ex99_2.htm

	March 31		September 30
	2011		2010
ASSETS

CURRENT
Cash and cash equivalents	$	19,355,581	$	17,787,741
Marketable securities		5,004,178		4,676,175
Accounts receivable		355,189		384,609
Prepaid expenses and deposits		194,128		267,408
Current portion of notes receivable		-		59,790
Future income taxes		-		3,623
		24,909,076		23,179,346

UNREALIZED RENTAL INCOME		86,739		31,642

RENTAL REAL ESTATE PROPERTIES		15,446,474		17,336,366

INTANGIBLE ASSETS		378,549		400,269

FUTURE INCOME TAXES		230,426		268,820
	$	41,051,264	$	41,216,443


LIABILITIES

CURRENT
Accounts payable and accrued liabilities	$	730,109	$	752,699
Income taxes payable		66,550		52,684
Current portion of long-term debt		2,301,170		2,482,475
		3,097,829		3,287,858

LONG-TERM DEBT		-		583,474

FUTURE INCOME TAXES		1,812,291		1,911,685

INTANGIBLE LIABILITIES		11,975		18,372

RETRACTABLE PREFERENCE SHARES		5,330,681		5,135,616
		10,252,776		10,937,005


SHAREHOLDERS' EQUITY

CAPITAL STOCK		17,432,461		17,432,461

CONTRIBUTED SURPLUS		562,398		562,398

RETAINED EARNINGS		12,803,629		12,284,579
		30,798,488		30,279,438

	$	41,051,264	$	41,216,443

See accompanying notes to consolidated financial statements

GENTERRA CAPITAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS, OTHER COMPREHENSIVE

INCOME AND RETAINED EARNINGS

(UNAUDITED)

(IN CANADIAN DOLLARS)

	Three months ended						Six months ended
	March 31						March 31
	2011			2010			2011			2010

REVENUE
Rent	$	819,495		$	-		$	1,645,206		$	-

EXPENSES
Administrative and general		209,907			167,100			494,738			324,703
Rental real estate operating expenses		517,541			-			993,491			-
		727,448			167,100			1,488,229			324,703
INCOME (LOSS) BEFORE THE FOLLOWING		92,047			(167,100	)		156,977			(324,703	)

Amortization		129,725			-			275,857			-
Dividends on retractable preference shares		96,461			-			195,065			-
Interest on long-term debt		28,137			-			63,754			-
		254,323			-			534,676			-
LOSS FROM OPERATIONS		(162,276	)		(167,100	)		(377,699	)		(324,703	)

OTHER INCOME AND EXPENSES
Interest income		75,953			20,778			146,463			41,655
Investment income		96,238			39,028			386,267			165,269
Impairment gain (loss) on receivables		(11,277	)		(14,893	)		(40,805	)		23,431
Gain on sale of rental real estate property		473,895			-			473,895			-
Equity income (loss) of significantly influenced company		-			524			-			(938	)
		634,809			45,437			965,820			229,417
INCOME (LOSS) BEFORE INCOME TAXES		472,533			(121,663	)		588,121			(95,286	)

Income taxes (recovery)
Current		111,611			(19,966	)		136,973			(19,466	)
Future		(59,519	)		-			(57,377	)		3,157
		52,092			(19,966	)		79,596			(16,309	)
INCOME (LOSS) FROM CONTINUING OPERATIONS		420,441			(101,697	)		508,525			(78,977	)

Deferred gain on sale of former consolidated subsidiary		10,525			42,100			10,525			42,100
NET INCOME (LOSS) FOR THE PERIOD, ALSO BEING
COMPREHENSIVE INCOME (LOSS)	$	430,966		$	(59,597	)	$	519,050		$	(36,877	)

Retained earnings at beginning of period		12,372,663			13,395,229			12,284,579			13,372,509
RETAINED EARNINGS at end of period	$	12,803,629		$	13,335,632		$	12,803,629		$	13,335,632

EARNINGS (LOSS) PER SHARE (Basic and diluted)
Continuing operations	$	0.04		$	(0.02	)	$	0.05		$	(0.01	)
Discontinued operations	$	0.00		$	0.01		$	0.00		$	0.01
Net income (loss)	$	0.04		$	(0.01	)	$	0.05		$	(0.00	)

Weighted average number of shares
Basic and diluted		9,389,015			5,076,407			9,389,015			5,076,407

The effect on earnings per share of the conversion of the Class A preference shares is anti-dilutive and therefore not disclosed.

See accompanying notes to consolidated financial statements

GENTERRA CAPITAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN CANADIAN DOLLARS)

	Three months ended March 31						Six months ended March 31
	2011			2010			2011			2010

OPERATING ACTIVITIES
Net income (loss) for the period from continuing operations	$	420,441		$	(101,697	)	$	508,525		$	(78,977	)
Items not affecting cash:
Gain on sale of rental real estate property		(473,895	)		-			(473,895	)		-
Amortization		129,725			-			275,857			-
Dividends on retractable preference shares		96,461			-			195,065			-
Future income taxes		(59,519	)		-			(57,377	)		3,157
Unrealized gain on marketable securities		(57,224	)		(11,520	)		(184,424	)		(226,528	)
Unrealized rental income		(20,078	)		-			(55,097	)		-
Accretion interest on discounted note receivable		(16,881	)		(18,040	)		(35,149	)		(34,534	)
Amortization of intangible assets and liabilities		7,578			-			15,323			-
Impairment loss (gain) on receivables		(3,339	)		14,893			26,189			(23,431	)
Equity (income) loss of significantly influenced company		-			(524	)		-			938
		23,269			(116,888	)		215,017			(359,375	)
Change in non-cash components of working capital
Accounts receivable		78,409			879			29,420			1,118
Prepaid expenses and deposits		(75,826	)		(121,290	)		73,280			(159,327	)
Accounts payable and accrued liabilities		(85,275	)		98,361			(22,590	)		174,177
Income taxes payable		51,693			(16,539	)		13,866			(17,038	)
		(7,730	)		(155,477	)		308,993			(360,445	)

