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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
Second Quarter Report
June 30, 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 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
SCHEDULE A: FINANCIAL INFORMATION
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
JUNE 30, DECEMBER 31,
2004 2003 (1)
------------ --------------
ASSETS
CURRENT
Cash and cash equivalents $ 827,378 $ 241,105
Marketable securities (Note 3) 245,564 110,000
Loans, notes and receivables (Note 4) 38,642 51,651
------------ --------------
1,111,584 402,756
LONG-TERM INVESTMENTS, COST (Note 5) 1 998,127
LONG-TERM INVESTMENTS, EQUITY (Note 5) 667,787 696,070
CAPITAL ASSETS 4,021 11,267
------------ --------------
$ 1,783,393 $ 2,108,220
============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 79,984 $ 69,260
------------ --------------
79,984 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 318,014 391,131
Deficit (1,748,553) (1,486,119)
------------ --------------
1,703,409 2,038,960
------------ --------------
$ 1,783,393 $ 2,108,220
============ ==============
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Audited
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
---------------------------------------- ----------------------------
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------- ----------------------------
2003 2003
AS RESTATED AS RESTATED
2004 NOTE 1 2004 NOTE 1
------------------ -------------------- ------------ --------------
REVENUE $ 88,904 $ 57,692 $ 81,042 $ 42,929
EXPENSES
General and administrative expenses
(Note 6) 76,832 195,373 61,608 151,562
Directors and management fees 43,691 3,529 39,929 3,529
Interest expense 99 11 99 -
------------------ -------------------- ------------ ------------
120,622 198,913 101,636 155,091
------------------ -------------------- ------------ ------------
Loss before other items (31,718) (141,221) (20,594) (112,162)
OTHER ITEMS
Loss on settlement of lawsuit (79,003) - - -
Write-down of marketable securities (143,731) - (143,731) -
Write-off investments (1) - (1) -
Loss on capital assets (3,460) - (3,460) -
Equity loss (4,521) (14,594) (10,065) (9,908)
------------------ -------------------- ------------ ------------
NET LOSS FOR THE PERIOD (262,434) (155,815) (177,851) (122,070)
Deficit, beginning of the period (1,486,119) (968,564) (1,570,702) (1,002,309)
------------------ -------------------- ------------ ------------
Deficit, end of the period $ (1,748,553) $ (1,124,379) $(1,748,553) $(1,124,379)
================== ==================== ============ ============
Basic and diluted loss per share $ (0.04) $ (0.03) $ (0.03) $ (0.02)
================== ==================== ============ ============
Weighted average number of common
shares outstanding 5,933,514 5,933,514 5,933,514 5,933,514
================== ==================== ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
MERCURY PARTNERS & COMPANY INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
---------------------------------------- ----------------------------
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------- ----------------------------
2003 2003
AS RESTATED AS RESTATED
2004 NOTE 1 2004 NOTE 1
------------------ -------------------- ------------ --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (262,434) $ (155,815) $ (177,851) $ (122,070)
Items not affecting cash:
Amortization 4,021 532 2,010 266
Equity loss 4,521 14,594 10,065 9,908
Write-down marketable securities 143,731 - 143,731 -
Loss on capital assets 3,460 - 3,460 -
Changes in current assets and
current liabilities:
(Increase) decrease in marketable
securities 677,070 10,182 678,205 5,355
(Increase) decrease in loans and
receivables 11,061 (12,443) 13,297 6,774
Increase (decrease) in accounts
Payable 13,334 2,783 49,389 99,717
Increase due to/from related party - (4,720) - (10)
------------------ -------------------- ------------ --------------
Net cash provided by (used in) operating
activities 594,764 (144,887) 722,306 (60)
------------------ -------------------- ------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Acquisition) disposal of long-term
investments (2,471) (136,258) 12,163 (11,617)
------------------ -------------------- ------------ --------------
Net cash provided by (used in) investing
activities (2,471) (136,258) 12,163 (11,617)
------------------ -------------------- ------------ --------------
------------------ -------------------- ------------ --------------
Effect of foreign exchange on cash and
cash equivalents (6,020) 70,960 (1,208) 41,147
------------------ -------------------- ------------ --------------
Increase (decrease) in cash and
Equivalents 586,273 (210,185) 733,261 29,470
Cash and cash equivalents, beginning
of the period 241,105 656,580 94,117 416,925
------------------ -------------------- ------------ --------------
CASH AND CASH EQUIVALENTS, END
OF THE PERIOD $ 827,378 $ 446,395 $ 827,378 $ 446,395
================== ==================== ============ ==============
The accompanying notes are an integral part of these consolidated financial
statements.
