EXHIBIT 99.2
GENTERRA CAPITAL INC. |
INTERIM REPORT
Notice to Reader
Management has compiled the unaudited interim financial information of Genterra Capital Inc. consisting of the interim consolidated balance sheet as at March 31, 2011 and the interim consolidated statement of operations, other comprehensive income and retained earnings and the interim consolidated statement of cash flows for the six-month period then ended. An accounting firm has not reviewed or audited this interim financial information.
GENTERRA CAPITAL INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN CANADIAN DOLLARS)
March 31 | September 30 | |||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
CURRENT | ||||||||
Cash and cash equivalents | $ | 19,355,581 | $ | 17,787,741 | ||||
Marketable securities | 5,004,178 | 4,676,175 | ||||||
Accounts receivable | 355,189 | 384,609 | ||||||
Prepaid expenses and deposits | 194,128 | 267,408 | ||||||
Current portion of notes receivable | - | 59,790 | ||||||
Future income taxes | - | 3,623 | ||||||
24,909,076 | 23,179,346 | |||||||
UNREALIZED RENTAL INCOME | 86,739 | 31,642 | ||||||
RENTAL REAL ESTATE PROPERTIES | 15,446,474 | 17,336,366 | ||||||
INTANGIBLE ASSETS | 378,549 | 400,269 | ||||||
FUTURE INCOME TAXES | 230,426 | 268,820 | ||||||
$ | 41,051,264 | $ | 41,216,443 | |||||
LIABILITIES | ||||||||
CURRENT | ||||||||
Accounts payable and accrued liabilities | $ | 730,109 | $ | 752,699 | ||||
Income taxes payable | 66,550 | 52,684 | ||||||
Current portion of long-term debt | 2,301,170 | 2,482,475 | ||||||
3,097,829 | 3,287,858 | |||||||
LONG-TERM DEBT | - | 583,474 | ||||||
FUTURE INCOME TAXES | 1,812,291 | 1,911,685 | ||||||
INTANGIBLE LIABILITIES | 11,975 | 18,372 | ||||||
RETRACTABLE PREFERENCE SHARES | 5,330,681 | 5,135,616 | ||||||
10,252,776 | 10,937,005 | |||||||
SHAREHOLDERS' EQUITY | ||||||||
CAPITAL STOCK | 17,432,461 | 17,432,461 | ||||||
CONTRIBUTED SURPLUS | 562,398 | 562,398 | ||||||
RETAINED EARNINGS | 12,803,629 | 12,284,579 | ||||||
30,798,488 | 30,279,438 | |||||||
$ | 41,051,264 | $ | 41,216,443 |
See accompanying notes to consolidated financial statements
GENTERRA CAPITAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS, OTHER COMPREHENSIVE
INCOME AND RETAINED EARNINGS
(UNAUDITED)
(IN CANADIAN DOLLARS)
Three months ended | Six months ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
REVENUE | ||||||||||||||||
Rent | $ | 819,495 | $ | - | $ | 1,645,206 | $ | - | ||||||||
EXPENSES | ||||||||||||||||
Administrative and general | 209,907 | 167,100 | 494,738 | 324,703 | ||||||||||||
Rental real estate operating expenses | 517,541 | - | 993,491 | - | ||||||||||||
727,448 | 167,100 | 1,488,229 | 324,703 | |||||||||||||
INCOME (LOSS) BEFORE THE FOLLOWING | 92,047 | (167,100 | ) | 156,977 | (324,703 | ) | ||||||||||
Amortization | 129,725 | - | 275,857 | - | ||||||||||||
Dividends on retractable preference shares | 96,461 | - | 195,065 | - | ||||||||||||
Interest on long-term debt | 28,137 | - | 63,754 | - | ||||||||||||
254,323 | - | 534,676 | - | |||||||||||||
LOSS FROM OPERATIONS | (162,276 | ) | (167,100 | ) | (377,699 | ) | (324,703 | ) | ||||||||
OTHER INCOME AND EXPENSES | ||||||||||||||||
Interest income | 75,953 | 20,778 | 146,463 | 41,655 | ||||||||||||
Investment income | 96,238 | 39,028 | 386,267 | 165,269 | ||||||||||||
Impairment gain (loss) on receivables | (11,277 | ) | (14,893 | ) | (40,805 | ) | 23,431 | |||||||||
Gain on sale of rental real estate property | 473,895 | - | 473,895 | - | ||||||||||||
Equity income (loss) of significantly influenced company | - | 524 | - | (938 | ) | |||||||||||
634,809 | 45,437 | 965,820 | 229,417 | |||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 472,533 | (121,663 | ) | 588,121 | (95,286 | ) | ||||||||||
Income taxes (recovery) | ||||||||||||||||
Current | 111,611 | (19,966 | ) | 136,973 | (19,466 | ) | ||||||||||
Future | (59,519 | ) | - | (57,377 | ) | 3,157 | ||||||||||
52,092 | (19,966 | ) | 79,596 | (16,309 | ) | |||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | 420,441 | (101,697 | ) | 508,525 | (78,977 | ) | ||||||||||
Deferred gain on sale of former consolidated subsidiary | 10,525 | 42,100 | 10,525 | 42,100 | ||||||||||||
NET INCOME (LOSS) FOR THE PERIOD, ALSO BEING | ||||||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | 430,966 | $ | (59,597 | ) | $ | 519,050 | $ | (36,877 | ) | ||||||
Retained earnings at beginning of period | 12,372,663 | 13,395,229 | 12,284,579 | 13,372,509 | ||||||||||||
RETAINED EARNINGS at end of period | $ | 12,803,629 | $ | 13,335,632 | $ | 12,803,629 | $ | 13,335,632 | ||||||||
