UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30,1996
------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ____________
Commission file number _____________________________________
INTERUNION FINANCIAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 87-0520294
- -------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
249 Royal Palm Way, Suite 301 H, Palm Beach, Fl 33480
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(Address of principal executive offices) (Zip Code)
(561) 820 - 0084
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(Issuer's telephone number)
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or 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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of share outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: $0.001 Par Value Common Shares -
969,714 as of December 31,1996.
Transitional Small Business Disclosure Format (Check One) Yes No X
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Page 1 of 8
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(Expressed in U.S. Dollars)
6 mos ended 6 mos ended 12 mos ended 12 mos ended
Sept-96 Sept-95 Mar-96 Mar-95
REVENUES
Commissions, trading & investment income ....... 2,300,357 2,156,556 4,500,899 3,971,161
Sales .......................................... 709,726
Fee Revenue .................................... 317,308 456,524 1,364,297 56,907
---------- ---------- ---------- ----------
3,327,390 2,613,080 5,865,196 4,028,068
---------- ---------- ---------- ----------
EXPENSES
Cost of Goods Sold ............................. 709,726
Selling, Marketing & Research .................. 1,697,964 2,056,179 4,207,289 2,868,886
Salaries & Benefits ............................ 514,436 315,976 759,361 291,687
General & Administration ....................... 318,206 290,310 710,939 796,674
Other Expenses ................................. (1,108) 1,083 13,132
Foreign Exchange Loss (Gain) ................... 5 (22,780) (20,902) (247)
Interest & Bank Charges Expense (Income) ....... (12,647) (20,274) (37,337) 5,830
Amortization & Depreciation .................... 164,353 107,686 218,083 24,272
---------- ---------- ---------- ----------
3,390,935 2,648,180 5,850,565 3,987,102
---------- ---------- ---------- ----------
PROFIT (LOSS) FROM CONTINUING OPERATIONS ......... (63,545) (35,100) 14,631 40,966
Loss from Discontinued Operation ............... (94,252) (94,252) (184,845)
Gain on Disposal of Discontinued Assets ........ 409,418 409,418
---------- ---------- ---------- ----------
PROFIT (LOSS) FOR THE PERIOD - BEFORE INCOME TAXES (63,545) 280,066 329,797 (143,879)
PROVISION FOR INCOME TAXES (RECOVERABLE) ......... 6,533 5,909 28,231 9,441
---------- ---------- ---------- ----------
NET PROFIT (LOSS) FOR THE PERIOD ................. (70,078) 274,157 301,566 (134,438)
RETAINED EARNINGS (DEFICIT) - BEGINNING OF PERIOD 167,128 (134,438) (134,438) 0
========== ========== ========== ==========
RETAINED EARNINGS (DEFICIT) - END OF PERIOD ...... 97,050 139,719 167,128 (134,438)
========== ========== ========== ==========
FINANCIAL OVERVIEW
Common Shares Outstanding ...................... 969,714 531,558 692,572 369,058
Weighted Average Shares Outstanding ............ 738,129 482,140 501,335 157,531
EPS - From Continuing Operations ............... (0.09) (0.07) 0.03 0.24
EPS - After Discontinued Operations ............ (0.09) 0.57 0.60 (0.85)
See Accompanying Notes
Page 2 of 8
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1996
(Expressed in U.S. Dollars)
6 mos ended 6 mos ended 12 mos ended 12 mos ended
Sept-96 Sept-95 Mar-96 Mar-95
CURRENT ASSETS
Cash ....................................... 599,162 294,528 722,795 490,681
Due from brokers and dealers ............... 3,629,834 568,355 1,168,190 172,944
Client deposits ............................ 2,865,584 10,036,091 2,093,966 21,147,890
Marketable securities ...................... 292,014 161,069 2,625,585 15,682,071
Accounts receivable ........................ 1,076,333 241,039 208,727 55,262
Income tax receivable ...................... 20,506 22,941 1,597 15,866
Sundry assets and prepaid expenses ......... 127,385 57,261 75,906 31,615
----------- ----------- ----------- -----------
8,610,818 11,381,283 6,896,766 37,596,329
----------- ----------- ----------- -----------
CAPITAL ASSETS ............................... 882,827 984,869 948,892 933,380
START-UP COSTS ............................... 394,923 241,914 438,803
LONG TERM INVESTMENTS ........................ 913,834 927,913 913,834 900,361
DEFERRED CHARGES ............................. 380,581 190,120 184,944 234,574
