EXHIBIT (3)(ii)
BYLAWS
OF
INTERUNION FINANCIAL CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. The principal office in the State of Delaware shall be at the
address of the registered agent for the corporation in the State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware and within or without the United
States of America as the board of directors may from time to time determine as
the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the board of
directors, either within or without the State of Delaware. Meetings of
stockholders for any other purpose may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at times
designated by the board of directors, and at such meetings the stockholders
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting shall be given to each
stockholder entitled to vote thereat at least ten days and not more than sixty
days before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, during ordinary business hours, for a
period of at least ten days prior to the election, either at a place within the
city, town, or village where the election is to be held and which place shall
be specified in the notice of the meeting, or if not specified, at the place
where said meeting is to be held, and the list shall be produced and
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kept at the time and place of election during the whole time thereof, and
subject to the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of the board of directors, or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed
meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, at least ten days before the date fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after six months from its date, and, except where the transfer books of the
corporation have been closed or a date has been fixed as a record date for the
determination of its stockholders entitled to vote, no share of stock shall be
voted on at any election for directors which has been transferred on the books
of the corporation within twenty days next preceding such election of
directors.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the certificates of incorporation, the
meeting and vote of stockholders may be dispensed with, if all the stockholders
who would have been entitled to vote upon the action if such meeting were held,
shall consent in writing to such corporate action being taken.
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ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than three and not more than seven, unless approved by all of
the directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this article, and each
director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, and the directors so chosen shall hold office
until the next annual election and until their successors are duly elected and
shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its board
of directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held immediately following the final adjournment of the annual meeting
of the stockholders. No notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and such place as shall from time to time be determined by
the board.
Section 7. Special meetings of the board may be called by the president on
forty-eight hours notice to each director, either personally or by mail or by
telegram setting forth the time and place thereat; special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of two directors.
Section 8. At all meetings of the board a majority of the directors then
in office shall constitute a quorum for the transaction of business and the act
of a majority of the directors, except as may be otherwise specifically
provided by statute or by the certificate of incorporation. If a quorum shall
not be present at any meeting of the board of directors the directors present
thereat may adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
of these by-laws, any action required or permitted to be taken at any meeting
of the board of directors or of any committee thereof may be taken without a
meeting, if prior to such action a written consent thereto is signed by all
members of the board or of such committee as the case may be, and such written
consent is filed with the minutes of proceedings of the board or committee.
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Section 10. Unless otherwise restricted by the certificate of
incorporation of these by-laws, members of the board of directors or any
committee designed by the board may participate in a meeting of such board or
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other and participation in a meeting in this manner shall constitute
presence in person at such meeting.
COMMITTEES OF DIRECTORS
Section 11. The directors may appoint an executive committee from their
number. The executive committee may make its own rules of procedure and shall
meet where and as provided by such rules, or by a resolution of the directors.
A majority shall constitute a quorum, and in every case the affirmative vote of
a majority of all the members of the committee shall be required for the
adoption of any resolution.
Section 12. During the intervals between the meetings of the directors,
the executive committee may exercise all the powers of the directors in the
management and direction of the business of the corporation, in such manner as
such committee shall deem best for the interest of the corporation, and in all
cases in which specific directions shall not have been given by the directors.
Section 13. The Board of directors may, by resolution passed by a majority
of the whole board, designate one or more other committees, each committee to
consist of two or more of the directors of the corporation, which, to the
extent provided in the resolution, shall have and may exercise the powers of
the board of directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors.
COMPENSATION OF DIRECTORS
Section 14. Directors shall not receive any stated salary for their
services as directors, but by resolution of the board, a fixed fee and expenses
of attendance may be allowed for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any capacity as an officer or otherwise and receiving
compensation therefor.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing in the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
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ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Two or more
offices may be held by the same person.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders may choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers of the corporation, if any, shall
be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall have power to call meetings of the directors and
stockholders in accordance with these by-laws, appoint and remove, subject to
the approval of the directors, servants, agents and employees of the
corporation and fix their compensation, make and sign contracts and agreements
in the name and on behalf of the corporation; he shall see that the books,
reports, statements and certificates required by the statute under which the
corporation is organized or any other laws applicable thereto are properly
kept, made and filed according to law; and he shall generally do and perform
all acts incident to the office of president, or which are authorized or
required by law.
