<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to_________
Commission File No. 33-25505
PEMBROKE CAPITAL, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-1098788
- - ----------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1220-885 West Georgia Street
Vancouver, B.C., Canada V6C 3E8
- - ---------------------------------------- -------------------
(Address of principal executive offices) (Zip code)
(604) 688-9963
-----------------------------------------------
(Issuer's telephone number including area code)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months, and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
Number of shares of common stock outstanding at December 31, 1995: 29,295,512
<PAGE> 2
PEMBROKE CAPITAL, INC.
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying interim unaudited condensed financial statements
have been prepared in accordance with the instructions to Form 10-QSB
and do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of the management, all adjustments
(consisting of normal recurring adjustments) considered necessary for
a fair presentation have been included, and the disclosures are
adequate to make the information presented not misleading. Operating
results for the three months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the
year ended June 30, 1996. These statements should be read in
conjunction with the financial statements and notes thereto included
in the Annual 10-K Report (filed with the Securities and Exchange
Commission) for the year ended June 30, 1995.
F-1
<PAGE> 3
PEMBROKE CAPITAL, INC.
(A Development Stage Company)
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995
------------------
<S> <C>
ASSETS
- - ------
Current assets
Cash and cash equivalents $ 5,577
Cash held in trust accounts 321,443
Accounts receivable - Multichannel 19,385
Credit card prepayments 27,400
Advances to officer 24,727
Sales taxes refundable 16,952
Interest receivable 824
Inventory 44,847
Prepaid expenses 10,265
----------
471,420
Property and equipment
Office and computer equipment 42,544
Vehicles 76,895
----------
119,439
Less: accumulated depreciation (28,008)
----------
91,431
----------
Other assets
Project advances - joint ventures 120,397
Advances to officer and stockholder, net of allowance
for doubtful accounts of $124,182 --
Deposits 11,356
----------
131,753
----------
$ 694,604
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities
Accounts payable $ 98,727
Payable to directors 117,313
----------
216,040
Stockholders' equity (deficit)
Preferred stock, $.10 par value per share; 1,000,000
shares authorized and no shares issued --
Common stock, $.000032 par value per share;
75,000,000 shares authorized; 29,295,512 shares
issued and outstanding at September 30, 1995 938
Additional paid-in capital 4,969,862
Cumulative translation adjustment (22,969)
Deficit accumulated during the development stage (4,469,267)
----------
478,564
----------
$ 694,604
==========
</TABLE>
F-2
<PAGE> 4
PEMBROKE CAPITAL, INC.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For the Period from Inception (May 1, 1993) to June 30, 1995
and for the Three Months Ended September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Common stock Additional Cumulative
---------------------- paid-in Translation
Shares Amount capital adjustment
---------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Shares issued April 1993 during the
formation of the Company to officers
and directors and a related entity
for cash of $.00001 per share 4,687,500 $ 150 $ (100) $
Shares issued pursuant to a private
placement from April 1993 to
June 30, 1993 at $.1257 per share 1,103,114 35 138,640
Shares issued to an unrelated entity for
consulting services from May 1993 to
June 30, 1993 valued at $.1495 per share 1,041,950 33 155,651
Net loss for the period from inception
(May 1, 1993) to June 30, 1993
--------- ------ ---------- -------
Balance at June 30, 1993 (restated,
see Notes 1 and 3a.) 6,832,564 218 294,191 --
Shares issued pursuant to a private
placement from July 1, 1993 to
July 14, 1993 at $.1257 per share 490,636 16 61,662
Shares issued to an unrelated entity for
consulting services from July 1, 1993 to
August 15, 1993 valued at $.1495 per share 2,083,050 67 311,349
Shares issued pursuant to a private
placement from August 1993 to
September 15, 1993 at $.1825 per share 2,187,500 70 399,140
