<PAGE> 1
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 Identification No.)
incorporation or organization)
249 Royal Palm Way, Suite 301 H, Palm Beach, Fl 33480
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(561) 820-0084
- --------------
(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 [ ]
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 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]
Page 1 of 11
<PAGE> 2
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)
<TABLE>
<CAPTION>
6 mos ended 6 mos ended 12 mos ended 12 mos ended
Sept-96 Sept-95 Mar-96 Mar-95
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Commissions, trading & investment income 2,300,357 2,156,556 4,500,899 3,971,160
Sales 709,726
Fee Revenue 317,308 456,524 1,364,297 56,907
---------- ---------- ---------- ----------
3,327,390 2,613,080 5,857,196 4,028,067
---------- ---------- ---------- ----------
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 318,206 290,310 710,939 796,673
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 5,842,565 3,987,101
---------- ---------- ---------- ----------
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 0.26
EPS - After Discontinued Operations (0.09) 0.57 0.60 (0.85)
</TABLE>
See Accompanying Notes
Page 2 of 11
<PAGE> 3
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1996
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
6 mos ended 6 mos ended 12 mos ended 12 mos ended
Sept-96 Sept-95 Mar-96 Mar-95
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
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
----------- ----------- ----------- -----------
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
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes
Page 3 of 11
<PAGE> 4
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
6 mos ended 6 mos ended 12 mos ended 12 mos ended
Sept-96 Sept-95 Mar-96 Mar-95
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) (70,078) 274,157 301,566 (134,438)
Amortization 164,353 107,686 218,084 24,272
Gain on disposition of discontinued operations (409,418) (409,418)
----------- ----------- ----------- -----------
94,275 (27,575) 110,232 (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 &
sundry assets (937,993) (218,497) (183,487) (102,741)
Decrease (increase) in accounts payable and
accrued liabilities 404,196 204,012 392,164 283,460
----------- ----------- ----------- -----------
CASH PROVIDED (USED) BY OPERATING ACTIVITIES (486,098) (17,658) 431,774 (395,078)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Capital stock and additional paid-in capital
issued 703,382 325,000 555,000 3,762,774
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) 57,336 (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
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes
Page 4 of 11
<PAGE> 5
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
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.
4. Reconciling Canadian GAAP to U.S. GAAP: The following is a
reconciliation of Net Income under Canadian GAAP to U.S. GAAP for the 6 months
ending September 30.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Income (Loss), in accordance with
Canadian GAAP (70,078) 274,157
Start-up Costs 43,880 (241,914)
Reorganization Costs 28,862 47,315
Deferred Costs (218,050) --
Acquisitions (39,142) (382,975)
---------------- ----------------
Net Income (Loss), in accordance with U.S.
GAAP (254,528) (303,417)
Retained Earning, Opening (1,328,128) (823,502)
---------------- ----------------
Retained Earning, Ending (1,582,656) (1,126,919)
================ ================
</TABLE>
The following is a reconciliation of Shareholders' Equity under
Canadian GAAP to U.S. GAAP as at September 30.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Shareholders' Equity, in accordance with
Canadian GAAP 4,772,944 3,825,984
Start-up Costs (394,923) (241,914)
Reorganization Costs (151,383) (182,561)
Deferred Costs (218,050) --
Long-term Investments (773,834) (773,834)
Acquisitions 247,948 (24,127)
---------------- -----------------
Shareholders' Equity, in accordance with
U.S. GAAP 3,482,702 2,603,548
================ ================
</TABLE>
Below is a summary of the reconciliation note that can be obtained in the
Company's Consolidated Financial Statements. In addition, any new information
has been added.
a) Start-up Costs: The Company's policy as permissible under Canadian GAAP has
been to capitalize the result of the first year of operation for the auction
house. Under U.S. GAAP, these amounts are charged to earnings as incurred.
