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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 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the Month of AUGUST 2004
Commission File No.: 0-13966
MERCURY PARTNERS & COMPANY INC.
(Translation of Registrant's name into English)
SUITE 613, 375 WATER STREET, VANCOUVER, BRITISH COLUMBIA, CANADA V6B 5C6
(Address of principal executive office)
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 the Registrant by furnishing the information
contained in this Form 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- .
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[GRAPHIC OMITTED] M E R C U R Y
First Quarter Report
March 31, 2004
Mercury Partners & Company Inc. is a publicly traded financial services 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 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
Amended & Restated
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
--------------------------------------
MARCH 31, DECEMBER 31,
2004 2003 (1)
---------------- ------------------
ASSETS
CURRENT
Cash and cash equivalents $ 94,117 $ 241,105
Marketable securities (Note 3) 110,000 110,000
Loans, notes and receivables (Note 4) 53,354 51,651
----------- -----------
257,471 402,756
LONG-TERM INVESTMENTS, COST (Note 5) 1,002,418 998,127
LONG-TERM INVESTMENTS, EQUITY (Note 5) 694,472 696,070
CAPITAL ASSETS 9,626 11,267
----------- -----------
$ 1,963,987 $ 2,108,220
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 32,490 $ 69,260
----------- -----------
32,490 69,260
----------- -----------
SHAREHOLDERS' EQUITY
Capital stock
Authorized - Unlimited number of common shares
Issued and outstanding - 8,183,733 common
shares 3,456,139 3,456,139
Additional paid-in capital 971,859 971,859
Less: Treasury stock - 2,250,219
common shares (1,294,050) (1,294,050)
Cumulative translation adjustment 368,251 391,131
Deficit (1,570,702) (1,486,119)
----------- -----------
1,931,497 2,038,960
----------- -----------
$ 1,963,987 $ 2,108,220
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Audited
Amended & Restated
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
------------------------------------
THREE MONTHS ENDED
MARCH 31,
------------------------------------
2003
(AS RESTATED
2004 NOTE 1)
-------------- ------------------
REVENUE $ 7,862 $ 14,763
EXPENSES
General and administrative expenses (Note 6) 15,224 43,811
Directors and management fees 3,762 -
Interest expense - 11
-------------- ---------------
18,986 43,822
-------------- ---------------
Loss before other items (11,124) (29,059)
------------- ---------------
OTHER ITEMS
Loss on settlement of lawsuit (79,003) -
Equity income (loss) 5,544 (4,686)
------------- ---------------
NET LOSS FOR THE PERIOD (84,583) (33,745)
------------- ---------------
Deficit, beginning of the period (1,486,119) (968,564)
------------- ---------------
Deficit, end of the period $ (1,570,702) $ (1,002,309)
============= ===============
Basic and diluted loss per share $ (0.01) $ (0.01)
============= ===============
Weighted average number of common shares outstanding 5,933,514 5,933,514
============= ===============
The accompanying notes are an integral part of these consolidated financial
statements.
2
Amended & Restated
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
------------------------------------
THREE MONTHS ENDED
MARCH 31,
------------------------------------
2003
(AS RESTATED
2003 NOTE 1)
-------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (84,583) $ (33,745)
Items not affecting cash:
Amortization 2,011 266
Equity income (loss) (5,544) 4,686
Changes in current assets and current liabilities:
(Increase) decrease in marketable securities (1,135) 5,874
(Increase) decrease in loans and receivables (2,235) (1,539)
Increase (decrease) in accounts payable (36,055) (105,739)
Increase due to/from related party - (20,053)
------------ ------------
Net cash used in operating activities (127,541) (150,250)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Long-term investments costs (14,634) (129,384)
------------ ------------
Net cash used in investing activities (14,634) (129,384)
------------ ------------
Effect of foreign exchange on cash and
cash equivalents (4,813) 39,979
Decrease in cash and equivalents (146,988) (239,655)
Cash and cash equivalents, beginning of the period 241,105 656,580
------------ ------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 94,117 $ 416,925
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
Amended & Restated
MERCURY PARTNERS & COMPANY INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
These interim consolidated financial statements should be read in conjunction
with Mercury Partners & Company Inc.'s (the "Company") most recent annual
consolidated financial statements.