THE VICE-PRESIDENTS
Section 7. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in
the absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
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THE SECRETARY AND ASSISTANT SECRETARIES
Section 8. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 9. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform such other duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 10. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
Section 11. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meting, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 12. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation.
Section 13. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
INDEMNIFICATION
Section 14. The corporation shall indemnify and reimburse each present and
future director and officer of the corporation for and against all or part of
the liabilities and expenses
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imposed upon or incurred by him, including but without being limited to
attorney's fees, court costs, judgments and reasonable compromise settlements;
provided, however, that such indemnification and reimbursement shall not cover:
(a) liabilities or expenses imposed or incurred in connection with any matter
as to which such director or officer shall be finally adjudged in such action,
suit or proceeding to be liably by reason of his having been derelict in the
performance of his duty as such director or officer, or (b) liabilities or
expenses (including amounts paid in compromise settlements) imposed or incurred
in connection with any matter which shall be settled by compromise (including
settlement by consent decree or judgment) unless the board of directors of the
corporation by resolution adopted by it (i) approves such settlement and (ii)
finds that such settlement is in the best interest of the corporation and that
such director or officer has not been derelict in the performance of his duty
as such director or officer with respect to such matter. These indemnity
provisions shall be separable, and if any portion thereof shall be finally
adjudged to be invalid, or shall for any other reason be inapplicable or
ineffective, such invalidity, inapplicability or ineffectiveness shall not
affect any other portion or any other application of such portion or any other
portion which can be given effect without the invalid, inapplicable or
ineffective portion. The rights of indemnification and reimbursement hereby
provided shall not be exclusive of other rights to which any director or
officer may be entitled as a matter of law or by votes of stockholders or
otherwise. As used in this paragraph, the terms "director" and "officer" shall
include their respective heirs, executors and administrators.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a vice-president or a vice-president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent (other than the corporation or a transfer clerk who is
an employee of the corporation) or (2) by a registrar (other than the
corporation or its employee), all other signatures may be a facsimile. In case
any officer or officers, transfer agent, or registrar, whether because of
death, resignation, or otherwise, before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures have been used thereon had not ceased
to be such officer, transfer agent or registrar.
TRANSFER AGENT AND REGISTRAR
Section 3. The corporation may have such transfer agents and registrars as
the board of directors may designate and appoint.
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LOST CERTIFICATES
Section 4. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of the fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 6. The board of directors may close the stock transfer books of
the corporation for a period not exceeding forty-five days preceding the date
of any meeting of stockholders or the date for payment of any dividend or the
date for the allotment of rights or the date when any change or conversion or
exchange of capital stock shall go into effect, or for a period of not
exceeding forty-five days in connection with obtaining the consent of
stockholders for any purpose. In lieu of closing the stock transfer books as
aforesaid, the board of directors may fix in advance a date, not exceeding
forty-five days preceding the date of any meeting of stockholders, or the date
for payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent, as a record date
for the determination of the stockholders entitled to notice of, and to vote
at, any such meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent and in such case such stockholders and
only such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, or to give such consent, as
the case may be notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 7. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner
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of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLES VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
RESIGNATIONS
Section 3. Any director, member of any committee or other officer may
resign at any time. Such resignation shall be made in writing, and shall take
effect at the time specified therein, and if no time be specified therein at
the time of its receipt by the president or secretary, the acceptance of a
resignation shall not be necessary to make it effective.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officers or such other person or persons as the board
of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be as determined by
the Board of Directors.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any regular meeting
of the stockholders or of the board of directors or at any special meeting of
the stockholders or of the
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board of directors if notice of such alteration or repeal be contained in the
notice of such special meeting.