GOODWILL ..................................... 1,057,870 1,115,052 1,086,461 1,143,982
DISCONTINUED ASSETS .......................... 240,693
----------- ----------- ----------- -----------
3,630,035 3,459,868 3,572,934 3,452,990
----------- ----------- ----------- -----------
=========== =========== =========== ===========
12,240,853 14,841,151 10,469,700 41,039,319
=========== =========== =========== ===========
CURRENT LIABILITIES
Accounts payable and accrued liabilities ... 1,079,819 487,471 675,623 283,459
Due to brokers and dealers ................. 353,503 2,499,665 30,168,593
Due to clients ............................. 6,388,090 10,006,099 3,035,310 6,368,681
----------- ----------- ----------- -----------
7,467,909 10,847,073 6,210,598 36,820,733
----------- ----------- ----------- -----------
DUE TO RELATED PARTIES ....................... 168,094 119,462 100,873
DISCONTINUED LIABILITIES ..................... 499,377
----------- ----------- ----------- -----------
0 168,094 119,462 600,250
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SHAREHOLDERS EQUITY
Capital Stock and additional paid-in capital 4,675,894 3,686,265 3,972,512 3,762,774
Retained Earnings (Deficit) ................ 97,050 137,719 167,128 (134,438)
----------- ----------- ----------- -----------
4,772,944 3,825,984 4,139,640 3,628,336
----------- ----------- ----------- -----------
=========== =========== =========== ===========
12,240,853 14,841,151 10,469,700 41,039,319
=========== =========== =========== ===========
See Accompanying Notes
Page 3 of 8
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(Expressed in U.S. Dollars)
6 mos 6 mos 12 mos 12 mos
ended ended ended ended
Sept-96 Sept-95 Mar-96 Mar-95
OPERATING ACTIVITIES
Net Income (Loss) ............................ (70,078) 274,157 301,566 (134,438)
Amortization ................................. 164,353 107,686 218,083 24,272
Gain on disposition of discontinued operations (409,418) (409,418)
----------- ----------- ----------- -----------
94,275 (27,575) 110,231 (110,166)
Increase (decrease) in due to brokers and .... (4,961,309) (30,210,501) (28,664,174) 29,995,649
dealers, net
Increase (decrease) in due to clients ........ 2,581,162 14,749,217 15,720,553 (14,779,209)
Increase (decrease) in marketable securities . 2,333,571 15,521,002 13,056,486 (15,682,071)
Increase (decrease) in accounts receivable & . (937,993) (218,497) (183,487) (102,741)
sundry assets
Decrease (increase) in accounts payable and .. 404,196 204,012 392,164 283,460
accrued liabilities
----------- ----------- ----------- -----------
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
(486,098) (17,658) 431,774 (395,078)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Capital stock and additional paid-in capital . 703,382 325,000 555,000 3,762,774
issued
Increase (decrease) in due to related parties (119,462) (67,221) 18,589 100,872
----------- ----------- ----------- -----------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES ... 583,920 392,221 573,589 3,863,646
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Capital assets ............................... (2,405) (57,914) (132,533) (957,654)
Start-up costs ............................... (241,914) (438,803)
Long term investments ........................ (27,552) (13,472) (900,361)
Deferred & Reorganization Costs .............. (70,547) (20,546) (61,632) (234,574)
Goodwill ..................................... (1,143,982)
Investment in subsidiaries ................... (507,456)
Acquisition Costs ............................ (148,503)
Discontinued operations ...................... (258,684) (126,809) 258,684
----------- ----------- ----------- -----------
CASH PROVIDED (USED) IN INVESTING ACTIVITIES ... (221,455) (606,032) (773,249) (3,485,343)
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH .................... (123,633) (196,153) 232,114 (16,775)
CASH - BEGINNING OF YEAR ....................... 722,795 490,681 490,681
CASH ACQUIRED ON ACQUISITION OF SUBSIDIARIES ... 507,456
----------- ----------- ----------- -----------
CASH - END OF YEAR ............................. 599,162 294,528 722,795 490,681
=========== =========== =========== ===========
See Accompanying Notes
Page 4 of 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Interim information is unaudited; however, in the opinion of the Company's
management, all adjustments necessary for a fair statement of interim results
have been included in accordance with Generally Accepted Accounting Principles
in Canada. All adjustments are of a normal recurring nature unless specified in
a separate note included in these Notes to Consolidated Financial Statements.
