<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

     PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: March 31, 1999          Commission File No: 000-28638


                        INTERUNION FINANCIAL CORPORATION
        (Exact name of small business issuer as specified in its charter)

Delaware                                                              87-0520294
--------                                                              ----------
(State or other jurisdiction                   (IRS Employer Identification No.)
of incorporation or organization)

249 Royal Palm Way, Suite 301 H, Palm Beach, Fl                            33480
-----------------------------------------------                            -----
(Address of principal executive offices)                              (Zip Code)

(561) 820-0084                                                    (561) 655-0146
--------------                                                    --------------
(Issuer's telephone number)                         (Issuer's telecopier number)


Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12 (g) of the Act:  Common Stock
                                                              $0.001 Par Value

Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [x]  No [ ]

Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [x]

State issuer's revenues for its most recent fiscal year:      $1,463,884

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock, as of a specified date within the past 60
days.   $3,194,955   As at June 28, 1999

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of share outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: $0.001 Par Value Common Shares -
2,114,425 as of June 28,1999.

Transitional Small Business Disclosure Format (Check One)  Yes [ ]  No [x]


                                  Page 1 of 24
<PAGE>   2


                        INTERUNION FINANCIAL CORPORATION
                                   FORM 10-KSB
                                TABLE OF CONTENTS



PART I ......................................................................  3
    Item 1 DESCRIPTION OF BUSINESS ..........................................  3
    Item 2 DESCRIPTION OF PROPERTY ..........................................  7
    Item 3 LEGAL PROCEEDINGS ................................................  7
    Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..............  7
PART II .....................................................................  8
    Item 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS .........  8
    Item 6 MANAGEMENT'S DISCUSSION AND ANALYSIS ............................. 10
    Item 7 FINANCIAL STATEMENTS ............................................. 16
    Item 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE ............................................. 16
PART III .................................................................... 17
    Item 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ................ 17
    Item 10 EXECUTIVE COMPENSATION .......................................... 19
    Item 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .. 20
    Item 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................. 22
    Item 13 EXHIBITS AND REPORTS ON FORM 8-K ................................ 23


                                  Page 2 of 24
<PAGE>   3

PART I

Item 1   DESCRIPTION OF BUSINESS

(A)      BUSINESS DEVELOPMENT

INTERUNION FINANCIAL CORPORATION (the "Company"), is a Delaware corporation. The
Company carries its activities in two main sectors: (i) merchant banking and
(ii) investment banking. Merchant banking activities focus on restructuring
and/or consolidating as principal, in order to capitalize smaller or
privately/family held companies and attract institutional interest. Investment
banking activities focus on advisory services and raising of capital, as agent,
for small and medium size corporations, public or private which are either
looking for institutional financing or strategic alliances in sectors in which
InterUnion Financial Corporation has recognized research and corporate finance
strength.

The Company's policy is not to get involved in the corporations it advises or
provides financing to when acting as agent, and to limit the extent of its
involvement in the corporations in which it acts as principal.

In fiscal 1996, the Company had the following subsidiaries and / or affiliates:
BEARHILL LIMITED ("BHL"), CREDIFINANCE CAPITAL INC. ("CFCI"), CREDIFINANCE
SECURITIES LIMITED ("CFSL"), GUARDIAN TIMING SERVICES, INC. ("GTS"), I & B, Inc.
("I&B") and REEVE, MACKAY AND ASSOCIATES LTD ("RMA").

On May 17, 1996, at a special meeting of shareholders, the Board of Directors
was authorized to consolidate all of the authorized Common Shares in a ratio of
twenty (20) to one (1). At the date of the meeting, the total of issued and
outstanding voting shares of stock was 13,851,156.

On January 19, 1997, the Company received from RECEPTAGEN LIMTED, ("RCG") a
restructuring mandate. RCG is a corporation incorporated under the laws of
Canada. RCG is a publicly reporting company in both the United States and
Canada. RCG is currently not trading on any exchange or over-the-counter market.
At the present time, it is not the intention of the Company to go beyond its
investment or merchant banking mandate and consider its investment in RCG other
than temporary.

