EX-99.2 3 ex99_2.htm EXHIBIT 99.2 ex99_2.htm
EXHIBIT 99.2
 
 
   
   
   
   
  GENTERRA CAPITAL INC.
 

 

 













INTERIM REPORT 


Notice to Reader
Management has compiled the unaudited interim financial information of Genterra Capital Inc. consisting of the interim consolidated balance sheet as at June 30, 2011 and the interim consolidated statement of operations, other comprehensive income and retained earnings and the interim consolidated statement of cash flows for the nine-month period then ended.  An accounting firm has not reviewed or audited this interim financial information.
 
 
 
 
 
GENTERRA CAPITAL INC.
                        
CONSOLIDATED BALANCE SHEETS
                    
(UNAUDITED)
                              
(IN CANADIAN DOLLARS)
                          
 
   
June 30
    
September 30
  
   
2011
    
2010
  
ASSETS
  
 
        
             
CURRENT
            
  Cash and cash equivalents
   $ 18,214,534     $ 17,787,741  
  Marketable securities
     4,855,326       4,676,175  
  Accounts receivable
     412,947       384,609  
  Prepaid expenses and deposits
     194,365       267,408  
  Current portion of notes receivable
     -       59,790  
  Future income taxes
     -       3,623  
                 
      23,677,172       23,179,346  
                 
UNREALIZED RENTAL INCOME
     103,891       31,642  
                 
NOTE RECEIVABLE
     522,000       -  
                 
RENTAL REAL ESTATE PROPERTIES
     15,318,590       17,336,366  
                 
INTANGIBLE ASSETS
     367,690       400,269  
                 
FUTURE INCOME TAXES
     223,102       268,820  
                 
    $ 40,212,445     $ 41,216,443  
                 
                 
LIABILITIES
                
                 
CURRENT
                
  Accounts payable and accrued liabilities
   $ 654,096     $ 752,699  
  Income taxes payable
     23,971       52,684  
  Current portion of long-term debt
     2,236,400       2,482,475  
                 
      2,914,467       3,287,858  
                 
LONG-TERM DEBT
     -       583,474  
                 
FUTURE INCOME TAXES
     1,724,056       1,911,685  
                 
INTANGIBLE LIABILITIES
     8,776       18,372  
                 
RETRACTABLE PREFERENCE SHARES
     5,037,012       5,135,616  
                 
      9,684,311       10,937,005  
                 
                 
SHAREHOLDERS' EQUITY
                
                 
CAPITAL STOCK
     17,432,461       17,432,461  
                 
CONTRIBUTED SURPLUS
     562,398       562,398  
                 
RETAINED EARNINGS
     12,533,275       12,284,579  
 
                
      30,528,134       30,279,438  
                 
                 
    $ 40,212,445     $ 41,216,443  
 
See accompanying notes to consolidated financial statements
          

 
 
 
 
GENTERRA CAPITAL INC.
                        
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                   
(UNAUDITED)
                              
(IN CANADIAN DOLLARS)
                          
 
    Three months ended    
Nine months ended
  
    June 30     June 30  
   
2011
    
2010
    
2011
    
2010
  
                         
                         
                         
Balance at beginning of period
   $ 12,803,629     $ 13,335,632     $ 12,284,579     $ 13,372,509  
                                 
                                 
Excess of cost of shares over stated value purchased from dissenting
                          
  shareholders for cancellation
     -       (489,388 )     -       (489,388 )
                                 
                                 
Net income (loss) for the period
     (270,354 )     (209,592 )     248,696       (246,469 )
                                 
Balance at end of period
   $ 12,533,275     $ 12,636,652     $ 12,533,275     $ 12,636,652  
                                 
                                 
See accompanying notes to consolidated financial statements
                                
 
 
 
 
 
 
 
 
 
 
GENTERRA CAPITAL INC.
                        