SCHEDULE B: SUPPLEMENTARY INFORMATION
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 six months ended June 30, 2003 was an
increase in the net loss of $70,960 ($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.
3. MARKETABLE SECURITIES
JUNE 30, 2004 DECEMBER 31 2003
------------------------------ --------------------------------
Fair Value Cost Fair Value Cost
------------------------------ --------------------------------
Fixed Income Securities
Canadian Bonds or Debentures $ - $ - $ - $ -
------------------------------ --------------------------------
Variable Income Securities
Publicly Traded Securities
Canadian 204,629 137,498 4,050 1,935
American 448,006 108,066 306,530 108,065
------------------------------ --------------------------------
Total Variable Income
Securities 652,635 245,564 310,580 110,000
------------------------------ --------------------------------
Total Marketable Securities $652,635 $245,564 $310,580 $110,000
============================== ================================
4. LOANS, NOTES AND RECEIVABLES
JUNE 30, DECEMBER 31,
2004 2003
------------- -------------------
Loan $ - $ 48,563
Receivables 38,642 3,088
-------- --------
Total $ 38,642 $ 51,651
======== ========
5. LONG-TERM INVESTMENTS
JUNE 30, 2004 DECEMBER 31, 2003
---------------------------------------------------------------
Fair Value Cost Fair Value Cost
---------------------------------------------------------------
Investment, carried at cost $ - $ 1 $ 718,651 $ 998,127
Investments, carried at equity 410,901 667,787 492,430 696,070
---------------------------------------------------------------
Total $410,901 $667,788 $1,211,081 $1,694,197
===============================================================
JUNE 30, 2004 DECEMBER 31, 2003
---------------------------------------------------------------
Fair Value Cost Fair Value Cost
---------------------------------------------------------------
Fixed Income Securities
Canadian Bonds or
Debentures $ - $ - $ - $ -
---------------------------------------------------------------
Variable Income Securities
Publicly Traded Securities -
Canadian 410,901 667,788 1,211,081 1,694,197
---------------------------------------------------------------
Total Long-term Investments $410,901 $667,788 $1,211,081 $1,694,197
===============================================================
For the six months ended June 30, 2004, the Company recorded an equity loss of
$(4,521) for its 19.89% ownership in North Group Limited.
6. GENERAL AND ADMINISTRATIVE EXPENSES
For the six months ended June 30, 2004, general and administrative expenses were
comprised of the following:
JUNE 30, JUNE 30,
2004 2003
- -- --------------------
Administration office and travel $ 3,907 $ 1,782
Amortization 4,021 532
Consulting fees, salaries and employee benefits 4,259 37,486
Non-recoverable GST 11,140 113,521
Professional fees 45,093 32,491
Regulatory, transfer agent and shareholder communications 8,412 9,561
--------------------
Total $ 76,832 $ 195,373
====================
7. CAPITAL STOCK
NUMBER OF
SHARES $AMOUNT
=============================
Issued and Outstanding - June 30, 2004 and December 31, 2003 8,183,733 $ 3,456,139
Less: Treasury Stock - June 30,2004 and December 31, 2003 (2,250,219) (1,294,050)
-----------------------------
Balance June 30, 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 six months ended
June 30, 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 June 30, 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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10. RELATED PARTY TRANSACTION
For the six months ended June 30, 2004, the Company paid external directors fees
of $11,022 and management fees to Tom S. Kusumoto, an internal director of
$65,338, of which $32,669 has been recorded as a prepaid expense.
11. 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 consolidated 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.
12. DIRECTORS AND EXECUTIVE OFFICERS AT JUNE 30, 2004
Name of Director Principle Position
- ------------------ -------------------
Tom S. Kusumoto President, Secretary CEO & CFO
Greg MacRae Director
Lance Eng Director
Alex W. Blodgett Director
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AS AT AUGUST 27, 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.
