UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended July 31, 2002.
COMMISSION FILE NUMBER: _______________
INTERNATIONAL FINANCIAL GROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS, BRITISH WEST INDIES
(JURISDICTION OF INCORPORATION OR ORGANIZATION)
P.O. BOX 10098 APO
GEORGE TOWN, GRAND CAYMAN, BRITISH WEST INDIES, AND
SUITE NO. 4 AND 5, TEMPLE BUILDING, MAIN AND PRINCE WILLIAM STREET,
CHARLESTOWN, NEVIS, WEST INDIES
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to section 15(d)
of the Act:
Ordinary Shares having a par value of $0.001 per share.
The number of outstanding shares of each of the issuer's classes of capital or
common stock as of January 31, 2003 was 21,146,500 Ordinary Shares.
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.
[X] Yes [ ] No
Indicate by check mark which financial statement item the registrant has elected
to follow.
[ ] Item 17 [X] Item 18
TABLE OF CONTENTS
PART I........................................................................1
Introduction............................................................1
Accounting Periods and Principles.......................................1
Cautionary Statement Regarding Forward-Looking Information..............1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.............2
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE...........................2
ITEM 3. KEY INFORMATION...................................................2
International Financial Group's Selected Financial Data.................2
Risk Factors............................................................3
ITEM 4. INFORMATION ON THE COMPANY........................................9
History and Background..................................................9
The Subsidiaries.......................................................11
Industry Background....................................................12
Business Strategy......................................................16
Government Regulation..................................................18
Organizational Structure...............................................19
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.....................20
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.......................24
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS................26
ITEM 8. FINANCIAL INFORMATION............................................28
ITEM 9. THE OFFER AND LISTING............................................28
ITEM 10. ADDITIONAL INFORMATION...........................................28
Memorandum and Articles of Association.................................28
Material Contracts.....................................................31
Exchange Controls......................................................31
Taxation...............................................................32
Personal Holding Companies.............................................33
Foreign Personal Holding Companies.....................................34
Passive Foreign Investment Companies...................................34
Controlled Foreign Corporation.........................................35
Documents On Display...................................................35
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK........35
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...........35
PART II......................................................................35
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..................35
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS.......................................................36
PART III.....................................................................36
ITEM 17. FINANCIAL STATEMENTS.............................................36
ITEM 18. FINANCIAL STATEMENTS.............................................36
ITEM 19. EXHIBITS.........................................................36
FINANCIAL STATEMENTS.........................................................39
EXHIBIT 99.1.................................................................51
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February 14, 2003 Annual Report Page i
International Financial Group, Inc.
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PART I
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Introduction
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This annual report on Form 20-F relates to the ordinary shares of International
Financial Group Inc. a corporation registered to carry on business in the Cayman
Islands.
In this annual report, except as otherwise indicated or as the context otherwise
requires, the "Company", "IFG", "we", "us" and "our" refers to International
Financial Group Inc. and its subsidiaries.
Accounting Periods and Principles
- ---------------------------------
We have prepared our audited annual consolidated financial statements as of July
31, 2002 and for the previous two years in U.S. dollars in accordance with
United States generally accepted accounting principles (U.S. GAAP).
Percentages and some amounts in this annual report have been rounded for ease of
presentation. Any discrepancies between totals and the sums of the amounts
listed are due to rounding.
Cautionary Statement Regarding Forward-Looking Information
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We make forward-looking statements in this annual report that are subject to
risks and uncertainties. These statements are based on the beliefs and
assumptions of our management, and on information currently available to us.
Forward-looking statements include statements regarding the intent, belief or
current expectations of our company or its directors or executive officers with
respect to:
o the declaration or payment of dividends;
o the direction of future operations;
o the implementation of principal operating strategies;
o the implementation of our financing strategy and capital expenditure
plans;
o the factors or trends affecting our financial condition, liquidity or
results of operations.
Forward-looking statements also include the information concerning possible or
assumed future results of operations of our company set forth under "Item
4--Information on the Company Business Overview" and "Item 8--Financial
Information" and statements preceded by, followed by, or that include, the words
"believes", "may", "will", "continues", "expects", "anticipates", "intends",
"plans", "estimates" or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions because they relate to future events and
therefore depend on circumstances that may or may not occur in the future. The
future results and shareholder values of our company may differ materially from
those expressed in or suggested by these forward-looking statements. Many of the
factors that will determine these results and values are beyond our ability to
control or predict. Investors are cautioned not to put undue reliance on any
forward-looking statements.
Investors should understand that the following important factors, in addition to
those discussed in this annual report, could affect the future results of our
company and could cause results to differ materially from those expressed in
such forward-looking statements:
o general economic conditions, such as the rates of economic growth in
the principal geographic markets of our company;
o industry conditions, such as the intensity of competition, pricing
pressures, the introduction of new products by our company, the
introduction of new products and services by competitors,
o changes in technology
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February 14, 2003 Annual Report Page 1
International Financial Group, Inc.
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o operating factors, such as the retention of staff and the consequent
achievement of efficiencies and the continued success of product and
service development.
o Political and economic instability
o Market globalization and deregulation
o The internationalization of business
o The lifting of trade barriers
o Trends towards steady global economic growth
o A global relaxation of foreign exchange controls
o High tax regimes
o More effective tax recovery
Item 1. Identity of Directors, Senior Management and Advisers
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Not Applicable.
Item 2. Offer Statistics and Expected Timetable
- -----------------------------------------------
Not Applicable.
Item 3. Key Information
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International Financial Group's Selected Financial Data
- -------------------------------------------------------
The following financial information of our company is only a summary and should
be read in conjunction with, and is qualified in its entirety by reference to,
the audited annual consolidated financial statements of our company and the
related notes which are included in this annual report.
We selected historical financial data set forth below as of and for each of the
years ended July 31, 2002, 2001 and 2000 have been derived from our consolidated
financial statements, which have been audited by Miller & McCollom, Certified
Public Accountants, Lakewood Colorado, USA, independent accountants. We only
represent these particular years because the Company was not in operation for
the years 1997 to 1999 even though it was incorporated and in good standing for
those years. Our financial statements have been prepared in U.S. dollars in
accordance with U.S. GAAP.
Our U.S. GAAP audited annual consolidated financial statements as of July 31,
2002, 2001 and 2000 are included in this annual report.
2002 2001 2000
---- ---- ----
Income $ 395,260 $ 48,365 -
Cost of Sales 112,238 7,633 -
Gross Profit 283,022 40,732 -
Net Loss From Operations 510,210 1,278,661 251,570
Net Loss 495,210 1,286,968 251,570
Net (loss) per common share (.02) (.06) (.09)
Total Assets 514,470 825,192 1,480,463
Total Shareholders Equity 217,988 623,962 1,408,430
Common Stock 21,146 20,250 20,000
Contributed Surplus 2,231,004 2,142,250 2,140,000
Subscription Receivable - - (500,000)
No. of Shares 21,146,500 20,250,000 20,000,000
Dividend Declared per Share - - -
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February 14, 2003 Annual Report Page 2
International Financial Group, Inc.
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Risk Factors
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Investors, holders and prospective purchasers of our shares of our company
should, in addition to paying due regard to the Cautionary Statement Regarding
Forward-Looking Information noted above, also carefully consider all of the
information set forth in this annual report. In general, investing in the
securities of issuers in development stage of its business involves a higher
degree of risk than investing in established companies with historical earnings
and financial data to compare and analyze.
For purposes of this section, when we state that a risk, uncertainty or problem
may, could or would have an "adverse effect" on our company, we mean that the
risk, uncertainty or problem may, could or would have an adverse effect on the
business, financial condition, liquidity, results of operations or prospects of
our company, except as otherwise indicated or as the context may otherwise
require. You should view similar expressions in this section as having a similar
meaning.
BECAUSE WE ARE A DEVELOPMENT STAGE COMPANY, WE CANNOT GUARANTEE OUR
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PROFITABILITY.
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IFG has a limited operating history. From the date of our incorporation on July
14th, 1997, until February 1st, 2001, we were a development-stage company that
had no revenues. Our operating activities during this period consisted primarily
of conducting research and developing our products and services to be provided
to clients desiring offshore financial products and services. Effective February
1, 2001, IFG Trust Services, Inc. and IFG Investments Services, Inc. commenced
business and have derived revenue from the businesses; however, we remain a
development-stage company. Our prospects are subject to the risks and expenses
encountered by development stage companies, companies entering the traditional
financial products and services market, and companies planning to move into the
Internet financial products and services market. Our limited operating history
and the uncertain nature of the markets addressed by us make it difficult or
impossible to predict future results of our operations. We cannot assure our
investors that we will establish a clientele that will make us profitable, which
might result in the loss of some or all of your investment in IFG.
BECAUSE IFG AND ITS OFFICERS AND DIRECTORS ARE LOCATED IN NON-U.S.
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JURISDICTIONS, INVESTORS MAY HAVE NO EFFECTIVE RECOURSE AGAINST IFG OR ITS
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MANAGEMENT FOR MISCONDUCT AND YOU MAY NOT BE ABLE TO ENFORCE JUDGMENTS AND CIVIL
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LIABILITIES AGAINST IFG AND ITS OFFICERS, DIRECTORS, EXPERTS AND AGENTS.
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International Financial Group Inc. has been incorporated under the laws of the
Cayman Islands, and our executive offices are located in the Federation of St.
Kitts and Nevis. Many of our directors, controlling persons and officers, and
representatives of the experts named in this prospectus, are residents of the
Federation of St. Kitts and Nevis and Canada, and a substantial portion of their
assets and all of our assets are located outside the United States. As a result,
it may be difficult for investors to effect service of process within the United
States upon the directors, controlling persons, officers and representatives of
experts who are not residents of the United States or to enforce against them
judgments of courts of the United States based upon civil liability under the
federal securities laws of the United States. There is doubt as to the
enforceability in Cayman Islands against us or against any of our directors,
controlling persons, officers or experts who are not residents of the United
States, in original actions or in actions for enforcement of judgments of United
States courts and of liabilities based solely upon the federal securities laws
of the United States.
BECAUSE THE REGULATORY AND TECHNOLOGICAL ENVIRONMENT AFFECTING INTERNET OFFSHORE
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FINANCIAL SERVICES IS RAPIDLY CHANGING, IF WE CANNOT COMPLY WITH CHANGING
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INDUSTRY REGULATIONS, OR ADOPT ADVANCES IN TECHNOLOGY, WE MAY BE UNABLE TO
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COMPETE EFFECTIVELY.
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The offshore financial services industry is characterized by rapid technological
change, changes in customer requirements, new service and product introductions
and enhancements, evolving industry standards and regulation from state, federal
and foreign governments. At present the G7 countries, the United Nations and the
Organization for Economic Cooperation and Development are lobbying for new
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February 14, 2003 Annual Report Page 3
International Financial Group, Inc.
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legislation and regulations that would require the disclosure of information
regarding participants in the offshore finance industry, with an eye toward
preventing tax evasion and money laundering. In this regard, the Cayman Islands,
has recently introduced legislation to criminalize failure to disclose to the
Cayman authorities knowledge or suspicion of money laundering.
If the Cayman Islands or the Federation of St. Kitts and Nevis discontinued
their policy of providing privacy in financial dealings, and our customers lost
confidence in our ability to protect their confidential financial information,
we might lose much of our business, and investors might lose some or all of
their investment in IFG.
Changing government regulations go hand-in-hand with changing technology,
including encryption technology that is routinely used on the Internet to
protect confidential financial information and transactions. Because encryption
and related technology is constantly advancing, we will be required to spend
considerable assets keeping current with evolving industry standards. If we are
unable to do so, we will probably lose our customers to competitors who keep
current with technological advances, which might result in the loss of some or
all of your investment in IFG.
IF WE ARE NOT ABLE TO OBTAIN FUTURE FINANCING WHEN REQUIRED, WE MIGHT BE FORCED
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TO DISCONTINUE OUR BUSINESS.
- ----------------------------
We may need to raise additional funds in order to maintain our trust and
investment services business, develop new or enhanced services and products,
respond to competitive pressures, acquire complementary businesses or
technologies or respond to unanticipated requirements. There can be no assurance
that additional financing will be available when needed on terms favorable to
us. There is no assurance that we will not incur debt in the future, that we
will have sufficient funds to repay our indebtedness or that we will not default
on our debt, jeopardizing our business viability. Furthermore, we may not be
able to borrow or raise additional capital in the future to meet our needs or to
otherwise provide the capital necessary to conduct business, which might result
in the loss of some or all of your investment in IFG.
BECAUSE A SUBSTANTIAL PORTION OF OUR REVENUES IS EXPECTED TO BE DERIVED FROM OUR
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SECURITIES BUSINESS, WE ARE PARTICULARLY VULNERABLE TO CHANGES IN MARKET
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CONDITIONS BEYOND OUR CONTROL.
- ------------------------------
A substantial portion of our revenues is expected to be derived from advice
provided to our clients through our securities subsidiary. The securities
business is subject to fluctuations and is directly affected by global economic
conditions, broad trends in business and finance and fluctuations in volume and
price levels of securities transactions, all of which are beyond our control.
Severe market fluctuations in the future could have a material adverse affect on
our business, financial condition and operating results. The securities business
is also subject to various other risks, including customer default and employee
misconduct, errors and omissions. We may be responsible for any such losses that
may occur as a result of these risks. The securities industry has undergone many
fundamental changes during the last two decades, including regulation and
deregulation in many countries, as well as consolidation. There can be no
assurance that future changes will not have a material adverse affect on our
business, financial condition and operating results. In addition, commissions
charged to customers for brokerage services have steadily decreased, and we
expect such decreases to continue. There can be no assurance that such decreases
will not have a material adverse affect on our business, financial condition and
operating results and, therefore, the prospect of a return of capital invested
in IFG.
BECAUSE OUR BUSINESS DEPENDS ON NEW AND EVOLVING MARKETS AND PRODUCTS, AN
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INVESTMENT IN OUR COMPANY IS HIGHLY SPECULATIVE.
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It is anticipated that, in the years that follow completion of our full-service
website, a large portion of our future business may be conducted over the
Internet. The market for electronic financial products and services offered over
the Internet is at an early stage of development and is continually evolving. As
is typical for new and rapidly evolving industries, demand and market acceptance
for recently introduced services and products are subject to a high level of
uncertainty. Our current and proposed products and services to be offered
through the Internet involve an alternative approach and, as a result, some
limited marketing and sales efforts may be necessary to educate prospective
users regarding the uses and benefits of our products and services. Consumers,
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February 14, 2003 Annual Report Page 4
International Financial Group, Inc.
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who already obtain their financial services from more traditional providers such
as banks, brokerage firms, lawyers, trust companies, insurance brokers etc., may
be reluctant or slow to change to utilizing our current and proposed products
and services over the Internet.
The future of our success will depend, in part, on our ability to attract
offshore financial services clients, to develop and use leading technologies,
respond to technological advances, enhance our existing products and services
and develop new products and services on a timely and cost-effective basis.
There can be no assurance that the market for our offshore financial services
will develop or, if it does develop, will continue to grow, or that we will be
successful in effectively developing or using new technologies, responding to
technological advances or developing, introducing or marketing new products and
services to establish, maintain or enhance our client base.
Acceptance of our products and services will depend upon the broader adoption of
the Internet by consumers as a medium for commerce and communication. Use of the
Internet depends on the continued development of the necessary infrastructure
and complementary services and products, such as high-speed modems and
high-speed communication lines. As the number of users and amount of traffic on
the Internet continues to increase, there can be no assurance that the Internet
infrastructure will continue to be able to support the demands placed on it. In
addition, delays in the development or adoption of new standards and protocols
to handle increased levels of Internet activity or increased governmental
restrictions could impede further use of the Internet. Moreover, consumer
concerns about the Internet (including security, reliability, cost, ease of use,
accessibility and quality of service) remain unresolved and may negatively
affect the growth of Internet use. As a result, there can be no assurance that
the number of future transactions generated through us will be enough to
maintain IFG.
BECAUSE WE FACE INTENSE COMPETITION, AN INVESTMENT IN OUR COMPANY IS HIGHLY
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SPECULATIVE.
- ------------
We will compete with other financial service providers in the offshore industry.
Those competitors currently include brokerage firms, trust companies, corporate
and management service providers and in the future are intended to include
banks, insurance companies, and other business entities that provide offshore
financial products and services. We expect such competition to continue and
intensify in the future. Further, other financial service providers may be
established in offshore jurisdictions with the same business strategy as us and
may attempt to compete directly with us for the same customers. We expect many
of our competitors to have significantly greater financial, technical, marketing
and other resources than us. Our current competitors include, but are not
limited to, Merrill Lynch, First Nevisian, SEGOES, Freedom Trade, Trident Trust,
Royal Bank of Scotland, Fiduciary Trust, HWR Services, Caribbean Management, the
Sovereign Group, and OCRA.