Shares issued to an unrelated entity for
consulting services in October 15, 1993
valued at $.1445 per share 78,125 3 11,287
<CAPTION>
Deficit accumulated Total
during the stockholders'
development stage equity (deficit)
------------------- ----------------
<S> <C> <C>
Shares issued April 1993 during the
formation of the Company to officers
and directors and a related entity
for cash of $.00001 per share $ $ 50
Shares issued pursuant to a private
placement from April 1993 to
June 30, 1993 at $.1257 per share 138,675
Shares issued to an unrelated entity for
consulting services from May 1993 to
June 30, 1993 valued at $.1495 per share 155,684
Net loss for the period from inception
(May 1, 1993) to June 30, 1993 (237,554) (237,554)
------------ ------------
Balance at June 30, 1993 (restated,
see Notes 1 and 3a.) (237,554) 56,855
Shares issued pursuant to a private
placement from July 1, 1993 to
July 14, 1993 at $.1257 per share 61,678
Shares issued to an unrelated entity for
consulting services from July 1, 1993 to
August 15, 1993 valued at $.1495 per share 311,416
Shares issued pursuant to a private
placement from August 1993 to
September 15, 1993 at $.1825 per share 399,210
Shares issued to an unrelated entity for
consulting services in October 15, 1993
valued at $.1445 per share 11,290
(Continued)
</TABLE>
F-3
<PAGE> 5
PEMBROKE CAPITAL, INC.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For the Period from Inception (May 1, 1993) to June 30, 1995
and for the Three Months Ended September 30, 1995 (Unaudited)
(Page 2)
<TABLE>
<CAPTION>
Common stock Additional Cumulative
---------------------- paid-in translation
Shares Amount capital adjustment
---------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Foreign currency translation adjustment
for the year ended June 30, 1994 (20,641)
Net loss for the year ended June 30, 1994
---------- --- --------- --------
Balance at June 30, 1994 (restated,
see Notes 1 and 3a.) 11,671,875 374 1,077,629 (20,641)
Acquisition of treasury shares on
September 2, 1994 pursuant to
Canadian regulatory ruling (78,125) (3) (11,287)
Adjustment for shares of Pembroke
outstanding immediately prior to
reorganization on September 28, 1994
valued at net monetary asset amount and
to reflect reissuance of treasury shares 664,387 21 (255)
Contribution to capital in October 1994 through
officer's contribution of his personal DiaChi
stock (750,000 shares) 237,571
Shares issued in October 1994 for consulting
services valued at $.1495 per share 78,125 3 11,675
Shares issued pursuant to a private placement
completed on October 18, 1994 at $.74
per share net of offering costs of $7,500 2,850,000 91 2,101,409
Shares issued on November 21, 1994 in
exchange for consulting services pursuant to a:
Consulting Services agreement, valued at
$.10 per share 1,875,000 60 187,440
<CAPTION>
Deficit accumulated Total
during the stockholders'
development stage equity (deficit)
------------------- ----------------
<S> <C> <C>
Foreign currency translation adjustment
for the year ended June 30, 1994 (20,641)
Net loss for the year ended June 30, 1994 (743,857) (743,857)
-------- --------
Balance at June 30, 1994 (restated,
see Notes 1 and 3a.) (981,411) 75,951
Acquisition of treasury shares on
September 2, 1994 pursuant to
Canadian regulatory ruling (11,290)
Adjustment for shares of Pembroke
outstanding immediately prior to
reorganization on September 28, 1994
valued at net monetary asset amount and
to reflect reissuance of treasury shares (234)
Contribution to capital in October 1994 through
officer's contribution of his personal DiaChi
stock (750,000 shares) 237,571
Shares issued in October 1994 for consulting
services valued at $.1495 per share 11,678
Shares issued pursuant to a private placement
completed on October 18, 1994 at $.74
per share net of offering costs of $7,500 2,101,500
Shares issued on November 21, 1994 in
exchange for consulting services pursuant to a:
Consulting Services agreement, valued at
$.10 per share 187,500
(Continued)
</TABLE>
F-4
<PAGE> 6
PEMBROKE CAPITAL, INC.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For the Period from Inception (May 1, 1993) to June 30, 1995
and for the Three Months Ended September 30, 1995 (Unaudited)
(Page 3)
<TABLE>
<CAPTION>
Common stock Additional Cumulative
---------------------- paid-in translation
Shares Amount capital adjustment
---------- ------ ---------- -----------
