U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Month of NOVEMBER 2002
Commission File Number 000-13966
MERCURY PARTNERS & COMPANY INC.
(Exact Name of Registrant as specified in its charter)
Suite 613, 375 Water Street, Vancouver, British Columbia, Canada V6B 5C6
(Address of principal executive offices)
(Indicate by check mark whether the Registrant files or will file annual reports
under cover of Form 20-F or Form 40-F).
[X] Form 20-F [ ] Form 40-F
-
Indicate by check mark if the Registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the Registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether by furnishing the information contained in this
Form, the Registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the Registrant in
connection with Rule 12g3-2(b): 82-_________________.
[Graphic Omitted] MERCURY
Third Quarter Report
September 30, 2002
Mercury Partners & Company Inc. is a publicly traded financial service company
engaging in merchant banking and private equity activities with operations in
Canada and the United States. Mercury's investment objective is to acquire
influential ownership in companies and through direct involvement bring about
the change required to realize the strategic value of the companies it invests
in.
Mercury's shares are quoted on the NASD OTC Bulletin Board in the United States
under the symbol "MYPIF" and on the TSX Venture Exchange, in U.S. dollars under
the symbol "MYP.U".
Press releases and other financial information can be accessed through the
Internet at www.mercury.ca or by writing to:
--------------
Office of Corporate Relations
Mercury Partners & Company Inc.
PO Box 28051 Harbour Centre
Vancouver, British Columbia
V6B 5L8
www.mercury.ca
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes included in this quarterly report. The
Company's financial statements included herein were prepared in accordance with
Canadian and United States GAAP and are expressed in U.S. dollars. The Company
has not entered into any investor relations arrangements or contracts or engaged
in any form of investor relations activities during the period.
Statements in this quarterly report, to the extent that they are not based on
historical events, constitute forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995. These
statements appear in a number of different places in this quarterly report and
include statements regarding the intent, belief or current expectations of the
Company and its directors or officers, primarily with respect to the future
market size and future operating performance of the Company and its
subsidiaries. Forward-looking statements include, without limitation, statements
regarding the outlook for future operations, forecasts of future costs and
expenditures, evaluation of market conditions, the outcome of legal proceedings,
the adequacy of reserves, or other business plans. Investors are cautioned that
any such forward-looking statements are not guarantees and may involve risks and
uncertainties, and that actual results may differ from those in the
forward-looking statements as a result of various factors such as general
economic and business conditions, including changes in interest rates, prices
and other economic conditions; actions by competitors; natural phenomena;
actions by government authorities, including changes in government regulation;
uncertainties associated with legal proceedings; technological development;
future decisions by management in response to changing conditions; the ability
to execute prospective business plans; and misjudgements in the course of
preparing forward-looking statements.
DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
At September 30, 2002, the Company's readily available cash and cash equivalents
totaled $248,455 while additional sources of liquidity included $672,682 in
marketable securities and $225,963 of loans, notes and other receivables.
The Company's long-term assets included meaningful equity ownership percentages
in North Group Limited (formerly Takla Star Resources Ltd.) and Cybersurf Corp.
Accordingly, total assets of the Company at September 30, 2002 were $2,702,864
as compared to $2,663,985 at December 31, 2001.
For the nine month period ending September 30, 2002, the Company's revenues were
$262,020 while expenses were $91,693 resulting in a profit of $170,327. The
Company reported revenues of $59,430 and expenses of $200,701, resulting in a
loss of $143,900 for the comparative nine month period ending September 30,
2001. Basic and diluted earnings per common share were $0.02 for the nine month
period ending September 30, 2002 as compared to a loss of $0.03 for the nine
month period ending September 30, 2001.
Realized investment gains or losses may fluctuate significantly from period to
period, with a meaningful effect upon the Company's consolidated net earnings.
However, the amount of realized investment gain or loss for any given period has
no predictive value, and variations in amounts from period to period have no
practical analytical value, particularly in view of the net unrealized price
appreciation now existing in the Company's consolidated investment portfolio.
