UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 2003
¨ 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 Incorporation or organization) | (IRS Employer Identification No.) |
1232 N. Ocean Way, Palm Beach, Fl | 33480 | |
(Address of principal executive offices) | (Zip Code) |
(561) 845-2849 | (561) 844-0517 | |
(Issuers telephone number) | (Issuers telecopier 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 ¨
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 ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: $0.001 Par Value Common Shares4,916,549 as of September 30, 2003
Transitional Small Business Disclosure Format (Check One) Yes ¨ No x
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 2003
Three Months Ended |
Six Months Ended |
|||||||||||
30-Sep-03 |
30-Sep-02 |
30-Sep-03 |
30-Sep-02 |
|||||||||
REVENUES |
||||||||||||
Investment Banking |
| 91,968 | | 79,956 | ||||||||
Interest Income |
| 7,631 | | 15,100 | ||||||||
| 99,599 | | 95,056 | |||||||||
EXPENSES |
||||||||||||
Selling, general and administrative |
43,100 | 1,735,865 | 68,171 | 1,761,161 | ||||||||
Foreign exchange loss (gain) |
1,529 | 19,696 | 2,245 | (14,348 | ) | |||||||
Interest |
| 9 | | 9 | ||||||||
44,629 | 1,755,570 | 70,416 | 1,746,822 | |||||||||
NET LOSS FOR THE PERIOD |
(44,629 | ) | (1,655,971 | ) | (70,416 | ) | (1,651,766 | ) | ||||
LOSS PER COMMON SHARE |
||||||||||||
Weighted Average common shares outstanding |
4,916,549 | 3,408,352 | 4,916,549 | 3,408,352 | ||||||||
Loss per share |
(0.009 | ) | (0.486 | ) | (0.014 | ) | (0.485 | ) |
See Accompanying Notes to Unaudited Consolidated Financial Statements
2
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 2003
AS AT SEPTEMBER 30 |
AS AT MARCH 31 |
|||||||||||
2003 |
2002 |
2003 |
2002 |
|||||||||
CURRENT ASSETS: |
||||||||||||
Cash and cash equivalent |
5,120 | 161,130 | 97,319 | 2,464,985 | ||||||||
Receivable from Affiliates |
3,428 | | | 41,226 | ||||||||
Refundable income taxes |
| 7,502 | | 7,502 | ||||||||
Prepaid expenses and other current assets |
1,451 | 3,871 | 1,239 | 7,061 | ||||||||
Notes receivable, current portion |
| | | | ||||||||
9,999 | 172,503 | 98,558 | 2,520,774 | |||||||||
NON-CURRENT ASSETS: |
||||||||||||
Note receivable, non-current portion |
| | | 717,598 | ||||||||
Total non-current assets |
| | | 717,598 | ||||||||
Total Assets |
9,999 | 172,503 | 98,558 | 3,238,372 | ||||||||
LIABILITES |
||||||||||||
CURRENT LIABILITIES: |
||||||||||||
Accounts payable and accrued liabilities |
14,913 | 31,314 | 33,056 | 46,272 | ||||||||
Total Current Liabilities |
14,913 | 31,314 | 33,056 | 46,272 | ||||||||
SHAREHOLDERS EQUITY: |
||||||||||||
Capital Stock and additional paid in Capital |
12,316,293 | 12,316,293 | 12,316,293 | 10,666,293 | ||||||||
Accumulated deficit |
(12,321,207 | ) | (12,175,104 | ) | (12,250,791 | ) | (7,474,193 | ) | ||||
Total shareholders equity |
(4,914 | ) | 141,189 | 65,502 | 3,192,100 | |||||||
Total Liabilities and Shareholders Equity |
9,999 | 172,503 | 98,558 | 3,238,372 | ||||||||
See Accompanying Notes to Unaudited Consolidated Financial Statements
3
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
AS AT SEPTEMBER 30, 2003
As at September 30 |
As at March 31 |
|||||||||||
2003 |
2002 |
2003 |
2002 |
|||||||||
CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL |
||||||||||||
Class A Preferred Stock, $0.10 par value |
||||||||||||
Authorized-1,500,000 shares |
| | | | ||||||||
Class B Preferred Stock, $0.10 par value |
||||||||||||
Authorized1,000 shares |
| | | | ||||||||
Issued and outstandingNone |
||||||||||||
Class C Preferred Stock, $0.10 par value |
