INTERNATIONAL MERCANTILE CORP
Filing Type: 10-Q
Description: Quarterly Report
Filing Date:
Period End: Mar 31, 1999
Primary Exchange: N/A
Ticker: N/A
<PAGE>
INTERNATIONAL MERCANTILE CORP - 10-Q - Quarterly Report
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TABLE OF CONTENTS
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To jump to a section, double-click on the section name.
10-Q
PART I........................................................................4
Item 1........................................................................4
Balance Sheet.................................................................4
Income Statement 1............................................................5
Cash Flow Statement...........................................................5
Table 5.......................................................................6
Table 6.......................................................................6
Table 7.......................................................................8
Table 8.......................................................................8
Item 2........................................................................9
PART II......................................................................10
Item 1.......................................................................10
Item 2.......................................................................10
Item 3.......................................................................11
Item 4.......................................................................11
EX-27
.............................................................................11
<PAGE>
INTERNATIONAL MERCANTILE CORP - 10-Q - Quarterly Report
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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended March 31, 1999.
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
For the transition period from to
Commission File Number: 0-7693
INTERNATIONAL MERCANTILE CORPORATION
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(Exact name of small business issuer as specified in its charter)
MISSOURI 43-0970243
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
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(Address of principal executive offices)
410-242-5000
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(Issuer's telephone number)
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(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 for such shorter period that
the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [ ] No [x]
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
4,080,757 Class A Common Shares as of March 31, 1999 1,000,000 Class B
Common Shares as of March 31, 1999
Transitional Small Business Disclosure Format Yes [ ] No [X]
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements for the period ended March 31, 1999 included
herein have been prepared by International Mercantile Corporation, (the
"Company") without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). In the opinion of
management, the statements include all adjustments necessary to present fairly
the financial position of the Company as of March 31, 1999, and the results of
operations and cash flows for the three month periods ended March 31, 1998 and
1999.
INTERNATIONAL MERCANTILE CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1999
1998 UNAUDITED
------------ ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $205,022 $278,168
Loans receivable -0- 132,532
Mortgages receivable 108,800 108,800
--------- ---------
Current assets 313,822 519,500
CAPITAL ASSETS-NET 6,328 5,711
OTHER ASSETS
Excess of purchase price over assets acquired 1,120,186 1,120,186
Notes receivable-affiliated parties 232,591 232,591
S Securities-available for sale 481,872 487,375
Security deposit 5,488 5,489
Intangible assets 32,241 28,239
--------- ---------
TOTAL OTHER ASSETS 1,872,378 1,873,877
--------- ---------
TOTAL ASSETS $2,192,528 $2,399,088
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 4,397 $ 6,582
Payroll liabilities and taxes payable 74,263 111,095
Warehouse loan payable 103,360 103,360
Notes payable 57,494 57,494
Deferred income 5,440 5,440
Bank line of credit 200,700 206,922
--------- ---------
Total current liabilities 445,654 490,893
CAPITAL STOCK
Preferred stock- Series 1- authorized 10,000,000 shares, $0.10 par value
each, at March 31, 1999, the number of shares outstanding is -0-.
Preferred stock- Series 2 - authorized 2,000,000 shares, $0.10 par value
each, at March 31, 1999, the number of shares outstanding is -0-.
Preferred stock - Series 3, authorized 5,000,000, $0.10 par value each. At
March 31, 1999, the number of shares outstanding is -0- .