* * * *
2
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
Expressed in U.S. dollars
---------------------------------------
SEPTEMBER 30, DECEMBER 31,
2002 2001(1)
---------------- ----------------
ASSETS
Current
Cash and cash equivalents $ 248,455 $ 301,383
Marketable securities 672,682 394,346
Loans and notes receivable 225,963 1,015,982
---------------- -----------------
Total current assets 1,147,100 1,711,711
---------------- -----------------
Capital assets 16,294 20,699
Investments 1,539,470 931,575
---------------- -----------------
$2,702,864 $2,663,985
---------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and
accrued liabilities $ 14,611 $ 92,649
Marketable securities
sold short 17,706 70,360
---------------- -----------------
Total current liabilities 32,317 163,009
---------------- -----------------
SHAREHOLDERS' EQUITY
Capital stock (authorized
- unlimited number of
common shares; issued
and outstanding
- 8,183,733 shares at
September 30, 2002 and
December 31, 2001) 2,161,333 2,162,089
Contributed surplus 971,859 971,859
Deficit (462,645) (632,972)
------------- -----------------
Total shareholders' equity 2,670,547 2,500,976
------------- -----------------
$2,702,864 $2,663,985
============= =================
The accompanying notes are an integral part of these consolidated financial
statements.
- -------------
(1) Audited
3
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Expressed in U.S. dollars
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Revenue $262,020 $ 59,430 $ 2,844 $(174,568)
Expenses
General and
administrative
expenses 91,693 187,895 44,319 51,357
Interest expense - 12,806 - 1,498
-------- -------- --------- ---------
91,693 200,701 44,319 52,855
-------- -------- --------- ---------
Operating income (loss) 170,327 (141,271) (41,475) (227,423)
Other items - (2,629) - -
-------- -------- --------- ---------
Net income (loss)
for the period 170,327 (143,900) (41,475) (227,423)
Retained earnings
(deficit),
beginning of
period (632,972) 195,646 (421,170) 279,169
--------- -------- --------- ---------
Retained earnings
(deficit), end
of period $(462,645) $ 51,746 $(426,645) $ 51,746
========= ======== ========= =========
Basic and diluted
earnings per
share $ 0.02 $ (0.03) $ (0.01) $ (0.04)
========= ======== ========= =========
The accompanying notes are an integral part of these consolidated financial
statements
4
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in U.S. dollars
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
2002 2001 2002 2001
--------- -------- -------- --------
Cash flows from
operating activities
Net income (loss)
for the period $ 170,327 $(143,900) $ (41,475) $(227,423)
Items not affecting
cash:
Amortization 4,544 9,676 1,515 3,225
Changes in current assets
and current liabilities:
(Increase) decrease in
marketable
securities (78,320) (305,073) (104,056) 561,892
Increase in
securities
sold short (52,654) (3,609) (8,211) (148,383)
Decrease in
accounts payable (77,385) 16,795 (29,479) 45,108
Increase in due
to/from related
party (742) - - -
Increase (decrease)
in loans payable - - - -
Foreign exchange (141) (2) - (2)
--------- -------- -------- --------
Net cash provided by
(used in) operating
activities (34,371) (426,113) (181,706) 234,417
---------- -------- -------- -------
CAsh flows from investing activities
(Acquisition) disposal
of capital assets,
net 89 - - -
(Acquisition) disposal
of investments (607,894) (1,245,892) (27,514) (1,273,036)
Loans, notes and
receivables 590,004 186,802 (598) 135,364
--------- ---------- ------- ---------
Net cash provided by
(used in) investing
activities (17,801) (1,059,090) (28,112) (1,137,672)
----------- ---------- ------- ----------
Cash flows from financing activities
Issuance of share capital,
net of issue costs (756) 865,760 - 865,760
------------ ----------- ------- ----------
Net cash provided by
(used in) financing
activities (756) 865,760 - 865,760
------------ ---------- ------- ----------
Increase (decrease)
in cash and
equivalents (52,928) (619,443) (209,818) (37,495)
Cash and cash
equivalents,
beginning of
year 301,383 1,099,651 458,273 517,703
Cash acquired on
acquisition - 149,963 - 149,963
---------- ---------- -------- ----------
Cash and cash
equivalents,
end of year $ 248,455 $ 630,171 $ 248,455 $ 630,171
========= =========== ========= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
MERCURY PARTNERS & COMPANY INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
These interim consolidated financial statements should be read in conjunction
with the Company's most recent annual consolidated financial statements.
1. BASIS OF PRESENTATION
The consolidated financial statements contained herein include the accounts of
Mercury Partners & Company Inc. and its wholly-owned subsidiaries.