||||||||||||
Authorized1,000 shares |
| | | | ||||||||
Issued and outstandingNone |
||||||||||||
Common Stock, $0.001 par value |
||||||||||||
Authorized10,000,000 shares |
||||||||||||
Issued and outstanding 4,916,549 in 2003; 1,916,549 in 2002 |
492 | 492 | 492 | 192 | ||||||||
Additional Paid-In Capital |
12,315,801 | 12,315,801 | 12,315,801 | 10,666,101 | ||||||||
ACCUMULATED DEFICIT |
(12,321,207 | ) | (12,175,104 | ) | (12,250,791 | ) | (7,474,193 | ) | ||||
TOTAL SHAREHOLDERS EQUITY |
(4,914 | ) | 141,189 | 65,502 | 3,192,100 | |||||||
See Accompanying Notes to Unaudited Consolidated Financial Statements
4
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED SEPTEMBER 30, 2003
Six Months Ended |
Twelve Months Ended |
|||||||||||
30-Sep-03 |
30-Sep-02 |
31-Mar-03 |
31-Mar-02 |
|||||||||
CASH FLOW FROM OPERATING ACTIVITIES |
||||||||||||
(Loss) Income |
(70,416 | ) | (1,651,766 | ) | (1,727,453 | ) | 377,487 | |||||
Adjustment to reconcile net loss to net cash provided by (used in) operating activities |
||||||||||||
Equity in net losses of unconsolidated affiliate |
| | | 238,342 | ||||||||
Non cash operating expenses (Income) |
| 1,650,000 | 1,650,000 | (29,282 | ) | |||||||
Gain on disposal of unconsolidated affiliate |
| | | (756,669 | ) | |||||||
(70,416 | ) | (1,766 | ) | (77,453 | ) | (170,122 | ) | |||||
Changes in non-cash operating assets and liabilities: |
||||||||||||
(Increase) Decrease in accounts receivable and other assets |
(3,640 | ) | 44,416 | 54,551 | (1,661 | ) | ||||||
(Decrease) Increase in accounts payable and accrued liabilities |
(18,143 | ) | (14,958 | ) | (13,217 | ) | 7,142 | |||||
NET CASH FLOWS (USED IN)/PROVIDED BY OPERATING ACTIVITIES |
(92,199 | ) | 27,692 | (36,119 | ) | (164,641 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||
Repayment of Note Receivable |
| | | (287,193 | ) | |||||||
Dividends Paid |
| (2,549,145 | ) | (2,549,145 | ) | | ||||||
NET CASH FLOWS USED IN FINANCING ACTIVITES |
| (2,549,145 | ) | (2,549,145 | ) | (287,193 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||
Repayment of long term notes receivable |
| 717,598 | 717,598 | | ||||||||
Investment in Short term notes receivable |
| (500,000 | ) | (500,000 | ) | | ||||||
Proceeds from sale of investment |
| | | 2,709,463 | ||||||||
Repayment of notes receivable |
| | | 200,000 | ||||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
| 217,598 | 217,598 | 2,909,463 | ||||||||
NET (DECREASE) INCREASE IN CASH |
(92,199 | ) | (2,303,855 | ) | (2,367,666 | ) | 2,457,629 | |||||
CASH AND CASH EQUIVALENTSBeginning of Period |
97,319 | 2,464,985 | 2,464,985 | 7,356 | ||||||||
CASH AND CASH EQUIVALENTSEnd of period |
5,120 | 161,130 | 97,319 | 2,464,985 | ||||||||
See Accompanying Notes to Unaudited Consolidated Financial Statements
5
INTERUNION FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003
1. Interim information is un-audited; however, in the opinion of management, all adjustments necessary for a fair statement of interim results have been included in accordance with Generally Accepted Accounting Principles. All adjustments are of a normal recurring nature unless specified in a separate note included in these Notes to Un-audited Consolidated Financial Statements. The results for interim periods are not necessarily indicative of results to be expected for the entire fiscal year. These financial statements and notes should be read in conjunction with the Companys annual consolidated financial statements and the notes thereto for the fiscal year ended March 31, 2003, included in its Form 10-KSB for the year ended March 31, 2003.
