UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER: 000-26031
EURO TRADE & FORFAITING, INC.
(Exact name of Registrant as specified in its charter)
UTAH 87-0571580
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1620 - 400 BURRARD STREET, VANCOUVER, BRITISH COLUMBIA, CANADA V6C 3A6
(Address of principal executive offices)
(604) 683-5767
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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
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Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date:
Class Outstanding at November 9, 2001
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Common Stock, $0.001 22,240,724
par value
FORWARD-LOOKING STATEMENTS
Statements in this report, to the extent that they are not based on historical
events, constitute forward-looking statements. 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 forward-looking statements are
subject to an inherent risk that actual results may vary materially from those
described herein. Factors that may result in such variance, in addition to
those accompanying the forward-looking statements, include changes in interest
rates, prices, and other economic conditions; actions by competitors; natural
phenomena; actions by government authorities; uncertainties associated with
legal proceedings; technological development; future decisions by management in
response to changing conditions; and misjudgments in the course of preparing
forward-looking statements.
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
EURO TRADE & FORFAITING, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
EURO TRADE & FORFAITING, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND JUNE 30, 2001
(UNAUDITED)
(IN THOUSANDS)
SEPTEMBER 30, 2001 JUNE 30, 2001
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ASSETS
Current assets
Cash and cash equivalents $ 23,234 $ 16,535
Forfaiting assets 1 1
Investments 1,471 7,295
Note receivable - affiliate 5,000 5,000
Interest receivable 343 223
Deposits and other current assets 1,087 920
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$ 31,136 $ 29,974
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and other accrued
expenses $ 71 $ 490
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Total liabilities 71 490
Shareholders' equity
Common stock 22 22
Additional paid-in capital 35,139 35,139
Retained deficit (4,096) (5,677)
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Total shareholders' equity 31,065 29,484
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$ 31,136 $ 29,974
=================== ==============
The accompanying notes are an integral part of these financial statements.
EURO TRADE & FORFAITING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30,2001 SEPTEMBER 30,2000
------------------ ------------------
Revenue $ 860 $ 25
Expenses
Interest - 24
General and administrative 285 474
Foreign currency transaction gains (1,006) (160)
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(721) 338
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Net income (loss) $ 1,581 $ (313)
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Basic and diluted earnings (loss) per share $ 0.07 $ (0.02)
================== ================
Weighted average number of common shares
outstanding (in thousands) 22,241 16,945
================== ================
The accompanying notes are an integral part of these financial statements.
EURO TRADE & FORFAITING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
(IN THOUSANDS)
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30,2001 SEPTEMBER 30, 2000
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Cash Flows from Operating Activities
Net income (loss) $ 1,581 $ (313)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gains on investments (571) -
Changes in current assets and liabilities:
Interest receivable (120) 109
Forfaiting assets - 3,341
Accounts payable and other accrued expenses (419) 2
Purchase of investments (33) (427)
Proceeds from sale of investments 6,428 -
Other (167) (213)
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Net cash providing by operating activities 6,699 2,499
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Cash Flows from Investing Activities
Net cash provided by investing actives - -
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Cash Flows from Financing Activities
Loan repayment to banks - (3,375)
Change in restricted cash balances - 1,139
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Net cash used in financing activities - (2,236)
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Net increase in cash and cash
equivalents 6,699 263
Cash and cash equivalents, beginning of period 16,535 16,338
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Cash and cash equivalents, end of period $ 23,234 $ 16,601
================== ===================
The accompanying notes are an integral part of these financial statements.
EURO TRADE & FORFAITING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The interim period consolidated financial statements contained herein include
the accounts of Euro Trade & Forfaiting, Inc. and its subsidiaries
(collectively, the "Company").
The interim period consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosure
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such SEC rules and regulations. The interim period
consolidated financial statements should be read together with the audited
financial statements and the accompanying notes included in the Company's
latest annual report on Form 10-K for the fiscal year ended June 30, 2001.
In the opinion of the Company, the unaudited consolidated financial statements
contained herein contain all adjustments necessary to present a fair statement
of the results of the interim periods presented.
NOTE 2. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing income (loss) available
to common shareholders by the weighted average number of common shares
outstanding in the period.
Diluted earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive common
shares. There were no potentially dilutive common shares at September 30, 2000.
The potentially dilutive common shares did not have an impact on the diluted
earnings per share for the three months ended September 30, 2001 because the
warrants to purchase common stock were anti-dilutive.
NOTE 3. FORFAITING ASSETS
Forfaiting is a method of financing international trade. The Company purchases
from an exporter the debt due from an importer when credit is required. The
debt is usually evidenced by a series of negotiable financial instruments such
as promissory notes or by deferred payment letters of credit opened by a bank.
The notes are usually guaranteed by a bank in the importer's country and,
subject to the quality of the guarantor, become marketable amongst international
banks and other financial institutions. In forfaiting, the notes are purchased
without recourse to the exporter.
Management makes regular credit reviews of the forfaiting portfolio on an
individual loan basis. Past experience, current economic conditions and problems
associated with borrowers are all factors in determining the adequacy of the
allowance for losses. The allowance is increased by provision charged to
operating expense, and reduced by recoveries and charge-offs.
NOTE 4. RECLASSIFICATIONS
Certain comparative figures have been reclassified to conform with the current
period's presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following information discussion and analysis of the financial condition and
results of operation of the Company for the three month period ended September
30, 2001 should be read in conjunction with the consolidated financial
statements and related notes included elsewhere herein.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2001
Revenues for the three month period ended September 30, 2001 increased to $0.9
million from $25,000 for the comparative period of 2000, primarily as a result
of interest income accrued by the note receivable and gain on sale of
investment.
Cost of revenues were ($0.7) million for the three month period ended September
30, 2001, compared to $0.3 million in the same period of 2000, primarily as a
result of foreign currency transaction gains.
The Company had net income of $1.6 million, or $0.07 per share, for the three
month period ended September 30, 2001, compared to net loss of $0.3 million, or
$0.02 per share, for the comparative period of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $23.2 million at September 30, 2001 from
$16.5 million at June 30, 2001.
Net cash provided by operating activities for the three month period ended
September 30, 2001 was $6.7 million, compared to $2.5 million in the same period
in 2000, primarily due to the proceeds from the sale of investments.
Net cash used by financing activities for the three month period ended September
30, 2001 was $nil, compared to $2.2 million in the same period in 2000.
At September 30, 2001, the Company had total assets and shareholders' equity of
$31.1 million, compared to total assets of $30.0 million and total shareholders'
equity of $29.5 million at June 30, 2001.
FOREIGN CURRENCY
Substantially all of the Company's operations are conducted in international
markets and its consolidated financial results are subject to foreign currency
exchange rate fluctuations. As at September 30, 2001, approximately 64% of the
Company's cash and cash equivalents were denominated in euros.
Since a substantial portion of the Company's revenues and assets are denominated
in foreign currencies, the financial position of the Company for any given
period, when reported in U.S. dollars, can be significantly affected by the
exchange rates prevailing during that period.
The Company does not currently enter into any currency hedging arrangements for
exchange rate fluctuations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to the Company's annual report on Form 10-K for the year ended
June 30, 2001 for information concerning market risk. The Company is of the
opinion that there were no material changes in market risk since June 30, 2001.
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's annual report on Form 10-K for the fiscal
year ended June 30, 2001 for information concerning legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: November 12, 2001
EURO TRADE & FORFAITING, INC.
By: /s/ Michael J. Smith
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Michael J. Smith, President and Chief
Executive Officer