The interim period consolidated financial statements have been prepared by the
Company in accordance with Canadian generally accepted accounting principles.
All financial summaries included are presented on a comparative and consistent
basis showing the figures for the corresponding period in the preceding year.
The preparation of financial data is based on accounting principles and
practices consistent with those used in the preparation of annual consolidated
financial statements. Certain information and footnote disclosure normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. These
interim period statements should be read together with the audited consolidated
financial statements and the accompanying notes included in the Company's latest
annual report. In the opinion of the Company, its unaudited interim consolidated
financial statements contain all adjustments necessary in order to present a
fair statement of the results of the interim periods presented.
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.
2. NATURE OF OPERATIONS
The Company is organized under the Business Corporations Act (Yukon). The
Company currently operates in the financial services industry, engaging in
private equity and merchant banking activities.
3. EARNINGS PER SHARE
Earnings per share amounts have been calculated and presented in accordance with
the new recommendation of the Canadian Institute of Chartered Accountants,
whereby the treasury stock method is used to calculate diluted earnings per
share. The new standard has been applied on a retroactive basis and had no
impact on the amounts presented.
4. GENERAL AND ADMINISTRATIVE EXPENSES
For the current fiscal year-to-date period, general and administrative expenses
include the following:
Administration, office & travel $ 3,914
Depreciation 4,544
Director, consultant, management & professional fees 75,902
Foreign exchange (305)
Interest 169
Regulatory, transfer agent and shareholder communication 7,469
- ------------------------------------------------------------------------------
Total $ 91,693
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6
5. RELATED PARTY TRANSACTIONS
As part of the Company's merchant banking service, the Company usually appoints
a representative to the client company's board of directors. Accordingly, such
transactions are deemed to be related party transactions in nature. For the
current fiscal year-to-date period, the aggregate amount of expenditures made to
parties not at arm's length from the Company was as follows:
During the quarter ended March 31, 2002, the Company borrowed $50,149 from a
company controlled by the management of the Company. The loan was non-interest
bearing and was repaid in May 2002.
During the quarter ended June 30, 2002, the Company borrowed $126,473 from a
company controlled by a director of the Company. The loan was non-interest
bearing and was repaid in May 2002.
During the quarter ended September 30, 2002, the aggregate amount of
expenditures made to parties not at arm's length from the Company was nil.
6. SUMMARY OF SECURITIES ISSUED AND OPTIONS GRANTED DURING THE PERIOD
During the years ended December 31, 2001, 2000 and 1999 and the quarter under
review no stock options were granted, exercised, forfeited or cancelled nor does
the Company have any common shares held in escrow or subject to any pooling
agreements. The following is a summary of the status of stock options
outstanding at September 30, 2002:
================================================================================
Outstanding Options Exercisable Options
- ------------------------------------------ -------------------------
Weighted Weighted
Average Weighted Average
Remaining Average Remaining
Exercise Number Contractual Exercise Number Contractual
Price of Shares Life (Years) Price of Shares Life (Years)
- --------------------------------------------------------------------------------
$1.25 120,000 3 $1.25 120,000 3
================================================================================
7. DIRECTOR AND OFFICERS
Name of Director Principal Position
- ------------------ -------------------
Tom S. Kusumoto President
Tian Kusumoto Secretary
Alex W. Blodgett Director
Lance Eng Director
* * * *
7
BC FORM 51-901F
QUARTERLY AND YEAR END REPORT
This document incorporates Schedules A, B & C
CERTIFICATE
THE SCHEDULE(S) REQUIRED TO COMPLETE THIS QUARTERLY REPORT ARE ATTACHED AND THE
DISCLOSURE CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A
COPY OF THIS REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT. PLEASE
NOTE THIS FORM IS INCORPORATED AS PART OF BOTH THE REQUIRED FILING OF SCHEDULE A
AND SCHEDULES A, B& C.
/s/ Tom S. Kusumoto /s/ Tian Kusumoto
---------------------- -------------------
Tom S. Kusumoto Tian Kusumoto
President Secretary
Mercury Partners & Company Inc. Mercury Partners & Company Inc.
November 28, 2002 November 28, 2002
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant MERCURY PARTNERS & COMPANY INC.
-----------------------------------
By /s/ Tom S. Kusumoto
------------------------------
TOM S. KUSUMOTO, PRESIDENT
Date November 29, 2002
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