2. Loss per share is computed using the weighted average number of common shares outstanding during the period.
3. The accompanying financial statements have been prepared assuming the Company will continue on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses from operations during its recent operating history. The ability of the Company to continue as a going concern is dependant upon obtaining future financing, attaining profitable operations and having continuing support from shareholders. Management is in the process of evaluating future business opportunities, which would generate revenue to sustain the operations of the Company. The financial statements do not include any adjustment relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENT:
On May 15, 2003The Financial Accounting Standards Board (FASB) issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The Statement improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity.
On April 30, 2003The Financial Accounting Standards Board (FASB) issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. The Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133.
Management does not expect that the adoption of SFAS 149 and SFAS 150 will have a material effect on the Companys operations, cash flows or financial position.
Capital Stock and Additional Paid-in-Capital
During the quarter ended September 30, 2002, the Company incurred an expense of $1,650,000 on account of a Service Agreement. The fee was paid by issuing 3,000,000 common shares in the fiscal year 2003. This increased the number of issued and outstanding common stock of the company to 4,916,549. The information was filed on Form S-8 dated August 26, 2002.
Dividends Paid
During the quarter ended September 30, 2002 extraordinary cash dividend of $2,549,010 ($1.33 per common share) was paid to the shareholders of record on August 23, 2002. Also, InterUnion has distributed as dividend 600,000 common shares of Kyto Biopharma, Inc. which it acquired in settlement of a Note Receivable of $500,000. The shareholders received 0.3131 common shares of Kyto Biopharma, Inc. for each common share of InterUnion Financial Corp they owned and cash for any fractional shares that would have been issued.
Related Party Transaction
During the the second quarter ended September 30, 2003 a $25,000 Management Fee was paid to Credifinance Securities Ltd (CFSL), a company with common ownership.
During the quarter ended September 30, 2002 a fee was paid to Credifinance Capital Corp (CFCC), a company with common ownership, of $30,000 to act as the Paying Agent for IUFCs Dividends. Also, a $30,000 Management Fee was paid to Credifinance Securities Ltd (CFSL), a company with common ownership.
6
INTERUNION FINANCIAL CORPORATION
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003
Supplemental disclosure of Non-Cash Financing and Investing Transactions
The following is additional information regarding the Consolidated Statement of Cash Flows:
Sept 30 2003 |
Sept 30 2002 | |||||
Shares of Kyto Biopharma, Inc. received in settlement of Notes Receivable |
$ | | $ | 500,000 | ||
Distribution of Kyto Biopharma, Inc. shares to shareholders as dividend |
| 500,000 | ||||
Liabilities paid by issuing Common Stock |
| 1,650,000 |
Item 2 Managements Discussion and Analysis
(1) Overview
The company had a net loss of $70,416 for the first half of fiscal 2004.
Selected financial data from InterUnions financial statements is (figures in 000s except per share data):
3 mos. ended Sept-30-03 |
3 mos. ended Sept-30-02 |
3 mos. Ended Sept-30-01 |
|||||||
Working Capital |
(5 | ) | 141 | (89 | ) | ||||
Cash Flow |
(92 | ) | (2,304 | ) | 15 | ||||
Total Assets |
10 | 173 | 3,005 | ||||||
Shareholders Equity |
(5 | ) | 141 | 2,593 | |||||
Common Share, # |
4,916 | 4,916 | 1,890 | ||||||
Book Value Per Share |
(0.001 | ) | 0.03 | 1.36 |
On August 18, 2003,InterUnion has entered into a non-binding Letter of Intent (the LOI) with BMB Holding, Inc. (BMB), a Delaware corporation with offices in New York and Almaty, Kazakhstan, for the proposed acquisition by InterUnion of all of the outstanding shares of BMB, which indirectly holds a 70% interest in the Aksaz, Dolinnoe and Emir oil fields in Kazakhstan (the Acquisition).
The proposed Acquisition is subject to certain conditions, including due diligence, the execution of a definitive agreement and approval of the Acquisition by the board of directors and shareholders of the respective companies as well as all regulatory and other approvals.
7
INTERUNION FINANCIAL CORPORATION
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003
On August 9 2002, InterUnion has entered into a non-binding Letter of Intent (the LOI) with Falcon Energy Holding Corporation (Falcon), a Delaware corporation with offices in Germany and Kazakhstan, for the proposed acquisition by InterUnion of all of the outstanding shares of two corporations to be incorporated by Falcon or an affiliate of Falcon, which will respectively hold, directly or indirectly, a 95% interest in the Kopa oil field in Kazakhstan (Falcon Kopa BV), and a 66.67% interest in the Aksaz, Dolinnoe and Emir oil fields in Kazakhstan (Falcon Caspian BV), (collectively, the Acquisition). Pursuant to the LOI, Falcon has agreed to pay a non-refundable deposit of $75,000 to InterUnion.
