the Fund's assets and income, which is prior to any claims of the stockholders; therefore, any decline in the value of the Fund's assets or the income it receives will cause the net asset value of the Fund's stock and any income available to it to decline more sharply than if there were no such prior claims. (b) As of September 30, 1999, all of the Fund's investments in securities were held with one broker, the Fund's custodian. ENGEX, INC. Schedule 1 SUPPLEMENTARY INFORMATION--SELECTED PER SHARE DATA AND RATIOS Selected data for each share of Capital Stock outstanding throughout each year:
Years Ended September 30, --------------------------------------------------------------------------- 1999(1) 1998(1) 1997(1) 1996(1) 1995(1) ----------- ----------- ----------- ----------- ----------- Investment income ......................... $ 0.04 $ 0.01 $ 4.28 $ 0.14 $ 0.18 ----------- ----------- ----------- ----------- ----------- Expenses: Interest ................................ 0.01 0.05 0.17 0.21 0.34 Other ................................... 0.45 0.54 0.31 0.31 0.22 ----------- ----------- ----------- ----------- ----------- Total expenses ........................ 0.46 0.59 0.48 0.52 0.56 ----------- ----------- ----------- ----------- ----------- Investment (loss) income before income tax (benefit) .................... (0.42) (0.58) 3.80 (0.38) (0.38) ----------- ----------- ----------- ----------- ----------- Deferred and current income tax (benefit) . (0.15) (0.19) (0.15) (0.14) (0.14) ----------- ----------- ----------- ----------- ----------- Net investment (loss) income .............. (0.27) (0.39) 3.95 (0.24) (0.24) ----------- ----------- ----------- ----------- ----------- Realized and unrealized gain (loss) before provision (benefit) for income taxes .... 10.10 (9.03) (4.87) 2.87 5.98 Deferred and current income tax provision (benefit) ............................... 3.30 (2.49) 0.20 1.12 1.98 ----------- ----------- ----------- ----------- ----------- Net realized and unrealized gain (loss) ... 6.80 (6.54) (5.07) 1.75 4.00 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net asset value 6.53 (6.93) (1.12) 1.51 3.76 Net asset value: Beginning of year ....................... 7.67 14.60 15.72 14.21 10.45 ----------- ----------- ----------- ----------- ----------- End of year ............................. $ 14.20 $ 7.67 $ 14.60 $ 15.72 $ 14.21 =========== =========== =========== =========== =========== Number of shares outstanding at end of year 977,223 977,223 977,223 977,223 977,223 =========== =========== =========== =========== =========== Ratios: Expenses to average net assets .......... 4.52% 5.78% 3.32% 3.32% 4.90% Net investment (loss) income to average net assets ............................ (2.71)% (2.02)% 26.88% (1.55)% (2.23)% Portfolio turnover ...................... 33.63% 16.24% 26.48% 4.29% 0.40%
(1) During these years, the Fund did not pay dividends from net investment income or make any distributions of net realized gains from securities transactions. The accompanying notes should be read in conjunction with this supplementary schedule. Directors Jerome Fisch Judah Feinerman Leonard Toboroff J. Morton Davis Officers J. Morton Davis, Chairman of the Board and President David Nachamie, Secretary Martin Bell, Assistant Secretary Gilbert Jackson, Treasurer Timothy Looney, Assistant Treasurer Custodian Summit Bank 210, Main Street, Hackensack, N.J. 07601 Transfer Agent Continental Stock Transfer & Trust Co. 2 Broadway, New York, N.Y. 10017 212-509-4000 Independent Accountants Grant Thornton LLP 60 Broad Street, New York, NY 10004 ENGEX, Inc. 44 Wall Street New York, N.Y. 10005 212-495-4200 -----END PRIVACY-ENHANCED MESSAGE-----