<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, 1999.
/ / 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 52-2002396
- ------------------------------- ---------------------------------
(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 (561) 655-0146
- --------------------------- ----------------------------
(Issuer's telephone number) (Issuer's telecopier number)
________________________________________________________________________
(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes /x/ No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15 (d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
$0.001 Par Value Common Shares - 2,114,475 as of June 30, 1999
Transitional Small Business Disclosure Format (Check One) Yes / / No /x/
Page 1 of 8
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
Jun-99 Jun-98 Mar-99 Mar-98
<S> <C> <C> <C> <C>
REVENUES 581060 274,012 1,348,466 2,642,958
Investment Banking 0 291,444 0 370,871
Investment Management** 35,643 38,888 115,418 101,578
Interest Income ---------- ---------- ---------- ----------
616,703 604,344 1,463,884 3,115,407
EXPENSES 260,316 618,773 1,504,959 3,674,548
Selling, General & Administration 64,406 81,705 200,171 240,886
Amortization & Depreciation (100,401) 25,940 (104,493) 17,361
Foreign Exchange Loss (Gain) 24,417 71,948 246,611 76,627
Interest Expense ---------- ---------- ---------- ----------
248,738 798,366 1,847,248 4,009,422
PROFIT (LOSS) FROM CONTINUING OPERATIONS
- before income taxes 367,965 (194,022) (383,364) (894,015)
GAIN ON SALE ON ISSUANCE OF SECURITY BY SUBSIDIARY 0 0 486,099 0
EQUITY IN NET EARNINGS (LOSSES) OF UNCONSOLIDATED** (147,513) 11,582 (492,917) (8,310)
PROVISION FOR INCOME TAXES (RECOVERABLE) 0 (2,548) 0 82,864
PROFIT (LOSS) FROM CONTINUOUS OPERATIONS 220,452 (179,892) (390,182) (819,461)
GAIN(LOSS) FROM DISCONTINUED OPERATIONS 0 0 0 691
- --------------------------------------- 0 0 0 803,483
GAIN (LOSS) ON DISPOSAL OF DISCONTINUED ASSETS
NET PROFIT (LOSS) FOR THE PERIOD 220,452 (179,892) (390,182) (15,287)
FOREIGN EXCHANGE TRANSLATION EFFECT (7,526) (42,785) (13,912) 4,146
RETAINED EARNINGS (DEFICIT) BEGINNING OF PERIOD (1,982,713) (1,578,619) (1,578,619) (1,567,478)
RETAINED EARNINGS (DEFICIT) END OF PERIOD (1,769,787) (1,801,296) (1,982,713) (1,578.619)
FINANCIAL OVERVIEW
Common Shares Outstanding 2,114,425 1,673,803 2,114,425 1,654,001
Weighted Average Shares Outstanding - Basic 1,855,386 1,665,693 1,855,386 1,232,100
EPS - From Continuing Operations (Basic) 0.118 (0.11) (0.21) (0.66)
EPS - From Discontinuing Operations (Basic) 0.00 0.00 N/A 0.65
EPS 0.118 (0.11) (0.21) (0.66)
Weighted Average Common Shares Outstanding - Diluted 2,754,608 2,403,411 2,754,608 1,671,568
Weighted Average Preferred Shares Outstanding - Diluted 150,000 150,000 150,000 150,000
EPS - From Continuing Operations (FD) 0.08 (0.11) (0.21) (0.66)
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
Page 2 of 8
<PAGE> 3
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of As of
June 30, 1999 June 30, 1998 March 31, 1999 March 31, 1998
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents 197,143 635,172 285,706 2,873,731
Marketable securities 111,102 176,944 19,885,302 35,169,986
Due from brokers and dealers 2,373,535 348,890 0 2,012
Due from clients 377,700 997,031 93,183 715,871
Accounts receivable 741,451 962,236 690,374 882,491
Refundable income tax 5,448 6,467 5,046 7,789
Prepaid expenses and other current items 48,770 51,655 25,772 56,733
Notes receivable 1,001,592 633,646 973,315 616,579
Total Current Assets 4,856,741 3,812,041 21,958,698 40,325,192
NON-CURRENT ASSETS
Property & equipment, net 1,148,278 1,371,370 1,199,953
Notes receivable, non-current portion 630,117 790,597 619,992 1,425,192
Other long-term assets 75,173 84,710 77,651 952,106
Investment in unconsolidated affiliates 5,745,201 3,887,687 5,591,892 84,710
Goodwill, net 0 2,084,782 0 3,488,322
Discontinued assets 0 0 0 2,468,210
Total Non-Current Assets 7,598,769 8,219,146 7,489,488 8,418,540
Total Assets 12,445,510 12,031,187 29,448,186 48,743,732
CURRENT LIABILITIES
Due to brokers and dealers 0 0 18,899,072 34,663,322
Due to clients 2,618,752 1,248,476 979,783 3,057,747
Accounts payable and accrued liabilities 285,236 373,205 253,476 1,063,956
Due to affiliates 733,206 0 776,213 0
Notes payable, current portion 55,623 1,988,793 0 1,703,441
Bank loan 0 705,022 0 0
Total Current Liabilities 3,692,817 4,315,496 20,908,544 40,488,466
Due to related parties 0 500,000 0 0
Other liabilities 0 73,057 0 77,033
Notes payable, long-term portion 630,117 624,821 619,992 1,485,801