These potential competitors may be able to respond more quickly to new or
changing opportunities, technologies and customer requirements than IFG and may
be able to undertake more extensive promotional activities, offer more
attractive terms to customers and adopt more aggressive pricing policies than
IFG. Moreover, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
enhance their services and products. We cannot guarantee that new competitors or
alliances among competitors will not emerge, and these competitors may acquire a
significant market share of the offshore financial industry.
There can be no assurance that we will be able to compete effectively with
current or future competitors or that the competitive pressures faced by us will
not have a material adverse affect on our business, financial condition and
operating results and, therefore, the prospect of an investor return of capital
invested in IFG.
BECAUSE WE DEPEND ON OUR COMPUTER SYSTEMS FOR ALL OF OUR OPERATIONS, ANY SYSTEM
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FAILURE WOULD DAMAGE OUR BUSINESS AND PROLONGED FAILURE COULD FORCE US OUT OF
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BUSINESS.
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Our success is dependent on the integrity and reliability of our computer
systems (hardware and software) and electronic systems supporting our
operations, websites and Internet applications. Extraordinary volumes of
activity could cause our computer systems and Internet applications to operate
at an unacceptably low speed or even fail. Any significant degradation or
failure of the computer systems or any other systems (including third party
providers integrated with our computer and Internet system) could cause users of
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February 14, 2003 Annual Report Page 5
International Financial Group, Inc.
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our system to suffer delays in carrying out their business activities. Such
delays could cause substantial losses for users of our system and could subject
us to claims from users for losses, including litigation claiming fraud or
negligence. There can be no assurance that our computer systems and Internet
applications will not fail for a variety of reasons, including, but not limited
to, an act of God, natural disaster, fire, power or telecommunications failure,
war, political instability or failure by a third-party software or hardware
provider. Any computer systems failure that causes interruptions in our
operations and delivery of service could have a material adverse affect on our
business, financial condition and operating results and, therefore, the prospect
of an investor's return of capital invested in IFG.
IF OUR SECURITY SYSTEMS ARE BREACHED, OR OUR SYSTEMS ARE SABOTAGED, WE WOULD
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LOSE BUSINESS AND INVESTORS COULD LOSE THEIR INVESTMENT.
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We rely on encryption and other online security technology, necessary to effect
secure transmission of confidential information over the Internet by users of
our computer systems and Internet systems. There can be no assurance that
advances in computer capabilities; new discoveries in the field of cryptography
or other events or developments will not result in a compromise or breach of our
security technologies. Any such compromise of the security available through our
system could have a material adverse affect on our business, financial condition
and operating results and, therefore, the prospect of an investor's return of
capital invested in IFG. We cannot assess the risk that our own Internet-based
applications will not be sabotaged by computer hackers.
BECAUSE WE DEPEND ON A SMALL GROUP OF QUALIFIED PEOPLE, IF WE CANNOT HIRE AND
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RETAIN QUALIFIED PERSONNEL, WE MIGHT BE FORCED TO DISCONTINUE OUR OPERATIONS.
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Our business is dependent upon a small number of directors, executive officers
and key personnel. We do not maintain any life insurance policies on any of our
directors, executives, or key personnel for the benefit of IFG. The loss of the
services of any of the aforementioned directors, executive officers or key
personnel, or the inability to identify, hire, train and retain other qualified
directors, executive officers or personnel in the future could have a material
adverse affect on our business, financial condition and operating results and,
therefore, the prospect of an investor's return of capital invested in IFG.
BECAUSE ANOTHER COMPANY CONTROLS A MAJORITY OF OUR COMMON STOCK, INVESTORS WILL
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HAVE LITTLE OR NO CONTROL OVER IFG OR ITS MANAGEMENT.
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We remain controlled by IFG World Holdings Inc., the major controlling
shareholder to IFG. As a result, IFG World Holdings Inc. will have the ability
to control matters affecting IFG, including the election of our directors, the
acquisition or disposition of our assets, and the future issuance of IFG's
shares. Because Mr. Daniel MacMullin currently owns over 99% of IFG's shares,
investors will not be able to replace our management if they disagree with the
way IFG's business is being run. Because control by "insiders" could result in
management making decisions that are in the best interest of those insiders and
not in the best interest of the investors, you may lose some or all of the value
of your investment in IFG.
IF WE CANNOT ESTABLISH INTERNATIONAL ALLIANCES AND BUSINESS RELATIONSHIPS, WE
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MAY NOT BE ABLE TO OPERATE OUR VARIOUS BUSINESSES EFFECTIVELY, AND INVESTORS
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COULD LOSE THEIR INVESTMENT IN IFG.
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We intend to accomplish our goals by establishing strategic alliances with other
corporations, partnerships, and individuals, including banks, securities
dealers, insurance companies, trust and corporate service providers, online
service providers, and domestic and offshore professionals around the world.
Such strategic alliances entail numerous risks, including difficulties in
assessing the integrity, professional ability and/or efficiency and reliability
of the corporations, partnerships, professionals and individuals around the
world. There can be no assurance that any such relationships will be maintained,
that if such relationships are maintained, that they will be successful or
profitable or that we will be successful in developing any new strategic
alliances.
BECAUSE WE RELY ON THE HONESTY OF OUR CLIENTS, WE MAY BREACH MONEY-LAUNDERING
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LAWS IF OUR CLIENTS LIE TO US, WHICH MIGHT PUT US OUT OF BUSINESS.
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February 14, 2003 Annual Report Page 6
International Financial Group, Inc.
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Although most offshore regulatory regimes contemporarily require the production
of extensive due diligence representation (in order to comply with the "know
your client" rule) from new parties involved in offshore financial structures
(e.g., directors, beneficiaries and beneficial owners, settlors, bank account
signatories, etc.), we cannot guarantee that required information and due
diligence provided by each new client will not be mistaken, misrepresented, the
product of forgery and/or fraud or otherwise inaccurate for reasons beyond our
control or the client.
Such inaccuracies may put us in breach of local laws and regulations which could
result in censure, fine, incarceration, revocation of work permits, the issuance
of cease-and-desist orders or the suspension or expulsion of our officers or
employees from certain countries. Such errors, omissions or inaccuracies may
also damage our international reputation as an offshore financial provider.
Either scenario could have a material adverse affect on our ability to carry on
business, which would, in turn, have a material adverse affect on our financial
condition and operating results and, therefore, the prospect of an investor's
return of capital invested in IFG.
BECAUSE WE RELY ON THIRD PARTY SERVICE PROVIDERS, THEIR ERRORS OR OMISSIONS
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COULD HAVE A MATERIAL ADVERSE AFFECT ON OUR BUSINESS AND CAUSE A LOSS OF YOUR
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INVESTMENT.
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We intend to rely on third party providers in all aspects of our business.
Errors and omissions in the various services performed by these third party
providers, although not the fault of ours, may expose us to criminal or civil
liability, and/or directly affect the quality and efficiency of goods and
services delivered by IFG. Such errors or admissions may have a material adverse
affect on our business, financial condition and operating results and,
therefore, the prospect of an investor's return of capital invested in IFG.
IF GOVERNMENT REGULATIONS CHANGE TO IMPEDE OR ELIMINATE OUR ABILITY TO FUNCTION
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AS AN OFFSHORE FINANCIAL SERVICE PROVIDER, WE COULD BE FORCED TO CEASE OUR
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OPERATIONS.
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In conducting various aspects of our business, we are subject to various laws
and regulations within the jurisdictions, which it operates in relating to
international commercial transactions. Given the expansion of the electronic
commerce market, it is possible that any of the foregoing agencies could revise
existing regulations or adopt new regulations governing or affecting our plan
and ability to conduct our business through traditional channels and through the
Internet. If enacted, such laws, rules and regulations could have a material
adverse effect on our business, operating results and financial condition.
We intend to be engaged in marketing financial products and services in up to 40
jurisdictions. As a result, it will be required to uphold all local laws,
including those laws related to the business of selling financial products and
services and all local money laundering laws. There can be no guarantee that we,
or our subsidiaries will obtain and retain licenses to conduct our business in
the various jurisdictions in which we are proposing to operate. Failure to
comply with any of these laws, rules or regulations could result in censure,
fine, incarceration, revocation of work permits, the issuance of
cease-and-desist orders or the suspension or expulsion of our officers or
employees from certain countries, any of which could have a material adverse
affect on the ability for us to carry on business, which would, in turn, have a
material adverse affect on the our financial condition and operating results
and, therefore, the prospect of an investor's return of capital invested in IFG.
It is our intent to expand our business to a number of offshore financial
centers through strategic alliances. In order to expand our services globally,
we must comply with regulatory controls of each specific country in which it
conducts business, which may include finding qualified professionals and
business people capable of providing correspondent services. The varying
compliance requirements of these different regulatory jurisdictions may also
limit our ability to expand internationally.
We intend to conduct a significant portion of our business through the Internet
and other electronic media and intend to expand our use of such media. To date,
the use of the Internet to conduct financial transactions has been relatively
free from regulatory restraints. However, a number of governments, including the
United States, are beginning to address the regulatory issues that may arise in
connection with use of the Internet. Accordingly, there can be no assurance that
these authorities will not adopt new regulations (or interpret their existing
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February 14, 2003 Annual Report Page 7
International Financial Group, Inc.
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regulations) in a manner that constrains our ability to transact business
through the Internet or other electronic media. Any additional regulation of our
use of electronic media could render our business or operations more costly,
less efficient or even impossible, any of which could have a material adverse
affect on the our business, financial condition and operating results.
In addition to the above risks, we cannot assess the effect that the
Organization for Economic Cooperation and Development, the United Nations and
the G7 countries initiatives will have upon the offshore financial industry and,
in particular, the jurisdictions that we will carry on business in and our
proposed clients.
BECAUSE WE ARE SUBJECT TO NET CAPITAL AND INSURANCE REQUIREMENTS, WE WILL HAVE
- ------------------------------------------------------------------------------
TO MAINTAIN SIGNIFICANT CASH RESERVES, WHICH MAY LEAVE US WITH LESS WORKING
- ---------------------------------------------------------------------------
CAPITAL AND MIGHT RESULT IN LIQUIDATION OF IFG.
- -----------------------------------------------
IFG's subsidiary, IFG Trust Services is subject to certain net capital to carry
on its current trust, corporate and management services. Failure to satisfy or
maintain the required net capital may prevent us from maintaining the required
license to carry on our trust business and may subject the us or our
subsidiaries to fines, suspension or revocation of license's and registration's
granted by certain governmental bodies, which could require liquidation of IFG
and/or its subsidiaries. In addition, a change in the net capitalization that
IFG Trust Services Inc. is subject to, the imposition of new rules or any
unusually large charge against net capital or insurance requirement could limit
our operations, which in turn, could limit our ability to pay dividends. A
significant operating loss or any unusually large charge against net capital
could adversely affect the our ability to expand or even develop the level of
business currently planned in IFG Trust Services Inc., which could have a
material adverse affect on our business, financial condition and operating
results and, therefore, the prospect of an investor's return of capital invested
in IFG.
BECAUSE WE DO NOT INTEND TO PAY ANY DIVIDENDS ON OUR ORDINARY SHARES, INVESTORS
- -------------------------------------------------------------------------------
SEEKING DIVIDEND INCOME OR LIQUIDITY SHOULD NOT PURCHASE OUR SHARES.
- --------------------------------------------------------------------
We do not currently anticipate declaring and paying dividends to our
shareholders in the near future. It is our current intention to apply net
earnings, if any, in the foreseeable future to increasing our capital base and
marketing. Prospective investors seeking or needing dividend income or liquidity
should, therefore, not purchase our shares. There can be no assurance that we
will ever have sufficient earnings to declare and pay dividends to the holders
of IFG's shares, and in any event, a decision to declare and pay dividends is at
the sole discretion of our Board of Directors. The subsequent sale of the shares
will be subject to market conditions for the sale of the shares and any
sanctions imposed by regulatory authorities upon the shares such as an order to
halt trading, cease trade orders and registration requirements.
BECAUSE WE DO NOT HAVE ANY TRADEMARK PROTECTION, OUR COMPETITION COULD
- ----------------------------------------------------------------------
APPROPRIATE OUR PRODUCTS AND SERVICES, RESULTING IN DECREASED REVENUES AND
- --------------------------------------------------------------------------
INCREASING THE POSSIBILITY THAT YOU WOULD LOSE YOUR INVESTMENT.
- ---------------------------------------------------------------
We have not been issued any registered trademarks for our legal or Internet
trade name. We intend to file trademark and trade name applications with the
United States Office of Patents and Trademarks for our proposed trade names and
trademarks in the future. No assurance can be given that we will be successful
in obtaining any trademarks, or that the trademarks, if obtained, will afford us
any protection or competitive advantages.
We may not own the property or intellectual property rights to the software that
we may use to conduct our business. Copyright, trade secret and trademark laws
will primarily be relied upon by the intended software providers to protect the
technology employed by IFG. We currently have no patents. In addition, effective
trademark protection may not be available for trademarks we may utilize or
develop. Notwithstanding the intended precautions to be taken by us, a third
party may copy or otherwise obtain and use software or other proprietary
information without authorization or may develop similar software independently.
Policing unauthorized use of technology is difficult, particularly because the
global nature of the Internet makes it difficult to control the ultimate
destination or security of software or other data transmitted. The laws of other
countries may afford little or no effective protection of intellectual property.
The steps we will take may not prevent misappropriation of our technology or the
agreements entered into for that purpose might not be enforceable. In addition,
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February 14, 2003 Annual Report Page 8
International Financial Group, Inc.
- --------------------------------------------------------------------------------
litigation may be necessary in the future to enforce intellectual property
rights, to protect trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity respecting our products or services. Such litigation could result in
substantial costs and diversions of resources, either of which could have a
material adverse affect on our business, financial condition and operating
results. Our financial resources may not be sufficient to successfully prevail
in litigation even when the merits are clearly on the side of IFG.
BECAUSE WE CAN ISSUE ADDITIONAL ORDINARY SHARES, INVESTORS WILL INCUR IMMEDIATE
- -------------------------------------------------------------------------------
DILUTION AND MAY EXPERIENCE FURTHER DILUTION.
- ---------------------------------------------
We are authorized to issue up to 50,000,000 shares. The Board of Directors has
the authority to cause IFG to issue more of its shares, and to determine the
rights, preferences and privileges of such shares, without the consent of any of
our shareholders. Consequently, the shareholders may experience more dilution in
their ownership of IFG in the future. Purchasers of Units and the constituent
shares in this Offering will experience immediate and substantial dilution in
the net tangible book value per share of their investments in the shares.
Item 4. Information on the Company
- ----------------------------------
History and Background
- ----------------------
The Company
- -----------
International Financial Group Inc., domiciled in the Cayman Islands, is an
exempt company incorporated in the Cayman Islands on July 14, 1997 pursuant to
the Companies Law (1998 Revision). Our company's registered address in the
Cayman Islands is P.O. Box 10098 APO, Georgetown, Grand Cayman, British West
Indies and our executive offices are located at suites no. 4 and 5 Temple
Building, Main and Prince William Streets, Charlestown, Nevis, West Indies. Our
telephone numbers in Nevis are 869-469-7040, 869-469-7041 and 869-469-7439.
Through our subsidiaries IFG Trust Services Inc. and IFG Investments Services,
Inc., we provide offshore financial services to the business-to-consumer and
business-to-business markets. We utilize traditional delivery channels including
in-person consultation, telephone and facsimile, as well as the Internet to
deliver our products and services. We commenced full service offshore
investment, trust and corporate services activities in February 2001, and during
the same month, also launched the websites www.ifg.com, www.apiip.com and
----------- -------------
www.ifgtrust.com to provide Internet-based discount offshore investment, trust
- ----------------
and incorporation services. It is our objective to provide to our clients an
efficient, professional and confidential environment in which to conduct their
financial affairs, with a focus on asset protection.
It is our goal to be an offshore trust company that provides investment services
to its clients.
During July 2002 we decided to concentrate our sole efforts on being a trust
company that provided investment services to our clients. In addition we
streamlined our operations due to our analysis that indicated it was unnecessary
to have subsidiaries in all offshore jurisdictions to properly service our
clients. We found that the utilization of third party offshore providers and
entering into revenue sharing arrangements with these providers as the need
arises was sufficient to satisfy our clients' needs and was cost beneficial.