Common stock-Class A-authorized 31,000,000 common shares, par value $0.01 33,236 40,807
each, at December 31, 1998 and March 31, 1999, the number of shares
outstanding was 3,323,615 and 4,080,757 respectively
Common stock - Class B - authorized 2,000,000, $0.01 par value each, the number 10,000 10,000
of shares outstanding at December 31, 1998 and March 31, 1999 is
1,000,000 Unrealized gain on securities available for sale -0- 5,500
Additional paid in capital 13,783,133 14,040,561
Retained earnings (11,265,312) (11,374,490)
---------- ----------
Total stockholders' equity 2,561,057 2,722,378
Less treasury stock (814,183) (814,183)
--------- ---------
Total stockholders equity 1,746,874 1,908,195
--------- ---------
Total liabilities and stockholders' equity $2,192,528 $2,399,088
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31
<TABLE>
<CAPTION>
1998 1999
UNAUDITED UNAUDITED
--------- ---------
<S> <C> <C>
Revenue $ 232,886 $ 337,263
Mortgage related expenses 136,653 177,724
------- -------
Gross profit 96,233 159,539
------- -------
Operations:
General and administrative 266,297 260,719
Depreciation and amortization 841 4,618
------- -------
Total expense 267,138 265,337
------- -------
Income (loss) from operations (170,905) (105,798)
Corporate income taxes -0- -0-
Other income
Interest income 1,598 1,420
Gain on sale of asset 250 -0-
Interest expense (2,683) (4,800)
-------- --------
Net Profit (Loss) $(171,740) $(109,178)
======== ========
Net income (loss) per share - basic $(0.05) $ (0.03)
======== ========
Number of shares outstanding 3,457,583 4,080,757
========= =========
Net income (loss) per share - diluted $(0.05) $(0.03)
========= =========
Number of shares outstanding 3,457,583 4,080,757
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended March 31
<TABLE>
<CAPTION>
1998 1999
UNAUDITED UNAUDITED
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (171,740) $ (109,178)
Depreciation 841 4,618
Adjustments
Accounts payable and accrued expenses 13,250 2,184
Accrued salaries and payroll taxes payable (12,495) 36,832
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TOTAL CASH FLOWS FROM OPERATIONS (170,144) (65,544)
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
Mortgages receivable 575,100 -0-
Notes and loans receivable (66,667) (132,532)
Fixed assets (2,500) -0-
------- -------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES 505,933 (132,532)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of capital stock 280,000 265,000
Warehouse loan payable (548,025) -0-
Bank line of credit -0- 6,222
Deferred income (27,075) -0-
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TOTAL CASH FLOWS FROM FINANCING ACTIVITIES (374,100) 271,222
------- -------
NET INCREASE (DECREASE) IN CASH (38,311) 73,146
CASH BALANCE BEGINNING OF PERIOD 290,951 205,022
------- -------
CASH BALANCE END OF PERIOD $252,640 $278,168
========= ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
PREFERRED PREFERRED PREFERRED CLASS A CLASS A CLASS B CLASS B
STOCK STOCK STOCK COMMON COMMON COMMON COMMON
DATE SERIES 1 SERIES 2 SERIES 3 STOCK STOCK STOCK STOCK
---- -------- -------- -------- ------ --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
12-31-1995 3,133,151 $ 3,133,151
Net loss
--------- ---------
12-31-1996 3,133,151 3,133,151
--------- ---------
Reflects 31 to 1 reverse split 101,083 1,011
Shares issued for consulting fees 946,500 9,465
Shares issued for acquisitions 1,910,000 19,100
Sale of shares through private 220,000 2,200
Placement at $1.00 per share
12-31-1997 Net loss
Prior period correction - 1,000,000) (10,000)
Cancellation of shares
--------- -------
12-31-1997 2,177,583 21,776
Sale of shares 420,000 4,200
Issuance of shares as 1,093,699 10,937
Non cash compensation
Issuance of shares for 125,000 1,250
Legal expenses
Issuance of shares pursuant 507,333 5,073
To S-8 options valued at $1.74
Exchange of shares (1,000,000) (10,000) 1,000,000 10,000
12/31/98 Net loss
--- --- --- --------- ------- --------- ------
12-31-1998 -0- -0- -0- 3,332,615 $33,236 1,000,000 10,000
Sale of shares 757,142 7,571
3-31-99 Net loss
--- --- --- --------- ------- --------- ------
3-31-99 -0- -0- -0- 6,080,757 $40,807 1,000,000 10,000
=== === === ========= ======= ========= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL TREASURY RETAINED UNREALIZED GAIN
DATE PAID IN CAPITAL STOCK EARNINGS ON SECURITIES TOTAL
---- -------------- ----- -------- -------------- -----
<S> <C> <C> <C> <C> <C>
12-31-1995 $ 5,326,395 $ (814,183) $ (7,958,757) $(313,395)
12-31-1996 Net loss -0- -0-
------------ ----------- ------------ ----------
12-31-1996 5,326,395 $ (814,183) $ (7,958,757) $(313,395)