FINANCING ACTIVITIES
Redemption of Class A preference shares		-			(138,839	)		-			(138,839	)
Repayment of long-term debt		(687,762	)		-			(764,779	)		-
		(687,762	)		(138,839	)		(764,779	)		(138,839	)

INVESTING ACTIVITIES
Proceeds from sale of rental real estate property		2,087,930			-			2,087,930			-
Proceeds from notes receivable		79,275			100,000			79,275			100,065
Proceeds from (additions to) marketable securities		(10,418	)		(20,376	)		(143,579	)		75,524
		2,156,787			79,624			2,023,626			175,589
CHANGE IN CASH AND CASH EQUIVALENTS		1,461,295			(214,692	)		1,567,840			(323,695	)
CASH AND CASH EQUIVALENTS, beginning of period		17,894,286			14,491,151			17,787,741			14,600,154
CASH AND CASH EQUIVALENTS, end of period	$	19,355,581		$	14,276,459		$	19,355,581		$	14,276,459


Cash and cash equivalents consist of cash balances with banks, and investments in money market instruments.
Cash and cash equivalents included in the cash flow statement are comprised of the following balance sheet amounts:

Cash balances with banks							$	330,581		$	14,076,459
Money market instruments								19,025,000			200,000
Total cash and cash equivalents							$	19,355,581		$	14,276,459

Money market instruments consist primarily of investments in short term deposits with maturities of three months or less.

Supplementary cash flow information:
Income taxes paid	$	37,244		$	15,000		$	123,803		$	8,662
Interest paid	$	31,139		$	-		$	66,926		$	-

See accompanying notes to consolidated financial statements

GENTERRA CAPITAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(IN CANADIAN DOLLARS)

Genterra Capital Inc. (“GCI” or the “Company”) is a Canadian management holding company operating in Canada with significant interests in real estate properties located in Ontario, Canada.

The accompanying unaudited interim consolidated financial statements for the six months ended March 31, 2011 have been prepared by the Company in accordance with accounting principles generally accepted in Canada on a basis consistent with those followed in the most recent audited consolidated financial statements for the period ended September 30, 2010

These unaudited interim consolidated financial statements do not include all the information and footnotes required by the generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report for the period ended September 30, 2010.

Amalgamation

On May 10, 2010 Genterra Inc. (“Genterra”) and Consolidated Mercantile Incorporated (“CMI) amalgamated (the "Amalgamation") and continue under the name “Genterra Capital Inc.” with a fiscal year-end of September 30.

The Amalgamation was accounted for as a purchase transaction based on the exchange amount as negotiated between the two companies with CMI identified as the acquirer of Genterra. Accordingly the net assets of CMI were recorded in the accounts of the Company at their carrying values and the net assets of Genterra were recorded at fair value. The results of operations for the three and six months ended March 31, 2011 include the operations of the combined entity, while the results for the three and six months ended March 31, 2010 include the results for CMI only.

In the process relating to the Amalgamation, the Company disqualified certain shares from the dissent process in those cases where it determined that the dissent in respect of such shares was not registered and pursued in compliance with the requirements of Section 185 of the Ontario Business Corporations Act (“OBCA”). The Company has filed a claim with the Superior Court of Justice and has, amongst other things, requested a declaration that the holder of certain of these shares is not a dissenting shareholder for the purposes of Section 185 of the OBCA and is not entitled to receive fair value for such shares.

Transition to International Financial Reporting Standards ("IFRS")

In February 2008, the CICA announced that Canadian generally accepted accounting principles (“GAAP”) for publicly accountable enterprises will be replaced by International Financial Reporting Standards (“IFRS”) for fiscal years beginning on or after January 1, 2011. Companies will be required to provide IFRS comparative information for the previous fiscal year. Accordingly, the conversion from Canadian GAAP to IFRS will be applicable to the Company’s reporting for the first quarter of the year ending September 30, 2012 for which the current and comparative information will be prepared under IFRS.

The Company’s IFRS project consists of three phases – scoping, evaluation and design, and implementation and review. The Company has completed the scoping phase of the project, which consists of project initiation and awareness, identification of high-level differences between Canadian GAAP and IFRS and project planning and resourcing and prepared a comparison of financial statement areas that would be impacted by the conversion.

A detailed assessment of the impact of adopting IFRS on the Company’s consolidated financial statements, accounting policies, information technology and data systems, internal controls over financial reporting, disclosure controls and procedures, and the various covenants and capital requirements and business activities has not been completed. The impact on such elements will depend on the particular circumstances prevailing at the adoption date and the IFRS accounting policy choices made by the Company. The Company has not completed its quantification of the effects of adopting IFRS. The financial performance and financial position as disclosed in the Company’s GAAP consolidated financial statements may be significantly different when presented in accordance with IFRS Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2009, the CICA issued three new accounting standards: Section 1582, Business Combinations, Section 1601, Consolidated Financial Statements, and Section 1602, Non-controlling Interests. These new standards will be effective for financial statements related to fiscal years beginning on or after January 1, 2011. It is not expected that these new standards will have a significant impact on the Company’s results of operations, financial position or disclosures.

Sale of Rental Real Estate Property

During the quarter ended March 31, 2011, the Company’s property located at 1095 Stellar Drive, Newmarket, Ontario was sold and the first mortgage of $619,098 relating to this property was repaid.