In August 2001 IFG Trust Services Inc. entered into a revenue sharing
arrangement with Mobius Trust Company of the Federation of St. Kitts and Nevis
to service its clients on a revenue sharing basis. We anticipate earning
approximately $100,000 to $150,000 per year from this arrangement.
Our principal capital expenditures for each of fiscal 2002, 2001and 2000 have
been for computer equipment and office furniture, for which we spent
approximately $241, $133,570 and $25,428 in each respective year. We sold
approximately $25,396 in computer equipment and furniture in 2001 regarding the
sublease of our office in the Cayman Islands.
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February 14, 2003 Annual Report Page 9
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Business Overview
- -----------------
Through our subsidiaries, IFG Trust Services Inc. and IFG Investment Services,
Inc. we provide offshore financial services to the business-to-consumer and
business-to-business markets. We utilize traditional delivery channels including
in-person consultation, telephone and facsimile, as well as the Internet to
deliver our products and services. We commenced full service offshore
investment, trust and corporate services activities in February 2001, and during
the same month, also launched the websites www.ifg.com, www.apiip.com and
----------- -------------
www.ifgtrust.com to provide Internet-based discount offshore investment, trust
- ----------------
and incorporation services. It is our objective to provide to our clients an
efficient, professional and confidential environment in which to conduct their
financial affairs, with a focus on asset protection.
Maintenance by individuals and corporations, of international financial planning
strategies have led management to believe there will continue to be a need for
full service offshore financial service providers. We believe that individuals
and corporations around the world have demonstrated a need to use financial
strategies that allow them to control their own financial affairs in a
convenient, confidential and efficient manner, while protecting their assets,
preserving their wealth, and providing flexibility in wealth transfer.
Furthermore, in the third quarter of 2000, The Standard (February - March 2001)
quotes, Salomon Smith Barney, that 30.5% of all NYSE and NASDAQ trades were
performed online. These transactions were facilitated by discount brokerages
such as E-Trade, Ameritrade and National Discount Brokers via the Internet.
While use of the Internet has continued to grow at an exponential rate, Internet
consumers have become increasingly confident in the security, reliability and
confidentiality of e-commerce transactions. We have developed our business plan
and corporate structure to accommodate these emerging consumer trends and
demands.
To accomplish these goals, we are established IFG Trust Services Inc. and IFG
Investment Services Inc. to provide comprehensive full service offshore
financial products and services with third party arrangements to satisfy the
customer's needs. Customer convenience and operating efficiency, along with
offering "bundled" financial services, are two key components of our strategy.
The products and services we currently provide include full service and discount
offshore investment, trust and corporate services. During 2003, we intend to
maintain our products and services offerings. By offering these services from
multiple jurisdictions, our clients are able to develop a financial plan
utilizing multiple layers of confidentiality and secrecy, while also offering
the client the ability to utilize the best available jurisdiction for each
distinctive part of their offshore financial strategy. As we expand our products
and services offered and our third party relationships, we will continue to
utilize both full service traditional and discount Internet based delivery
channels.
We have not renewed the registration of many of our non-operating subsidiaries
around the world as we have found that we can service our client needs in these
jurisdictions from our executive offices in Nevis. This action will save us
substantial incorporation and renewal fees charged by the various countries to
conduct business in their jurisdiction.
We have maintained our trust services subsidiary IFG Trust Services, Inc.'s,
head office in St. Kitts and Nevis, West Indies and have maintained our license
to conduct trust activities in this jurisdiction. IFG Trust Services, Inc. owns
IFG Investments Services, Inc., a Nevis subsidiary that conducts brokerage and
investment banking services for our clients and refers clients to offshore
brokerage firms for trading services.
In February 2001, we made applications for offshore bank licenses to be held by,
IFG Bank, Inc., in Belize and St. Vincent and the Grenadines. Due to the effects
of September 11, 2001 the offshore industry has not grown substantially and
therefore we have discontinued our banking and insurance license applications
due to the cost to establish these subsidiaries.
On June 13, 2000 we distributed an offering memorandum pursuant to Regulation
"S", for the issuance of 4,000,000 units that were comprised of one (1) share of
our ordinary stock and one (1) warrant. The price per unit was $0.50 USD. We
realized gross offering proceeds of $2,000,000. The warrants allow the holders
to purchase one (1) ordinary share at an exercise price of $2.00 USD, to be
exercised not later than December 31, 2002, after which date the warrant will
become null and void. This offering was distributed to persons that were not
residents of the Cayman Islands or the United States of America. On January 31,
2001, IFG World Holdings Inc. purchased all of the 4,000,000 units from the
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February 14, 2003 Annual Report Page 10
International Financial Group, Inc.
- --------------------------------------------------------------------------------
minority shareholders that held the units by issuing a promissory note to each
minority shareholder to pay $0.50 USD per unit, together with interest payable
on December 31, 2002.
On October 31, 2001 our F-1 registration statement was declared effective by the
SEC. The said registration statement registered 20,000,000 shares and 4,000,000
warrants (one warrant for one share with an exercise price of $2.00 per warrant
to be exercised by December 31, 2002) for sale by IFG World Holdings Inc and
5,000,000 units to the public at an offering price of $0.10 USD per unit. Each
unit consists of one (1) ordinary share, and one (1) share purchase warrant. The
share purchase warrant allows the holder of each warrant to purchase one (1)
ordinary share at an exercise price of $2.00 USD, to be exercised not later than
December 31, 2002, after which date the warrant will expire.
The following website has been registered by IFG. The website marked "active" is
functional.
International Financial Group, Inc. www.ifgnevis.com Active
----------------
IFG Trust Services www.ifgnevis.com Active
----------------
The Subsidiaries
- ----------------
IFG Trust Services
- ------------------
On July 13, 2000, IFG Trust's application for authorization to conduct trust
activities was approved by the Government of Nevis, West Indies. We have
established a physical office in Nevis to function as our head office for
worldwide trust service activities. Our Trust services include, but are not
limited to, the establishment of trusts, the provision of professional trustees,
the provision of professional trust protectors, the drafting of trust documents
(trust deeds, letters of wishes, etc.) and the filing of all necessary
government documentation. It is anticipated that many clients will use a trust
in an offshore jurisdiction for the purpose of asset protection. This typically
serves to add an additional layer of confidentiality, control and versatility to
overall financial strategy.
IFG Trust commenced full-service offshore trust activities in late January 2001.
Our full service division provides trust services through traditional means
including in-person consultation, telephone, facsimile, mail and courier. We
maintain a website at www.ifgtrust.com that serves as the online brochure
----------------
detailing our products and services. Due to this subsidiary commencing operation
in late January it has not earned significant revenue.
IFG Trust has commenced the provision of online discount trust services from our
websites located at www.ifgnevis.com in March 2001. Through the use of
----------------
proprietary technology and a three-step process, clients are able to establish a
customized offshore structure in a secure environment 24 hours a day, seven days
a week, 365 days a year. One of the major barriers in attracting the
middle-income market segment to the offshore financial sector, has been the high
cost traditionally associated with the establishment and maintenance of offshore
legal structures. By utilizing our technology and business model, IFG Trust has
been able to reduce the cost of providing and utilizing sophisticated offshore
structures, thereby reducing the barrier to making these services available to a
whole new segment of the market Our technology, developed in-house, also allows
us to automate the process of establishing corporations and trusts which reduces
our corporate labor costs and corporate overhead such as offices, equipment and
fixtures.
The Company has changed its focus of establishing trust subsidiaries around the
world as it has found it can service its clients need through the use of third
party providers therefore allowing the company to save costs on incorporation,
annual business fees, registration fees and director and secretary fees. IFG
Trust Services Inc accounts for almost all the revenue earned by the company to
date.
IFG Trust Services Inc. has also entered into a revenue sharing arrangement with
Mobius Trust Company to service its clients on a revenue sharing basis. We
anticipate to earn approximately $100,000 to $150,000 per year from this
arrangement.
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February 14, 2003 Annual Report Page 11
International Financial Group, Inc.
- --------------------------------------------------------------------------------
IFG Investments Services
- ------------------------
IFG Investments Services, Inc., was incorporated in St. Kitts and Nevis in
December 2000 and commenced operations in Nevis in February 2001, offering
brokerage and investment banking services via traditional offshore service
delivery channels including in-person consultation, telephone and facsimile. In
February 2002 we stopped our brokerage business due to the increased cost of
maintaining and debugging our securities trading plat form. The subsidiary now
concentrates on investment banking services including advising clients on going
public.
IFG Corporate Services
- ----------------------
Our subsidiary, IFG Trust Services Inc. (Nevis), established IFG Corporate Inc.
in the Federation of St. Kitts and Nevis on January 29, 2001. We have
established our office in Nevis to function as the worldwide head office for
corporate services activities supplied to IFG clients and we share these office
facilities with IFG Trust. The corporate services we provide include, but are
not limited to, incorporation services, the provision of registered offices,
professional directorships, corporate drafting services, and corporate
secretarial services. It is anticipated that many of our clients will use a
corporation in an offshore jurisdiction for the purpose of asset protection as
well as investment management. This typically serves to add an additional layer
of confidentiality, control and versatility to overall financial strategy.
Offshore corporate services are currently available through traditional service
channels including in-person consultation, telephone, facsimile, mail, courier
and the Internet.
The main purpose of this subsidiary is to provide ancillary services to IFG
Trusts clients as determined and directed by our clients.
IFG Corporate Inc. commenced full-service offshore corporate services activities
in February 2001. Our full service division provides corporate services through
traditional means including in-person consultation, telephone, facsimile, mail
and courier.
IFG Management Services
- -----------------------
Our subsidiary, IFG Trust Services Inc. (Nevis), established IFG Management Inc.
in the Federation of St. Kitts and Nevis on January 29, 2001. We have
established our office in Nevis to function as the worldwide head office for
management services activities supplied to our IFG clients and share these
office facilities with IFG Trust and IFG Corporate. The management services we
provide include, but are not limited to, office management, secretarial,
bookkeeping, mail forwarding, and general administration.
IFG Management Inc. commenced full-service offshore management service
activities in February 2001. Our full service division provides management
services through traditional means including in-person consultation, telephone,
facsimile, mail and courier.
Through the International Financial Group subsidiaries and third party
relationships, we offer clients flexibility and convenience in constructing and
managing an offshore financial strategy using full-service and discount
Internet-based delivery channels. Each client has very specific structural needs
based on their own specific circumstances and goals. Our infrastructure allows
clients to utilize a wide variety of products and services, available separately
and in bundled formats, and to utilize specific offshore jurisdictions that
particularly strive to meet these goals. There is no guarantee we will be
effective in penetrating the offshore financial services market in a timely
manner, or at all.
Industry Background
- -------------------
The "offshore industry" is comprised of those jurisdictions and institutions
outside a person's home jurisdiction that can be used to create an advantage,
financial or otherwise, for an individual or a business. Some of the more
popular offshore jurisdictions are the British Virgin Islands, Barbados,
Bermuda, Cayman Islands, the Federation of St. Kitts and Nevis, Isle of Man,
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February 14, 2003 Annual Report Page 12
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Channel Islands, and Switzerland. The differing legislative environment of
different jurisdictions can yield numerous advantages to any person that has the
flexibility to relocate themselves or a portion of their assets. Thus, "going
offshore" means nothing more than utilizing a jurisdiction other than ones own
to hold ones assets and/or conduct business and financial affairs to some
financial or legal advantage.
There are a number of reasons people and companies elect to engage an offshore
financial strategy. For the most part, they go offshore to protect assets,
increase flexibility in corporate management, minimize taxation, get access to
global investments, and gain testamentary freedom.
While the costs associated with creating and managing an offshore investment
plan has decreased significantly, telecommunications and particularly the
Internet have made access to these services faster, easier and more reliable.
Thus, while reduced costs make going offshore justifiable to a growing portion
of the market, an increasing portion of that market also has access to
everything they need to find out about and use these services via the Internet.
Growth of the Internet and Online Commerce
- ------------------------------------------
Internet usage and online commerce continue to grow worldwide. Offshore
Financial USA estimated that there would be 510 million people estimated to be
online by the summer of 2001 and they also predicted on-line revenue collected
by Canadian and American companies by the end of 1999 to be $36.6 billion. The
Internet financial magazine, The Standard, quoting Jupiter Research, estimates
"By 2005, more than half of US households online - 44 million homes - will bank
on the Internet, and 34 million households will trade stocks... As a result
online financial institutions will have at their disposal more than $5 trillion
in investable assets in 2005..." In addition, The Standard states, "neither
traditional banks nor brokerages will claim the largest share of those assets.
The bulk of the business will go to firms that provide multiple offerings. In
fact, online financial institutions that provide only a single service may soon
go the way of the Susan B. Anthony coin. Consumers already favour financial
institutions that provide more than one service." Offshore Finance Yearbook
states European private banking assets at $5 trillion with worldwide private
assets estimated to be at $16.6 trillion USD. It is our believe that this growth
can be attributed to many factors, including: a large and growing installed base
of personal computers and other Internet-connected devices in the workplace and
home; advances in performance and speed of personal computers and modems;
improvements in network security, infrastructure and bandwidth; easier and
cheaper access to the Internet; and the rapidly expanding availability of online
content and commerce sites.
Market Opportunity
- ------------------
Arnold Goldstein, author of Offshore Havens, stated, non-resident bank deposits
in the Caribbean are in excess of one trillion dollars USD, up from just two
billion in 1980. The value of offshore trust accounts established by Americans
in the Caribbean is in excess of $450 billion according to Offshore Finance
Canada.
This tremendous growth comes from an increasing number of individuals and
corporations that look to the international offshore marketplace for asset
protection, testamentary freedom, greater investment returns, tax and succession
planning and increased confidentiality in business dealings. For example, it is
estimated by Offshore Financial USA that the number of lawsuits filed in the USA
in 1999 were 18 million and the estimated cost of litigation was $300 billion.
Worldwide Internet users demand for online services is growing according to IDC.
According to Global Research in March 2001, there were estimated to be 453.4
million Internet users worldwide. The Standard, quoting American Express,
states, one-quarter of online consumers around the world are banking and trading
online - or plan to start soon. That number could jump sharply if financial
institutions can ease the fears of the nearly 80 percent of online consumers who
worry about privacy and security on the net. The Standard also quoted that
Western Europe will supply the most new customers to Net banks and brokerages,
and by 2004 it will lead both sectors. The U.S. is also expecting strong growth
in online banking and trading. By 2004, The Standard estimates that online
brokerage customers worldwide will reach 63.6 million people. Data provided by
Salomon Smith Barney shows online trading accounted for 30.5% of all trades on
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February 14, 2003 Annual Report Page 13
International Financial Group, Inc.
- --------------------------------------------------------------------------------
the NYSE and NASDAQ in the third quarter of 2000. We believe that the offshore
and online financial services industries will continue to grow. This belief is
supported by six recent trends.
First, global demographic statistics suggest that individuals will be investing,
holding and acquiring unprecedented wealth during the next decade. Large numbers
of "baby boomers" are beginning to invest for their children's education and for
their own retirement. Additionally, it is estimated that these individuals, many
of whom have greater education, technical capabilities and investment choices
than their parents, as well as greater access to information, will inherit
significant wealth from the previous generation during the next decade. This
represents the largest transfer of wealth in history, a fact that we believe
will result in - new consideration being given to the development of effective
estate plans and asset protection strategies, including the utilization of
offshore financial strategies.
Second, we believe there is an increased need by individuals and corporations to
protect themselves and their assets in today's increasingly litigious
environment. Higher levels of asset protection can be achieved through the
utilization of financial structures and institutions in confidentiality and
secrecy bound offshore jurisdictions. Through the use of offshore financial
structures, individuals and corporations are better able to protect themselves
from claims that may arise from frivolous lawsuits, creditors and disputes
arising from marital difficulties.
Third, investors are becoming more self-reliant in the pursuit of their
financial goals in general. They are increasingly willing to acquire information
about, and an understanding of, investments, trusts, corporations and other
offshore products and services and have become increasingly sophisticated and
knowledgeable about these products and services. Access to a broad range of
financial information and advice has decreased the necessity for hands-on
banking advice, brokerage advice, trust expertise, insurance expertise and other
professional financial assistance.
Fourth, consumers have expanded their access to powerful, yet inexpensive,
computer technology and are becoming more comfortable with and proficient in the
use of this technology. The Internet delivers information that facilitates
inexpensive communication of data and, therefore, independent "E-commerce"
transactions have been growing at an accelerating rate. In short, we believe the
Internet is producing thousands of new cyber-investors every day. Investors are
increasingly making their own decisions about their financial future and tend to
seek flexibility and efficiency in execution of these independent transactions.