<S> <C> <C> <C> <C>
A Restricted Stock Plan, valued at $.10
per share to:
Officers and directors 1,350,000 43 134,957
Others 2,193,750 70 219,305
Valued at $.10 per share to:
Officers and directors 993,750 32 99,343
Others 7,397,500 237 739,513
Shares of DiaChi rescinded in December 1994, at
original cost (218,750) (7) (37,421)
Shares issued in March and April 1995 to
unrelated parties in exchange for services
valued at $.10 per share 400,000 13 39,987
Shares issued in April 1995 to unrelated party
in exchange for promotional services valued
at $.6759 per share 98,000 3 144,997
Foreign currency translation adjustment for the
year ended June 30, 1995 (11,388)
Net loss for the year ended
June 30, 1995
---------- --- -------- -------
Balance at June 30, 1995 29,275,512 937 4,944,863 (32,029)
Shares issued in July 1995 to unrelated party
in exchange for promotional services valued
at $1.25 per share (unaudited) 20,000 1 24,999
<CAPTION>
Deficit accumulated Total
during the stockholders'
development stage equity (deficit)
------------------- ----------------
<S> <C> <C>
A Restricted Stock Plan, valued at $.10
per share to:
Officers and directors 135,000
Others 219,375
Valued at $.10 per share to:
Officers and directors 99,375
Others 739,750
Shares of DiaChi rescinded in December 1994, at
original cost (37,428)
Shares issued in March and April 1995 to
unrelated parties in exchange for services
valued at $.10 per share 40,000
Shares issued in April 1995 to unrelated party
in exchange for promotional services valued
at $.6759 per share 145,000
Foreign currency translation adjustment for the
year ended June 30, 1995 (11,388)
Net loss for the year ended
June 30, 1995 (3,144,262) (3,144,262)
---------- ----------
Balance at June 30, 1995 (4,125,673) 788,098
Shares issued in July 1995 to unrelated party
in exchange for promotional services valued
at $1.25 per share (unaudited) 25,000
(Continued)
</TABLE>
F-5
<PAGE> 7
PEMBROKE CAPITAL, INC.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For the Period from Inception (May 1, 1993) to June 30, 1995
and for the Three Months Ended September 30, 1995 (Unaudited)
(Page 4)
<TABLE>
<CAPTION>
Common stock Additional Cumulative
---------------------- paid-in translation
Shares Amount capital adjustment
---------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Foreign currency translation adjustment
for the three months ended
September 30, 1995 (unaudited) 9,060
Net loss for the three months ended
September 30, 1995 (unaudited)
---------- ------- ---------- ---------
Balance at September 30, 1995 (unaudited) 29,295,512 $ 938 $4,969,862 $ (22,969)
========== ======= ========== =========
<CAPTION>
Deficit accumulated Total
during the stockholders'
development stage equity (deficit)
------------------- ----------------
<S> <C> <C>
Foreign currency translation adjustment
for the three months ended
September 30, 1995 (unaudited) 9,060
Net loss for the three months ended
September 30, 1995 (unaudited) (343,594) (343,594)
----------- ---------
Balance at September 30, 1995 (unaudited) $(4,469,267) $ 478,564
=========== =========
</TABLE>
F-6
<PAGE> 8
PEMBROKE CAPITAL, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the period
September 30, from inception
-------------------------------- (May 1, 1993) to
1995 1994 September 30, 1995
------------ ---------- ------------------
<S> <C> <C> <C>
Revenues
Diamond sales $ $ $ 872,223
Less cost of goods sold (1,066,434)
------------- ------------ --------------
Gross profit (loss) (194,211)
Operating Expenses
Engineering and geological 10,500
Technical reports 13,924
Consulting fees 30,955 71,814 2,351,870
Sales commissions 20,229
Depreciation 7,127 1,606 28,770
Legal and accounting fees 58,698 16,842 277,830
Management fees 77,164 16,517 464,162
Office expense 12,850 3,210 78,024
Rent expense 12,001 1,108 20,023
Promotion 52,832 4,374 244,937
Salaries 4,058 4,058
Transfer and filing fees 2,632 19,805
Telephone 7,569 6,072 43,089
Travel expense 62,766 41,828 554,671
Translation loss 3,822 17,072
Other general and administrative 2,586 9,237
Write-off of advances to stockholders
and former director 11,517 128,497
Loss on sale of fixed assets 4,363
------------- ------------ --------------
Sub-total - operating expenses 346,577 163,371 4,291,061
------------- ------------ --------------
Net loss from operations (346,577) (163,371) (4,490,806)