Page 5 of 11
<PAGE> 6
b) Reorganization Costs: The Company's policy as permissible under Canadian
GAAP has been to capitalize Reorganization Costs. Under U.S. GAAP, these amounts
are charged to earnings as incurred.
c) Deferred Costs and Acquisition Costs: The Company's policy as permissible
under Canadian GAAP is to capitalize Deferred Costs and Acquisition Costs. These
costs are then amortized over five (5) year, on a straight line basis. Should
during this time the capitalized amount no longer carry a benefit to the
Company, the unamortized amount will be charged to earnings at that time. The
Company capitalized approximately $220,000 in the second quarter as deferred
costs and acquisition costs. Under U.S. GAAP, the Company's policy is to charge
to earnings these deferred costs when incurred. Acquisitions costs would be
added to the cost of the acquisition is those costs meet the requirement
outlined in APB 16, otherwise, these would be charged to earnings when incurred.
d) Long-term Investments: Shares of the Company held by a subsidiary have not
been eliminated under Canadian GAAP as they are held for resale. Under U.S.
GAAP, these shares would be eliminated in consolidation. In addition, under
Canadian GAAP the sale of these shares would be treated as a capital
transaction. Under U.S. GAAP, the sale of these shares will not be treated as a
capital transaction.
e) Acquisitions: Under US GAAP, the Company's acquisitions of its subsidiaries
are required to be accounted for either as a purchase or a pooling of interest
depending on whether or not there is any beneficial change in control. U.S. GAAP
requires the value of the assets acquired to be based on the value of the
consideration given under the purchase method. Whereas, under Canadian GAAP,
assets acquired are valued on the basis of the fair market value of the assets
at the date acquired. In the pooling of interest method where there is no
effective change in beneficial ownership the assets are consolidated using their
historical values and retained earnings are carried forward with no adjustments.
This difference in GAAP in the application of the purchase method described
above would have caused the Company to carry the ITM software at a greater value
under US GAAP. The original carrying value under Canadian GAAP is $864,554,
while under US GAAP that amount is $1,924,443, for an increase of $1,059,889.
The value of the software was determined at acquisition on the basis that
Bearhill Limited ("Bearhill") had no liabilities and no other asset except the
ITM Software that was created in-house. Therefore, since the transaction was
done at arms length, the fair market value of the ITM Software was determined to
be the value of the transaction. Under both Canadian and US GAAP, this amount is
being charged to earnings on a straight line basis.
After recognizing the new value for the software and evaluating the
carrying cost in accordance with SFAS 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be disposed of", it was decided
that no reduction in the carrying value was required. The cash flow stream that
justifies the Company to maintain the current carrying value is the revenues
that Guardian Timing Services receive on a continuous basis by utilizing the ITM
Software. The Company did not consider the Option Agreement that was entered
into in its cash flow stream.
In accounting for the purchase of Guardian Timing Services Inc.
("Guardian") under US GAAP, Goodwill in the amount of $438,138 would have been
recorded as a result in the difference in the purchase accounting described
above. Under U.S. GAAP, this Goodwill must be charged to operations over a
period not to exceed forty (40) years. The Company's policy is to amortize this
amount over a period of twenty (20) years starting in fiscal 1996, on a
straight-line basis under U.S. GAAP as it is under Canadian GAAP. No Goodwill
for Guardian was recognized under Canadian GAAP as the Guardian and Bearhill
purchase was treated as a single acquisition due to their common beneficial
controlling shareholder. Therefore, in accordance with Canadian GAAP, all value
in excess of the carrying amounts was attributed to the ITM Software.
I & B Inc. and its subsidiaries, Credifinance Capital Inc., Credifinance
Securities Limited and 95% of Rosedale Realty Limited were acquired on a tax
free basis. In connection with these transactions the company incurred
professional fees. It is the Company's policy, in accordance with Canadian GAAP
to capitalize and to amortize them over a period of five (5) years, on a
straight-line basis. Under US GAAP, these cost must be charged to operations
when incurred.
Under Canadian GAAP, Goodwill in the amount of $1,143,982 was recorded.
This amount represented the Au `N Ag deficit at the time of the change in
control. Under US GAAP, this amount is recorded as a reduction in Additional
Paid-In Capital.
Page 6 of 11
<PAGE> 7
f) Shareholders Equity and Additional Paid-In Capital: The variances between
Canadian GAAP and US GAAP are due to the different methods of accounting for the
disposition of Rosedale Realty Corporation.
g) Income Taxes: Under Canadian GAAP the deferral method is used to account
for the timing differences between accounting and taxable income. U.S GAAP (SFAS
109, "Accounting for Income Taxes"), requires the use of the liability method to
account for the differences between the accounting basis and the income tax
basis of assets and liabilities. Under the liability method, deferred assets and
liabilities are recognized for temporary differences between the accounting
basis and the taxes basis for the respective assets and liabilities based on
currently enacted tax rates.