------------ ----------- ------------ ----------
Reflects 31 to 1 reverse split 8,458,535 (814,183) $ (7,958,757) (313,395)
Shares issued for consulting 947,035 956,500
Shares issued for acquisition 2,500,900 2,520,000
Sale of shares - private plmt 217,800 220,000
Prior period correction (990,000) (1,000,000)
12-31-1997 Net loss (1,511,538) (1,511,538)
------------ ----------- ------------ ----------
12-31-1997 11,134,270 (814,183) (9,470,295) 871,568
Sale of shares 415,800 420,000
Issuance of shares as 1,100,762 1,111,699
Non cash compensation
Issuance of shares for 254,375 255,625
Legal expense
Issuance of shares pursuant 877,927 883,000
To S-8
Exchange of shares -0-
12-31-98 Net loss (1,795,017) (1,795,017)
------------ ----------- ------------ ----------
12-31-1998 $ 13,783,134 $ (814,183) $(11,265,312) $1,746,875
Sale of shares 257,429 265,000
Unrealized Gain on Securities 5,500 5,500
3-31-99 Net loss (109,178) (109,178)
------------ ----------- ------------ --------- ----------
3-31-99 $ 14,040,561 $ (814,183) $(11,374,490) 5,500 $1,908,195
============ =========== ============ ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of International Mercantile
Corporation, (the "Company"), reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results of the interim
periods presented. All such adjustments are of a normal recurring nature. The
financial statements should be read in conjunction with the notes to financial
statements contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
2. NET INCOME PER SHARE
Shares used in calculating basic and diluted net income per share were as
follows:
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
1998 1999
------------- --------------
Total number common
shares outstanding 3,457,583 4,080,757
========= =========
3. ACCOUNTING FOR INCOME TAXES
The Company follows Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," which requires an asset and liability
approach of accounting for income taxes. Deferred tax assets and liabilities are
computed annually for differences between financial statement basis and tax
basis of assets, liabilities and available general business tax credit
carry-forwards. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized.
4. MARKETABLE SECURITIES
The Company adopted Financial Accounting Standards Board ("FASB") Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities", which
requires that investments in equity securities that have readily determinable
fair values and investments in debt securities be classified in three
categories: held-to-maturity, trading and available-for-sale. Based on the
nature of the assets held by the Company and Management's investment strategy,
the Company's investments have been classified as available-for-sale. Management
determines the appropriate classification of debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date.
Securities classified as available-for-sale are carried at estimated fair value,
as determined by quoted market prices, with unrealized gains and losses, net of
tax, reported in a separate component of stockholders' equity. At December 31,
1998 and March 31, 1999, the Company had no investments that were classified as
trading or held-to-maturity as defined by the Statement.
<PAGE>
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at December 31, 1998:
ESTIMATED
GROSS GROSS FAIR
UNREALIZED UNREALIZED MARKET
COST LOSSES GAINS VALUE
----- -------- --------- ---------
Cash $ 205,022 $ -0- $ -0- $ 205,022
------- ------- ------- --------
Total cash and cash
equivalents $ 205,022 -0- -0- $ 205,022
Securities-available for
sale $ 580,000 ( 98,128) -0- $ 481,872
-------- ------- ------ -------
Total cash, cash
equivalents and
securities available
for sale $ 785,022 $( 98,128) -0- $ 686,894
======== ======== ====== ========
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at March 31, 1999:
ESTIMATED
GROSS GROSS FAIR
UNREALIZED UNREALIZED MARKET
COST LOSSES GAINS VALUE
----- -------- --------- ---------
Cash $ 278,168 $ -0- $ -0- $ 278,168
------- ------- ------- --------
Total cash and cash
equivalents $ 278,168 -0- -0- $ 278,168
Securities-available for
sale $ 580,000 $(142,628) 50,000 $ 487,372
-------- ------- ------ -------
Total cash, cash
equivalents and
securities available
for sale $ 858,168 $(142,628) 50,000 $ 657,951
======== ======== ====== ========
5. Commitments and Contingencies
a. The employment agreement with Mr. Walter Deronde has been cancelled.
b. The employment agreement with Mr. Max Apple has also been cancelled.
c. The financial consulting agreement with Frederic Richardson has been paid
in full.