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby certify that the undersigned is the
secretary of AU 'n AG, INC. a corporation duly organized and existing under and
by virtue of the laws of the State of Delaware; that the above and foregoing
Bylaws of said corporation were duly and regularly adopted as such by the Board
of Directors of said corporation by unanimous consent on the 15th day of
February 1994; and that the above and foregoing Bylaws are now in full force
and effect.
Dated this 15th day of February 1994.
/s/ Ronald N. Vance
--------------------------------
Ronald N. Vance, Secretary
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EXHIBIT (21)
SUBSIDIARIES
OF
INTERUNION FINANCIAL CORPORATION
Name of Subsidiary Jurisdiction of Incorporation
- ----------------------------- -------------------------------------------
Guardian Timing Services, Inc. Ontario, Canada
Bearhill Limited, Inc. British Virgin Islands
I & B, Inc. State of Delaware
Credifinance Securities, Ltd. Ontario, Canada
Credifinance Capital, Inc. Ontario, Canada
Reeve, Mackay & Associates, Ltd. Ontario, Canada
NOTE: All subsidiaries do business under their official names.
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INTERUNION FINANCIAL CORPORATION
FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
F-1
INTERUNION FINANCIAL CORPORATION
MARCH 31, 1996 AND 1995
CONTENTS
PAGE
Auditors' Report F-3
Financial Statements:
Consolidated Balance Sheet F-4
Consolidated Statement of Operations and Retained Earnings F-6
Consolidated Statement of Changes in Financial Position F-7
Notes to Consolidated Financial Statements F-8
F-2
[MINTZ & PARTNERS LETTERHEAD]
AUDITORS' REPORT
To The Shareholders,
InterUnion Financial Corporation
We have audited the consolidated balance sheet of InterUnion Financial
Corporation as at March 31, 1996 and 1995 and the consolidated statements of
operations and retained earnings and changes in financial position for the
years then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to
obtain reasonable assurance whether the financial statements are free of
material misstatement. Audits include examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Audits
also include assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 31, 1996
and 1995 and the results of operations and changes in financial position for
the years then ended in accordance with generally accepted accounting
principles.
/S/ MINTZ & PARTNERS
Toronto, Ontario.
May 10, 1996.
CHARTERED ACCOUNTANTS
F-3
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN U.S. DOLLARS)
AS AT MARCH 31 1996 1995
===================================================================================================================
A S S E T S
CURRENT ASSETS
Cash $ 722,795 $ 490,681
Due from brokers and dealers 1,168,190 172,944
Client deposits 2,093,966 21,147,890
Marketable securities 2,625,585 15,682,071
Accounts receivable 208,727 55,262
Income tax receivable 1,597 15,866
Prepaid expenses and sundry assets 75,906 31,615
----------- ------------
6,896,766 37,596,329
----------- ------------
OTHER ASSETS
Start-up costs 438,803 --
Long-term investments 913,834 900,361
Capital assets (Note 3) 948,892 933,380
Reorganization costs 184,944 234,574
Goodwill 1,086,461 1,143,982
Assets of discontinued operations (Note 13) -- 240,693
----------- ------------
3,572,934 3,452,990
----------- ------------
$10,469,700 $ 41,049,319
=========== ============
APPROVED ON BEHALF OF THE BOARD:
____________________________ Director ______________________________ Director
===================================================================================================================
See Accompanying Notes F-4
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN U.S. DOLLARS)
AS AT MARCH 31 1996 1995
===================================================================================================================
L I A B I L I T I E S
CURRENT LIABILITIES
Due to brokers and dealers $ 2,499,665 $30,168,593
Due to clients 3,035,310 6,368,681
Accounts payable and accrued liabilities 675,623 283,459
----------- -----------
6,210,598 36,820,733
LOANS PAYABLE (Note 4) 119,462 100,873
LIABILITIES OF DISCONTINUED OPERATIONS (Note 13) -- 499,377
----------- -----------
6,330,060 37,420,983
----------- -----------