EARNINGS (LOSS) PER SHARE (Basic and diluted) | ||||||||||||||||
Continuing operations | $ | 0.04 | $ | (0.02 | ) | $ | 0.05 | $ | (0.01 | ) | ||||||
Discontinued operations | $ | 0.00 | $ | 0.01 | $ | 0.00 | $ | 0.01 | ||||||||
Net income (loss) | $ | 0.04 | $ | (0.01 | ) | $ | 0.05 | $ | (0.00 | ) | ||||||
Weighted average number of shares | ||||||||||||||||
Basic and diluted | 9,389,015 | 5,076,407 | 9,389,015 | 5,076,407 |
The effect on earnings per share of the conversion of the Class A preference shares is anti-dilutive and therefore not disclosed.
See accompanying notes to consolidated financial statements
GENTERRA CAPITAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN CANADIAN DOLLARS)
Three months ended March 31 | Six months ended March 31 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net income (loss) for the period from continuing operations | $ | 420,441 | $ | (101,697 | ) | $ | 508,525 | $ | (78,977 | ) | ||||||
Items not affecting cash: | ||||||||||||||||
Gain on sale of rental real estate property | (473,895 | ) | - | (473,895 | ) | - | ||||||||||
Amortization | 129,725 | - | 275,857 | - | ||||||||||||
Dividends on retractable preference shares | 96,461 | - | 195,065 | - | ||||||||||||
Future income taxes | (59,519 | ) | - | (57,377 | ) | 3,157 | ||||||||||
Unrealized gain on marketable securities | (57,224 | ) | (11,520 | ) | (184,424 | ) | (226,528 | ) | ||||||||
Unrealized rental income | (20,078 | ) | - | (55,097 | ) | - | ||||||||||
Accretion interest on discounted note receivable | (16,881 | ) | (18,040 | ) | (35,149 | ) | (34,534 | ) | ||||||||
Amortization of intangible assets and liabilities | 7,578 | - | 15,323 | - | ||||||||||||
Impairment loss (gain) on receivables | (3,339 | ) | 14,893 | 26,189 | (23,431 | ) | ||||||||||
Equity (income) loss of significantly influenced company | - | (524 | ) | - | 938 | |||||||||||
23,269 | (116,888 | ) | 215,017 | (359,375 | ) | |||||||||||
Change in non-cash components of working capital | ||||||||||||||||
Accounts receivable | 78,409 | 879 | 29,420 | 1,118 | ||||||||||||
Prepaid expenses and deposits | (75,826 | ) | (121,290 | ) | 73,280 | (159,327 | ) | |||||||||
Accounts payable and accrued liabilities | (85,275 | ) | 98,361 | (22,590 | ) | 174,177 | ||||||||||
Income taxes payable | 51,693 | (16,539 | ) | 13,866 | (17,038 | ) | ||||||||||
(7,730 | ) | (155,477 | ) | 308,993 | (360,445 | ) | ||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Redemption of Class A preference shares | - | (138,839 | ) | - | (138,839 | ) | ||||||||||
Repayment of long-term debt | (687,762 | ) | - | (764,779 | ) | - | ||||||||||
(687,762 | ) | (138,839 | ) | (764,779 | ) | (138,839 | ) | |||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Proceeds from sale of rental real estate property | 2,087,930 | - | 2,087,930 | - | ||||||||||||
Proceeds from notes receivable | 79,275 | 100,000 | 79,275 | 100,065 | ||||||||||||
Proceeds from (additions to) marketable securities | (10,418 | ) | (20,376 | ) | (143,579 | ) | 75,524 | |||||||||
2,156,787 | 79,624 | 2,023,626 | 175,589 | |||||||||||||
CHANGE IN CASH AND CASH EQUIVALENTS | 1,461,295 | (214,692 | ) | 1,567,840 | (323,695 | ) | ||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 17,894,286 | 14,491,151 | 17,787,741 | 14,600,154 | ||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 19,355,581 | $ | 14,276,459 | $ | 19,355,581 | $ | 14,276,459 | ||||||||
Cash and cash equivalents consist of cash balances with banks, and investments in money market instruments. | ||||||||||||||||
Cash and cash equivalents included in the cash flow statement are comprised of the following balance sheet amounts: | ||||||||||||||||
Cash balances with banks | $ | 330,581 | $ | 14,076,459 | ||||||||||||
Money market instruments | 19,025,000 | 200,000 | ||||||||||||||
Total cash and cash equivalents | $ | 19,355,581 | $ | 14,276,459 | ||||||||||||
Money market instruments consist primarily of investments in short term deposits with maturities of three months or less. | ||||||||||||||||
Supplementary cash flow information: | ||||||||||||||||
Income taxes paid | $ | 37,244 | $ | 15,000 | $ | 123,803 | $ | 8,662 | ||||||||
Interest paid | $ | 31,139 | $ | - | $ | 66,926 | $ | - |
See accompanying notes to consolidated financial statements
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN CANADIAN DOLLARS)
Genterra Capital Inc. (“GCI” or the “Company”) is a Canadian management holding company operating in Canada with significant interests in real estate properties located in Ontario, Canada.