1. BASIS OF PRESENTATION
The consolidated financial statements contained herein include the accounts of
the Company 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.
During 2003, the Company changed from the temporal method of accounting for
foreign exchange translation to the current rate method as required by EIC 130
issued by the CICA. The standard requires retroactive restatement and therefore
financial statements for all periods presented have been restated. The impact
of this change on net loss for the three months ended March 31, 2003 was an
increase in the net loss of $29,813 ($0.01 per share). This amount represents
foreign exchange gains, which are now reflected on the balance sheet versus the
statement of operations.
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.
2. ORGANIZATION AND 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, consulting activities and asset-based
commercial lending.
4
Amended & Restated
3. MARKETABLE SECURITIES
MARCH 31, 2004 DECEMBER 31 2003
--------------------------- --------------------------
Fair Value Cost Fair Value Cost
--------------------------- --------------------------
Fixed Income Securities
Canadian Bonds or Debentures $ - $ - $ - $ -
Variable Income Securities
Publicly Traded Securities
Canadian 114,079 1,935 4,050 1,935
American 391,416 108,065 306,530 108,065
Total Variable Income Securities 505,495 110,000 390,580 110,000
--------------------------- --------------------------
Total Marketable Securities $505,495 $110,000 $ 390,580 $110,000
=========================== ==========================
4. LOANS, NOTES AND RECEIVABLES
MARCH 31, DECEMBER 31,
2004 2003
----------------------------------
Loan $ 50,257 $ 48,563
Receivables 3,097 3,088
----------------------------------
Total $ 53,357 $ 51,651
===================================
5. LONG-TERM INVESTMENTS
MARCH 31, 2004 DECEMBER 31, 2003
----------------------------------------------------------
Fair Value Cost Fair Value Cost
----------------------------------------------------------
Investment, carried at cost $ 908,800 $1,002,418 $ 718,651 $ 998,127
Investments, carried at equity 410,901 694,472 492,430 696,070
----------------------------------------------------------
Total $1,319,701 $1,696,890 $1,211,081 $1,694,197
----------------------------------------------------------
MARCH 31, 2004 DECEMBER 31, 2003
------------------------------------------------------------
Fair Value Cost Fair Value Cost
------------------------------------------------------------
Fixed Income Securities
Canadian Bonds or Debentures $ - $ - $ - $ -
Variable Income Securities
Publicly Traded Securities -
Canadian 1,319,701 1,696,890 1,211,081 1,694,197
------------------------------------------------------------
Total Long-term Investments $1,319,701 $1,696,890 $1,211,081 $1,694,197
------------------------------------------------------------
For the three months ended March 31, 2004, the Company recorded equity income of
$5,544 for its 19.89% ownership in North Group Limited.
5
Amended & Restated
6. GENERAL AND ADMINISTRATIVE EXPENSES
For the three months ended March 31, 2004, general and administrative expenses
were comprised of the following:
MARCH 31, MARCH 31,
2004 2003
--------------------------
Administration office and travel $ 794 $ 1,083
Amortization 2,011 266
Consulting fees, salaries and employee benefits - 31,496
Non-recoverable GST 1,509 -
Professional fees 8,315 8,546
Regulatory, transfer agent and shareholder communications 2,595 2,420
---------------------------
Total $15,224 $43,811
===========================
7. CAPITAL STOCK
NUMBER OF SHARES $ AMOUNT
================= ============
Issued and Outstanding - March 31, 2004 and December 31, 2003 8,183,733 $ 3,456,139
Less: Treasury Stock - March 31,2004 and December 31, 2003 (2,250,219) (1,294,050)
------------------------------
Balance March 31, 2004 and December 31, 2003 5,933,514 $ 2,162,089
==============================
8. LOSS PER SHARE
The weighted average number of common shares outstanding used in determining
loss per share amounts was 5,933,514.