S H A R E H O L D E R S' E Q U I T Y
CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Note 7) 3,972,512 3,762,774
RETAINED EARNINGS (DEFICIT) 167,128 (134,438)
----------- -----------
4,139,640 3,628,336
----------- -----------
$10,469,700 $41,049,319
=========== ===========
===================================================================================================================
See Accompanying Notes F-5
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(EXPRESSED IN U.S. DOLLARS)
FOR THE YEAR ENDED MARCH 31 1996 1995
===================================================================================================================
REVENUES
Commissions, trading and investment income $4,500,899 $3,971,160
Fee revenue 1,356,297 56,907
---------- ----------
5,857,196 4,028,067
---------- ----------
EXPENSES
Selling, marketing and research 4,207,289 2,868,886
Salaries and benefits 759,361 291,687
General and administration 702,938 796,673
Other 13,132 --
Gain on foreign exchange (20,902) (247)
Interest, bank charges and interest income, net (37,337) 5,830
Amortization 218,084 24,272
---------- ----------
5,842,565 3,987,101
---------- ----------
INCOME FROM CONTINUING OPERATIONS 14,631 40,966
LOSS FROM DISCONTINUED OPERATIONS (94,252) (184,845)
GAIN ON DISPOSITION OF SUBSIDIARY (Note 13) 409,418 --
---------- ----------
INCOME (LOSS) - Before income taxes 329,797 (143,879)
PROVISION FOR (RECOVERY OF) INCOME TAXES 28,231 (9,441)
---------- ----------
NET INCOME (LOSS) 301,566 (134,438)
DEFICIT - Beginning of year (134,438) --
---------- ----------
RETAINED EARNINGS (DEFICIT) - End of year $ 167,128 $ (134,438)
========== ==========
EARNINGS (LOSS) PER SHARE (Note 14)
From continuing operations $ 0.03 $ 0.26
========== ==========
After discontinued operations and gain on disposition of subsidiaries $ 0.60 $ (0.85)
========== ==========
===================================================================================================================
See Accompanying Notes F-6
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(EXPRESSED IN U.S. DOLLARS)
FOR THE YEAR ENDED MARCH 31 1996 1995
===================================================================================================================
OPERATING ACTIVITIES
Net income (loss) $ 301,566 $ (134,438)
Items not affecting cash
Amortization 218,084 24,272
Gain on disposition of subsidiary (409,418) --
------------- -----------
110,232 (110,166)
(Decrease) increase in due to brokers and dealers, net (28,664,174) 29,995,649
Decrease (increase) in client deposits 15,720,553 (14,779,20)
Increase (decrease) in marketable securities 13,056,486 (15,682,07)
Increase in accounts receivable and sundry assets (183,487) (102,741)
Increase in accounts payable and accrued liabilities 392,164 283,460
------------- -----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 431,774 (395,078)
------------- -----------
FINANCING ACTIVITIES
Proceeds on issuance of capital stock and additional paid-in capital 555,000 3,762,774
Increase in loans payable 18,589 100,872
------------- ------------
CASH PROVIDED BY FINANCING ACTIVITIES 573,589 3,863,646
------------- ------------
INVESTING ACTIVITIES
Start-up costs (438,803) --
Long-term investments (13,472) (900,361)
Purchase of capital assets (132,533) (957,653)
Reorganization costs (61,632) (234,574)
Goodwill -- (1,143,982)
Investment in subsidiaries (Note 5) -- (507,457)
Discontinued operations (126,809) 258,684
------------- ------------
CASH USED IN INVESTING ACTIVITIES (773,249) (3,485,343)
------------- ------------
INCREASE (DECREASE) IN CASH 232,114 (16,775)
CASH - Beginning of Year 490,681 --
CASH ACQUIRED ON ACQUISITION OF SUBSIDIARIES -- 507,456
------------- ------------
CASH - End of Year 722,795 $ 490,681
============= ============
===================================================================================================================
See Accompanying Notes F-7
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
1. CHANGE IN ACCOUNTING POLICY
During the year, the company changed its method of valuing certain
subsidiaries from fair value of consideration, which was based on the
market price of shares given up to the carrying value of the underlying
assets to reflect that the effective control of these subsidiaries did not
change on acquisition.