The accompanying unaudited interim consolidated financial statements for the six months ended March 31, 2011 have been prepared by the Company in accordance with accounting principles generally accepted in Canada on a basis consistent with those followed in the most recent audited consolidated financial statements for the period ended September 30, 2010
These unaudited interim consolidated financial statements do not include all the information and footnotes required by the generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report for the period ended September 30, 2010.
Amalgamation
On May 10, 2010 Genterra Inc. (“Genterra”) and Consolidated Mercantile Incorporated (“CMI) amalgamated (the "Amalgamation") and continue under the name “Genterra Capital Inc.” with a fiscal year-end of September 30.
The Amalgamation was accounted for as a purchase transaction based on the exchange amount as negotiated between the two companies with CMI identified as the acquirer of Genterra. Accordingly the net assets of CMI were recorded in the accounts of the Company at their carrying values and the net assets of Genterra were recorded at fair value. The results of operations for the three and six months ended March 31, 2011 include the operations of the combined entity, while the results for the three and six months ended March 31, 2010 include the results for CMI only.
In the process relating to the Amalgamation, the Company disqualified certain shares from the dissent process in those cases where it determined that the dissent in respect of such shares was not registered and pursued in compliance with the requirements of Section 185 of the Ontario Business Corporations Act (“OBCA”). The Company has filed a claim with the Superior Court of Justice and has, amongst other things, requested a declaration that the holder of certain of these shares is not a dissenting shareholder for the purposes of Section 185 of the OBCA and is not entitled to receive fair value for such shares.
Transition to International Financial Reporting Standards ("IFRS")
In February 2008, the CICA announced that Canadian generally accepted accounting principles (“GAAP”) for publicly accountable enterprises will be replaced by International Financial Reporting Standards (“IFRS”) for fiscal years beginning on or after January 1, 2011. Companies will be required to provide IFRS comparative information for the previous fiscal year. Accordingly, the conversion from Canadian GAAP to IFRS will be applicable to the Company’s reporting for the first quarter of the year ending September 30, 2012 for which the current and comparative information will be prepared under IFRS.
The Company’s IFRS project consists of three phases – scoping, evaluation and design, and implementation and review. The Company has completed the scoping phase of the project, which consists of project initiation and awareness, identification of high-level differences between Canadian GAAP and IFRS and project planning and resourcing and prepared a comparison of financial statement areas that would be impacted by the conversion.
A detailed assessment of the impact of adopting IFRS on the Company’s consolidated financial statements, accounting policies, information technology and data systems, internal controls over financial reporting, disclosure controls and procedures, and the various covenants and capital requirements and business activities has not been completed. The impact on such elements will depend on the particular circumstances prevailing at the adoption date and the IFRS accounting policy choices made by the Company. The Company has not completed its quantification of the effects of adopting IFRS. The financial performance and financial position as disclosed in the Company’s GAAP consolidated financial statements may be significantly different when presented in accordance with IFRS Recent Accounting Pronouncements
Recent Accounting Pronouncements
In January 2009, the CICA issued three new accounting standards: Section 1582, Business Combinations, Section 1601, Consolidated Financial Statements, and Section 1602, Non-controlling Interests. These new standards will be effective for financial statements related to fiscal years beginning on or after January 1, 2011. It is not expected that these new standards will have a significant impact on the Company’s results of operations, financial position or disclosures.
Sale of Rental Real Estate Property
During the quarter ended March 31, 2011, the Company’s property located at 1095 Stellar Drive, Newmarket, Ontario was sold and the first mortgage of $619,098 relating to this property was repaid.