Fifth, the Internet and advanced telecommunication systems have allowed banking,
brokerage, insurance and offshore corporate and trust products and services to
be offered from any place in the world to customers located any place in the
world. Thus, in most cases, dealing with an offshore financial account has
become as convenient as dealing with the bank down the street. Customers may
access their financial empire merely by dialing up a local telephone number and
logging on by computer through a user name and password. From the access screen,
they can ascertain information regarding their deposits, stock quotes, view
their positions, execute orders, change orders, purchase products and deposit
and withdraw funds. Orders are routed electronically either to members of a
particular market or off-market facilities that match orders submitted directly
from brokerages.
Finally, we believe that the technology for on-line transactions has developed
to a stage where customers can be virtually assured complete security and
confidentiality. New and sophisticated cryptographic systems have been developed
that assures all information transmitted between a given client and offshore
service is completely protected. Further, we hope this new technology will give
new consumers confidence that their deposits will be protected from
technological espionage.
Management believes these trends will assure continued growth in the use of
offshore financial strategies, and particularly offshore financial strategies
that are accessible via the Internet.
Marketing Strategy
- ------------------
Our marketing strategy focuses on creating value for our clients through the
utilization of offshore asset protection and investment strategies. We market
our full-service division primarily through the use of a
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February 14, 2003 Annual Report Page 14
International Financial Group, Inc.
- --------------------------------------------------------------------------------
telemarketing/fax/email-based Professional Referral Program, and we have placed
advertisements in offshore trade publications. We market our discount
Internet-based services primarily through the registration of our websites in
popular Internet search engines and directories. We have focused our marketing
campaign on asset protection opportunities for potential clients, cost-effective
full line of offshore financial services, available in both bundled and separate
formats.
We market our full service offshore financial products and services primarily
through a telemarketing/fax/email-based Professional Referral Program directed
at lawyers, accountants and investment advisors. The Professional Referral
Program has been developed to introduce IFG and our products and services to
those professional advisors who may have clients that would benefit through the
utilization of offshore strategies. We then work with the client and the
professional advisor to develop and implement an individualized offshore
financial strategy. We have also placed advertisements, aimed at professional
advisors, in popular offshore industry trade publications.
We market our offshore financial products and services to the following target
markets:
o Professionals and entrepreneurs who are subject to a high degree of
potential legal liability in the course of their profession such as
lawyers, doctors and business owners;
o Individuals looking for asset protection and additional freedom in
estate and succession planning;
o Businesses that market and sell products internationally; and
o High and middle-income market individuals and business entities with
liquid assets in excess of $100,000.00 or assets that lend themselves
to offshore strategies.
Our marketing campaign focuses on the asset protection opportunities for
potential clients to utilize the cost effective full line of offshore financial
services that are available in both bundled and separate formats. The campaign
addresses new opportunities for potential clients to protect their assets in
multiple offshore jurisdictions. Through the utilization of advanced proprietary
technology, we have been able to substantially reduce the costs associated with
establishing and managing an offshore financial plan, and as such, we highlight
this cost saving opportunity. Our marketing campaign also focuses on our ability
to deliver a full range of both bundled and separate offshore financial products
and services including investments, trust and corporate services.
It is our objective to gain a leading position as a provider of offshore and
Internet-based financial products and services by combining confidentiality,
technology, innovation, convenience, service and value. Our marketing strategies
to accomplish this goal will include:
o Continuing to increase the number of offshore jurisdictions from which
we offers services;
o Continuing to apply advanced and Internet-based technologies in the
delivery of cost-effective offshore financial products and services;
and,
o Continuing to retain offshore financial professionals with expertise
in law, banking, insurance and investments.
Revenues
- --------
We currently are able to generate revenues from the following sources:
o Establishment of trusts and corporations, trustee services and related
fees;
o Investment services and related fees;
o Consulting fees relating to capital acquisition activities for
clients; and,
o Incorporation, administration, management and related fees.
The revenues earned by the company to date has been derived from IFG Trust
Services Inc. and its subsidiary IFG Investments Services Inc. These net
revenues total $323,754 from the date of inception of these corporations to July
31, 2001.
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February 14, 2003 Annual Report Page 15
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Business Strategy
- -----------------
Main Objectives
- ---------------
Our business strategy has been developed by management to achieve the following
corporate objectives:
o To create shareholder value by being a leading provider of
comprehensive offshore financial services;
o To attain the highest market share penetration possible, by delivering
both bundled and separate offshore financial services through
full-service traditional delivery channels and discount Internet-based
channels;
o To provide a confidential and secure environment for our clients to
conduct their offshore financial affairs with a focus on asset
protection;
o To utilize the latest Internet-based technologies to ensure cost
effective and convenient provision of our offshore financial products
and services on a global basis;
o To provide prompt, reliable, efficient and professional service;
o To provide reliability in offshore financial planning by establishing
redundancy; and,
o To maintain an exceptional reputation in the international offshore
financial industry by satisfying all local anti-money laundering
regulatory requirements.
Full and Discount Products and Services
- ---------------------------------------
We currently provide full service offshore investment, trust, corporate and
management services, through traditional delivery channels including in-person
consultation, telephone, facsimile, courier and mail. Through contacting IFG and
its subsidiaries, clients are able to interact with our offshore experts on a
one-to-one basis in a confidential environment. Our office in St. Kitts and
Nevis provide facilities to conduct in-person consultations when customers
prefer to conduct their business face-to-face. Clients may also contact us via
telephone, facsimile, mail and courier. All of these service channels are
currently available during North American market hours.
In May 2001, we implemented proprietary technologies, to commence providing
online discount offshore financial services from our website located at
www.ifgnevis.com. The services currently provided via the Internet include:
- ----------------
trust, corporate and management services activities. Through our websites,
clients are able to establish and manage offshore trust and corporate
structures. These Internet-based services are provided in a confidential and
secure offshore environment 24 hours a day, seven days a week, 365 days a year.
Today's investor demands confidentiality, asset protection, investment
alternatives and ease of access to assets.
We offer our offshore financial products and services both separately and in
bundled formats. By offering clients the convenience of a "one-stop"
comprehensive offshore financial service option, we create a number of internal
efficiencies in the delivery of our products and services.
Confidential and Secure Environment
- -----------------------------------
There is no denying that confidentiality is a principal motivation behind many
decisions to initiate an offshore financial plan. Thus, we have developed an
infrastructure which is intended to allow clients autonomy in establishing,
modifying and managing their offshore financial plan, while hopefully minimizing
the number of individuals required to receive and process client requests. We
have developed a comprehensive internal confidentiality policy, which guides
each employee in respect of confidentiality. Moreover, each Company employee is
specifically trained and informed in their respective jurisdiction's privacy
legislation, and any violations are intended to be prosecuted to the fullest
extent of the law. Most offshore jurisdictions make it an offense, and in some
jurisdictions a criminal offense, for any offshore provider or employee to
divulge any information regarding a client to anyone unless ordered to by a
court of competent jurisdiction.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 16
International Financial Group, Inc.
- --------------------------------------------------------------------------------
The global corporate infrastructure of IFG allows clients to establish and
manage their offshore financial plan to include the use of multiple offshore
jurisdictions in an efficient and timely manner. This allows for multiple layers
of confidentiality protection in each individual financial plan, while also
providing portfolio diversification, and a maximization of international
regulatory benefits. For example, a client is able to establish an offshore
trust in Nevis, which owns an offshore company in Barbados, which in turn has
funds invested in the Cayman Islands or on deposit in St. Vincent and the
Grenadines.
Our Internet-based systems have been designed to maximize client ease of use,
while at the same time clients allowing the opportunity to contact our
representatives directly should they choose to do so. It is our intention for
clients to establish corporations and trusts and manage their investment
portfolio in a secure and confidential on-line offshore environment as well as
through traditional delivery channels.
Cost Effective and Convenient Service
- -------------------------------------
Through the use of the latest advanced and Internet-based technologies we are
attempting to provide cost effective and convenient services of our offshore
financial products on a global basis. Through our unique advanced and
Internet-based technologies and by the cost efficiencies gained through
providing a comprehensive bundled package of offshore financial products and
services, we are able to offer our clients a more cost-effective method for
moving their affairs offshore. We believe the use of the Internet by clients
makes access to offshore strategies more affordable, efficient and accessible
than ever before. On-line operating efficiencies such as a minimal physical
branch system and automatic record keeping and transaction processing reduce our
day-to-day operating costs. These savings, in turn, allow us to offer more cost
competitive offshore products and services.
We offer clients the convenience of managing their offshore financial affairs in
either a full-service or discount Internet-based environment. Our full-service
offerings enable clients the convenience of dealing with their professional
advisors on an individual basis. Our discount Internet-based offerings allow
clients the convenience of managing their offshore financial plan, via the
Internet, 24 hours of each day from virtually any Internet-enabled computer
system in the world
Prompt, Reliable, Efficient and Professional Service
- ----------------------------------------------------
We intend to continue to attract and retain leading offshore financial services
professionals. Our management team and staff are comprised of individuals with
extensive education and experience in law, taxation, banking, investments,
insurance, trusts, and corporate services. Due to the highly complex and
demanding nature of our business activities, and the sophisticated needs of our
clients, it will be essential for us to continue to maintain this high level of
professionalism.
Reliability Through Redundancy
- ------------------------------
We have established redundancy in two areas. First, we have established
relationships with third party providers or have our own subsidiaries that allow
us to conduct bank, investment, insurance, trust, and CSP activities in more
than one jurisdiction. This redundancy allows us to react to changing
international and domestic legislation, and provide our clients with an
alternative offshore jurisdiction where required.
Reputation
- ----------
We are committed to upholding anti-money laundering laws in the jurisdictions in
which we operate and, therefore, have initiated stringent due diligence
standards to ensure relevant legislation is not offended and that client due
diligence requirements are satisfied. We recognize the importance of such
legislation in the prevention of crime and joins with all other offshore
providers in sharing this responsibility.
Competition
- -----------
We compete with numerous established offshore service providers in the offshore
financial industry. These competitors currently include banks, offshore
investment firms, trust companies, and corporate and management service
providers. As we expand our products and services offered it is assumed we will
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 17
International Financial Group, Inc.
- --------------------------------------------------------------------------------
also compete with offshore banks, insurance companies, and other business
entities that provide offshore financial products and services. We expect such
competition to continue and intensify in the future. We expect many of our
competitors will have significantly greater financial, technical, marketing and
other resources than IFG.
There exists a number of well established, and in some cases much better
capitalized, competitors in both traditional and online securities and
investment services in the offshore venue. These include many companies and
financial services endeavors with single offices. We will be entering an arena
with well practiced, and in many instances well financed, competitors. While we
believe that we will eventually establish a position within this market, there
is no guarantee that our efforts will be successful.
Current competitors of our offshore investment services subsidiaries include,
but are not limited to, Merrill Lynch, Morgan Stanley, First Nevisian, Cayman
National Securities, Smith Barney, SEGOES, www.offshoretrading.com, Freedom
-----------------------
Trade, E-Trade, www.schwab.com, Insinger Trust, Trident Trust, Royal Bank of
Scotland, Atlas Private Trust and Fiduciary Trust, www.globaltrusts.com,
--------------------
www.guardiantrustees.com, www.henley-partner.com, pishon-trust-management.com,
- -----------------------------------------------------------------------------
www.corporate-premier.com, HWR Services and Caribbean Management, Codan
- -------------------------
Management, Morningstar, Insad, Sovereign Group, OCRA, Worldwide, Offshore
Corporate Services, www.corporate.com, www.123ezcorp.com, Barclays Bank, UBS,
----------------- -----------------
Royal Bank of Canada, ING Bank and Cayman National Bank, www.fsharpbank.com,
www.bayshorebank.com, www.providentbelize.com, www.paritatebank.com and
- -------------------------------------------------------------------
www.hsbc.com Prudential Insurance, London Life, Lloyds of London, The Guardian
- ------------
and Northern Life Insurance, I-Quote, www.budgetlife.com, www.quotesmith.com,
www.cheap-life-insurance.com and www.interlinx.com.
All these current and potential competitors may be able to respond more quickly
to new or changing opportunities, technologies and customer requirements than we
and may be able to undertake more extensive promotional activities, offer more
attractive terms to customers and adopt more aggressive pricing policies than
IFG. Moreover, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
enhance their services and products. We cannot guarantee that new competitors or
alliances among competitors will not emerge, and these competitors may acquire a
significant market share of the offshore financial industry. There can be no
assurance that we will be able to compete effectively with current or future
competitors or that the competitive pressures faced by us will not have a
material adverse affect on our business, financial condition and operating
results.
Government Regulation
- ---------------------
The Company
- -----------
In conducting various aspects of our business, we will be subject to various
laws and regulations within each jurisdiction in which we operate.
We will be engaged in marketing financial products and services from up to 30
jurisdictions. As a result, we are bound to uphold all local laws including
those laws related to the business of selling financial products and services
and all local money laundering laws. Failure to comply with any of these laws,
rules or regulations could result in censure, fine, incarceration, revocation of
work permits, the issuance of cease-and-desist orders or the suspension or
expulsion of the our officers or employees from certain countries, any of which
could have a material adverse affect on our ability to carry on business, which
would, in turn, have a material adverse affect on our financial condition and
operating results and, therefore, the prospect of an investor's return of
capital invested our company.
We eventually intend to conduct a significant portion of our business through
the Internet and other electronic media and intend to expand our use of such
media. To date, the use of the Internet to conduct financial transactions has
been relatively free from regulatory restraints. However, a number of
governments, including the United States, are beginning to address the
regulatory issues that may arise in connection with use of the Internet.
Accordingly, there can be no assurance that these authorities will not adopt new
regulations (or interpret their existing regulations) in a manner that
constrains our ability to transact business through the Internet or other
electronic media. Any additional regulation of our use of electronic media could
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 18
International Financial Group, Inc.
- --------------------------------------------------------------------------------
render our business or operations more costly, less efficient or even
impossible, any of which could have a material adverse affect our business,
financial condition and operating results.
In addition to the above risks, we cannot assess the effect that the
Organization for Economic Cooperation and Development, the United Nations and
the G7 countries initiatives will have upon the offshore financial industry and,
in particular, the jurisdictions that we will carry on business in and our
proposed clients.
Organizational Structure
- ------------------------
CORPORATE CHART
International Financial Group, Inc. Corporate Structure Flowchart
^
/ \
/ \
/ \
/ \
/ \
/ \
/ \
---------------------------- / \
| Mr. Daniel MacMullin is | / \
| the major beneficial owner | / IFG WORLD HOLDINGS\
| of Internationl Financial |<------ / TRUST \
| Group, Inc. | / (Nevis) \
| | / \
---------------------------- --------------------------
|
|
|
100% |
V
------------------------
|IFG WORLD HOLDINGS INC. | ------------
| (Nevis) | |Minority S/H|
| | ------------
------------------------ /
| /
| /
| |/_ 1%
99 % |
V
----------------------------------
|Internation Financial Group, Inc. |
| (CAYMAN CORP.) |
----------------------------------
|
|
|
100% |
V
-------------------
| IFG Trust |
| Services, Inc. |
/| (Nevis) |\
/ ------------------- \
/ | \
/ | \
|/_ 100% | 100% 100% _\|
V
--------------- --------------- ---------------
| IFG Corporate,| |IFG Investments| |IFG Management,|
| Inc. | |Services Inc. | |Inc. |
--------------- --------------- ---------------
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 19
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Property, Plant and Equipment
- -----------------------------
Offices
- -------
We operate our head office in The Federation of St Kitts & Nevis, West Indies.
This space is utilized as IFG Trust Services, IFG Investments Services (Nevis),
IFG Corporate and IFG Management headquarters in Nevis, West Indies. We have
maintained our lease space in St. Kitts & Nevis to centralize our operation and
to accommodate the infrastructure required to facilitate our businesses.
Computer Hardware
- -----------------
We have installed all necessary computer hardware and systems required to
operate our Internet based offshore financial services system with third-party
organizations that offer web-hosting services. We may eventually acquire and
maintain all the additional premises necessary for hosting our servers
internally. To ensure sufficient capacity and uninterrupted service, we intend
to provide redundant facilities that are located at our different operating
sites.
Computer Software
- -----------------
We have either developed or licensed all the necessary proprietary computer
software required to operate our Internet-based offshore financial services
systems. For purposes of future computer software development, we intend to
evaluate software from third-party providers that can be customized and
integrated into our system. Where necessary to meet the diverse needs for
integrated data of the different Company's operating units, customer database
and web page software will be contracted to software developers hired by IFG.
The latest hardware and software environments and development tools will be
utilized.