The change has been applied retroactively, and has resulted in a
restatement of 1995 balances. The effect of this is a decrease in goodwill
and additional paid-in capital, of $7,103,020.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with generally
accepted accounting principles and reflect the following policies:
a) Principles of consolidation
The attached consolidated financial statements of InterUnion
Financial Corporation, a Delaware Corporation, ("the Company")
contain the financial position, results of operations and changes
in financial position of the Company and its subsidiaries, Bearhill
Limited, Credifinance Capital Inc., Credifinance Securities
Limited, Guardian Timing Services Inc., I & B Inc. and Reeve,
MacKay & Associates Limited. All transactions and balances between
the company and its subsidiaries have been eliminated.
b) Marketable securities
Marketable securities are stated at market value.
c) Security transactions
Security transactions are recorded in the accounts on trade date.
Commission income and related expenses for transactions executed
but not yet settled are accrued as of the financial statement date.
d) Capital assets
Capital assets are stated at cost less accumulated amortization.
It is the company's policy to provide amortization over the
estimated useful lives of the capital assets at the following
rates:
Automobile 30% on diminishing balance
Computer equipment 30% on diminishing balance
Furniture, fixtures and equipment 20% on diminishing balance
Computer software over 10 years
Leasehold improvements over the lease term
Research materials 20% on diminishing balance
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/Continued... F-8
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
e) Start-up Costs
Costs incurred in start-up of the company's wholly-owned auction
subsidiary will be amortized on a straight- line basis over 5 years
commencing in the 1997 fiscal year.
f) Reorganization Costs
Costs incurred in reorganizing the structure of the company are
amortized on a straight-line basis over 5 years commencing in the
1996 fiscal year.
g) Goodwill
Goodwill represents the deficit of Au 'N Ag Inc. at acquisition
date and is amortized on a straight-line basis over 20 years
commencing in the 1996 fiscal year.
h) Long-Term Investments
Long-term investments in non-marketable securities where control or
significant influence is not exercised are recorded at cost. The
long-term investment in shares of the company held by a subsidiary
is included with long-term investments until sold. The sale of
these shares will be accounted for as a capital transaction.
Stock exchange seats are recorded at cost and included in long-term
investments. Declines in market value are only recorded when there
is an indication of permanent decline in value.
i) Valuation of Subsidiaries Acquired
Subsidiaries acquired from non-related parties are valued at
acquisition based on the fair market value of the underlying assets
acquired.
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/Continued... F-9
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
j) Additional Paid-in Capital
Additional paid-in capital represents the proceeds on issuance of
common shares in excess of par value of shares issued, net of costs
to issue such shares.
k) Translation of Foreign Currencies
Foreign currency amounts have been translated to U.S. funds as
follows:
i) Monetary assets and liabilities, at the rate of exchange
prevailing on the balance sheet date.
ii) Revenues and expenses, at average rate of exchange for the
month of the transaction.
Gains and losses on translation of foreign currencies,
which are not significant, are included in the statement of
operations.
l) Capital Leases
Leases which transfer substantially all of the benefits and risks
incident of ownership of the property to the company, are treated
as "capital leases" and are recorded as the acquisition of an asset
and the incurrence of an obligation.