DOCUMENTS 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
www.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.
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.
On August 20, 2004, the Company announced a special dividend (the
"Dividend") to be distributed to its shareholders consisting of 0.42 common
shares of North Group Limited (TSX Venture Exchange: NOR) ("North Group") for
each common share of Mercury held by shareholders. Mercury intends to distribute
approximately 2,492,075 common shares of North Group pursuant to the Dividend.
The record date for the Dividend has been set at August 31, 2004. Shareholders
holding Mercury common shares on that date will be entitled to receive the
Dividend. Fractional interest will be rounded off. For registered shareholders
with addresses in the United States, the shares of North Group which they would
otherwise be entitled to will be sold on their behalf and the proceeds of such
sale will be distributed to them as soon as practicable after such sale is
effected. In the event such shareholder is entitled to receive $10 (Canadian) or
less, no distribution will be made and any funds held on behalf of such
shareholders but not otherwise claimed within three years following the record
date will be returned to the Company.
The Company has no recurring cash requirements other than 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 unaudited quarterly financial statements
and are qualified in their entirety by reference to, and should be read in
conjunction with, such financial statements:
2004 2003(2) 2002
---------------------------------------------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
(in thousands, other than per share amounts)
Revenues(1) 81 $ 8 $ 76 $ 63 $ 58 $ 15 $ 184 $ 262 $ 259 $ 37
Net income (loss) from
continuing operations (178) (85) (237) (94) 85 (4) (365) 170 212 22
Net income (loss) per share
from continuing
operations:
Basic (0.03) (0.01) (0.04) (0.02) (0.01) (0.00) (0.06) 0.02 0.03 0.00
Fully diluted. (0.03) (0.01) (0.04) (0.02) (0.01) (0.00) (0.06) 0.02 0.03 0.00
Total assets 1,783 1,964 2,109 2,065 2,169 2,150 2,261 2,703 2,782 514
Net assets 1,783 1,931 2,040 2,034 2,043 2,124 2,119 2,671 2,712 2,522
Debt 80 32 69 32 126 26 142 32 70 89
Shareholders' equity 1,703 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 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 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.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2004, the Company's readily available cash and cash equivalents
totaled $827,378, while additional sources of liquidity included $245,564 in
marketable securities and $38,642 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 June 30, 2004 was $652,635. Total current assets as of June
30, 2004 were $1,111,584 compared to $402,756 as of December 31, 2003.
During the six-month period ending June 30, 2004, operations generated cash
of $594,764 predominately as a result of the sale of marketable securities,
which increased current assets. Cashflow from investing activities used cash of
$2,471 due to the acquisition of long-term investments. Financing activities
provided no cash in fiscal 2004 year to date or 2003.
The Company's long-term assets totaled $667,788 as of June 30, 2004, and
included long-term investment equity investment in North Group Limited ("North
Group"). During the quarter, the Company sold the majority of its investment in
Cybersurf Corp. The market value of long-term investments as of June 30, 2004
was $410,901.
Total assets of the Company as at June 30, 2004 were $1,783,393 compared to
$2,108,220 at December 31, 2003 due largely to the accounting write-down of
marketable securities during the six months ended June 30, 2004.
Operating Results
For the six-month period ending June 30, 2004, the Company reported
revenues, which were generated from securities trading, oil and gas royalties
and interest income, of $88,904 and operating expenses of $120,622 which
resulted in a net loss of $262,434 after accounting for the write-down of
marketable securities of $143,731, an equity loss of $4,521 from North Group and
legal expenses of $79,003. The Company reported revenues of $57,692 and expenses
of $198,913, resulting in a net loss of $155,815 for the corresponding
comparative period.
General and administrative costs were $76,832 for the six month period
ended June 30, 2004 and included among other expenses, professional fees of
$45,093, non-recoverable GST of $11,140 and regulatory, transfer agent and
shareholder communication costs of $8,412.
Director and management fees were $43,691 during the six month period
ending June 30, 2004 compared to $3,529 for the corresponding comparative
period.
Basic and diluted loss per common share were ($0.04) and ($0.03)
for the six-month periods ended June 30, 2004 and 2003, respectively. As of the
quarter ending June 30, 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 June 30, 2004
was 5,933,514.
* * *
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 30, 2004
-----------------------------------