Item 5. Operating and Financial Review and Prospects
- ----------------------------------------------------
Forward Looking Statements
- --------------------------
Some of the information in this section contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward looking words such as "expect", "anticipate", "believe", "seek",
"estimate" and similar words. Statements that we make in this section that are
not statements of historical fact also may be forward looking statements.
Forward looking statements are not guarantees of our future performance, and
involve risks, uncertainties and assumptions that may cause our actual results
to differ materially from the expectations we describe in our forward looking
statements. There may be events in the future that we are not accurately able to
predict, or over which we have no control. You should not place undue reliance
on forward looking-statements. We do not promise to notify you if we learn that
our assumptions or projections are wrong for any reason. We disclaim any
obligation to update our forward-looking statements. See "Risk Factors" for more
information.
Introduction
- ------------
The following analysis addresses International Financial Group Inc.'s financial
condition, changes in financial condition and results of operations for July 31,
2002 compared to July 31, 2001. From the date of our incorporation on July 14th,
1997 to March 14, 2000 the company was not active. From March 14, 2000 until
late January 2001, we were a development-stage company that had no revenues. Our
operating activities during this period consisted primarily of conducting
research and developing our products and services to be provided to clients
desiring offshore financial products and services. The company effectively
commenced revenue earning operations in late January 2001 with the opening of
IFG Trust Services Inc. and its subsidiaries IFG Corporate Inc and IFG
Management Inc. and IFG Investments Services Inc in the Federation of St. Kitts
and Nevis. Prior to this time period the focus of the company was to establish
its infrastructure and design its Internet and traditional operating systems.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 20
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Our financial statements are prepared in accordance with U.S. generally accepted
accounting principles. We have expensed all development expenses related to the
establishment of our subsidiary corporations and the corresponding professional
fees incurred to establish these corporations around the world.
Financial Condition
- -------------------
International Financial Group Inc. raised $2,180,000 during 2000 and 2001 for
the purpose of raising the necessary capital to establish the infrastructure
that would facilitate the establishment of offshore structures and strategies
for clients. The capital was used to lease office space in the Federation of St.
Kitts and Nevis and the Cayman Islands, to hire the necessary personnel skilled
in offshore structures and strategies and to design the intellectual property
necessary to facilitate the implementation of offshore strategies over the
Internet. The present infrastructure supports the company's activities in IFG
Trust and its subsidiaries including the delivery of products and services
pursuant to the Internet.
During 2000 the company was adequately financed to achieve its goals referred to
above and did establish the infrastructure and personnel necessary to execute
offshore strategies required by clients from around the world from both
traditional and Internet based delivery methods.
During 2002 the company was able to raise $89,650 in financing that it required
to maintain its infrastructure and to preliminary bank and insurance company
analysis. We have streamlined our infrastructure by fostering relationships with
third party offshore providers that could satisfy our clients needs saving us
the time and expense of having our own operating subsidiaries in these foreign
jurisdictions. If it is necessary to retain a third party in a foreign
jurisdiction that our company does not serve we will enter into an arrangement
with that third party to complete our clients' offshore strategy. These
arrangements will generally be revenue sharing arrangements.
The company has excellent operating facilities and computer equipment and
support to execute all client strategies in our traditional and Internet based
platforms. Given this new focus the company has the necessary funds to operate
for the fiscal year 2002-2003 from its present cash resources and expected
profits during the year.
Results of Operations
- ---------------------
Our analysis will evaluate the periods of time from August 1, 2001 to July 31,
2002 and from August 1, 2000 to July 31, 2001.
Our operating expenses are classified into four categories:
o Legal and professional fees;
o Salaries;
o Depreciation; and
o Other administrative expenses.
Legal and professional fees consist primarily of accounting, legal and
professional fees incurred by us in establishing our infrastructure.
Salary and consulting fees consists primarily of wages and salary paid to our
employees and independent contractors, social security and withholding payments
made to various government authorities, work permits, and directors' fees for
International Financial Group, Inc.
Depreciation consists of depreciation and amortization of our assets.
Other administrative expenses consist primarily of employee medical expenses and
health insurance, director fees, advertising and promotion, courier, postage,
credit card charges, currency exchanges and rounding, insurance, interest and
bank charges, office supplies, printing and design, office equipment lease
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 21
International Financial Group, Inc.
- --------------------------------------------------------------------------------
expense, conference expense, computer development expense, rent, rent
residential, vehicle rental, living allowance, telephone travel and
entertainment, brokerage fees, incorporation fees, security and parking.
In our development of new products and services, the technical feasibility of
the software is not established until substantially all product development is
complete. Historically, our software development costs eligible for
capitalization have been insignificant and all costs related to internal product
development have been expensed as incurred.
We believe that period-to-period comparisons of our historical operating results
are not necessarily meaningful and should not be relied upon as a good
indication of our future performance. Our prospects must be considered in light
of the risks, expenses and difficulties frequently experienced by companies in
early stages of development, particularly companies in new and rapidly evolving
markets like ours. As stated above our company from the date of inception on
July 14, 1997 to March 14, 2000 was inactive. From March 14, 2000 to
approximately late January 2001 we developed our infrastructure and earned no
revenue. Our income earning operations commenced in late January 2001 with the
opening of IFG Trust Services Inc. The relevant time period for analysis is
therefore the periods ended July 31, 2001 and July 31 2002.
August 1, 2000 to July 31, 2001 compared to August 1, 2001 to July 31, 2002
- ---------------------------------------------------------------------------
Legal and professional fees decreased from $229,595 for the year ended July 31,
2001 compared to $70,560 for the year ended July 31, 2002. This decrease was
attributable primarily to our infrastructure being established during the time
period ending July 31, 2000 and earlier and the fact that our SEC filing was
completed on October 31, 2001. We anticipate that legal and professional fees
will decrease in the future because the infrastructure streamlining has been
completed and no new subsidiaries are planned to be organized and all SEC
filings are completed regarding our F-1 registration statement.
Salaries and consulting fees decreased from $518,379 for the year ended July 31,
2001, compared to $282,655 for the year ended January 31, 2002. This decrease is
attributable in part to less employees working for the company in the year ended
July 31, 2002 versus the prior year. In the year end July 31, 2001 we had 14
employees whereas for the year ended July 31, 2002 we had 6 paid employees.
Therefore the reduction of eight employees led to decreased wages, social
security fees, the payment of work permits, living allowances, and travel.
Depreciation has decreased from 25,468 for the year ended July 31, 2001 compared
to $22,260 for the year ended July 31, 2002. This decrease is attributable to
taking depreciation on a lower depreciable cost basis.
Other administrative expenses decreased from $545,951 for the year ended July
31, 2001, compared to $417,757 for the year ended July 31, 2002. This decrease
was attributable primarily to the company streamlining its operation over the
entire year versus the partial year in the previous year.
August 1, 2000 to July 31, 2001 compared to March 14, 2000 to July 31, 2000
- ---------------------------------------------------------------------------
Legal and professional fees increased from $149,712 for the five month period
ended July 31, 2000 compared to $229,595 for the 12 month period ended July 31,
2001. This increase was attributable primarily to expenses being reported over a
12 month period versus a five month comparison period. However on a normalized
yearly analysis legal fees have decreased ($149,712 x 12/5=$359,308). This
decrease is attributable to the fact that a lot of our infrastructure was
established during the time period ending July 31, 2000. We anticipate that
legal and professional fees will decrease in the future because the
infrastructure has been streamlined and no new subsidiaries need to be
established.
Salaries and consulting fees increased from $78,468 for the five month period
ended July 31, 2000, compared to $518,379 for the 12 month period ended January
31, 2001. This increase was attributable in part to expenses being reported over
a 12 month period versus a five month comparison period. However this increase
is due primarily to an increase in the number of employees working during the
period from August 1, 2000 to July 31, 2001 as compared to the previous five
month period. Employees increased from four in the period ending July 31, 2000
as compared to 14 employees who worked for the company during the period ended
on July 31, 2001. Therefore the addition of eight employees added to increased
social security fees and the payment of work permits and living allowances, and
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 22
International Financial Group, Inc.
- --------------------------------------------------------------------------------
the travel and entertainment undertaken by those in IFG responsible for
establishing our infrastructure worldwide.
Depreciation has increased from nil for the five month period ended July 31,
2000 compared to $25,468 for the 12 month period ended July 31, 2001. This
increase is attributable to taking depreciation on our assets for the first
time.
Other administrative expenses increased from $23,390 for the five month period
ended July 31, 2000, compared to $545,951 for the 12 month period ended July 31,
2001. This increase was attributable primarily to expenses being reported over a
12 month period versus a five month comparison period. However it is also
attributable to increased courier and postage charges, bank charges, computer
development expenses, printing, rents, living allowances, vehicle rentals,
telephone charges and travel and entertainment expenses to establish our
infrastructure.
Due to the foregoing factors, our operating results are difficult to forecast.
We believe that period-to-period comparisons of our operating results are not
meaningful and you should not rely on them as indicative of our future
performance. You should also evaluate our prospects in light of the risk,
expenses and difficulties commonly encountered by comparable development-stage
companies in new and rapidly evolving markets. We cannot assure you that we will
successfully address such risks and challenges. In addition, even though we have
successfully launched our IFG Investments Services, IFG Trust Services and IFG
Corporate Services subsidiaries and carry on investment, trust and corporate
services activities, we cannot assure you that our revenues will increase or
that we will become profitable in the future.
Changes in Financial Condition
- ------------------------------
The change in the company's financial position for the year ended July 31, 2002
is expected for a development stage company that has completed its
infrastructure and had a full year of earnings.
Net cash by operating activities increased this year from using cash by
operation last year. Last year the company used cash from by operating
activities of ($1,068,277) for the year ended July 31, 2001 compared to earning
cash by operating activities of $107,634 for the year ended July 31, 2002. This
is attributable primarily to reducing expenses from operation over the previous
year as a result of our streamlining and increasing revenues.
Net cash used by investing activities decreased from $262,874 for the year ended
July 31, 2001 compared to $241 for the year ended July 31, 2002. This decrease
was attributable primarily to the Company not purchasing property and equipment
for the Cayman Islands office and servers for its internet operations in the
previous year and suspending payment of a loan made by one of its directors,
Kevin Mellor, to IFG World Holdings Inc. which said loan was used by IFG World
Holdings Inc. to invest in our company and gave our company the seed capital to
commence business. Our company has an agreement with IFG World Holdings Inc. to
pay Mr. Mellor for the loan he made to IFG World Holdings Inc. to save wire
transfer costs of wiring money to IFG World Holdings Inc. which in turn would
repay the loan. For administrative ease and to save money our company repays the
loan and records the receivable from IFG World Holdings Inc.
Net cash provided by financing activities decreased from $1,000,000 for the year
period ended July 31, 2001 compared to $89,650 for the year ended July 31, 2002.
This decrease was attributable primarily to the company raising $910,350 more in
capital in fiscal 2001 versus fiscal 2002.
Liquidity and Capital Resources
- -------------------------------
Since the date of our incorporation, we have raised an aggregate of $2,249,650
through private placements and public offerings of our ordinary shares.
Our capital requirements depend on a number of factors. We expect to maintain
our operations as is for the next fiscal year.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 23
International Financial Group, Inc.
- --------------------------------------------------------------------------------
At July 31, 2002, we had cash and cash equivalents of $364,659. We believe that
our cash and cash equivalents together with our revenues from operations are
sufficient to fund our operations for the next fiscal year.
IFG does not intend to have any material commitments this fiscal year.
In addition, if cash generated from operations is insufficient to meet our
long-term liquidity needs, we may need to raise additional funds or seek other
financing arrangements. Additional funding may not be available on favorable
terms or at all. In addition, although there are no present understandings,
commitments, or agreements with respect to any acquisition of other businesses,
products or technologies, we may, from time to time, evaluate potential
acquisitions of other businesses, products and technologies to enhance our
offshore presence. In order to consummate potential acquisitions, we may issue
additional securities or need additional equity or debt financing and any such
financing may be dilutive to existing investors.
Trend Information
- -----------------
The company entered into a revenue sharing arrangement with Mobius Trust Company
to service its clients in fiscal 2002. This arrangement will earn our company
approximately $100,000-$150,000 each year from renewal fees of trusts and
corporations, management fees and secretarial fees.
Item 6. Directors, Senior Management and Employees
- --------------------------------------------------
Directors and Senior Management
- -------------------------------
The daily affairs of IFG are under the direction of its senior management: Mr.
Kevin Mellor, President and Mr. Daniel MacMullin, Sr. Vice President of Trust
Services.
The directors, officers and senior management of International Financial Group
Inc. are as follows:
Name Age Position Residency Term as Director
- ---- --- -------- --------- ----------------
Mr. Kevin Mellor 42 President and Chair of the Board Director* Regina, Canada 34 months
Mr. Vernon Veira 47 Director* Basseterre, St. Kitts 31 months
Mr. Daniel MacMullin 41 Sr. Vice President, Trust Services Director* Nevis, BWI 11 months
Ms Catherine Rublack 41 Sr. Vice President, Administration Basseterre, St. Kitts
<FN>
*Directors of International Financial Group, Inc.
</FN>
Key Personnel Qualifications
- ----------------------------
Mr. Kevin Mellor received his Bachelor of Administration from the University of
Regina, Canada in 1983 and his Bachelor of Laws from the University of
Saskatchewan, Canada in 1990. Mr. Mellor received his Chartered Accountant
(Canada) designation in 1986 and became a Barrister & Solicitor (Canada) in
1991. Mr. Mellor has extensive litigation experience in the Tax Court of Canada
and the Federal Court of Appeal (Canada). Mr. Mellor practiced as a
corporate/commercial lawyer with his preferred area of practice in taxation. Mr.
Mellor's professional experience includes being an auditor for the Government of
Saskatchewan and a member of the National Hockey League Players Association in
his capacity as a players' agent. Mr. Mellor has for the past five (5) years
been a partner in the law firm Mellor & Anderson. Mr. Mellor has not previously
been a director of a reporting company.
Mr. Vernon Veira received his Bachelor of Laws from La Salle Extension
University (Canada) in 1980 and received his LEC from Norman Manley Law School
in Kingston, Jamaica. During 1983 Mr. Veira established his own law firm and
acted as Crown Counsel for the Government of St Kitts-Nevis. Mr. Veira, has
maintained his law practice and now practices, as the senior partner in the law
firm of Veira, Grant & Associates as a corporate/commercial lawyer with his
preferred area of practice in offshore corporate/commercial law. Mr. Veira is a
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 24
International Financial Group, Inc.
- --------------------------------------------------------------------------------
member of the St. Kitts-Nevis Bar Association and the International Bar
Association and is a former Member of Parliament in St. Kitts. Mr. Veira is a
director of a public company named DotCom 2000.
Mr. Daniel MacMullin received his Bachelor of Arts degree from the University of
Saskatchewan, Canada in 1989 and his Bachelor of Laws Degree from the University
of Saskatchewan, Canada in 1992. Mr. MacMullin became a Barrister & Solicitor
(Canada) in 1993 with his preferred area of practice being criminal law. Mr.
MacMullin has also served with the Canadian Armed Forces as a commissioned
officer from 1978 to 1981 and in the Royal Canadian Mounted Police (RCMP) from
1982 to 1988. Mr. MacMullin is also a member of the Saskatchewan Criminal
Defense Bar. For the past five years, Mr. MacMullin has been a partner in the
law firm Hawkins & MacMullin. Mr. MacMullin has not previously been a director
of a reporting company.
Ms. Catherine Rublack was employed with the Canadian Venture Exchange (formerly
Vancouver Stock Exchange) for over twelve years prior to joining IFG. Ms.
Rublack held several management and administrative positions within the Exchange
with the two most recent positions being Manager, President's Action Line and
Manager, Administration. Ms. Rublack has completed and passed her Canadian
Securities Course and the Conduct and Practices Handbook examination for
Registered Representatives. Ms. Rublack has also successfully completed other
Canadian securities related courses and University-level classes.
Compensation
- ------------
Our present directors receive no compensation. Mr. Mellor, Chairman of the Board
has not taken any directors fees to date and nominal compensation. We reimburse
all of our directors for their reasonable expenses incurred in connection with
attending meetings of the board of directors. As of the date of this annual
report no employee or executive stock option plans have been designed or
approved by us.
A total of 7 persons who served either as directors of International Financial
Group or members of its administrative, supervisory or management bodies during
fiscal 2002 received remuneration from International Financial Group Inc. The
aggregate remuneration paid by us to such persons was approximately $282,655 but
does not include amounts expended by personnel for travel or other fringe
benefits. Included in this amount is remuneration for three former members of
our board of directors and Anthony Chan.