Other revenue (expense):
Other income 2,983 -- 2,983
Interest income 18,556
------------- ------------ --------------
Net loss $ (343,594) $ (163,371) $ (4,469,267)
============= ============ ==============
Weighted average number of shares 29,289,642 11,642,988 17,107,841
============= ============ ==============
Net loss per common share $ (.01) $ (.01) $ (.26)
============= ============ ==============
</TABLE>
F-7
<PAGE> 9
PEMBROKE CAPITAL, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the period
September 30, from inception
-------------------------------- (May 1, 1993) to
1995 1994 September 30, 1995
------------ ---------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (343,594) $ (163,371) $(4,469,267)
Non-cash items included in net loss
Stock issued for services 25,000 2,081,068
Depreciation 7,127 1,606 28,008
Bad debt expense on advances 11,517 129,376
Changes in assets and liabilities:
(Increase) decrease in accounts receivable - misc. 480,732
Increase decrease in accounts receivable/advances
to officers and directors (24,727) 10,520 (24,727)
(Increase) decrease in accounts
receivable - other (7,699) (4,896) (19,385)
(Increase) in credit card prepayments (27,400) (27,400)
(Increase) decrease in sales taxes refundable (5,183) (16,952)
(Increase) decrease in interest receivable 3,286 (824)
(Increase) in inventory (967) (44,847)
(Increase) decrease in prepaid expenses 10,537 (1,125) (10,265)
Increase (decrease) in bank overdraft (23,181)
Increase (decrease) in accounts payable 7,819 1,216 98,727
Increase in payable to directors 49,941 117,313
Increase in liability to issue common stock 57,063
---------- ----------- -----------
Net cash provided (used) by operating activities 163,208 (89,195) (2,159,175)
Cash flow from investing activities:
Purchase of computers, equipment and vehicles (6,872) (5,064) (119,440)
Project advances to joint ventures (30,697) (120,397)
Advances to officer and stockholder (11,517) (129,376)
Increase in deposits (11,356) (11,356)
---------- ----------- -----------
Net cash (used) in investing activities (60,442) (5,064) (380,569)
---------- ----------- -----------
Cash flow from financing activities:
Common stock proceeds 2,700,880
Contribution to capital by officer 237,571
Foreign currency translation adjustment 9,060 2,164 (22,969)
Purchase of treasury/rescinded shares (11,290) (48,718)
Loan from stockholder 137,284
---------- ----------- -----------
Net cash provided (used) by financing
activities 9,060 128,158 2,866,764
---------- ----------- -----------
Increase in cash 111,826 33,899 327,020
Cash, beginning of period 215,194 34,752 -0-
---------- ----------- -----------
Cash, end of period $ 327,020 $ 68,651 $ 327,020
========== =========== ===========
</TABLE>
F-8
<PAGE> 10
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis or Plan of Operation
a) Liquidity and Capital Resources
During the quarter ended September 30, 1995 the Registrant
received no additional financing. Cash increased due to the
receipt of funds from the "account receivable -miscellaneous" at
June 30, 1995 into the Company's trust account in Hong Kong in
July 1995. The Company utilizes trust accounts in both Hong Kong
and Canada as a part of its normal operating methods. The cash
in the trust accounts is not restricted. During the quarter
ended September 30, 1995, the Registrant's investing activities
consisted primarily of advancing funds of $30,697 to two joint
venture partners. A small amount ($6,872) of fixed assets were
purchased, and $11,517 more in advances were made to a former
officer and a former consultant both of whom are stockholders of
the Registrant. These advances have been fully reserved as the
success of the Registrant's collection efforts is not assured.
The Registrant expects that it will be necessary to undertake
additional private placements or a public offering of its common
stock within the next six months. The Registrant is trying to
conserve its cash as much as possible by offering equity
positions to its joint venturers and other consultants.
The Registrant remains dependent upon the sale of additional
equity or debt financing to cover cash requirements. The
Registrant's projected revenue from the sale of diamond rough
from the Wafangdian joint venture has not commenced. The
Registrant must operate on a limited cash flow until start-up of
the Wafangdian joint venture is accomplished.