The proposed Acquisition was subject to conditions, such as due diligence; the receipt of $2,000,000 in firm commitments with respect to a private placement of Post-Consolidation Shares by 5:00 p.m. EST on August 30, 2002, and closing of such private placement on or prior to September 13, 2002; as well as all necessary regulatory and other approvals. The non binding letter of intent was cancelled on October 31, 2002 as Falcon did not meet the financing conditions.
(2) Net Revenues
The Company had no revenues for the first six months of fiscal 2004, however during the first six months of fiscal 2003, the company had revenues of $99,599 mainly due to $75,000 being received from Falcon Energy Holding Corporation.
(3) Expenses
Selling, general and administration expenses for six months ended September 30, 2003, amounted to $68,171 as compared to $1,791,161 a decrease of $1,722,990 or 96%. This was mainly due to a $1,650,000 consulting expense which occurred in the second quarter of fiscal 2003 by issuing 3,000,000 InterUnion Financial Common shares in-lieu of cash payment.
(4) Net Income for six months ending September 30, 2003
Net loss for the six months ended September 30, 2003 was $70,416 or $0.014 per share based on a weighted average number of shares of 4,916,549 versus a loss of $1,651,766 or $0.485 per share based on a weighted average number of shares of 3,408,352 a year earlier.
(5) Liquidity and Capital Resources
Date |
Number of Shares |
Amount |
Type | |||
May 1998 |
17,002 | 68,008 | Regulation S | |||
June 1998 |
35,000 | 140,000 | Regulation S | |||
July 1998 |
262,142 | 1,048,568 | Regulation S | |||
December 1998 |
10,000 | 40,000 | Regulation S | |||
February 1999 |
180,000 | 630,000 | Regulation S | |||
March 1999 |
25,000 | 87,500 | Regulation S | |||
March 1999 |
1,140 | 4,560 | Regulation S | |||
November 1999 |
114,500 | 57,250 | Regulation S | |||
November 1999 |
2,014,198 | 805,679 | Regulation S | |||
September 2000 |
15,000,000 | 150,000 | Regulation S | |||
April 2002 |
16,575 | 50,000 | Regulation S | |||
August 2002 |
3,000,000 | 1,650,000 | Regulation S-8 |
8
INTERUNION FINANCIAL CORPORATION
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003
(6) 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 Companys short-term or long-term liquidity that have not been discussed above.
In addition, there is no significant income or loss that has risen from the Companys continuing operations that has not been analyzed or discussed above. In addition, there has not been any material change in any line item that is presented on the financial statements that has not been discussed above.
(7) 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 managements control, such as financial market trends and investors appetite for new financings. It should also be emphasized that, should the Company not be successful in completing its own financing (either by debt or by the issuance of securities from treasury), its strategy to grow by acquisition will be affected.
In the opinion of management the financial statements for the period ended September 30, 2003 accurately reflect the operations of the Company and its subsidiaries. The Company has taken every reasonable step to ensure itself 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 for the year ended March 31, 2003.
Forward-looking information included in Managements Analysis and Discussion reflects managements best judgment based on known factors, and involves risks and uncertainties. Actual results could differ materially from those anticipated in this forward-looking information. 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.
9
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.
Item 2 Changes in Securities
During the quarter ended September 30, 2002, the Company incurred an expense of $1,650,000 on account of a Service Agreement. The fee was paid by issuing 3,000,000 common shares in the fiscal year 2003. This increased the number of issued and outstanding common stock of the company to 4,916,549. The information was filed on Form S-8 dated August 26, 2002.
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
31.1) Section 302 Certification
32.1) Certification Pursuant to 18 U.S.C. Section 1350.
10
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 14, 2003 |
InterUnion Financial Corporation (Registrant)
/s/ Georges Benarroch, Director (Signature) |
11
Exhibit Index
Exhibit Number |
Description | |
31.1 |
Section 302 Certification | |
32.1 |
Certification Pursuant to 18 U.S.C. Section 1350. |
12