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
                              
(IN CANADIAN DOLLARS)
                          
 
   
Three months ended
    
Nine months ended
  
    June 30     June 30  
   
2011
    
2010
    
2011
    
2010
  
   
 
    
 
    
 
    
 
  
REVENUE
                        
  Rent
   $ 782,996     $ 459,168     $ 2,428,202     $ 459,168  
                                 
EXPENSES
                                
  Administrative and general
     239,780       274,451       734,518       599,154  
  Rental real estate operating expenses
     614,171       214,521       1,607,662       214,521  
      853,951       488,972       2,342,180       813,675  
                                 
INCOME (LOSS) BEFORE THE FOLLOWING
     (70,955 )     (29,804 )     86,022       (354,507 )
                                 
  Amortization
     127,884       123,083       403,741       123,083  
  Dividends on retractable preference shares
     97,531       55,733       292,596       55,733  
  Interest on long-term debt
     25,894       20,555       89,648       20,555  
      251,309       199,371       785,985       199,371  
                                 
LOSS FROM OPERATIONS
     (322,264 )     (229,175 )     (699,963 )     (553,878 )
                                 
OTHER INCOME AND EXPENSES
                                
  Interest income
     86,809       44,128       233,272       85,783  
  Investment income (loss)
     (120,227 )     (86,310 )     266,040       78,959  
  Impairment gain (loss) on receivables
     (2,394 )     (18,069 )     (43,199 )     5,362  
  Gain on sale of rental real estate property
     -       -       473,895       -  
  Equity income (loss) of significantly influenced company
     -       415       -       (523 )
      (35,812 )     (59,836 )     930,008       169,581  
                                 
INCOME (LOSS) BEFORE INCOME TAXES
     (358,076 )     (289,011 )     230,045       (384,297 )
                                 
  Income taxes (recovery)
                                
     Current
     3,714       16,840       140,687       (2,626 )
     Future
     (80,911 )     (96,259 )     (138,288 )     (93,102 )
 
     (77,197 )     (79,419 )     2,399       (95,728 )
                                 
INCOME (LOSS) FROM CONTINUING OPERATIONS
     (280,879 )     (209,592 )     227,646       (288,569 )
                                 
Deferred gain on sale of former consolidated subsidiary
     10,525       -       21,050       42,100  
                                 
NET INCOME (LOSS) FOR THE PERIOD, ALSO BEING
                                
COMPREHENSIVE INCOME (LOSS)
   $ (270,354 )   $ (209,592 )   $ 248,696     $ (246,469 )
                                 
EARNINGS (LOSS) PER SHARE (Basic and diluted)
                                
Continuing operations
   $ (0.03 )   $ (0.03 )   $ 0.02     $ (0.04 )
                                 
Discontinued operations
   $ 0.00     $ 0.00     $ 0.00     $ 0.01  
                                 
Net income (loss)
   $ (0.03 )   $ (0.03 )   $ 0.02     $ (0.03 )
                                 
Weighted average number of  shares
                                
Basic and diluted
     9,389,015       7,599,585       9,389,015       5,917,466  
                                 
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 June 30
    
Nine months ended June 30
  
   
2011
    
2010
    
2011
    
2010
  
   
 
    
 
    
 
    
 
  
OPERATING ACTIVITIES
  
 
          
 
        
  Net income (loss) for the period from continuing operations
   $ (280,879 )   $ (209,592 )   $ 227,646     $ (288,569 )
  Items not affecting cash:
                                
  Gain on sale of rental real estate property
     -       -       (473,895 )     -  
  Amortization
     127,884       123,083       403,741       123,083  
  Dividends on retractable preference shares
     97,531       55,733       292,596       55,733  
  Future income taxes
     (80,911 )     (96,259 )     (138,288 )     (93,102 )
  Unrealized loss (gain) on marketable securities
     100,489       59,322       (83,935 )     (167,206 )
  Unrealized rental income
     (17,152 )     -       (72,249 )     -  
  Accretion interest on discounted note receivable
     (16,869 )     (18,069 )     (52,018 )     (52,603 )
  Amortization of intangible assets and liabilities
     7,660       -       22,983       -  
  Impairment loss (gain) on receivables
     2,394       18,069       28,583       (5,362 )
  Equity (income) loss of significantly influenced company
     -       (415 )     -       523  
 