The results for interim periods are not necessarily indicative of results to be
expected for the entire year. These financial statements and notes should be
read in conjunction with the Company's annual consolidated financial statements
and the notes thereto for the fiscal year ended March 31, 1996, included in its
on Form 10-SB/A for the year ended March 31,1996 (the "1996 Form 10-SB/A") and
available from the Company. As of March 31,1997, the Company will report solely
under US GAAP.
2. In the second quarter of 1997, the Company issued 277,142 common shares for
gross proceeds to the Company of US$759,710. The Company incurred approximately
US$56,328 in costs associated with the issuance of these common shares:
these costs are accounted for as a deduction from the gross proceeds.
3. Earnings per share is computed using the weighted average number of common
shares outstanding during the period. Loss per share is computed using the
weighted average number of common shares outstanding during the period.
Page 5 of 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
During the second quarter of fiscal 1997 (three months ending September
30,1996), InterUnion reported consolidated revenues of US$1.2 million.
Selected financial data from InterUnion's financial statements is (figures in
000's except per share data):
3 mos ended 3 mos ended 6 mos ended 6 mos ended
Sept-96 Sept-95 Sept-96 Sept-95
Commission 936 763 2,300 2,157
Sales 194 710
Fee Revenue 87 697 317 456
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Total 1,217 1,460 3,327 2,613
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E.P.S. - Continuing Operations (0.10) (0.20) (0.09) (0.07)
E.P.S. - Discontinuing Operations (0.10) 0.61 (0.09) 0.57
3 mos ended 3 mos ended 3 mos ended 3 mos ended
Sept-96 Jun-96 Mar-96 Dec-95
Working Capital 1,143 653 686 419
Shareholders' Equity 4,773 4,146 4,140 3,782
The sales component under Revenues represents the revenues that the Company's
auction subsidiary generates net of commissions and buyers premium. This amount
is offset by the Cost of Goods Sold item under Expenses. Had the revenue
component been excluded, total revenues would have been the same as a year
earlier at $2.6 million for the six months and down 30% for the three months
ending September 1996.
The reduction in the second quarter revenues versus the first is due to the
following:
- Credifinance Securities Limited: most of the sales and research staff
effort was directed towards corporate finance activities which allowed
the completion of two transactions (efforts continue to hire
traders/salespeople).
- Reeve, Mackay & Associates Limited: as previously stated in the 10-QSB
MDA, there are two high seasons in the auction business: fall (November
& December) and late spring (May/June). Reeve, Mackay incurred a great
portion of the expenses related to important sales in the off season
months: moving and storage of goods, marketing of consignments and
cataloging.
Net loss for the six months ended September 30, 1996 was $70,078 on a weighted
average of 738,129 common shares for the period. Therefore, the loss per share
for the period is $0.09. Consolidated cash flow for the period was $94,275. In
the corresponding period a year earlier net income was $280,066 for E.P.S of
$0.57 on a weighted average number of common shares outstanding of 482,140. The
figure for the six months ending September 1995 includes a profit from
discontinued operations of $315,166 or $0.64 per share. Therefore, from
operations, the Company had a net loss of $41,009 or $0.07 per share.
Operating losses increased marginally due to increased non cash expenses.