Temporary differences, therefore, would arise from the requirements under
SFAS 109 to provide for deferred income taxes on the difference between book
value of assets and liabilities recorded under U.S. GAAP and their respective
tax values.
In addition, Canadian GAAP requires that the tax benefit of net operating
losses available to reduce future tax liabilities only be recorded when "virtual
certainty" (as defined by section 3470 of the Handbook of the Canadian Institute
of Chartered Accountants) of their use to reduce taxable income in the
carry-forward period exists. FSAS 109 requires that such benefits be recorded if
it is more likely than not that such losses will be used to reduce future income
tax liabilities in the carry forward period.
There are no significant items that would have a difference between their
carrying value based on U.S. GAAP and their respective tax values.
h) Statement of Changes In Financial Position: Canadian GAAP presentation
requires a Statement of Changes in Financial Position. U.S. GAAP requires a
Statement of Changes in Cash Flows. The Canadian GAAP presentation contains
similar information and disclosures except as described below to that required
by U.S. GAAP.
Under U.S. GAAP, investing and financing activities of an enterprise that
do not result in cash receipts or cash payments are reported in supplemental
information to the Statement of Cash Flows and not in the Statement of Cash
Flows.
i) Earnings (Loss) Per Share: Under Canadian and U.S GAAP, the earnings (loss)
per share is computed on the basis of weighted average number of common shares
outstanding. The effect of common shares equivalents arising from stock options
was not included as they are anti-dilutive using the treasury method.
Page 7 of 11
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
(1) OVERVIEW
During the second quarter of fiscal 1997 (three months ending September
30, 1996), InterUnion reported consolidated revenues of $1.2 million versus
$1.3 million a year earlier.
Selected financial data from InterUnion's financial statements is (figures in
000's except per share data):
<TABLE>
<CAPTION>
3 mo ended 3 mo ended 6 mo ended 6 mo ended
Sept-96 Sept-95 Sept-96 Sept-95
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commission Income 936 1,121 2,300 2,157
Sales 194 710
Fee Revenue 87 233 317 456
Total Revenues 1,217 1,354 3,327 2,613
Cost of Goods Sold 194 710
Net Revenues (i) 1,023 1,354 2,617 2,613
Net Profit (Loss) (76) (20) (70) 274
EPS - Operations (0.10) (0.03) (0.09) (0.07)
EPS (0.10) 0.76 (0.09) 0.57
Common Share, # 969,714 531,588 969,714 531,558
Working Capital 1,143 534 1,143 534
Cash Flow 8 (41) 94 67
Shareholders' Equity 4,773 3,826 4,773 3,826
Book Value Per Share 4.92 7.20 4.92 7.20
</TABLE>
(i) This amount is equal to Total Revenues under U.S. GAAP. In fiscal year
1996, Total Revenues, under U.S. GAAP would have been $6,169,578, as the
sales component of revenues and the cost of goods sold under expenses are
eliminated.
(2) NET REVENUES
During the second quarter of fiscal 1997, InterUnion reported consolidated
revenues of $1.2 million versus $1.3 million a year earlier. Commissions and fee
revenues were $1.02 million versus $1.35 million a year earlier, for a decrease
of 24.4%. Revenues for the six months to September 1996 were $3,327,390 versus
$2,613,080, for an increase of 27.3%. If we exclude the sales revenues of Reeve,
Mackay revenues, commissions and fees would have been substantially level,
showing an increase of just over $4,500.
The reduction in the revenues for the second quarter is due to the following
factors:
- Credifinance Securities Limited: a number of sales people left the
firm to join another.
- Reeve, Mackay & Associates Limited: there are two high seasons in the
auction business: fall (October, 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.
(3) COST OF REVENUES
Costs of revenues for the quarter decreased by $310,059, to $929,395 from
$1,239,454 for the same period a year earlier. This translates into a 25%
reduction. This reduction is in line with the reduction for Commissions and fee
revenues discussed above of 24.4%.