Discontinued liabilities 0 0 0 0
Deferred income tax liability 0 0 0 0
Total Liabilities 4,322,934 5,513,374 21,528,536 42,051,300
SHAREHOLDERS' EQUITY
Capital stock and additional paid-in capital 9,902,363 8,319,109 9,902,363 8,271,051
Accumulated comprehensive income 0 (47,836) 0 0
Cumulative translation adjustment (26,489) 0 (18,963) (5,051)
Retained earnings (Deficit) (1,743,298) (1,753,460) (1,963,750) (1,573,568)
Total Shareholders' Equity 8,132,576 6,517,813 7,919,650 6,692,432
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 12,455,510 12,031,187 29,448,186 48,743,732
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
Page 3 of 8
<PAGE> 4
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
FOR THE PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
June 30, 1999 June 30, 1998 March 31, 1999 March 31, 1998
<S> <C> <C> <C> <C>
Class A Preferred Stock, $0.10 par value 150,000 150,000 150,000 150,000
Authorized - 1,500 shares
Issued and outstanding - 1,500,000
Class B Preferred stock, $0.10 par value 0 0 0 0
Authorized - 1,000,000 shares
Issued and outstanding - None
Class C Preferred Stock, $0.10 par value 0 0 0 0
Authorized - 1,000 shares
Issued and outstanding - None
Common Stock, $0.01 par value
Authorized-5,000,000 in 1999, 2,500,000 in 1998
Issued and outstanding - 2,114, 425 in 1999, 1,654,001 in 1998 2,114 1,674 2,114 1,654
Additional paid-in-capital 9,750,249 8,167,435 9,750,249 8,119,397
Accumulated Comprehensive Income (47,836)
CUMULATIVE TRANSLATION ADJUSTMENT (26,489) 0 (18,963) (5,051)
ACCUMULATED DEFICIT (1,743,298) (1,753,460) (1,963,750) (1,573,568)
Total Shareholders' Equity 8,132,576 6,517,813 7,919,650 6,692,432
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
Page 4 of 8
<PAGE> 5
INTERUNION FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
June 30, 1999 June 30, 1998 March 31, 1999 March 31, 1998
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) 220,452 (179,892) (390,182) (15,287)
Adjustment to reconcile net profit (loss) to net 0 0 0 0
Cash provided by (used in) operating activities 0 0 0 0
Depreciation and amortization 64,406 81,705 200,171 240,886
Loss on equity investments 147,513 0 492,917 0
Gain on sale of securities by subsidiary 0 0 (486,099) 0
Gain on disposal of discontinued operations 0 0 0 (804,174)
Non cash compensation 0 0 87,500 60,000
Non cash expenses 0 0 40,000 0
Deferred income taxes 0 0 0 (85,000)
Unrealized loss (gain) in marketable securities (100,401) 27,817 (11,814) 159,831
331,970 (70,370) (67,507) (443,644)
Changes in operating assets and liabilities net of effects
from the purchase /divestiture of InterUnion Asset
Management Limited 0 0 0 0
Increase in due to/from brokers and dealers, net (21,272,607) (35,010,200) (15,762,238) 1,814,508
Decrease (increase) in due to/from client, net 1,354,451 (2,090,431) (1,455,276) 6,988,991
Decrease (increase) in marketable securities 19,774,200 35,063,538 15,242,302 (5,871,852)
Increase in accounts receivable and other assets (74,478) 73,345 124,263 (452,610)
Increase (decrease) in accounts payable and accruals 31,760 (690,751) (572,359) 633,103
Increase (decrease) in assets and liabilities related to (287,734)
Discontinued operations 0 0 0 0
NET CASH PROVIDED BY (USED IN) OPEARATING ACTIVITIES 145,296 (2,724,869) (2,490,815) 2,380,662
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds on issuance of capital stock 0 133,000 133,000 270,000
Increase (decrease) in due to related parties (43,007) 500,000 771,109 0
Proceeds (repayment) of notes payable 17,221 (705,022) (103,448) 1,508,712
Proceeds (repayment) of bank loan 0 705,022 0 0
NET CASH PROVIDED BY FINANCING ACTIVITIES (25,786) 663,000 800,661 1,778,712
CASH FLOW FROM FINANCING ACTIVITIES
Purchase of property and equipment, net 0 (7,438) (2,032)
Purchase of long-term investment, net (200,014) 0 (437,363) (485,336)
Cash acquired on acquisition of subsidiary 0 0 151,922
Cash divested on sale of security by subsidiary 0 0 (195,304)
Investment in notes receivable 0 0 (257,767) (1,299,935)
NET CASH USED IN INVESTING ACTIVITIES (200,014) 0 (897,872) (1,635,381)
NET INCREASE (DECREASE) IN CASH (80,504) (2,091,869) (2,588,026) 2,523,993
CASH AND CASH EQUIVALENTS - BEG. OF PERIOD 285,705 2,873,731 2,873,731 349,738
CASH AND CASH EQUIVALENTS - END OF PERIOD 197,143 635,172 285,705 2,873,731
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
Page 5 of 8
<PAGE> 6
INTERUNION FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE * QUARTER ENDED JUNE 30, 99 *
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 Principals.