9. SUMMARY OF SECURITIES ISSUED AND OPTIONS GRANTED DURING THE PERIOD
During the years ended December 31, 2003, 2002 and 2001 and the three months
ended March 31, 2004, 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 issued to former management as at March 31, 2004:
Outstanding Options Exercisable Options
- -----------------------------------------------------------------------------------------
Weighted Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price of Shares Life (Years) Price of Shares Price
- -----------------------------------------------------------------------------------------
$ 1.25 120,000 1 $ 1.25 120,000 $ 1.25
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6
Amended & Restated
10. RELATED PARTY TRANSACTION
For the three months ended March 31, 2004, the Company did not enter into any
related party transactions.
11. DIRECTORS AND EXECUTIVE OFFICERS AT MARCH 31, 2004
Name of Director Principle Position
- ------------------ -------------------
Tom S. Kusumoto President, CEO and CFO
Greg MacRae Director & Secretary
Lance Eng Director
Alex W. Blodgett Director
12. NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an
auditor has not performed a review of the interim financial statements, they
must be accompanied by a notice indicating that the financial statements
have not been reviewed by an auditor.
The accompanying unaudited interim financial statements of the Company have
been prepared by and are the responsibility of the Company's management.
The Company's independent auditor has not performed a review of these
financial statements in accordance with the standards established by the
Canadian Institute of Chartered Accountants for a review of interim
financial statements by an entity's auditor.
* * *
7
Amended & Restated
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AS AT MAY 28, 2004
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.
DOUCMENTS ON DISPLAY
The Company files reports and other information on the System for
Electronic Document Analysis and Retrieval (SEDAR) in Canada and with the
Securities and Exchange Commission (SEC) in the United States. The public may
obtain information on the operations of SEDAR and the SEC's public reference
facilities by visiting their websites at http://www.sedar.com and
http://www.sec.gov, respectively. The Company is the owner of the website
wwww.mercury.ca.
FORWARD-LOOKING STATEMENTS
Statements in this financial 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 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 misjudgments in the course of
preparing forward-looking statements. Investors are advised that these
cautionary remarks expressly qualify in their entirety all forward-looking
statements attributable to the Company or persons acting on its behalf.
EXCHANGE RATES
In this financial report, unless otherwise specified, all monetary amounts
are expressed in U.S. dollars.
RESTATEMENT OF FISCAL 2002 AND 2001 FINANCIAL STATEMENTS
In accordance with Emerging Issues Committee (EIC) 130 of The Canadian
Institute of Chartered Accounts (CICA) Handbook, the Company has changed from
the temporal method of accounting for foreign exchange translation to the
current rate method as of December 31, 2003. Accordingly, the Company has
retroactively restated its financial statements for the years ending December
31, 2002 and 2001. Please see Note 3 to the Company's audited financial
statements for the year ending December 31, 2003 for more information.
8
Amended & Restated
OVERALL PERFORMANCE
The Company operates in both the United States and Canada and, as such, the
Company's consolidated financial results are subject to foreign currency
exchange rate fluctuations. The Company reports its results of operations in
U.S. dollars and translates assets and liabilities into U.S. dollars at the rate
of exchange on the balance sheet date. Unrealized gains and losses from these
translations are recorded on the consolidated balance sheet as "Cumulative
translation adjustment".
Realized investment gains or losses are a recurring element in the Company's
revenues and net earnings. 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 amount from
period to period have no practical analytical value.
The Company's principal sources of funds are its available cash resources, bank
financing, public financing and the revenues generated from the Company's
merchant banking activities and realized investment gains from the Company's
private equity operations. The Company has no recurring cash requirements other
than repayment of interest and principal on its debt, tax payments and corporate
overhead.
