<PAGE> 1
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 JUNE 30, 1997
-------------
[ ] 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 -
1,255,250 as of July 31, 1997.
Transitional Small Business Disclosure Format (Check One) Yes [ ] No [X]
Page 1 of 10
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
3 MOS ENDED 3 MOS ENDED 12 MOS ENDED 12 MOS ENDED
JUN-97 JUN-96 MAR-97 MAR-96
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Commissions, trading & investment income 1,122,895 1,228,326 4,843,951 4,500,899
Fee Revenue 350,096 229,908 868,232 1,356,296
---------- ---------- ---------- ----------
1,472,991 1,458,234 5,712,183 5,857,155
---------- ---------- ---------- ----------
EXPENSES
Selling, General & Administration 1,257,351 1,291,185 5,214,477 5,729,997
Foreign Exchange Loss (Gain) (13,032) 810 31,067 (33,057)
Interest & Bank Charges Expense (Income) 19,473 (8,682) (23,034) (37,337)
Amortization & Depreciation 58,098 59,201 240,912 244,739
---------- ---------- ---------- ----------
1,321,890 1,342,514 5,463,422 5,904,341
---------- ---------- ---------- ----------
PROFIT (LOSS) FROM CONTINUING OPERATIONS - BEFORE
INCOME TAXES 151,101 115,720 248,761 (47,146)
PROVISION FOR INCOME TAXES (RECOVERABLE) 53,000 57,772 88,085 28,232
---------- ---------- ---------- ----------
PROFIT (LOSS) FROM CONTINUING OPERATIONS 98,101 57,948 160,676 (75,378)
Loss from Discontinued Operation 691 (35,812) (390,829) (546,544)
Gain on Disposal of Discontinued Assets -- 117,296
---------- ---------- ---------- ----------
NET PROFIT (LOSS) FOR THE PERIOD 98,792 22,136 (230,153) (504,626)
FOREIGN EXCHANGE TRANSLATION EFFECT 376 -- (9,197) --
RETAINED EARNINGS (DEFICIT)
- BEGINNING OF PERIOD (1,567,478) (1,328,128) (1,328,128) (823,502)
---------- ---------- ---------- ----------
RETAINED EARNINGS (DEFICIT)
- END OF PERIOD (1,468,310) (1,305,992) (1,567,478) (1,328,128)
========== ========== ========== ==========
FINANCIAL OVERVIEW
Common Shares Outstanding 1,255,250 692,572 969,714 692,558
Weighted Average Shares Outstanding 1,061,436 692,572 907,097 501,335
EPS - From Continuing Operations 0.09 0.08 0.18 (0.15)
EPS - From Discontinuing Operations 0.00 (0.05) (0.43) (0.86)
EPS 0.09 0.03 (0.25) (1.01)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 2 of 10
<PAGE> 3
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 1997
<TABLE>
<CAPTION>
3 MOS AT 3 MOS AT 12 MOS AT 12 MOS AT
JUN-97 JUN-96 MAR-97 MAR-96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash 1,141,277 461,642 349,738 674,159
Due from brokers and dealers 1,720,919 911,160 166,062 1,168,190
Client deposits 839,662 1,070,270 5,967,989 2,093,966
Marketable securities 627,545 194,117 29,457,965 2,625,585
Accounts receivable 392,486 373,891 226,663 148,078
Income tax receivable -- -- 22,197 1,597
Prepaid expenses and other current assets 39,085 158,181 151,483 65,698
Notes receivables 678,074 -- -- --
----------- ----------- ----------- -----------
5,439,048 3,169,261 36,342,097 6,777,273
----------- ----------- ----------- -----------
CAPITAL ASSETS 1,559,920 1,776,234 1,609,905 1,827,240
LONG TERM INVESTMENTS 2,140,618 140,000 256,945 140,000
GOODWILL AND NON-CURRENT ASSETS 388,855 410,763 394,332 416,240
DISCONTINUED ASSETS 534,399 367,779 217,228 203,254
----------- ----------- ----------- -----------
4,623,792 2,694,776 2,478,410 2,586,734
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
10,062,840 5,864,037 38,820,507 9,364,007
=========== =========== =========== ===========
CURRENT LIABILITIES
Due to brokers and dealers -- 429,091 33,012,864 2,499,665
Due to clients 2,334,546 1,629,007 1,320,874 3,035,310
Accounts payable and accrued liabilities 280,160 240,164 257,470 314,030
Notes payables 678,074 -- -- --