<PAGE>
6. Private Placement
Pursuant to a private placement under Rule 506 of the Securities Act of 1933,
the Company is offering a minimum of 4 Units and a maximum of 80 Units of its
securities. Each Unit is being sold at $25,000 per Unit and consists of 20,833
shares of Class A Common Stock and 20,833 shares of Convertible Series 1
Preferred Stock, which are convertible into 20,833 shares of Class A Common
Stock. The Units are being offered on a "best-efforts" basis. The Minimum Amount
of securities offered shall be 4 Units. The Units must be purchased for
investment purposes only and the free transferability of the securities is
restricted. The above terms were changed upon mutual agreement with the
investors to only the sale of Class A common stock shares at $0.35 per share.
This Offering will terminate on the earlier of receipt and acceptance of
subscriptions for all 80 Units or December 31, 1999, unless extended in the sole
discretion of the Company for an additional period of up to 90 days, subject to
termination at any time prior thereto by the Company.
As of March 31, 1999, the Company has sold several Units. The Company has
reserved approximately $200,000 worth of shares.
Item 2. Management's Discussion and Analysis or Plan of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three months ended March 31, 1998 and 1999
------------------------------------------------
Except for the description of historical facts contained herein, this Form 10Q
contains certain forward looking statements that involve risks and uncertainties
as detailed herein and from time to time in the Company's filings with the
Securities and Exchange Commission and elsewhere. Such statements are based on
management's current expectations and are subject to a number of factors and
uncertainties which could cause actual results to differ materially from those
described in the forward-looking statements. These factors include, among
others, the Company's fluctuations in sales and operating results, risks
associated with international operations and regulatory, competitive and
contractual risks and product development.
Results of operations for the three months ended March 31, 1999 as compared to
the three months ended March 31, 1998.
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Revenues were $337,263 for the three months ended March 31, 1999 as compared to
$232,886 for the three months ended March 31, 1998. Mortgages and related
expenses for the three months ended March 31, 1999, were $177,724 as compared to
$136,653 for the three months ended March 31, 1998 representing a cost of
mortgages related expenses of 52.7% for the three months ended March 31, 1999 as
compared to 58.7% for the three months ended March 31, 1998.
General and administrative costs for the three months ended March 31, 1999 were
$260,716, an decrease of 2.1% over expenses of $266,297 for the three months
ended March 31, 1998.
Liquidity and capital resources as of March 31, 1999.
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The Company's cash balance was $278,168 and working capital was $28,607 as of
March 31, 1999.
The Company's primary short-term needs for capital, which are subject to change,
are for the search for acquisitions, operation of the Company's mortgage
business and payment of the day to day operating expenses.
<PAGE>
Income tax: As of March 31, 1999, the Company has a tax loss carry-forward of
$12,040,102. The Company's ability to utilize its tax credit carry-forwards in
future years will be subject to an annual limitation pursuant to the "Change in
Ownership Rules" under Section 382 of the Internal Revenue Code of 1986, as
amended. However, any annual limitation is not expected to have a material
adverse effect on the Company's ability to utilize its tax credit
carry-forwards.
The Company expects its capital requirements to increase over the next several
years as it continues to develop its mortgage business and seek new
acquisitions, increases sales and administration infrastructure and embarks on
developing in-house business capabilities and facilities. The Company's future
liquidity and capital funding requirements will depend on numerous factors,
including the extent to which the Company's present management can fund the
continued capital requirements, the timing of regulatory actions regarding the
Company's potential acquisitions, the costs and timing of expansion of sales,
marketing activities, facilities expansion needs, and competition in the
mortgage business entered into.