Board Practices
- ---------------
All directors hold office until their respective successors are duly elected and
qualified or their positions are earlier vacated by resignation or otherwise.
Executive officers of the International Financial Group Inc. and its
subsidiaries serve in their positions until their respective successors have
been duly elected or qualified or their positions are earlier vacated by
resignation or otherwise.
There are no service contracts between our company and any of our directors
providing for benefits upon termination of their office.
Committees
- ----------
Our audit committee is comprised of Mr. Daniel MacMullin, Mr. Vernon Veira and
Mr. Kevin Mellor.
Employees
- ---------
As of July 31, 2002, we employed on a full-time basis approximately seven
persons with five located in Caribbean and two in North America.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 25
International Financial Group, Inc.
- --------------------------------------------------------------------------------
As of July 31, 2001, we employed on a full-time basis approximately fourteen
persons with seven located in Caribbean and seven in North America.
As of July 31, 2000, we employed on a full-time basis approximately four persons
with two located in the Caribbean and two in North America.
As of July 31, 1999, the company had not employed any persons as it was not
active.
Our principal operating subsidiaries are not party to any collective bargaining
agreements.
Share Ownership
- ---------------
SECURITY OWNERSHIP OF DIRECTORS AND SENIOR MANAGEMENT AND CERTAIN KEY EMPLOYEES
As of the date of this annual return, the aggregate number of our voting
ordinary shares beneficially owned by our director, senior managers and certain
key employees was 20,250,000 shares. This number includes 20,000,000 voting
ordinary shares (94.57% of the ordinary shares) held by IFG World Holdings Inc,
which is owned by IFG World Holding Trust to which Mr. Daniel MacMullin is the
sole beneficiary. Mr. MacMullin is a Director and Senior Vice-President of
International Financial Group. In addition Sound Refuge Trust holds 250,000
voting ordinary shares, a trust established for a former Director and former
executive officer of the company and his family.
Beneficial ownership by a person assumes the exercise of all options and
warrants held by such person that are currently exercisable or are exercisable
within 60 days of such date.
International Financial Group Inc. has no stock option plan as of the date of
this annual return.
Item 7. Major Shareholders and Related Party Transactions
- ---------------------------------------------------------
Our voting ordinary shares are owned 94.58% by IFG World Holdings Inc. with the
remaining 1.18% by Sound Refuge Trust and 4.24% by the minority shareholders.
As a result of the concentration of ownership of our voting ordinary shares, IFG
World Holdings Inc. will be able to exercise control over matters requiring
shareholder approval, including the election of directors and approval of
significant corporate transactions.
The following table sets forth-specified information with respect to the
beneficial ownership as of January 31, 2003 of the person known by us to be the
beneficial owner of our outstanding voting ordinary shares.
This control may have the effect of delaying or preventing a change in control
of International Financial Group Inc.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 26
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Number of shares Percentage of shares
Beneficially owned Beneficially owned
Shareholder Outstanding Shares Right to Acquire Total Number Before Offering
- ----------- ------------------ ---------------- ------------ ---------------
IFG World Holdings Inc. (1) 20,000,000 nil 20,000,000 94.58
Sound Refuge Trust (2) 250,000 nil 250,000 1.18
Minority Shareholders 896,500 nil 896,500 4.24
<FN>
(1) IFG World Holdings Inc. is owned by IFG World Holdings Trust of which Mr.
Daniel MacMullin, Vice-President and Director of International Financial
Group Inc., is the sole beneficiary.
(2) The beneficial owners of Sound Refuge Trust are Dr. James Stephenson, his
wife and two sons.
</FN>
Related Party Transactions
- --------------------------
Loans Payable by IFG
- --------------------
The loan payable to related parties of $20,000 as of July 31, 2001 due to IFG
World Holdings, Inc. was unsecured, non-interest bearing and payable upon
demand. The said loan was made for the purpose of having International Financial
Group Inc. purchase the Uniform Resource Locator (URL) www.ifg.com for its sole
-----------
use in May 2000. A URL specifies the location of a resource residing on the
Internet. In 2002 this amount was offset against the amount owed by IFG World
Holdings Inc. to International Financial Group Inc. eliminating the said
payable.
For the year 2001 the financial statements have been restated to reflect the
offset of the amount owed by IFG World Holdings Inc. to International Financial
Group Inc. This offset completely eliminated the loan payable to IFG World
Holdings Inc.
Loans Receivable by IFG
- -----------------------
In respect of the fiscal year 2002 the loan receivable to related parties was
set up as a reserve but is not reflected on the financial statements as it was
determined that our parent company, IFG World Holdings Inc. did not have
sufficient assets to pay the receivable. The amount of the reserve is $165,531
which is made up of the IFG World Holdings Inc. loan receivable of $185,731 less
the offset payable for the URL purchased by IFG World Holdings Inc. on our
company's behalf of $20,200. The said amount has increased from 2001 to reflect
the repayment of seed capital loaned to IFG World Holdings Inc. by Mr. Kevin
Mellor, director which in turn provided the seed capital to the Company. Please
see below for further explanation.
In respect of the fiscal year 2001 the loan receivable to related parties was
$125,000. This amount is made up of the amount due from IFG World Holdings Inc.,
of $145,200 and is unsecured, non-interest bearing and payable on demand. A loan
of $10,000 of this amount resulted from transactions involving a former key
employee/director whereby the Company issued 250,000 shares of its common stock,
and included an adjustment for amounts the former key employee/director had paid
to IFG World Holdings Inc. In addition, there were payments made by the Company
on behalf of IFG World Holdings, Inc. totaling $135,200 regarding amounts it had
paid to Kevin Mellor in repayment of a loan owed by IFG World Holdings Inc. to
Mr. Mellor for seed capital that was used by IFG World Holdings Inc. to provide
seed capital to International Financial Group Inc. To facilitate the repayment
and save on wire charges International Financial Group Inc. agreed with IFG
World Holdings Inc. to make the payments to Mr. Mellor and record a receivable
owing by IFG World Holdings Inc. We have offset for financial statement purposes
the $20,200 amount that we owed to IFG World Holdings Inc. for the purchase of
the URL to come to a total loan receivable by our parent company, IFG World
Holdings Inc. of $125,000.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 27
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Item 8. Financial Information
- -----------------------------
Financial Statements
- --------------------
See "Financial Statements" for our audited Consolidated Financial Statements and
Financial Statement Schedule filed as part of this report.
Legal Proceedings
- -----------------
We are not involved in any material legal proceedings.
Dividend Policy
- ---------------
We have not declared dividends from our inception and do not foresee declaring
any dividends in the foreseeable future. The payment of any future dividends
will be paid by us based on conditions then existing, including our earnings,
financial condition and capital requirements as well as other conditions we deem
relevant.
Item 9. The Offer and Listing
- -----------------------------
Our ordinary shares have never been quoted on any exchange or quotation service.
Item 10. Additional Information
- -------------------------------
Memorandum and Articles of Association
- --------------------------------------
1. The Company is registered at the Companies Registry with the Registrar of
Companies in the Cayman Islands, and has been assigned company number CR-75001,
registered office situated at P.O. Box 10098APO, Georgetown, Cayman Islands,
British West Indies. The telephone number at that location is 345-946-4170.
The objects for which the Company is established are unrestricted and the
Company shall have full power and authority to carry out any object not
prohibited by any law as provided by Section 7(4) of The Companies Law (2000
Revision) as referred to in paragraph two of the Memorandum of Association.
2. Article 97 of the Amended and Restated Articles of Association of the Company
(the "Articles of Association") provides that a Director who is in any way,
whether directly or indirectly, interested in a contract or proposed contract
with the Company shall declare the nature of his interest at a meeting of the
Directors. A general notice given to the Directors by any Director to the effect
that he is a member of any specified company or firm and is to be regarded as
interested in any contract which may thereafter be made with that company or
firm shall be deemed a sufficient declaration of interest in regard to any
contract so made. A Director may vote in respect of any contract or proposed
contract or arrangement notwithstanding that he may be interested therein and if
he does so his vote shall be counted and he may be counted in the quorum at any
meeting of the Directors at which any such contract or proposed contract or
arrangement shall come before the meeting for consideration.
Article 75 of the Articles of Association provides that the remuneration of the
Directors shall from time to time be determined by the Company by ordinary
resolution.
Article 89 of the Articles of Association provides the Directors may exercise
all the powers of the company to borrow money and to mortgage or charge its
undertaking, property and uncalled capital or any part thereof, to issue
debentures, debenture stock and other securities whenever money is borrowed or
as security for any debt, liability or obligation of the Company or of any third
party. Such borrowing powers can only be altered through an amendment to the
Articles of Association.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 28
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Directors of the company do not have to retire under an age limit requirement
and are not required to own shares of the company in order to serve as
directors.
3. The share capital of the Company is $50,000USD divided into 50,000,000
ordinary shares with a par value of $0.001USD. The rights, preferences and
restrictions attaching to the ordinary shares are as follows:
Dividend Rights (Articles 108-116)
The Directors may from time to time declare dividends (including interim
dividends) by ordinary resolution and other distributions on shares in issue and
authorise payment of the same out of the funds of the Company lawfully available
therefore. Any dividend may be paid by cheque or warrant sent through the post
to the registered address of the Member or person entitled thereto, or in the
case of joint holders, to any one of such joint holders at his registered
address or to such person and such address as the Member or person entitled, or
such joint holders as the case may be, may direct. Every such cheque or warrant
shall be made payable to the order of the person to whom it is sent or to the
order of such other person as the Member or person entitled, or such joint
holders as the case may be, may direct. The Directors when paying dividends to
the Members may make such payment either in cash or in specie. Subject to the
rights of persons, if any, entitled to shares with special rights as to
dividends, all dividends shall be declared and paid according to the amounts
paid on the shares, but if and so long as nothing is paid up on any of the
shares in the Company dividends may be declared and paid according to the
amounts of the shares. No amount paid on a share in advance of calls shall,
while carrying interest, be treated for the purposes of this Article as paid on
the share. No dividend shall bear interest against the Company.
Voting Rights (Articles 61-69)
The holders of our ordinary shares are entitled to vote on all matters to be
voted on by the members.
Profits (Article 110)
No dividend shall be paid otherwise than out of profits or, subject to the
restrictions of the Companies Law, the share premium account.
Liquidation (Article 113)
If we shall be wound up the liquidator may, with the sanction of an Ordinary
Resolution of the Company divide amongst the Members in specie or kind the whole
or any part of the assets of the Company (whether they shall consist of property
of the same kind or not) and may, for such purpose set such value as he deems
fair upon any property to be divided as aforesaid and may determine how such
division shall be carried out as between the Members or different classes of
Members. The liquidator may, with the like sanction, vest the whole or any part
of such assets in trustees upon such trusts for the benefit of the
contributories as the liquidator, with the like sanction shall think fit, but so
that no Member shall be compelled to accept any shares or other securities
whereon there is any liability.
Redemption (Articles 39-42)
Subject to the provisions of the Companies Law, the Company may:
(a) issue shares on terms that they are to be redeemed or are liable to be
redeemed at the option of the Company or the Member on such terms and
in such manner as the Directors may, before the issue of such shares,
determine;
(b) purchase its own shares (including any redeemable shares) on such
terms and in such manner as the Directors may determine and agree with
the Member; and
(c) make a payment in respect of the redemption or purchase of its own
shares otherwise than out of profits or the proceeds of a fresh issue
of shares.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 29
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Any share in respect of which notice of redemption has been given shall not be
entitled to participate in the profits of the Company in respect of the period
after the date specified as the date of redemption in the notice of redemption.
The redemption or purchase of any share shall not be deemed to give rise to the
redemption or purchase of any other share.
The Directors may when making payments in respect of redemption or purchase of
shares, if authorized by the terms of issue of the shares being redeemed or
purchased or with the agreement of the holder of such shares, make such payment
either in cash or in specie.
Sinking Fund (Article 110)
The Directors may, before recommending or declaring any dividend, set aside out
of the funds legally available for distribution such sums as they think proper
as a reserve or reserves which shall, at the discretion of the Directors be
applicable for meeting contingencies, or for equalising dividends or for any
other purpose to which those funds be properly applied and pending such
application may, at the like discretion, either be employed in the business of
the Company or be invested in such investments (other than shares of the
Company) as the Directors may from time to time think fit.
Capital Calls (Article 17-22)
The Directors may from time to time make calls upon the Members in respect of
any moneys unpaid on their shares, and each Member shall (subject to receiving
at least 14 days notice specifying the time or times of payment) pay to the
Company at the time or times so specified the amount called on his shares. The
joint holders of a share shall be jointly and severally liable to pay calls in
respect thereof. If a sum called in respect of a share is not paid before or on
the day appointed for payment thereof, the person from whom the sum is due shall
pay interest upon the sum at the rate of eight per centum per annum from the day
appointed for the payment thereof to the time of the actual payment, but the
Directors shall be at liberty to waive payment of that interest wholly or in
part. The provisions of these Articles as to the liability of joint holders and
as to payment of interest shall apply in the case of non-payment of any sum
which, by the terms of issue of a share, becomes payable at a fixed time,
whether on account of the amount of the share, or by way of premium, as if the
same had become payable by virtue of a call duly made and notified. The
Directors may make arrangements on the issue of shares for a difference between
the Members, or the particular shares, in the amount of calls to be paid and in
the times of payment. The Directors may, if they think fit, receive from any
member willing to advance the same all or any part of the moneys uncalled and
unpaid upon any shares held by him, and upon all or any of the moneys so
advanced may (until the same would, but for such advance, become presently
payable) pay interest at such rate (not exceeding without the sanction of an
Ordinary Resolution, eight per cent. per annum) as may be agreed upon between
the Member paying the sum in advance and the Directors.
Discrimination Against Shareholders
There are no provisions in the company's articles that would discriminate
against an existing or prospective shareholder as a result of such shareholder
holding a substantial number of shares.
4. Due to the fact that there is only one class of shares the rights of the
ordinary shares cannot be changed. Upon the company having more than one class
of shares in the future the action that is necessary to change the rights of
holders of stock the rights attaching to any class (unless otherwise provided by
the terms of issue of the shares of that class) may be varied or abrogated
pursuant to Article 8 and 9, with the consent in writing of the holders of
two-thirds of the issued shares of that class, or with the sanction of a
resolution passed by at least a two-thirds majority of the holders of shares of
the class present in person or by proxy at a separate general meeting of the
holders of the shares of the class. The rights conferred upon the holders of the
shares of any class issued with preferred or other rights shall not, unless
otherwise expressly provided by the terms of issue of the shares of that class,
be deemed to be varied or abrogated by the creation or issue of further shares
ranking pari passu therewith or the redemption or purchase of shares of any
class by the Company.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 30
International Financial Group, Inc.
- --------------------------------------------------------------------------------
5. Pursuant to Articles 46-60 the conditions governing the manner in which
annual general meetings of shareholders are convoked are:
(a) The Directors may, whenever they think fit, convene a general meeting of
the Company.
(b) General meetings shall also be convened on the written requisition of any
Member or Members entitled to attend and vote at general meetings of the Company
who hold not less than 10 per cent of the paid up voting share capital of the
Company deposited at the registered office of the Company specifying the objects
of the meeting for a date no later than 21 days from the date of deposit of the
requisition signed by the requisitionists, and if the Directors do not convene
such meeting for a date not later than 45 days after the date of such deposit,
the requisitionists themselves may convene the general meeting in the same
manner, as nearly as possible, as that in which meetings may be convened by the
Directors, and all reasonable expenses incurred by the requisitionists as a
result of the failure of the Directors shall be reimbursed to them by the
Company.
(c) If at any time there are no Directors of the Company, any two Members (or
if there is only one Member then that Member) entitled to vote at general
meetings of the Company may convene a general meeting in the same manner as
nearly as possible as that in which meetings may be convened by the Directors.
(d) At least seven days notice counting from the date service is deemed to take
place as provided in these Articles specifying the place, the day and the hour
of the meeting and, in case of special business, the general nature of that
business, shall be given in a manner hereinafter provided or in such other
manner (if any) as may be prescribed by the Company by Ordinary Resolution to
such persons as are, under these Articles, entitled to receive such notices from
the Company, but with the consent of all the Members entitled to receive notice
of some particular meeting and attend and vote thereat, that meeting may be
convened by such shorter notice or without notice and in such manner as those
Members may think fit.
(e) The accidental omission to give notice of a meeting to or the non-receipt
of a notice of a meeting by any Member shall not invalidate the proceedings at
any meeting.
There are no conditions of admission to a general meeting and there is no
provision for an extraordinary general meeting.