3. CAPITAL ASSETS Accumulated Net Carrying Amount
Cost Amortization 1996 1996
---- ------------ ---- ----
Automobile $ 21,781 $ 8,192 $ 13,589 $ 3,123
Computer equipment 104,024 47,944 56,080 44,573
Furniture, fixtures and equipment 118,299 32,393 85,906 30,253
Leasehold improvements 1,273 1,273 -- --
Research materials 20,964 2,097 18,867 --
Computer software (Note 12) 864,554 90,104 774,450 855,432
---------- -------- -------- --------
$1,130,895 $182,003 $948,892 $933,381
========== ======== ======== ========
Automobile and furniture, fixtures and equipment includes amounts under
capital leases with a cost of approximately $21,000. The $19,000
obligation under these capital leases is included in accounts payable.
===============================================================================
/Continued... F-10
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
4. LOANS PAYABLE
The amounts are due to shareholders or parties that are directly or
indirectly related to shareholders. The loans are non-interest bearing and
have no specific repayment terms.
5. ACQUISITION OF SUBSIDIARIES
During 1995, the company acquired the subsidiaries described in Note 2(a).
The consideration for these acquisitions was a combination of common shares
of the company and 27,828 common share purchase warrants (Note 8).
The acquisition of the subsidiaries is summarized as follows:
Cash $ 507,456
Computer software (Note 12) 855,432
Other non-cash liabilities assumed in excess of assets acquired (40,542)
----------
$1,322,346
==========
6. CHANGE OF NAME
Effective, April 17, 1994, subsequent to the controlling interest being
acquired by the company's shareholders on April 11, 1994, the name of the
company was changed to InterUnion Financial Corporation from Au 'N Ag, Inc.
Because effective control was acquired by the shareholders of the company
in an arm's length transaction, the deficit of $1,143,643 in Au 'N Ag at
April 11, 1994 has been included in 1995 goodwill in the attached
consolidated balance sheet.
===============================================================================
/Continued... F-11
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
7. CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
AUTHORIZED
1,500,000 Non-cumulative, non-participating, ($.10
par value) Class A preference shares entitled
to 100 votes for every one share issued
50,000,000 Non-cumulative, non-participating non-voting
Class "B" preference shares with a par value to
be determined at date of first issue
50,000,000 Non-cumulative, non-participating, non-voting,
convertible into common shares at a conversion
rate to be determined at the date of first
conversion, Class "C" preference shares with a
par value to be determined at date of first issue
100,000,000 Common shares ($.001 par value)
ISSUED
Additional
Number Capital Paid-In
of Shares Stock Capital Total
--------- ------- ----------- -----
Class A preference shares 1,500,000 $ 150,000 $ -- $ 150,000
========= ---------- ------------ ------------
Common shares (adjusted for
reverse stock splits)
Balance, April 15, 1994 122,739 $ 24,546 $ 1,122,059 $ 1,146,605
Shares issued during 1995,
net of costs 246,319 49,264 2,416,905 2,466,169
--------- ---------- ------------ ------------
Balance, March 31, 1995 369,058 73,810 3,538,964 3,612,774
Shares issued during 1996,
net of costs, and other
adjustments 323,500 64,700 145,038 209,738
Balance, March 31, 1996 692,558 138,510 3,684,002 3,822,512
========= ----------- ------------ ------------
$ 288,510 $ 3,684,002 $ 3,972,512
=========== ============ ============
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/Continued... F-12
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
7. CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL - Continued
During 1995, a reverse stock split of 10 (ten) to 1 (one) was approved.
Subsequent to the 1996 year-end, a reverse stock split of 20 (twenty) to 1
(one) was approved, as explained in Note 14.
8. OPTIONS AND WARRANTS
Subsequent to year-end, options for 40,250 shares (adjusted for the 20 to 1
reverse stock split described in Note 7) at $40.00 and warrants for 102,828
shares (adjusted for the 20 to 1 reverse stock split described in Note 7)
at $40.00 outstanding as at March 31, 1995 and 1996 were cancelled.
9. INCOME TAX MATTERS
The company's subsidiaries have available losses, the benefits of which
have not been recorded, of approximately $650,000 to be applied against
future taxable income. These losses expire as follows:
1999 $ 160,000
2000 240,000
2001 60,000
2002 190,000
-----------
$ 650,000
===========
10. CONTRACTS AND COMMITMENTS
a) Agreement with Canada Trust Securities Inc.