The Registrant has made numerous commitments relative to
commencement of its stone diamond cutting operation in China.
See the discussions of the Wafangdian Joint Venture and Ming Chi
Prime Corporation Joint Understanding in the Registrant's annual
report on Form 10-KSB for the year ended June 30, 1995.
b) Results of Operations
The Registrant's net loss for the quarter ended September 30,
1995 increased from the net loss for the comparable period in
1994 by $180,223. The increase related to an overall increase in
level of activity of the Registrant since its reorganization with
Dia Chi in September 1994. Management fees increased by $60,647
because of employment agreements entered into with the three
officers effective January 1, 1995. In addition, legal and
accounting increased by $41,556, travel increased by $20,938 and
marketing increased by $48,458. The increased travel is
attributable to the cost associated with management's travel for
business development purposes to Asia and Europe.
No sales were effected during either the quarter ended September
30, 1995 or 1994. The Registrant is concentrating its efforts on
developing its joint venture arrangements, method of operations,
and expanding on its area of business prior to purchasing any
additional diamond rough for further evaluation and processing.
The Registrant has negotiated with Wafangdian to expand its
working relationship to include marketing of Mine No. 50 and No.
51's production.
The Registrant has entered into agreements with Wafangdian to
develop and put into production six new kimberlite and two
alluvial mines within close proximity of Mine No. 50. The
initial engineering and management studies were started in 1995
and are expected to be finalized during the first calendar
quarter of 1996. This agreement would expand the scope of the
Registrant's operations and would add significant supplies of
diamond rough over the next 50 years.
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Except for the following, the Issuer is not a party to any
proceedings nor is the Issuer aware of any pending actions. On June
14, 1995, a lawsuit titled Paradise Investments Limited v. Larry
Lorenz, Multi Channel Investment Ltd., and Pembroke Capital, Inc. was
filed in the Supreme Court of British Columbia, Canada. Larry Lorenz
is an officer and director of the Issuer, and Multi Channel
Investment Ltd. ("Multi Channel") is the record owner of more than 5%
of the Issuer's outstanding common stock. This litigation alleges a
contract between Paradise Investments Limited ("Paradise") and Multi
Channel to sell common shares of the Issuer's wholly-owned
subsidiary, DiaChi Investment Corporation ("DiaChi") prior to its
reorganization with the Issuer; it seeks specific performance and
delivery of 468,750 shares, and damages from breach of the alleged
contract. Paradise also alleges negligent misrepresentation by Mr.
Lorenz in connection with the alleged transaction. Paradise further
alleges a contract for consulting services consisting of the
introduction of potential purchasers of the Issuer's common stock,
for which Paradise was allegedly to paid with 890,625 shares of
common stock of the Issuer, and claims negligent misrepresentation by
Mr. Lorenz, and unjust enrichment and quantum meruit on the part of
the Issuer. Paradise seek specific performance by and damages from
Mr. Lorenz, and damages from the Issuer. Paradise has not specified
an amount of damages being sought. The Issuer believes the claims
are wholly without merit and intend to vigorously defend the action.
The Issuer is also aware of a threatened action by other parties in
connection with activities by Paradise which, if filed, may name the
Issuer as a defendant.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
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
(a) Exhibits
27) Financial Data Schedule
(b) Reports on Form 8-K - None
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PEMBROKE CAPITAL, INC.
(Registrant)
By /s/ BERNARD C. LAW
--------------------------------------
Bernard C. Law
President and Chief Accounting Officer
February 13, 1996
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- - -------------- -------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS FILED AS PART OF THE FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REGISTRANT'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED JUNE 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 327,020
<SECURITIES> 0
<RECEIVABLES> 89,288
<ALLOWANCES> 0
<INVENTORY> 44,847
<CURRENT-ASSETS> 471,420
<PP&E> 119,439
<DEPRECIATION> 28,008
<TOTAL-ASSETS> 694,604
<CURRENT-LIABILITIES> 216,040
<BONDS> 0
<COMMON> 938
0
0
<OTHER-SE> 4,969,862
<TOTAL-LIABILITY-AND-EQUITY> 694,604
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 346,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (343,594)
<INCOME-TAX> 0
<INCOME-CONTINUING> (343,594)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (343,594)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>