SELECTED ANNUAL INFORMATION
The following selected financial data for the past eight business quarters
have been summarized from the Company's un-audited quarterly financial
statements and are qualified in their entirety be reference to, and should be
read in conjunction with, such financial statements:
2004 2003(2) 2002
--------------------------------------------------------------------------
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
--------------------------------------------------------------------------
(in thousands, other than per share amounts)
Revenues(1) $ 8 $ 76 $ 63 $ 58 $ 15 $ 184 $ 262 $ 259 $ 37
Net income (loss) from
continuing operations (85) (237) (94) 85 (4) (365) 170 212 22
Net income (loss) per share
from continuing operations:
Basic (0.01) (0.04) (0.02) (0.01) (0.00) (0.06) 0.02 0.03 0.00
Fully diluted (0.01) (0.04) (0.02) (0.01) (0.00) (0.06) 0.02 0.03 0.00
Total assets 1,964 2,109 2,065 2,169 2,150 2,261 2,703 2,782 514
Net assets 1,931 2,040 2,034 2,043 2,124 2,119 2,671 2,712 2,522
Debt 32 69 32 126 26 142 32 70 89
Shareholders' equity 1,931 2,040 2,065 2,043 2,124 2,119 2,671 2,712 2,522
Capital stock 3,456 3,456 3,456 3,456 3,456 3,456 2,161 2,161 2,161
Dividends - - - - - - - - -
Weighted average common
stock outstanding, fully
diluted shares) 5,934 5,934 5,934 5,934 5,934 5,934 5,934 5,934 5,934
(1) Excludes revenues from discontinued operations.
(2) During fiscal 2003, the Company changed from the temporal method of
accounting for foreign exchange translation to the current rate
method as required by Emerging Issues Committee 130 issued by the
Canadian Institute of Chartered Accountants. The standard requires
restatement and therefore financial statements for fiscal 2002 and
2001 have been restated. For more information about the accounting
change and restatement see Note 3 to the Company's
consolidated financial statements for the year ending December
31, 2003.
9
Amended & Restated
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2004, the Company's readily available cash and cash
equivalents totaled $94,117 while additional sources of liquidity included
$110,000 in marketable securities and $53,354 of loans, notes and other
receivables. The Company held cash and cash equivalents and marketable
securities of $241,105 and $110,000, respectively as of December 31, 2003. The
Company's accounting policy is to report the value of marketable securities at
the lower of cost or market at the time of the financial reporting period. The
market value of marketable securities as of March 31, 2004 was $505,495. Total
current assets as of March 31, 2004 were $257,471 compared to $402,756 as of
December 31, 2003.
During the three-month period ending March 31, 2004, operations used cash
of $127,541 predominately as a result of operating losses and a decrease in
accounts payable during the quarter. Accounts payables and accrued liabilities
for the quarter ending March 31, 2004 were reduced to $32,490 from $69,260 at
December 31, 2003. Cashflow from investing activities used cash of $14,634 for
additional costs to long-term investments for the current quarter. Financing
activities provided no cash in fiscal 2003 or 2002.
The Company's long-term assets totaled $1,696,890 as of March 31, 2004, and
included long-term investments in North Group Limited ("North Group") and
Cybersurf Corp. ("Cybersurf"), both of which trade on the TSX Venture Exchange
in Canada. The market value of long term investments as of March 31, 2004 was
$1,319,701.
Total assets of the Company as at March 31, 2004 were $1,963,987 compared to
$2,108,220 at December 31, 2003.
OPERATING RESULTS
For the three-month period ending March 31, 2004, the Company reported
revenues, which were generated from securities trading, oil and gas royalties
and interest income, of $7,862 and expenses of $18,986 resulting in a loss of
$84,583 after accounting for the equity earnings of $5,544 from North Group and
loss on settlement of lawsuit of $79,003, which is related to the payment of
legal costs associated with the litigation with Cybersurf. The Company reported
revenues of $14,763 and expenses of $43,822, resulting in a loss of $33,745 for
the comparative three month period ended March 30, 2003
General and administrative costs were $15,224 for the three month period ended
March 31, 2004 and included professional fees of $8,315 and regulatory,
transfer agent and shareholder communication costs of $2,595. Basic and diluted
loss per common share were $0.01 for the three month periods ended March 31,
2004 and 2003. As of the quarter ending March 31, 2004, the Company had
8,183,733 shares issued and outstanding of which 2,250,219 are held in treasury
for cancellation. The weighted average common stock outstanding, fully diluted,
as of March 31, 2004 was 5,933,514.
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 amount from period to period have no
practical analytical value.
* * *
10
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: August 26, 2004
-----------------------------------