A subsidiary of the company has entered into an agreement with
Canada Trust Securities Inc. ("CT") whereby CT will perform certain
securities trading and clearing activities and record-keeping as
agent for and on behalf of the company in various securities
markets. The agreement requires CT to hold securities and/or cash
of the clients of the company in segregation or safekeeping as the
case may be, as and when required by regulatory requirements. In
summary, the services provided by CT are merely administrative in
nature and all obligations to pay for securities purchased and to
deliver securities sold for the company's clients rests with the
company and not CT.
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/Continued... F-13
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
10. CONTRACTS AND COMMITMENTS - Continued
b) Lease Commitments
The total annual rent obligations under the operating leases for
equipment is approximately $13,000
Minimum annual rentals, exclusive of additional operating costs,
under the leases for the company's premises in each of the next
five years are approximately:
1996 $ 100,000
1997 115,000
1998 135,000
1999 120,000
2000 120,000
11. WARRANTS HELD
The company, holds warrants for common shares in public companies
received as fees in connection with underwritings and other
services provided. No value has been recorded in respect of these
warrants.
12. SALES COMMITMENT
The company entered into an option agreement with a major
international financial institution whereby software owned by its
subsidiary, Bearhill Inc. may be sold for proceeds to the company
of approximately $15,000,000 Cdn. (March 31, 1996 - $11,000,000
U.S.). The company's interest in this software through its
interest in Bearhill Inc. is valued at approximately $770,000 and
is included in capital assets (Note 3).
===============================================================================
/Continued... F-14
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
13. DISCONTINUED OPERATIONS
During 1996 the company disposed, by way of an assignment in
bankruptcy of its real estate sales subsidiary, Rosedale Realty
Corporation ("Rosedale").
Accordingly, the assets and liabilities of Rosedale as at March 31,
1995 and the results of operations for the year ended March 31,
1995 and until the effective date of disposition (September 26,
1995) are accounted for as discontinued operations in the attached
consolidated financial statements.
As a result of the disposition of Rosedale, the company has a gain
to the extent that the deficit of Rosedale exceeds the company's
net investment at disposition date. There is no tax charge
required in respect of this gain.
At March 31, 1995, Rosedale's summarized financial position is as
follows:
Current assets $ 168,000
Capital assets 72,000
----------
$ 240,000
==========
Current liabilities $ 240,000
Long-term debt 260,000
----------
500,000
----------
Share capital 360,000
Deficit (620,000)
----------
$ (260,000)
-----------
$ 240,000
==========
Revenues of Rosedale up to September 26, 1995 were approximately
$400,000 ($1,300,000 for the year ended March 31, 1995).
14. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share have been calculated on the weighted
average number of common shares outstanding, adjusted for the
reverse stock splits described in Note 7, which amounted to 501,335
shares (1995 - 157,531 shares).
Fully diluted earnings per share for 1995 have not been computed as
the effect would have been anti- dilutive. All options and
warrants that were outstanding at the end of 1995 have been
cancelled as described in Note 8.
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/Continued... F-15
INTERUNION FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(EXPRESSED IN U.S. DOLLARS)
===============================================================================
15. INCOME TAXES
The company's approximate income tax charges (recovery) and
approximate effective rates are as follows:
1996 1995
---- ----
% %
- -
Statutory income tax
rate (recovery) $ 149,000 45 $ (64,000) (45)
Non-taxable gains (176,000) (53) (5,000) (3)
Other non-deductible items 13,000 4 -- ---
Losses not tax affected 42,000 12 60,000 42
----------- ---- -------- ---
Net taxes (recovery) and effective rate $ 28,000 8 $ (9,000) (6)
=========== ==== ========= ===
16. 1995 FINANCIAL STATEMENTS
1995 financial statements have been restated and reclassified to
reflect the change in accounting policy described in Note 1.
===============================================================================
F-16