6. There are no limitations on the rights to own the ordinary shares or to hold
or exercise voting rights on the ordinary shares by non-resident or foreign
shareholders.
7. There is no provision in the company's Articles and Memorandum of Association
that would have an effect of delaying, deferring or preventing a change in
control of the company and that would operate only with respect to a merger,
acquisition or corporate restructuring involving the company (or any of its
subsidiaries).
The provisions in relation to the alteration of the Company's capital are in
accordance with but no more onerous than the Companies Law.
Material Contracts
- ------------------
In the past three years we have not entered into any material contracts other
than contracts entered into in the ordinary course of our business.
Exchange Controls
- -----------------
Not applicable.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 31
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Taxation
- --------
Cayman Islands
- --------------
At the present time there are no taxes imposed in the Cayman Islands, the
jurisdiction in which we were formed and from which we currently conduct our
business, on income, profits, capital gains or appreciation of the holders of
the shares or warrants. There are also currently no taxes imposed by the Cayman
Islands on the holders of shares or warrants in the nature of estate, duty,
inheritance or capital transfer tax. Therefore, under the existing laws of the
Cayman Islands, no income tax or withholding tax will be applicable in the
Cayman Islands to holders of the shares or warrants offered hereby.
We are an exempted company under Cayman Islands law and we have made application
to the Governor-in-Council of the Cayman Islands for, and expects to receive, an
undertaking as to tax concessions pursuant to Section 6 of the Tax Concessions
Law (1999 Revision) which will provide that, for a period of 20 years from the
date of issue of the undertaking, no law hereafter enacted in the Cayman Islands
imposing any taxes or duty to be levied on profits, income gains or
appreciations or which is in the nature of estate duty or inheritance tax will
apply to our company or in respect of shares, debentures or other obligations of
our company.
United States of America
- ------------------------
In this section we summarize the material anticipated United States income tax
considerations relevant to a purchase of ordinary shares in this offering by
individuals and corporations which:
o For purposes of the United States Internal Revenue Code are resident
in the United States, or are otherwise subject to United States
federal income taxation without regard to source;
o Hold the common shares as capital assets for purposes of the Internal
Revenue Code;
o Deal at arm's length with International Financial Group Inc.;
o Do not use or hold the ordinary shares in carrying on a business in
the Cayman Islands, through a permanent establishment or in connection
with a fixed base in the Cayman Islands or otherwise, and are not an
insurer which carries on business in the Cayman Islands and elsewhere;
and
o In the case of individual holders, are also U.S. citizens.
We will refer to persons who satisfy the above conditions as "Unconnected U.S.
Shareholders."
We will assume, for purposes of this discussion, that you are an Unconnected
U.S. Shareholder. The tax consequences of a purchase of ordinary shares (i.e.
common shares) by persons who are not Unconnected U.S. Shareholders may differ
substantially from the tax consequences discussed in this section.
This discussion is based upon:
o the current provisions of the Internal Revenue Code and regulations
under the Internal Revenue Code;
o the administrative policies published by the U.S. Internal Revenue
Service; and
o judicial decisions,
all of which are subject to change either prospectively or retroactively. We do
not discuss the potential effects of any recently proposed legislation in the
United States and do not take into account the tax laws of the various state and
local jurisdictions of the United States or foreign jurisdictions.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 32
International Financial Group, Inc.
- --------------------------------------------------------------------------------
IFG intends this discussion to be a general description of the U.S. Federal
Income Tax considerations material to a purchase of ordinary (common) shares.
This discussion does not deal with all possible tax consequences relating to an
investment in IFG's ordinary shares. IFG has not taken into account your
particular circumstances and does not address consequences peculiar to you under
provisions of U.S. tax law or any other taxing jurisdiction. Therefore, you
should consult your own tax advisor regarding the particular consequences to you
of purchasing ordinary shares in this offering.
United State Federal Income Tax Considerations
- ----------------------------------------------
As an Unconnected U.S. Shareholder, you generally will include in income
dividend distributions paid by IFG to the extent of our current or accumulated
earnings and profits. You must include in income an amount equal to the U.S.
dollar value of such dividends on the date of receipt based on the exchange rate
on such date, without reduction for any withholding tax. To the extent dividend
distributions paid by IFG exceed our current or accumulated earnings and
profits, they will be treated first as a return of capital up to your adjusted
tax basis in the shares, and then as a gain from the sale or exchange of the
shares.
Dividends paid by IFG on the shares will not generally be eligible for the
"dividends received" deductions. An Unconnected U.S. Shareholder, which is a
corporation, may, under some circumstances, be entitled to a 70% deduction of
the U.S. source portion of dividends received from IFG if such Unconnected U.S.
Shareholder owns shares representing at least 10% of our voting power and value.
If you sell the shares, you generally will recognize gain or loss in an amount
equal to the difference, if any between the amount realized on the sale and your
adjusted tax basis in the shares. Any gain or loss you recognize upon the sale
of shares held as capital assets will be long-term or short-term capital gain or
loss, depending on whether the shares have been held by you for more than one
year.
Under current U.S. tax regulations, dividends paid by us on the shares generally
will not be subject to U.S. information reporting or the 31% backup withholding
tax unless they are paid in the United States through a U.S. or U.S. related
paying agent, including a broker. If you furnish the paying agent with a duly
completed and signed Form W8-BEN or W-9 or such other form as is appropriate to
the situation such dividends will not be subject to the backup withholding tax.
We recommend that you see a tax advisor to determine the appropriate form to
complete and file with your agent so that you are not subject to withholding tax
unnecessarily. You will be allowed a refund or a credit equal to any amounts
withheld under the U.S. backup withholding tax rules against your U.S. federal
income tax liability, provided you furnish the required information to the
Internal Revenue Service.
Personal Holding Companies
- --------------------------
We could be classified as a personal holding company for U.S. federal income tax
purposes if both of the following tests are satisfied:
o if at any time during the last half of our taxable year, five or fewer
individuals own or are deemed to own more than 50% of the total value
of our shares; and
o we receive 60% or more of our U.S. related gross income from specified
passive sources, such as royalty payments.
A personal holding company is taxed on a portion of its undistributed U.S.
source income, including specific types of foreign source income, which are
connected with the conduct of a U.S. trade or business, to the extent this
income is not distributed to shareholders. We do not believe it is a personal
holding company presently, and we do not expect to become one. However, we
cannot assure you that we will not qualify as a personal holding company in the
future.
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February 14, 2003 Annual Report Page 33
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Foreign Personal Holding Companies
- ----------------------------------
We could be classified as a foreign personal holding company if in any taxable
year both of the following tests are satisfied:
o five or fewer individuals who are United States citizens or residents
own or are deemed to own more than 50% of the total voting power of
all classes of our shares entitled to vote or the total value of our
shares; and
o at least 60%, 50% in some cases, of our gross income consists of
"foreign personal holding company income," which generally includes
passive income such as dividends, interests, gains from the sale or
exchange of shares or securities, rent and royalties.
If we are classified as a foreign personal holding company and if you hold
shares on the last day of our taxable year, you must include in your gross
income as a dividend your pro rata portion of our undistributed foreign personal
holding company income. If you dispose of your shares prior to such date, you
will not be subject to tax under these rules. We do not believe we are a foreign
personal holding company presently, and we do not expect to become one. However,
we cannot assure you that we will not qualify as a foreign personal holding
company in the future.
Passive Foreign Investment Companies
- ------------------------------------
The rules governing "passive foreign investment companies" can have significant
tax effects on Unconnected U.S. Shareholders. We could be classified as a
passive foreign investment company if, for any taxable year, either:
o 75% or more of its gross income is "passive income," which includes
interest, dividends and some types of rents and royalties, or
o the average percentage, by fair market value, or, in some cases, by
adjusted tax basis, of our assets that produce or are held for the
production of "passive income" is 50% or more.
Distributions which constitute "excess distributions," as defined in Section
1291 of the Internal Revenue Code, from a passive foreign investment company and
dispositions of shares of a passive foreign investment company are subject to
the highest rate of tax on ordinary income in effect and to an interest charge
based on the value of the tax deferred during the period during which the shares
are owned. However, if an Unconnected U.S. Shareholder makes a timely election
to treat IFG as a qualified electing fund under section 1295, the
above-described rules generally will not apply. Instead, the Unconnected U.S.
Shareholder would include annually in his gross income his pro rata share of our
ordinary earnings and net capital gain, regardless of whether such income or
gain was actually distributed. Tax on this income, however, may be deferred.
In addition, subject to specific limitations, Unconnected U.S. Shareholders
owning actually or constructively marketable shares in a passive foreign
investment company may make an election to mark that stock to market annually,
rather than being subject to the above-described rules. Amounts included in or
deducted from income under this mark to market election and actual gains and
losses realized upon disposition, subject to specific limitations, will be
treated as ordinary gains or losses.
In addition, special rules apply if we qualify as both a passive foreign
investment company and a "controlled foreign corporation," as defined below, and
an Unconnected U.S. Shareholder owns, actually or constructively, 10% or more of
the total combined voting power of all classes of our shares entitled to vote.
We believe that we will not be a passive foreign investment company for the
current fiscal year and we do not expect to become a passive foreign investment
company in future years. You should be aware, however, that if we are or become
a passive foreign investment company we may not be able to satisfy
record-keeping requirements that would permit you to make a qualified electing
fund election. You should consult your tax advisor with respect to how the
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 34
International Financial Group, Inc.
- --------------------------------------------------------------------------------
passive foreign investment company rules affect your tax situation, including
the advisability of making an election to treat us as a qualified electing fund
or making a mark to market election.
Controlled Foreign Corporation
- ------------------------------
If more than 50% of the voting power of all classes of our shares or the total
value of our shares is owned, directly or indirectly, by citizens of the United
States, U.S. domestic partnerships and corporations or estates or trusts other
than foreign estates or trusts, each of which owns 10% or more of the total
combined voting power of all classes of our shares, we could be treated as a
"controlled foreign corporation" under Subpart F of the Internal Revenue Code.
This classification would effect many complex results, including requiring such
shareholders to include in income their pro rata shares of our "Subpart F
Income," as defined by the Internal Revenue Code. In addition, gain from the
sale or exchange of shares by an Unconnected U.S. Shareholder who is or was a
10% or greater shareholder at any time during the five-year period ending with
the sale or exchange will be ordinary dividend income to the extent of our
earnings and profits attributable to the shares sold or exchanged.
We do not believe that we are a controlled foreign corporation and we do not
anticipate that we will become a controlled foreign corporation as a result of
the offering. However, we cannot assure you that we will not qualify as a
controlled foreign corporation in the future.
Documents On Display
- --------------------
Documents which are referred to in this annual return and that are not
confidential to our company, all of which are or will be in effect may be
obtained and/or reviewed at our offices by contacting Ms. Catherine Rublack at
crublack@ifgnevis.com or 869-469-7040 or 869-469-7041. We may require a
- -----------------------------------------------------
prospective investor's prior execution of confidentiality and nondisclosure
agreements before accessing certain of our documents.
Item 11. Quantitative and Qualitative Disclosure about Market Risk
- ------------------------------------------------------------------
(a) Quantitative and Qualitative information about market risk.
We are not subject to market risk as referred to in this item because we use the
United States of America dollar in all transactions we conduct and operate in
jurisdictions that utilize the American dollar as the unit of measure. Other
than being a foreign issuer our company would satisfy the definition of a Small
Business Issuer under the Securities Exchange Act of 1934.
Item 12. Description of Securities other than Equity Securities
- ---------------------------------------------------------------
Not applicable.
PART II
- -------
Item 13. Defaults, Dividend Arrearages and Delinquencies
- --------------------------------------------------------
Not applicable.
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 35
International Financial Group, Inc.
- --------------------------------------------------------------------------------
Item 14. Material Modifications to the Rights of Security Holders and Use of
- ----------------------------------------------------------------------------
Proceeds
- --------
Not applicable.
PART III
- --------
Item 17. Financial Statements
- -----------------------------
Not applicable.
Item 18. Financial Statements
- -----------------------------
FINANCIAL STATEMENTS AND SCHEDULE
- ---------------------------------
The following Consolidated Financial Statements and Financial Statement
Schedule are included at the end of this report:
FINANCIAL STATEMENTS
--------------------
o Report of Independent Auditors
o Consolidated Balance Sheets as of July 31, 2002 and 2001
o Consolidated Statements of Operations for the years ended July 31,
2002 and July 31, 2001
o Consolidated Statements of Changes in Shareholders' Equity (Deficit)
for the years ended July 31, 2002 and July 31, 2001.
o Consolidated Statements of Cash Flows for the years ended July 31,
2002 and July 31, 2001.
o Notes to Consolidated Financial Statements
Item 19. Exhibits
- -----------------
10.a.1. Consent of Miller & McCollom dated February 14, 2003.
SIGNATURES
----------
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
INTERNATIONAL FINANCIAL GROUP INC.
/s/ Kevin C. Mellor
----------------------------------------
Kevin C. Mellor - President and Director
Authorized U.S. Representative
Date: February 14, 2003
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 36
International Financial Group, Inc.
- --------------------------------------------------------------------------------
CERTIFICATIONS
I, Kevin Mellor, certify that:
1. I have reviewed this annual report on Form 20-F of International Financial
Group, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: February 14, 2003
/s/ Kevin Mellor
Chairman and Chief Executive Officer
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 37
International Financial Group, Inc.
- --------------------------------------------------------------------------------
I, Kevin Mellor, certify that:
1. I have reviewed this annual report on Form 20-F of International Financial
Group, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: February 14, 2003
/s/ Kevin Mellor
Executive Vice President,
Chief Financial Officer
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 38
FINANCIAL STATEMENTS
- --------------------
INTERNATIONAL FINANCIAL GROUP, INC.
INDEX TO CONSOLIDATED FINANICAL STATEMENTS
With
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Page
Audit Report of Independent Certified Public Accountants F-1
Consolidated Financial Statements:
Balance Sheets F-2
Statements of Operations F-3
Statements of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F11
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 39
Independent Accountants' Report
-------------------------------
Board of Directors
International Financial Group, Inc.
We have audited the accompanying balance sheets of International Financial
Group, Inc. (a Development Stage Company) as of July 31, 2002, and July 31,
2001, and the related statements of operations, stockholders' equity, and cash
flows for the years ended July 31, 2002 and 2001, and for the period from July
14, 1997 (date of incorporation) through July 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentations. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of International Financial
Group, Inc. (a Development Stage Company) as of July 31, 2002, and July 31,
2001, and the results of its operations, its stockholders' equity, and its cash
flows for the years then ended and for the period from July 14, 1997 (date of
incorporation) to July 31, 2002, in conformity with generally accepted
accounting principles in the United States of America.
/s/ Miller and McCollom
MILLER AND MCCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
February 10, 2003
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 40
INTERNATIONAL FINANCIAL GROUP, INC.
(a Development Stage Company)
Consolidated Balance Sheets
---------------------------
July 31, 2002 July 31, 2001
---------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 364,659 $ 382,884
Accounts receivable, net of $23,711 allowance for
doubtful accounts for 2002 22,521 43,484
Loan receivable, employee 5,000 --
Prepaid expenses and deposits 11,175 45,695
---------------- ----------------
Total current assets 403,355 472,063
PROPERTY AND EQUIPMENT:
Office furniture and equipment 34,128 33,997
Computer equipment and software 75,292 75,181
---------------- ----------------
Total property and equipment 109,420 109,178
Less accumulated depreciation (43,305) (21,044)
---------------- ----------------
Net property and equipment 66,115 88,134
OTHER ASSETS:
Investments 25,000 --
Intangible asset 20,000 20,000
Loan receivable from parent -- 125,000
---------------- ----------------
Total assets $ 514,470 $ 705,197
================ ================
LIABILITIES AND SHARHOLDERS' EQUITY
CURRENT LIABILTIES:
Accounts payable and accrued expenses $ 35,621 $ 81,235
Customer deposits 260,861 --
---------------- ----------------
Total current liabilities 296,482 81,235
SHAREHOLDERS' EQUITY:
Common stock 50,000,000 shares of $0.001
par value authorized; 21,146,500 and 20,250,000
issued and outstanding at July 31, 2002 and 2001 21,146 20,250
Additional paid-in capital 2,231,004 2,142,250
Deficit accumulated during the development stage (2,034,162) (1,538,538)
---------------- ----------------
Total shareholders' equity 217,988 623,962
---------------- ----------------
Total liabilities and shareholders' equity $ 514,470 $ 705,197
================ ================
The accompanying notes to financial statements are
an integral part of this statement.
F-2
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 41
INTERNATIONAL FINANCIAL GROUP, INC.