On July 1, 1997, the Company acquired for cash and notes payable, a one third
interest in LEON FRAZER, BLACK & ASSOCIATES LIMITED. ("LFB"), a corporation
organized under the laws of Ontario, Canada. On the same day, the Company sold
its interest in RMA.

On August 18, 1997, at the Company's Shareholders' meeting the following
capitalization was approved:

         2,500,000 shares of common voting stock at $0.001 par value.

         1,500,000 shares of Class A preferred stock at $0.10 par value.

         1,000 shares of Class B preferred stock at $0.10 par value.

         1,000 shares of Class C preferred stock at $0.10 par value.

A Certificate of Amendment was filed with the Secretary of State, State of
Delaware, reflecting the above modification.

Effective March 1, 1998, the Company acquired all of the outstanding common
stock of CLUSTER ASSET MANAGEMENT LIMITED ("CAM"), which include its only asset
and wholly owned subsidiary, THE GLEN ARDITH-FRAZER CORPORATION ("GAF"), through
the issuance of 213,194 shares of Common Shares and 106,597 Shares Purchase
Warrants of the Company. Both CAM and GAF corporations organized under the laws
of Ontario. On May 26, 1998, CAM changed its name to INTERUNION ASSET MANAGEMENT
LIMITED ("IUAM").

Effective March 31, 1998, the Company acquired 45% of the outstanding common
shares of BLACK INVESTMENT MANAGEMENT LIMITED ("BIM"), a corporation organized
under the laws of Ontario, for


                                  Page 3 of 24
<PAGE>   4

the issuance of 216,640 shares of common stock of the Company and cash. BIM also
has a 31.9% interest in LFB.

On September 3, 1998, at the Company's Shareholders' meeting it was approved
that the Company is authorized to issue up to 5,000,000 shares of common voting
stock at $0.001 par value.

On January 25, 1999, the Company, through a roll over of its interests,
reorganized its investment management companies; BIM, GTS and LFB, into IUAM.
The purpose of the reorganization was to allow IUAM to implement its business
plan and continue its acquisition program, on a tax effective basis, as a
consolidator of Canadian investment management companies and get access to an
institutional strategic alliance. That restructuring has allowed the Company to
include its IUAM ownership in its merchant banking activities.

On January 25, 1999, IUAM issued 310,010 convertible preferred shares to Working
Venture Canadian Fund ("WVCF") for gross proceeds of C$5,000,000. (C$ is the
symbol used for the Canadian currency, unless preceded by C, all dollar amounts
are US dollars). Each convertible preferred share is convertible into one common
share of IUAM and gives the holder one vote per share. WVCF is a Canadian
institutional investor with more than $500 million in funds under
administration. WVCF's only fund is a labor sponsored fund with approximately
400 shareholders. Investors in these funds receive an immediate tax credit of up
to 40% of the amount invested.

On March 9,1999, WVCF converted their Convertible Preferred Shares in IUAM
Common Shares and acquired an additional 568,160 Common Shares for C$5,000,000.
At that point, the ownership structure of IUAM became WVCF 56% and IUFC 44%.
Concurrent with that last financing, IUAM incorporated a new entity, AIL
INVESTMENT SERVICES LIMITED ("AILIS"). The objective of AILIS being to create a
family of mutual funds in order to expand WVCF's product line. The funds raised
by expanding the products sold by WVCF's sales force would be managed by the
various investment managers within the IUAM group.

In April 1999, IUAM acquired 5,978 shares of BIM to own 50.5% of the issued and
outstanding Common Shares of BIM.

(B)      BUSINESS OF ISSUER

GENERAL

The Company was formed as a "business bank" which would acquire, when possible,
a majority interest in financial services companies in order to expand its
investment banking and merchant banking activities.

The Company provides bridge financing and development capital as part of its
investment banking activities. Financing can be provided to companies outside
the financial service sector and can be extended for a period of up to five
years, depending on the complexity of the undertaking.

InterUnion is both a holding and an operating company as it engages in
activities which can be separate from the activities of its named subsidiaries:
InterUnion derives independent revenues from its own investment banking and
merchant banking activities.