The Company believes that its available cash and cash from management
contributions will be sufficient to satisfy its funding needs for the day to day
mortgage banking activities for at least the next 12 months. Thereafter, if cash
generated from any newly acquired or developed business operations is
insufficient to satisfy the Company's working capital and capital expenditure
requirements, the Company may be required to sell additional equity or debt
securities or obtain additional credit facilities. There can be no assurance
that such financing, if required, will be available on satisfactory terms, if at
all.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
No legal proceedings were brought, are pending or are threatened during the
quarter.
Item 2. Changes in Securities
Amendment to the Certificate of Incorporation
The Company has amended its certificate of incorporation to authorized the
Company to issue an aggregate of 50,000,000 shares of stock as follows:
31,000,000 shares of Class A Common Stock, par value $0.01 per share.
2,000,000 shares of Class B Common Stock, $0.01 per share.
10,000,000 shares of Preferred Stock, Series 1, $0.10 per share.
2,000,000 shares of Preferred Stock, Series 2, $0.10 per share.
5,000,000 shares of Preferred Stock, Series 2, $0.10 per share.
Class A Common Stock.
The holders of shares of Class A Common Stock are entitled to 1 vote per share
and do not have cumulative voting rights on the election of directors. Upon any
liquidation, dissolution or winding up of the Company, holders of shares of
Class A Common Stock are entitled to receive pro rata all of the assets of the
Company available for distribution to holders of shares of the Company's Class A
Common Stock. Shareholders of the Company do not have any preemptive rights to
subscribe for or purchase any stock, obligations, warrants or other securities
of the Company.
Class B Common Stock
The holders of shares of Class B Common Stock are entitled to 51 votes per share
and do not have cumulative voting rights on the election of directors. Upon any
liquidation, dissolution or winding up of the Company, holders of shares of
Class B Common Stock are entitled to receive pro rata all of the assets of the
Company available for distribution to holders of shares of the Company's Class B
Common Stock. Shareholders of the Company do not have any preemptive rights to
subscribe for or purchase any stock, obligations, warrants or other securities
of the Company.
<PAGE>
Series 1 Convertible Preferred Stock
Each share of Series 1 Preferred Stock is convertible into one (1) share of
Class A Common Stock at any time for 3 years following issuance, at a price of
two dollars ($2.00) per share. The Series 1 Preferred Stock does not carry any
voting rights. In the event the Company declares a dividend, the Series 1
Preferred Stock has a dividend preference to that of the Class A Common Stock.
The Series 1 Preferred Stock is redeemable by the Company for $.10 per share at
any time after the first annual anniversary of issuance, if the average closing
bid price of the Class A Common Stock for 10 business days immediately preceding
the date of such redemption notice is at least 125% of the exercise price of the
Series 1 Preferred Stock. Following any such redemption notice, the holder of
the Series 1 Preferred Stock shall have the opportunity to convert the Series 1
Preferred Stock for a period of 20 days following such notice.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
under signed thereunto duly authorized.
INTERNATIONAL MERCANTILE CORPORATION
(Registrant)
By:
------------------
PRESIDENT
Dated:
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000051387
<NAME> International Mercantile Corporation
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 278,168
<SECURITIES> 487,372
<RECEIVABLES> 241,332
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 519,500
<PP&E> 139,655
<DEPRECIATION> 133,944
<TOTAL-ASSETS> 2,399,088
<CURRENT-LIABILITIES> 490,893
<BONDS> 0
0
0
<COMMON> 50,807
<OTHER-SE> 2,671,571
<TOTAL-LIABILITY-AND-EQUITY> 2,399,088
<SALES> 337,263
<TOTAL-REVENUES> 337,263
<CGS> 177,724
<TOTAL-COSTS> 260,719
<OTHER-EXPENSES> (4,618)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,800
<INCOME-PRETAX> (109,178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (109,178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (109,178)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