(a Development Stage Company)
Consolidated Statements of Operations
-------------------------------------
July 14, 1997
(Date of
Incorporation)
Years Ended July 31, through
------------------------------------ ----------------
2002 2001 July 31, 2002
---------------- ---------------- ----------------
INCOME $ 395,260 $ 48,365 $ 443,625
COST OF SALES 112,238 7,633 119,871
---------------- ---------------- ----------------
Gross profit 283,022 40,732 323,754
EXPENSES:
Legal and professional fees 70,560 229,595 449,867
Salaries and consulting fees 282,655 518,379 879,502
Depreciation 22,260 25,468 47,728
Other administrative expenses 417,757 545,951 987,107
---------------- ---------------- ----------------
Total expenses 793,232 1,319,393 2,364,204
---------------- ---------------- ----------------
NET (LOSS) FROM OPERATIONS (510,210) (1,278,661) (2,040,450)
OTHER INCOME (EXPENSE):
Interest revenue 14,586 -- 14,586
Loss on sale of assets -- (8,307) (8,307)
---------------- ---------------- ----------------
NET LOSS $ (495,624) $ (1,286,968) $ (2,034,171)
================ ================ ================
Net (loss) per common share $ (.02) $ (.06) $ (.10)
================ ================ ================
Weighted average
shares outstanding 20,632,542 20,104,167 20,182,019
The accompanying notes to financial statements are
an integral part of this statement.
F-3
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 42
INTERNATIONAL FINANCIAL GROUP, INC.
(a Development Stage Company)
Consolidated Statement of Shareholders' Equity
----------------------------------------------
Accumulated
Contributed Subscription Deficit in the Shareholders'
Common Shares Common Stock Surplus Receivable Development Stage Equity
------------- ------------ ----------- ------------ ----------------- -------------
Stock issued June, 2000
to IFG World Holdings, Inc. 16,000,000 $ 16,000 $ 144,000 $ -- $ -- $ 160,000
Stock issued under
private placement 4,000,000 4,000 1,996,000 (500,000) -- 1,500,000
Net loss for the year
ended July 31, 2000 -- -- -- -- (251,570) (251,570)
------------- ------------ ----------- ------------ ----------------- -------------
Balance July 31, 2000 20,000,000 $ 20,000 $ 2,140,000 $ (500,000) $ (251,570) $ 1,408,430
------------- ------------ ----------- ------------ ----------------- -------------
Payment received for
private placement -- -- -- 500,000 -- 500,000
Stock issued under
private placement 250,000 250 2,250 -- -- 2,500
Net loss for the year
ended July 31, 2001 -- -- -- -- (1,286,968) (1,286,968)
------------- ------------ ----------- ------------ ----------------- -------------
Balance July 31, 2001 20,250,000 $ 20,250 $ 2,142,250 $ -- $ (1,538,538) $ 623,962
------------- ------------ ----------- ------------ ----------------- -------------
Stock issued under
private placement 896,500 896 88,754 -- -- 89,650
Net loss for the year
ended July 31, 2002 -- -- -- -- (495,624) (495,624)
------------- ------------ ----------- ------------ ----------------- -------------
Balance July 31, 2002 21,146,500 $ 21,146 $ 2,231,004 $ -- $ (2,034,162) $ 217,988
============= ============ =========== ============ ================= =============
The accompanying notes to financial statements are
an integral part of this statement.
F-4
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 43
INTERNATIONAL FINANCIAL GROUP, INC.
(a Development Stage Company)
Consolidated Statement of Cash Flows
------------------------------------
July 14, 1997
(Date of
Incorporation)
Year Ended Year Ended through
July 31, 2002 July 31, 2001 July 31, 2002
---------------- ---------------- ----------------
Cash Flows from Operating Activities:
Net loss $ (495,624) $ (1,286,968) $ (2,034,162)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 22,260 25,468 47,728
Allowance for doubtful accounts 148,711 -- 148,711
Revenue paid in stock (25,000) -- (25,000)
Net change in operating assets and
liabilities -
Restricted cash -- 200,000 --
Accounts receivable (7,748) (17,484) (51,232)
Prepaid expense 34,520 (35,695) (11,175)
Accounts payable and accrued
expense 215,247 46,402 296,482
---------------- ---------------- ----------------
Net cash (used) by operating activities (107,634) (1,068,277) (1,628,648)
Cash flows from investing activities:
Loan receivable from related parties -- (154,700) (122,500)
Purchase of intangible asset -- -- (20,000)
Purchase of property and equipment (241) (133,570) (139,239)
Sale of property and equipment -- 25,396 25,396
---------------- ---------------- ----------------
Net cash (used) by investing activities (241) (262,874) (256,102)
Cash flows from financing activities:
Proceeds from sale of common stock 89,650 1,000,000 2,249,650
---------------- ---------------- ----------------
Net cash provided by financing activities 89,650 1,000,000 2,249,650
---------------- ---------------- ----------------
Net increase (decrease) in cash (18,225) (331,151) 364,659
Cash, beginning of period 382,884 714,035 --
---------------- ---------------- ----------------
Cash, end of period $ 364,659 $ 382,884 $ 364,659
================ ================ ================
Supplemental cash flow information:
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
The accompanying notes to financial statements are
an integral part of this statement.
F-5
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 44
INTERNATIONAL FINANCIAL GROUP, INC.
(a development Stage Company)
Notes to the Financial Statements
1. Incorporation and Background Information
- ---------------------------------------------
International Financial Group, Inc. (the "Company"), was registered as an exempt
company in the Cayman Islands on July 14, 1997, under the name The Caledonian
500 Index Fund. On March 13, 2000, the Company changed its name to INTERNET
FINANCIAL GROUP, INC. On May 29, 2000, the Company changed its name to ifg.com,
Inc. On March 7, 2001, the Company changed its name to International Financial
Group, Inc. The Company is 98.8 % owned by IFG World Holdings Inc., which is a
wholly owned by IFG World Holdings Trust. The Company was established to act as
a holding corporation for its operating subsidiaries carrying on business in the
Cayman Islands, Nevis and other offshore jurisdictions.
The Company's operating subsidiary, IFG Trust Service Inc., carries on the
business of supplying offshore financial products and services via traditional
delivery channels and the internet. The Company plans to establish itself as a
comprehensive offshore provider of trust services, corporate services,
management services, banking services, securities services, and insurance
services. The Company has established relationships with other offshore
providers in up to forty offshore jurisdictions to ensure our clients can access
these jurisdictions. On August 1, 2002 IFG Trust Services entered into an
arrangement with Noble Securities to provide offshore security services to our
clients.
IFG Trust Services Inc., wholly owns IFG Investment Services Inc. Currently, IFG
Investment Inc. is an operating subsidiary providing services to clients in
search of specialized consulting services. IFG Trust Services, Inc. also wholly
owns IFG Corporate Inc. which provides corporate services, and IFG Management,
Inc. which provides management services.
The Company has commenced limited business operations, as referred to above, and
is continuing its efforts to raise capital.
2. Significant Accounting Policies
- ------------------------------------
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States and are stated in United
States Dollars.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiaries. All
intercompany accounts have been eliminated.
Use of Estimates
----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the period. Actual results could differ from these estimates.
F-6
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 45
INTERNATIONAL FINANCIAL GROUP, INC.
(a development Stage Company)
Notes to the Financial Statements
Revenue Recognition
-------------------
Revenues are recognized in accordance with SEC Staff Accounting Bulletin
(SAB) No. 101, "Revenue Recognition in Financial Statements." Under SAB
101, product revenues (or service revenues) are recognized when persuasive
evidence of an arrangement exists, delivery has occurred (or service has
been performed), the sales price is fixed and determinable and
collectibility is reasonably assured.
Revenue reflected in the financial statements consists of sales of
international business corporations and from the sale of trusts.
International business corporation revenue is recognized when a contract
has been executed with the client and certificates of incorporation issued.
Trust revenue is recognized when a contract has been executed with the
client and a trust certificate issued.
Fixed Assets
------------
Fixed assets are recorded at cost, net of accumulated depreciation, and are
depreciated on a declining-balance basis over their estimated useful lives.
Management has estimated the useful life of computer equipment to be three
years and the life of office furniture and equipment to be five years.
Intangibles
-----------
Intangibles are recorded at cost. The Company's intangible asset consists
of an Uniform Resource Locater (URL). This asset has an indefinite life and
the Company intends to test for impairment annually.
Earnings (loss) per share
-------------------------
Earnings (loss) per share of common stock is computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding
during the period.
Foreign Currency
----------------
The functional currency of the Company is the United States Dollar. Foreign
currency transactions are recorded in accordance with Statement of
Financial Accounting Standards (SFAS) 52. Transactions in foreign
currencies are valued at the transaction date using the Interbank rate.
Currency gains or losses are recognized when the transaction is settled.
F-7
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 46
INTERNATIONAL FINANCIAL GROUP, INC.
(a development Stage Company)
Notes to the Financial Statements
Estimated Fair Value of Financial Instruments
---------------------------------------------
The carrying value of accounts receivable, accounts payable, and other
financial instruments reflected in the financial statement approximates
fair value due to the short-term maturity of the instruments. The Company's
investment in non-marketable securities is valued at cost, which estimates
fair value.
Comprehensive Income
--------------------
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income". SFAS 130 requires that the
components and total amounts of comprehensive income be displayed in the
financial statements beginning in 1998. Comprehensive income includes net
income and all changes in equity during a period that arises from non-owner
sources, such as foreign currency items and unrealized gains and losses on
certain investments in equity securities. The Company has no sources of
comprehensive income other than net income.
Income Taxes
------------
The Company records deferred taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." The statement requires recognition of deferred tax assets and
liabilities for temporary differences between the tax bases of assets and
liabilities and the amounts at which they are carried in the financial
statements, based upon the enacted tax rates in effect for the year in
which the differences are expected to reverse. A valuation allowance is
established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Valuation of Long-Lived Assets
------------------------------
The Company periodically analyzes its long-lived assets for potential
impairment, assessing the appropriateness of lives and recoverability of
unamortized balances through measurement of undiscounted operation cash
flows on a basis consistent with accounting principles generally accepted
in the United States of America.
Bad debts and Allowance for Doubtful Accounts
---------------------------------------------
Invoices not collected within stated terms are considered past due.
Accounts receivable more than 120 days past due are considered
uncollectible and written off to an allowance for doubtful accounts.
Other
-----
The Company's fiscal year end is July 31.
The Company paid no dividends during the periods presented. Certain
comparative figures have been reclassified to conform to the current year
presentation.
The Company consists of one reportable business segment.
The Company derives 100% of its revenues from external customers. The
Company derives approximately 60 percent of its revenues from clients
located in Canada and the United States. Approximately 30 percent of
clients are from Europe and the Caribbean with the remaining 10 percent
being located in various other countries.
F-8
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 47
INTERNATIONAL FINANCIAL GROUP, INC.
(a development Stage Company)
Notes to the Financial Statements
3. Development Stage Company
- ------------------------------
Based upon the Company's business plan, it is a development stage enterprise.
Accordingly, the Company presents its financial statements in conformity with
the accounting principles generally accepted in the United States of America
that apply in establishing operating enterprises. As a development stage
enterprise, the Company discloses the deficit accumulated during the development
stage and the cumulative statements of operations and cash flows from inception
to the current balance sheet date.
4. Investments
- ----------------
The company has an investment in Gravity Spin, Inc, a non-publicly traded
company. The stock is classified as a non-marketable security. The investment is
valued at cost, which does not exceed net realizable value.
5. Related Party Transactions
- -------------------------------
The Company has a loan payable of $20,200 that is due to IFG World Holdings,
Inc., the Company's parent, which is unsecured, and payable upon demand. The
Company does not accrue interest because it is an intercompany balance.
The Company has loans receivable from IFG World Holdings Inc., totaling $185,731
and are unsecured, non-interest bearing and payable on demand. A loan of $10,000
results from a transaction involving a former key employee/director whereby the
Company issued 250,000 shares of its common stock, and included an adjustment
for amounts the former key employee/director had paid to IFG World Holdings Inc.
In addition, there were payments made y the Company on behalf of IFG World
Holdings Inc. from inception totaling $175,731 representing an agreement with
the Company and IFG World Holdings, Inc to repay a director monies he lent to
IFG World Holdings Inc., which was used to initially capitalize the Company.
Because IFG World Holdings, Inc. has insufficient assets and revenues to make
the repayment of these loans likely, the Company has offset the loan payable and
established a reserve of $165,531 during the year ended July 31, 2002.
F-9
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 48
INTERNATIONAL FINANCIAL GROUP, INC.
(a development Stage Company)
Notes to the Financial Statements
A key employee, an officer, received a loan of $5000 in July 2002. This loan
amount was repaid in full during August 2002.
6. Common Stock
- -----------------
The Company raised $2,000,000 pursuant to an offering memorandum dated June 13,
2000, by offering 4,000,000 units that are comprised of one (1) share and one
(1) warrant having an exercise price of $5.00 per warrant that becomes null and
void on December 31, 2002. The warrant allows the purchaser to purchase on (1)
share of common stock. The units issued under this offering were acquired on
January 31, 2001, by IFG World Holdings Inc.
The Company during fiscal year ending July 31, 2002 has issued 896,500 shares of
its common stock to various investors for $89,650.
7. Website
- ------------
The Company purchased the Uniform Resource Locator (URL) www.ifg.com for its
sole use in May 2000. A URL specifies the location of a resource residing on the
Internet The URL was put into limited use during the year ending July 31, 2002
for the Company's website. In accordance with Statement of Financial Accounting
Standards (SFAS) No. 142, the company has determined that the asset has an
indeterminable life, and therefore is subject to periodic review for impairment.
Because the website is still under development at July 31, 2002, there has been
no impairment of the asset.
8. Fixed Assets
- -----------------
The Company has purchased computer and other ancillary equipment and certain
furniture and fixtures. Depreciation is recorded in accordance with the policy
described in Note 2.
9. Risks and Uncertainties
- ----------------------------
The Company is subject to risks common to start-up companies and companies in
new and rapidly evolving markets, including a limited operating history,
dependence on key personnel, the need to raise capital, rapid technological
change, political uncertainty, competition, and the need for successful
development and marketing of products and services.
Because of the nature of the Company's prospective businesses, these are
considerable risks and uncertainties inherent in the planned operations. Further
risks and uncertainties are dependent upon the Company's ability to provide the
necessary capital for its operations. The Company will be subject to
considerable government regulations and restrictions which would be associated
with the multiple governmental organizations under which it proposes to operate.
F-10
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 49
INTERNATIONAL FINANCIAL GROUP, INC.
(a development Stage Company)
Notes to the Financial Statements
Demand for the Company's trust and corporate products is dependent on economic
conditions and the legal environment in which the products are created and
maintained. These conditions are subject to change.
The Company maintains cash balances in banks outside the United States that are
not FDIC insured.
10. Income Taxes
- -----------------
At the present time, no income, profit, capital or capital gains taxes are
levied in the Cayman Islands. Accordingly, no provision for such taxes has been
recorded in the accompanying financial statements. In the event that such taxes
are levied, the Company has received an undertaking from the Cayman Islands
government exempting it from all such taxes until April, 2020. Except under
certain circumstances, the Company does not expect to be liable for United
States income taxes.
11. Commitments and Contingencies
- ----------------------------------
The Company and its subsidiaries have presently one office lease. The lease is
for a one-year terms with renewable one-year terms. Future base rent commitments
for the year ending July 31, 2003 is $32,400. A portion of this lease has been
sublet for the duration of one year commencing August 01, 2002 and dependant on
the lessee being granted a business license in the jurisdiction. The monthly
sublease amount is $2,100. As of Jan 20, 2003 the lessee has not been granted a
business license.
The Company has a contractual arrangement whereby it purchased a client list and
has agreed to pay 50% of the net proceeds from revenues generated from renewals
associated with these clients. During the year ended July 31, 2002, the company
paid $4,000 under this agreement. Future payments due under this agreement
cannot be determined.
F-11
- --------------------------------------------------------------------------------
February 14, 2003 Annual Report Page 50
International Financial Group, Inc.
- --------------------------------------------------------------------------------
EXHIBIT 99.1
- ------------
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of International Financial Group, Inc. (the
"Company") on Form 20-F for the period ending July 31, 2002, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certify that to the best of our knowledge:
1. The Report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: February 14, 2003 /s/ Kevin Mellor
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Name: Kevin Mellor
Title: Chairman and Chief Executive
Officer
Date: February 14, 2003 /s/ Kevin Mellor
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Name: Kevin Mellor
Title: Executive Vice President,
Chief Financial Officer
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February 14, 2003 Annual Report Page 51