PRODUCTS AND/OR SERVICES OF ACTIVE SUBSIDIARIES

In addition to the operations of InterUnion Financial Corporation as the parent,
the Company owns operating subsidiaries. These subsidiaries are; Credifinance
Capital, Inc., Credifinance Securities Limited and Marbury Trading Corporation.
In addition to these subsidiaries, the Company has a 44% interest in InterUnion
Asset Management Limited. IUAM is a holding company with interests in Canadian
investment management companies.


                                  Page 4 of 24
<PAGE>   5

(1)      INVESTMENT BANKING

Credifinance Capital, Inc. ("CFCI") is an investment corporation located in
Toronto, Canada. The business of this company is to advise and/or act as agent
in the trading of international securities essentially for its European and
offshore clients on both the primary and secondary markets. CFCI owns
Credifinance Securities Limited.

Credifinance Securities Limited ("CFSL") started operations in September 1991 as
an institutional boutique active in trading for the accounts of its Canadian
clients, in the fixed income and equity markets. CFSL acts exclusively as agent
and its specialized research is the basis for its underwriting and corporate
finance activities that focus on small and medium size companies in select
sectors.

CFSL is a member of the Canadian Investment Dealers Association, the Toronto
Stock Exchange and the Montreal Exchange. CFSL is also a member of the
International Securities Market Association.

(2)      MERCHANT BANKING

Marbury Trading Corporation ("MTC") is a Panama corporation with administrative
office in Geneva, Switzerland. The business of Marbury is to take debt and
equity positions in companies for which InterUnion acts directly or through its
investment banking subsidiary for the purpose of restructuring, merger or
acquisition. Such investments can be carried from a few months up to 5 years
depending on the complexity of the transaction. Although MTC's, and therefore
the Company's, interest in the reorganized companies can be substantial at
times, the objective is either to dispose of its interest over time or reduce it
to a minority position upon completing its mandate.

Currently MTC's investment is limited to its interest in Receptagen.

Bearhill Limited ("BHL") is located in the British Virgin Islands. BHL owns the
proprietary rights to certain computer software known as ITM Software, which is
a computer software program used to generate buy and sell signals with respect
to any stock market monitored. The forecasting technique used by the ITM market
timing model involves general market indicators, interest rates and monetary
analysis, market perception indicators, and various statistical data to detect
trends. The model is continually updated and has been credited with successfully
avoiding many of the overall market declines in the early part of the 1990s.

Currently, BHL has granted exclusive rights to Guardian Timing Services, Inc.
("GTS") to use the ITM Software. As partial consideration for this right, GTS
has to maintain the development of the ITM software and any similar product that
GTS could develop is to be the sole property of BHL. It is the Company's
objective to maximize the value of this asset since it no longer owns 100% of
GTS, which could include the exercise, its intellectual property rights.

(3)      INVESTMENT MANAGEMENT

The Company's primary interest in the investment management business is through
its 44% ownership of IUAM based in Toronto, Canada. IUAM's investment management
activities are carried out through Guardian Timing Services, Inc, Black
Investment Management Limited, Leon Frazer, Black & Associates Limited, The Glen
Ardith-Frazer Corporation and A.I.L. Investment Services Limited. Working
Venture Canadian Fund owns the remaining 56%. In addition, the Company owns 100%
of Bearhill Limited.

Guardian Timing Services, Inc. ("GTS") is an independent investment and fund
management firm located in Toronto, Canada, with approximately C$100 million in
assets under management. GTS manages the Canadian Protected Fund, the Protected
American Fund and the First America Fund, in addition to being the co-manager of
the India Excel Fund. It uses the proprietary ITM market timing model owned by
BHL, a subsidiary of the Company.


                                  Page 5 of 24
<PAGE>   6

Black Investment Management Limited ("BIM") is an independent investment counsel
based in Toronto, Canada, that provides professional management of financial
assets for pension funds, corporations, foundations, mutual funds and group
investment plans. Mr. Paul Black and Mr. Robert W. Crosbie established BIM in
1973. BIM has approximately C$300 million in assets under administration. IUAM
has a 50.5% interest in BIM.

Leon Frazer, Black & Associates Limited ("LFB") was established in 1939 and is
the second oldest independent counseling and investment management firm in
Toronto, Canada. LFB manages about C$250 million of assets for high net worth
individuals. IUAM has a 33.3% direct interest in LFB as well as an additional
16% indirect interest through BIM, which owns 31.7% directly.