----------- ----------- ----------- -----------
3,292,780 2,298,262 34,591,208 5,849,005
----------- ----------- ----------- -----------
DUE TO RELATED PARTIES 300,000 171 -- 119,462
DISCONTINUED LIABILITIES 767,804 509,620 504,962 361,692
DEFERRED INCOME TAX LIABILITY 85,000 -- 85,000 --
----------- ----------- ----------- -----------
1,152,804 509,791 589,962 481,154
----------- ----------- ----------- -----------
SHAREHOLDERS EQUITY
Capital Stock and additional paid-in capital 7,085,566 4,361,976 5,206,815 4,361,976
Retained Earnings (Deficit) (1,468,310) (1,305,992) (1,567,478) (1,328,128)
----------- ----------- ----------- -----------
5,617,256 3,055,984 3,639,337 3,033,848
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
10,062,840 5,864,037 38,820,507 9,364,007
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 3 of 10
<PAGE> 4
INTERUNION FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
3 MOS ENDED 3 MOS ENDED 12 MOS ENDED 12 MOS ENDED
JUN-97 JUN-96 MAR-97 MAR-96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) 98,792 22,136 (230,153) (504,626
Amortization 58,098 59,201 240,912 244,739
Non cash compensation 100,000 117,500
Gain on disposition of discontinued operations (117,296)
Deferred income tax 85,000
Gain on disposition of discontinued operations (117,296)
----------- ----------- ----------- -----------
256,890 81,337 213,259 (377,182)
Increase (decrease) in due to/from brokers and
dealers, net (34,567,721) (1,813,544) 31,515,327 (28,663,907)
Increase (decrease) in due to/from clients, net 6,141,999 (382,607) (5,588,459) 15,720,553
Increase (decrease) in marketable securities 28,830,420 2,431,468 (26,882,380) 13,056,486
Increase (decrease) in accounts receivable &
sundry assets (31,228) (210,441) (184,970) (136,916)
Decrease (increase) in accounts payable and
accrued liabilities 22,690 (470,861) (56,560) 30,571
Increase in assets and liabilities related to
discontinued operations (54,329) 271,422 129,296 31,629
----------- ----------- ----------- -----------
CASH PROVIDED (USED) BY OPERATING ACTIVITIES 598,721 (93,226) (854,487) (338,767)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Capital stock and additional paid-in capital
issued 1,778,751 -- 727,339 555,000
Increase (decrease) in due to related parties 300,000 (119,462) (119,462) 18,589
Notes payables 678,074 -- -- --
----------- ----------- ----------- -----------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES 2,756,825 (119,462) 607,877 573,589
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Capital assets (12,688) -- (10,866) (37,872)
Long term investments (1,873,245) -- (66,945) (13,472)
Notes recevables (678,074) -- -- --
----------- ----------- ----------- -----------
CASH PROVIDED (USED) IN INVESTING ACTIVITIES (2,564,007) -- (77,811) (51,344)
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH 791,539 (212,517) (324,421) 183,478
CASH - BEGINNING OF YEAR 349,738 674,159 674,159 490,681
----------- ----------- ----------- -----------
CASH - END OF YEAR 1,141,277 461,642 349,738 674,159
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 4 of 10
<PAGE> 5
INTERUNION FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1997
===============================================================================
1. Interim information is unaudited; 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 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 Company's annual consolidated financial statements and the notes
thereto for the fiscal year ended March 31, 1997, included in its Form 10-KSB
for the year ended March 31, 1997.
2. During the first quarter, the Company issued 60,000 incentive stock options
with an exercise price of $3.00. These stock options were exercised for a net
funding of $180,000.