All adjustments are of a normal recurring nature unless specified in a
separate note included in these Notes to Unaudited 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, 1999, included in its Form 10-KSB for
the year ended March 31, 1999.
2. Earning 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.
3. As of April 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive income." This statement
establishes standards for reporting and display of comprehensive income
and its components. Comprehensive income is net income plus certain items
that are recorded directly to shareholders' equity bypassing net income.
The only such item currently applicable to the Company is foreign currency
translation adjustments.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
(1) Overview
InterUnion Financial Corporation ("IUFC" or "Inter Union "), was incorporated
on February 7, 1994. InterUnion's strategy is to acquire, when possible, a
majority interest in financial services business, using cash and issuance of
its own Common Stock, which subsequently, can be reduced to a minority interest
or sold. InterUnion and its subsidiaries, (collectively, the "Company"), also
provides bridge financing or takes temporary equity positions as part of its
merchant banking activities.
In 1999, the Company has realigned its interest in the Canadian side of its
investment management business, in order to facilitate InterUnion Asset
Management Ltd growth strategy. Upon this realignment, IUAM issued 878,170
Common Shares for gross proceeds of C$10million from Working Venture Canadian
Fund ("WVCF"). The effect of this transaction was to reduce the Company's
interest in IUAM to 44% from 100%. During the first quarter, IUAM informed its
shareholders that its wholly owned subsidiary, AILIS, contrary to earlier
plans, was not going to create a family of funds to be distributed by WVCF.
Since the Company's interest in IUAM is 44% and it has three of seven seats on
the board of directors, IUAM is accounted for on the equity method and is
considered as part of the Company's merchant banking activities.
Selected financial data from InterUnion's fiscal statements is (figures in
000's except per share data):
<TABLE>
<CAPTION>
3 mos. Ended 3 mos. ended 3 mos.ended
June 99* June 98 June 97
<S> <C> <C> <C>
Working Capital 1,164 (503) 2,146
Cash Flow 332 (70) 242
Total Assets 12,456 12,031 10,063
Shareholders' Equity 8,132 6,518 5,617
Common Share # 2,114,425 1,673,803 1,255,250
Book Value Per share 3.84 3.89 4.48
</TABLE>
(2) NET REVENUES
Until the end of fiscal 1999, the Company has dedicated without compensation
the majority of its human and financial resources to IUAM in order to allow
that subsidiary to obtain financing. In the current quarter, the Company has
been able to generate fees as it could dedicate its resources towards its
investment banking business.
During the first three months of fiscal 2000, InterUnion reported consolidated
revenues of $616,703 versus $604,344 in the first three months of fiscal 1999,
an increase of 2.05%. Investment management revenues were affected by a
$147,513 loss in net earnings in unconsolidated affiliate, IUAM. IUAM revenues
for the quarter have been $1,179,445 versus $1,163,320 in the same
Page 6 of 8
<PAGE> 7
period in 1998. IUAM's net earnings for the quarter have been recorded in the
books of InterUnion on the equity method basis. (44%). IUAM's net loss for
the quarter amounted to $335,256 versus $149,411. IUAM investment management
revenues have been affected by increased spending related to a larger payroll
and the AILIS business. Investment banking revenues increased to $581,060 from
$274,012 during the same period in the previous year.