The Glen Ardith-Frazer Corporation ("GAF") is an independent investment counsel
located in Toronto, Canada that provides discretionary management to both
institutional and private clients. GAF has approximately C$150 million in assets
under administration.

A.I.L. Investment Services Limited ("AILIS") was recently incorporated in
Ontario. The objective of AILIS is to create a full family of mutual funds that
is to be managed by affiliated companies within the IUAM Group. The distribution
and marketing of the mutual funds themselves will be done by WVCF. AILIS is
wholly owned by IUAM.

The Company has reached its objective to consolidate and capitalize through an
association with an institutional investor, its Canadian investment management
activities through a pure play vehicle, which could facilitate and accelerate
its acquisition program. Going forward, the Company will be considering its
interest in the Canadian investment management industry as part of its
investment banking activity.

COMPETITION

Competition is a part of every business. InterUnion faces competition directly
and through its subsidiaries from larger, better-capitalized financial service
companies as well as smaller, also better capitalized niche companies. These
companies can be commercial / investment / merchant banks, thrift institutions,
venture capital firms, etc. In addition, the Company is a minority investor in
IUAM, albeit with extensive minority shareholders rights granted under a
Shareholders Agreement. The performance of the assets under administration by
IUAM and its subsidiaries is a factor that could adversely affect the results of
the Company, as poor performance or loss of key portfolio managers may cause
clients to move their assets to other investment management companies.

GROWTH STRATEGY

Since inception, InterUnion's strategy has been to be a "business bank" i.e. to
be able to take advantage of investing/advisory opportunities. These
opportunities can include the temporary involvement of the Company in pure
financial service transactions. InterUnion's business will retain the purchase
and selling of companies or part of companies which will use InterUnion's
investment banking services as well as its ability to pay cash and/or issue its
own security in order to complete corporate transactions. InterUnion's strategy
is also to reduce its shareholders' risk by ensuring that its book value is
spread among various interests and does not depend on only one sector of
activity or only one operating company. InterUnion has been successful in
managing its investors' risk as today there is a sufficient number of
professionals with adequate credentials and experience in the various operations
who at the same time are shareholders of InterUnion. In time, as InterUnion gets
a larger and more diversified shareholder base, that strategy should help
InterUnion to grow and enable it to obtain outside financing.

The investment management activity of the Company through IUAM should continue
to expand as: (i) IUAM has now been converted into a pure Canadian consolidator,
(ii) IUAM has the necessary resources to acquire firms either with cash or
stock, in a tax efficient manner and (iii) IUAM will also be able to benefit
from its ownership of AILIS to grow as it can benefit from the resources of its
main shareholder, WWCF.


                                  Page 6 of 24
<PAGE>   7

GOVERNMENT REGULATION

The operating activities of the Company are not subject to governmental
regulatory agencies, except for:

Credifinance Securities Limited is a member of the Investment Dealers
Association of Canada, The Toronto Stock Exchange, The Montreal Exchange and the
International Securities Market Association. As such, it is subject to the
compliance, rules and regulations of these self-regulatory organizations.

Black Investment Management Limited, The Glen Ardith-Frazer Corporation,
Guardian Timing Services Inc. and Leon Frazer Black & Associates Limited are
regulated by the Ontario Securities Commission.

EMPLOYEES

InterUnion has 12 full time employees within its majority owned subsidiaries.

Item 2    DESCRIPTION OF PROPERTY

The Company does not own real estate.

The Company has leasehold interests in real estate as shown below, and all
premises are in good condition.

<TABLE>
<CAPTION>

                                                         Gross Area                              Annual Rent
            Lessee & Location of Premises                (Sq. Ft.)              Term             Per Sq. Ft.
            -----------------------------                -----------      ---------------        ------------
            <S>                                          <C>              <C>                    <C>

            InterUnion Financial Corporation                  300         Mar. 98-Feb. 99            $15.32
            Suite 301
            249 Royal Palm Way
            Palm Beach, Florida

            Credifinance Securities Limited                 3,310         Feb. 97-Jan. 02           C$22.00
            Suite 3303
            130 Adelaide Street W
            Toronto, Ontario

            Credifinance Securities Limited                   927         Jul. 97-Jan. 02           C$15.00
            Suite 3304
            130 Adelaide Street W
            Toronto, Ontario
</TABLE>


Item 3   LEGAL PROCEEDINGS

Not applicable


Item 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the fiscal year covered by this report, there was
no matter brought to a vote of security holders, through the solicitation of
proxies or otherwise.