     (59,853 )     (68,128 )     155,164       (427,503 )
  Change in non-cash components of working capital
                                
    Accounts receivable
     (57,758 )     351,966       (28,338 )     353,084  
    Prepaid expenses and deposits
     (237 )     585,025       73,043       425,698  
    Accounts payable and accrued liabilities
     (76,013 )     (403,637 )     (98,603 )     (229,460 )
    Income taxes payable
     (42,579 )     (1,130,763 )     (28,713 )     (1,147,801 )
      (236,440 )     (665,537 )     72,553       (1,025,982 )
                                 
FINANCING ACTIVITIES
                                
  Redemption of shares held by dissenting shareholders
     -       (2,141,464 )     -       (2,141,464 )
  Dividends paid on Class A preference shares
     (391,200 )             (391,200 )     -  
  Redemption of preference shares
     -       -       -       (138,839 )
  Repayment of long-term debt
     (64,770 )     (25,371 )     (829,549 )     (25,371 )
      (455,970 )     (2,166,835 )     (1,220,749 )     (2,305,674 )
 
                                
INVESTING ACTIVITIES
                                
  Cash acquired on acquisition of Genterra Inc.
     -       7,255,426       -       7,255,426  
  Proceeds from sale of rental real estate property
     -       -       2,087,930       -  
  Transactions costs
     -       (747,289 )     -       (747,289 )
  Increase in notes receivable
     (522,000 )     -       (522,000 )     -  
  Proceeds from notes receivable
     25,000       147,200       104,275       247,265  
  Proceeds from (additions to) marketable securities
     48,363       49,330       (95,216 )     124,854  
      (448,637 )     6,704,667       1,574,989       6,880,256  
                                 
CHANGE IN CASH AND CASH EQUIVALENTS
     (1,141,047 )     3,872,295       426,793       3,548,600  
                                 
CASH AND CASH EQUIVALENTS, beginning of period
     19,355,581       14,276,459       17,787,741       14,600,154  
                                 
CASH AND CASH EQUIVALENTS, end of period
   $ 18,214,534     $ 18,148,754     $ 18,214,534     $ 18,148,754  
                                 
                                 
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
                   $ 3,289,534     $ 798,754  
  Money market instruments
                     14,925,000       17,350,000  
  Total cash and cash equivalents
                   $ 18,214,534     $ 18,148,754  
                                 
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
   $ 45,736     $ 1,158,136     $ 169,539     $ 1,166,798  
   Interest paid
   $ 26,146     $ 11,779     $ 93,072     $ 11,779  
                                 
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 nine months ended June 30, 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 nine months ended June 30, 2011 include the operations of the combined entity, while the results for the three and nine months ended June 30, 2010 include the results for CMI only.

In the process relating to the Amalgamation, the Company disqualified 612,600 shares from the dissent process where it determined that the dissent in respect of these shares was not registered and pursued in compliance with the requirements of Section 185 of the Ontario Business Corporations Act (“OBCA”). The Company filed a claim with the Superior Court of Justice and amongst other things, requested a declaration that the holder of these shares was not a dissenting shareholder for the purposes of Section 185 of the OBCA and was not entitled to receive fair value for such shares. The claimant in respect of these shares subsequently applied for and was granted partial summary judgement by the Ontario Superior Court of Justice for the Company to pay him an amount of $2.53 per share which is the amount paid to shareholders, who in the opinion of the Company, had complied with the requirements of Section 185 of the OBCA. The Company does not agree with this decision and intends to file an appeal with the Court of Appeal of Ontario.

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.
 
 
 
 
 
GENTERRA CAPITAL INC.
                        
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
                              
(IN CANADIAN DOLLARS)
                          
 
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 will 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 is in the process of being 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 is in the process of completing 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 six months ended June 30, 2011, the Company’s property located at 1095 Stellar Drive, Newmarket, Ontario was sold for gross proceeds of $2,087,930 and the first mortgage of $619,098 relating to this property was repaid. The transaction resulted in a net gain of $473,895.