(3) EXPENSES
During the first three months, the Company reduced its expenses by 68.84% to
$248,738 from $798,336. The decrease is attributable to reduction of the
Company's direct costs related to IUAM as well as a foreign exchange gain of
$100,401.
(4) NET INCOME
Net profit from operations (basic) for the three months ending June 30, 1999
was $220,452 or $0.118 per share versus a loss of $179,892 or $0.11 per share
during the same period in fiscal 1999. The increase is due to drastic reduction
in fixed costs, direct costs associated with the management of IUAM as well as
with increased investment banking activity. The Company net income however,
will continue to be affected by the losses incurred by its 44% owned subsidiary
IUAM and certain amortization costs associated with the investment management
business.
The basis weighted average number of Common Shares (diluted) outstanding for
the three months ending June30, 1999 is 2,754,608 versus 2,403,411 the previous
year. The increase is due to the issuance of shares in the form of Regulation
"S" financing in order to meet obligations resulting from the purchase of
investment managers, their realignment and the expenses associated with the
sale of 56% of the Company's interest in IUAM.
(5) LIQUIDITY AND CAPITAL RESOURCES
In order to meet its growth plans and fund any operating cash requirements, the
Company's policy is to issue additional capital stock, when possible. To date
the Company has done this either through the issuance of common stock under
Regulation "D" or Regulation "S". The following are details of these private
placements during the previous three fiscal years.
<TABLE>
<CAPTION>
Date # of Shares Amount Type
<S> <C> <C> <C>
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"
May 1998 17,002 68,008 Regulation "S"
June 1998 35,000 140,000 Regulation "S"
July 1998 262,142 1,048,568 Regulation "S"
December 1998 10,000 40,000 Regulation "S"
</TABLE>
(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 that have not been discussed above.
In addition, there is no significant income or loss that has risen from the
Company's continuing operations that has not been analyzed or specified above.
In addition, there has not been any material change in any line item that is
presented on the financial statements that has not been discussed above.
(7) CERTAIN RISK FACTORS WHICH MAY IMPACT FUTURE OPERATIONS
The Company and its subsidiaries operate in a rapidly changing environment that
involves a number of factors, some of which are beyond management's control,
such as financial market trends and investors' appetite for new financings. It
should also be emphasized that, should the Company not be successful in
completing its own financing (either by debt or by the issuance of securities
from treasury), its strategy to grow by acquisition will be affected.
Management has compiled a list of both internally and externally supplied
information systems that utilize imbedded date codes which could experience
operational difficulties in the year 2000. The Company uses third party
applications or suppliers for all high
Page 7 of 8
<PAGE> 8
level systems and reporting. These systems will either be upgraded and tested
to be in compliance for the year 2000 or the Company will take necessary steps
to replace the supplier. Management is testing new systems for which it is
responsible. It is the Company's objective to be year 2000 compliant for all
systems by the end of fiscal 1999, however, no assurances can be given. The
Company believes that it has provisioned sufficient amounts to cover future
expenditures.
In the opinion of management the financial statements for the period ending
June 30, 1999, accurately reflect the operation of the Company of 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 have also
reviewed its previous audited annual financial statements for the year ended
March 31, 1999.
Forward looking statements included in Management's Analysis and Discussion
reflects management's best judgment based on known factors and involves 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 and should be evaluated in the context of these factors.
PART 11 - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings 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 SEC 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
--------------------------------
<TABLE>
<S> <C>
Date __August 12, 99________________________ /s/ Georges Benarroch, Director
-------------------------------
(Signature)*
Date __August 12, 1999_______________________ /s/ Robert Crosbie, Director
-------------------------------
(Signature)*
</TABLE>
* Print the name of each signing officer under his signature.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
INTERUNION FINANCIAL CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) 10-QSB FILING
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 197,143
<SECURITIES> 111,102
<RECEIVABLES> 741,451
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,856,741
<PP&E> 2,067,696
<DEPRECIATION> (919,418)
<TOTAL-ASSETS> 12,445,510
<CURRENT-LIABILITIES> 3,692,817
<BONDS> 0
0
150,000
<COMMON> 2,114
<OTHER-SE> 9,750,249
<TOTAL-LIABILITY-AND-EQUITY> 12,455,510
<SALES> 0
<TOTAL-REVENUES> 616,703
<CGS> 0
<TOTAL-COSTS> 260,316
<OTHER-EXPENSES> (35,995)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,417
<INCOME-PRETAX> 367,965
<INCOME-TAX> 0
<INCOME-CONTINUING> 220,452
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,452
<EPS-BASIC> 0.118
<EPS-DILUTED> 0.08
</TABLE>