                                  Page 7 of 24
<PAGE>   8

PART II

Item 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)      MARKET INFORMATION

The issuer's common equity is traded on the NASD OTC Bulletin Board under the
symbol: IUFC.

The high and low sale prices for each quarter within the last two fiscal years
are as follows.

<TABLE>
<CAPTION>

                Period                   Open                 High                  Low                  Close
                ------                   -----                -----                 -----                -----
              <S>                        <C>                  <C>                   <C>                  <C>
              FY98 Qtr 1                 $5.00                $6.50                 $4.00                $6.00
              FY98 Qtr 2                  6.00                 6.75                  4.50                 4.50
              FY98 Qtr 3                  4.50                 5.75                  4.00                 4.50
              FY98 Qtr 4                  4.50                 5.50                  3.50                 3.50
              FY99 Qtr 1                  3.50                 4.75                  3.47                 3.75
              FY99 Qtr 2                  4.12                 5.75                  4.00                 4.80
              FY99 Qtr 3                  4.75                 4.85                  2.62                 4.06
              FY99 Qtr 4                  4.06                 5.12                  4.00                 4.25
</TABLE>

(b)      HOLDERS

The approximate number of holders of record of each class of stock is as
follows:

<TABLE>
<CAPTION>

           Class of Stock                                      Number of Holders
           --------------                                      -----------------
         <S>                                                   <C>
         Common Share                                                  450
         Class A Preferred                                               1
         Class B Preferred                                        none issued
         Class C Preferred                                        none issued
</TABLE>

(c)      DIVIDENDS

The Company has never declared or paid dividends on its common stock or its
preferred stock. There are no restrictions, other than state law that may be
applicable, those limit the ability to pay out all earnings as dividends. The
Board of Directors does not anticipate paying any dividends in the foreseeable
future; it intends to retain the earnings which could be distributed, if any,
for the operations, expansion and development of its business.

    (d)  RECENT SALES OF UNREGISTERED SECURITIES

    (i)  SALES PURSUANT TO REGULATION D

The Company has not made any sales within the past three (3) years in reliance
upon an exemption from the registration requirements of the Securities Act of
1933, as amended, as contained within Regulation D, promulgated by the
Securities and Exchange Commission.


                                  Page 8 of 24
<PAGE>   9

(B)      SALES PURSUANT TO REGULATION S

         The following sales of Common Stock were made by the Company within the
past three (3) years in reliance upon an exemption from the registration
requirements of the Securities Act of 1933, as amended, as contained within
Regulation S promulgated by the Securities and Exchange Commission:

<TABLE>
<CAPTION>
       Title of Class        Number of        Price per
       (1)(2)(3)(4)            Shares           Share         Consideration       Commission             Date
      ------------------ ----------------- --------------- ------------------ ------------------ --------------------
      <S>                <C>               <C>             <C>                <C>                <C>
      Common(5)                 20,000           4.00              80,000              Nil            July 1996
      Common                   151,500           1.00             151,500              Nil           August 1996
      Common                   105,642           5.00             528,210           32,371          October 1996
      Common(6)                229,453           5.00           1,147,265              Nil           April 1997
      Common(7)                 60,000           3.00             180,000              Nil            June 1997
      Common(8)                 15,000           6.00              90,000              Nil           August 1997
      Common(9)                213,194           4.00             852,776              Nil          February 1998
      Common(10)               216,640           3.64             788,569              Nil           April 1998
      Common(11)                17,002           4.00              68,008              Nil            May 1998
      Common                    35,000           4.00             140,000            7,000            June 1998
      Common(11)               262,142           4.00           1,048,568              Nil            July 1998
      Common(11)                10,000           4.00              40,000              Nil          December 1998
      Common(11)               180,000           3.50             630,000           63,000          February 1999
      Common(12)                25,000           3.50              87,500              Nil           March 1999
      Common(11)                 1,140           4.00               4,560              Nil           March 1999
</TABLE>

NOTES TO SALES PURSUANT TO REGULATION S

    (1)  All sales were made directly by the Company as issuer.