3. In the first quarter of fiscal 1998, the Company crystallized its investment
in Receptagen Ltd. discribed in the Company's audited consolidated statements
dated March 31, 1997 and its annual filing. This investment is recorded as a
long term investment on the Company's balance sheet. The Company assumed the
financial responsibility of $678,074 in notes payables by Receptagen and issued
225,536 shares and 225,536 InterUnion share purchase warrants. In return,
InterUnion received approximately 21,284,898 units of Receptagen and a note
receivable for $678,074 from Receptagen. Each InterUnion share purchase warrant
entitles the holder to purchase one share of InterUnion at $4.00. Each
Receptagen unit is exchangeable into one Receptagen Common Share and one
Receptagen warrant. Each Receptagen warrant entitles the holder to purchase one
Receptagen share at C$0.07. InterUnion subsequently disposed of 8,189,655
Receptagen units, to hold 13,095,243.
4. Earnings per share is computed using the weighted average number of common
shares outstanding during the period. Loss per share is computed using the
weighted average number of common shares outstanding during the period.
Page 5 of 10
<PAGE> 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
(1) OVERVIEW
During the first quarter of fiscal 1998 (three months ending June 30, 1997),
InterUnion reported consolidated revenues of $1.47 million versus $1.46 million
a year earlier.
Selected financial data from InterUnion's financial statements is (figures in
000's except per share data):
3 MO. ENDED 3 MO. ENDED
JUN. - 97 JUN. - 96
Revenues 1,473 1,458
Net Profit (Loss) 99 58
EPS - Operations 0.09 0.08
EPS - Discontinued Operations 0.00 (0.05)
EPS 0.09 0.03
Working Capital 2,146 871
Cash Flow 257 81
Total Assets 10,063 5,864
Shareholders' Equity 5,617 3,056
Common Share, # 1,293,250 692,572
Book Value Per Share 4.48 4.41
In the first quarter of fiscal 1998, InterUnion crystallized the
recapitalization plan of Receptagen Ltd. InterUnion assumed the financial
responsibility of $678,074 in notes payables by Receptagen and issued 225,536
shares and 225,536 InterUnion share purchase warrants. In return, InterUnion
received approximately 21,284,898 units of Receptagen and a note receivable for
$678,074 from Receptagen. Each InterUnion share purchase warrant entitles the
holder to purchase one share of InterUnion at $4.00. Each Receptagen unit is
exchangeable into one Receptagen Common Share and one Receptagen warrant. Each
Receptagen warrant entitles the holder to purchase one Receptagen share at
C$0.07. InterUnion subsequently disposed of 8,189,655 Receptagen units to hold
13,095,243.
(2) NET REVENUES
During the first quarter of fiscal 1998, InterUnion reported consolidated
revenues of $1.47 million versus $1.46 million a year earlier. Commissions and
investment revenues were $1.12 million versus $1.23 million a year earlier, for
a decrease of 8.5%. Revenues for the three months to June 1997 were $1,472,991
versus $1,458,234, for an increase of 1.0%. The increase in revenue is
attributable to the increase in Fee Revenue as the firm restructured its
broker/dealer operations to concentrate on corporate finance versus agency
activities.
(3) EXPENSES
Expenses for the quarter decreased by $20,624, to $1,321,890 from $1,342,514 for
the same period a year earlier. This translates into a 1.5% reduction. This
reduction is attributable to the gain on foreign exchange and a reduction in
Selling, Marketing & Research costs due to the concentration on corporate
finance mentioned above.
(4) NET INCOME
Net income from operations for the three months ending June 30, 1997 was $98,101
or $0.09 per share versus $57,948 or $0.08 per share a year earlier. Net income
for the three months ending June 30, 1997 is $98,792 or $0.09 per share versus
$22,136 or $0.03 in 1996. The increase in EPS is due to the increase fee revenue
that the firm earned and the reduction in Selling, Marketing & Research costs
discribed above. In the first quarter of fiscal 1998, InterUnion recorded a gain
from discontinued operation of $691 versus a loss of $35,812 a year earlier. The
increase in income from discontinued operation is due to InterUnion's auction
subsidiary, Reeve Mackay & Associates, ability to break-even in the quarter.