(4) NET INCOME
Net loss from operations for the six months ending September 30, 1996 was
$70,078 or $0.09 per share versus a loss of $41,009 or $0.07 per share a year
earlier. Net loss for the three months ending September 30, 1996 is $127,343 or
$0.10 per share versus a loss of $20,098 or $0.03 in 1995. These figures do not
include an extra ordinary gain of $409,418 in 1995 on the disposal of Rosedale
Realty, nor does it include the operating loss of
Page 8 or 11
<PAGE> 9
this unit's discontinued operation of $94,252. The increase in the loss is due
to the start-up of a new auction business, Reeve, Mackay. When Reeve, Mackay was
launched, management did not anticipate to reach break-even until the third year
of operations, fiscal 1998.
The average number of common shares outstanding for the six months ending
September 30, 1996 is 738,129 versus 482,140 a year earlier. The Company issued
additional shares in the form of Regulation "D" during the year in order to
finance the cash flow requirements of its subsidiaries.
(5) LIQUIDITY AND CAPITAL RESOURCES
The Company does not have any long term debt. In order to meet its growth plans
and any operating cash requirement the Company's current policy is to issue
additional capital stock. To date the Company has done this either through the
issuance of Confidential Private Placement Offerings under Regulation "D" or
Regulation "S". The following are details of these private placements:
<TABLE>
<CAPTION>
Date # of Shares Amount Type
- ---- ----------- ------ ----
<S> <C> <C> <C>
April 1994 2,500 10,000 Regulation "D"
May 1994 5,000 20,000 Regulation "D"
July 1994 11,250 35,000 Regulation "D"
August 1994 43,511 87,022 Regulation "D"
October 1994 5,000 50,000 Regulation "D"
March 1995 75,000 300,000 Regulation "D"
June 1995 62,500 125,000 Regulation "D"
October 1995 100,000 200,000 Regulation "D" & "S"
March 1996 160,000 320,000 Regulation "D"
September 1996 277,142 759,710 Regulation "D"
</TABLE>
Reeve, Mackay has been in operation for approximately 15 months and InterUnion
did not expect its operation to be profitable prior to its third year. Since
inception, Reeve Mackay has posted a loss of approximately $750,000, of which
$438,000 was during the first year of operation. For the six months ending
September 30, 1996, Reeve Mackay lost over $300,000 versus an anticipated loss
of approximately $275,000. During that period, Reeve, Mackay has broken even in
just two separate months.
Reeve, Mackay's sales have been according to schedule, however, their expenses
have exceeded pro-forma budgets. Reeve, Mackay was adversely affected due to
negotiated commissions on two major collections. The cost of reducing the
commission charged to the consignors was required in order to be awarded the
mandate of selling the goods on behalf of the consignor. The success of the
auctions that presented these collections to the public was instrumental to the
Company's objective to gain industry approval as a viable alternative to the
competition. Additional costs over-run was due to the larger than expected
number of items in each of the autumn auctions which drastically increased the
cost of cataloguing and processing. In addition, marketing and advertising
expenditures ran over budget.
The continuous operating problem has caused Reeve, Mackay to have a substantial
working capital deficit of over $325,000. The Company has managed to date to
finance this deficit by deferring the payment on the goods sold on behalf of its
consignors and delaying suppliers. To date certain consignors have requested to
have their goods returned, however, Reeve, Mackay has been able to replace these
consigned goods as the number of active consignors continues to grow. This is
demonstrated by the fact that Reeve, Mackay has more collectors' auctions than
any other competing auctioneer in Toronto.
To date, suppliers have not refused to provide services. However, should
suppliers and particularly consignors as a group start to withdraw their goods
the company's auction subsidiary's ability to operate would be in jeopardy
unless the Company agrees to inject the additional cash as required. Currently,
Reeve, Mackay's liabilities have not been guaranteed by any other subsidiary
within the group nor by InterUnion, itself.
Page 9 of 11
<PAGE> 10
(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 Company's short-term or
long-term liquidity.
In addition, there is no significant income or losses that has risen 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.
Page 10 of 11
<PAGE> 11
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 March 31, 1997 /s/ Georges Benarroch, Director
-------------- ---------------------------------
(Signature)*
Date March 31, 1997 /s/ Ann Glover, Director
-------------- ---------------------------------
(Signature)*
* Print the name and title of each signing officer under his signature.
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