Differences in cash related expenditures offset each other. Selling, Marketing &
Research were down as more revenues are being generated from new financing than
from agency commission. Administration, General Expenditures and Salaries are up
in comparison to a year earlier as the Company is no longer capitalizing the
start-up of the new auction business. In the previous fiscal year, the Company
capitalized $438,803 in start-up costs under Canadian GAAP. This amount is to be
charged to earnings over five years, under US GAAP this amount has already been
charged to earnings.
The increase in the cost of business results, in part, from the labor costs
associated with the auction business which is a fixed cost, unlike the other
subsidiaries in which labor costs are variable expenditure.
The Company's book value per share at the end of the second quarter is $4.92
versus $5.98 six months earlier and $7.20 at September 30, 1995. The reduction
is primarily due to the issuance of 277,142 new common stock for net proceeds of
$703,382 during the second quarter of the current fiscal year.
Page 6 of 8
As reported in our 10-QSB for the first quarter, InterUnion has raised $759,710
and received commitment for an additional $1.5 million but the Company would
rather finalize the Placement at the same time that it announces an acquisition
or it receives its NASDAQ listing.
The Company continues to explore opportunities for the acquisition of operating
companies that will provide additional liquidity and cash flow. The Company
anticipates that such acquisitions would be financed by the use of the cash
generated by the above mentioned financing as well as the issuance of common
stock from treasury. Management of the Company advises that, while a number of
oppotunities have been explored, none have been consummated as the Company's
parameters were not satisfied.
Concluding Remarks
There are no other known trends, events or uncertainties that may have or are
reasonably likely to have a material impact on the Company's short-term or
long-term liquidity which has not been discussed above.
In addition, there are no significant income or losses that have arisen from the
Company's continuing operations that has not been analyzed or discussed above,
nor has there been any material change in any line item that is presented on the
financial statements which has also not been discussed above.
Certain Risk Factors Which May Impact Future Operations
The Company and its subsidiaries operate in a rapidly changing environment that
involves a number of factors, some of which are beyond management's control,
such as financial market trend and investors appetite for new financings.
Forward-looking statements included in Management's Analysis and Discussion
reflect management's best judgment based on known factors and involve risks and
uncertainties. Actual results could differ materially from those anticipated in
these forward-looking statements. Forward-looking information is provided by
InterUnion pursuant to the safe harbor established by recent securities
legislation and should be evaluated in the context of these factors.
In the opinion of management the financial statements for the periods ending
September 30,1996 accurately reflect the operations of the Company and its
subsidiaries. The Company has taken every reasonable step to ensure that its
quarterly financial statements do not represent a distorted picture to anyone
having a business reason to review such statements and who has also reviewed its
previous audited annual financial statements dated January 28, 1997.
Page 7 of 8
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceeding, nor is its property
the subject of a pending legal proceeding for which the claims, exclusive of
interest and costs, exceed 10% of the current assets of the Company on a
consolidated basis with the exception of the following.
As reported in our Form 10-SB, a Statement of Claim was filed in Ontario Court
(General Division) on May 31,1996 against Credifinance Securities Limited,
InterUnion Financial Corporation, Georges Benarroch and Ann Glover by Mr. John
Illidge, a former President and Chief Operating Officer of Credifinance
Securities Limited and Director of the Company. The plaintiff is seeking in
excess of $1.8 million. In the opinion of management and its legal advisors, the
likelihood that this law suit will adversely affect the Company is negligible
There has not been any change in the status of this claim.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There have been no defaults in the payment of principal or interest with respect
to any senior indebtedness of InterUnion Financial Corporation.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27........Financial Data Schedule (for S.E.C. use only).
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
InterUnion Financial Corporation
------------------------------------
(Registrant)
Date February 10, 1997 /s/ Georges Benarroch, Director
-------------------- ------------------------------------
(Signature)*
Date February 10, 1997 /s/ Ann Glover, Director
-------------------- ------------------------------------
(Signature)*
* Print the name and title of each signing officer under his signature.
Page 8 of 8