(InterUnion anticipates finalizing the sale of Reeve, Mackay in the second
quarter.)
Page 6 of 10
<PAGE> 7
The average number of common shares outstanding for the three months ending June
30, 1997 is 1,061,436 versus 692,572 a year earlier. The Company issued
additional shares in the form of Regulation "S" financings during the period in
order to finance its expansion and the cash flow requirements of its
subsidiaries. Shares issued in the recapitalization of Receptagen Ltd were
issued under Rule 144.
(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 "S"
June 1997 60,000 180,000 Regulation "S"
</TABLE>
Reeve, Mackay has been in operation for approximately 27 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 $838,000, of which
$438,000 was during the first year of operation and $400,000 in the second year.
Although Reeve, Mackay has broken even for the quarter, InterUnion plans to
carry out its disposition of its auction subsidiary during the second quarter.
(6) ACQUISITION PROGRAM AND NEW RESEARCHES CORPORATION
In July 1997, InterUnion acquired a 33% interest in Leon Fraser, Black &
Associates Limited. ("LFB"). InterUnion's investment in LFB has been financed
from working capital. LFB has approximately C$200 million under management, thus
bringing total assets under management through the InterUnion Group of companies
almost C$300 million. This investment will be reflected in InterUnion's
financial statements for the second quarter of fiscal 1998.
InterUnion's management continues to explore opportunities for the acquisition
of operating companies that will provide additional liquidity and cash flow.
Such acquisitions would be financed by the issuance of common stock from
treasury or, if required, by means of private placement. Management has
investigated a number of opportunities, and to date, has finalized the
acquisition of the option on New Researches and the investment banking
facilities offered to Receptagen as they have met the Company's objectives. The
Company is also considering special situation acquisitions linked to bridge
financing activities.
(7) 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 that it has not been discussed above.
In addition, there are no significant income or losses that has risen from the
Company's 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 which has not been discussed above.
Page 7 of 10
<PAGE> 8
(8) CERTAIN RISK FACTORS WHICH MAY IMPACT FUTURE OPERATIONS
The Company and its subsidiaries operate in a rapidly changing environment that
involves a number of factors, some of which are beyond management's control,
such as financial market trends and investors' appetite for new financings.
Forward-looking statements included in Management's Analysis and Discussion
reflects management's best judgment based on known factors and involve risks and
uncertainties. Actual results could differ materially from those anticipated in
these forward-looking statements. Forward-looking information is provided by
InterUnion pursuant to the safe harbor established by recent securities
legislation and should be evaluated in the context of these factors.
In the opinion of management the financial statements for the periods ending
June 30, 1997 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, 1997.
Page 8 of 10
<PAGE> 9
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
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 AUGUST 11, 1997 /s/ GEORGES BENARROCH, DIRECTOR
--------------- ----------------------------------
(Signature)*
Date AUGUST 11, 1997 /s/ ANN GLOVER, DIRECTOR
--------------- ----------------------------------
(Signature)*
* Print the name and title of each signing officer under his signature.
Page 9 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERUNION
FINANCIAL CORPORATION CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,141,277
<SECURITIES> 627,545
<RECEIVABLES> 392,486
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,439,048
<PP&E> 2,102,883
<DEPRECIATION> (542,963)
<TOTAL-ASSETS> 10,062,840
<CURRENT-LIABILITIES> 3,292,780
<BONDS> 0
0
150,000
<COMMON> 1,295
<OTHER-SE> 5,465,961
<TOTAL-LIABILITY-AND-EQUITY> 10,062,840
<SALES> 0
<TOTAL-REVENUES> 1,472,991
<CGS> 0
<TOTAL-COSTS> 1,276,824
<OTHER-EXPENSES> 45,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,473
<INCOME-PRETAX> 151,101
<INCOME-TAX> 53,000
<INCOME-CONTINUING> 98,101
<DISCONTINUED> 691
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,792
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