    (2)  The class of persons to whom the Company sold the above-referenced
         securities were individuals or entities whom the Company had reason to
         believe were either accredited investors within the meaning of
         Regulation Section 230.501 or were investors having such knowledge and
         experience in financial and business matters that the purchaser could
         properly evaluate the risks and merits of the investment.

    (3)  All sales as shown above were made to non-U.S. persons.

    (4)  The company specifically relied upon compliance with Regulation S as
         promulgated by the Securities and Exchanges Commission. The Company was
         in compliance with Category 3 of Rule 903 of Regulation S which
         provides an issuer safe harbor. Under this Category the Company
         complied with the two general conditions of Rule 903(a) and (b) and to
         transactional and offering restrictions by the execution of an investor
         Subscription Agreement, and the placing of the appropriate restrictive
         legend on the stock certificate(s).

    (5)  These shares were issued on the conversion of a debenture.

    (6)  These shares were issued with regards to the Receptagen restructuring.
         The consideration was determined by the price of the common stock at
         the time of the transaction. These shares were given to a non-related
         party.

    (7)  These shares were issued upon the exercise of employee stock options,
         previously granted to Mr. Selwyn J. Kletz.

    (8)  These shares were issued upon the exercise of warrants.

    (9)  These shares were issued in the acquisition of IUAM. The consideration
         received was 91.55% of all of the issued and outstanding shares of
         IUAM. The valuation of IUAM was determined by an arms lengths
         transaction. These shares were given to a non-related party.


                                  Page 9 of 24
<PAGE>   10

   (10)  These shares were issued in the acquisition of BIM. The consideration
         received was 45% of all of the issued and outstanding shares of BIM.
         The valuation of BIM was determined by an arms lengths transaction.
         These shares were given to a non-related party.

   (11)  These shares were issued in settlement of an equal amount due to the
         purchaser of the common stock.

   (12)  These shares issued for services received from the Chairman of the
         Company, Mr. Robert Crosbie.


Item 6   MANAGEMENT'S DISCUSSION AND ANALYSIS

    (a)  OVERVIEW

InterUnion Financial Corporation, ("IUFC" or "InterUnion"), was incorporated on
February 7, 1994. InterUnion's strategy is to acquire, when possible, a majority
interest in financial services business. InterUnion and its subsidiaries,
(collectively the "Company"), also provides bridge financing or takes equity
positions as part of its merchant banking. The Company acquires companies or
interests in companies for cash but preferably for common shares of the Company
with additional incentives for vending shareholders via common share purchase
warrant and stock options for management. Since 1994, the Company has acquired:

<TABLE>
<CAPTION>
           Corporation Acquired or Invested In                   Nature of the Company                Date
           -----------------------------------                   ---------------------                ----
<S>                                                        <C>                                <C>
Bearhill Limited ("BHL")                                   Investment Software                    January 1995
Guardian Timing Services, Inc. ("GTS")                     Investment Management                  January 1995
Credifinance Capital Inc. ("CFCI")                         Investment Company                      March 1995
Credifinance Securities Limited ("CFSL")                   Investment Bank                         March 1995
Rosedale Realty Corporation ("RRC")                        Real Estate Sales                       March 1995
Reeve, Mackay & Associates Ltd. ("RMA")                    Auction Sales                            May 1995
Receptagen Limited ("RCG")                                 Biotechnology                           April 1997
Leon Frazer, Black & Associates Limited ("LFB")            Investment Management                   July 1997
InterUnion Asset Management Limited ("IUAM")               Investment Management                   March 1998
The Glen Ardith-Corporation ("GAF")                        Investment Management                   March 1998
Black Investment Management Limited ("BIM")                Investment Management                   March 1998
AIL Investment Services Limited ("AILIS")                  Investment Management                   March 1999
</TABLE>


      Note:  1  InterUnion still has an interest in all of these companies
                with the exception of Rosedale Realty Corporation and
                Reeve, Mackay & Associates.

             2  IUAM changed its name from Cluster Asset Management Limited in
                April 1998.


The Company realigned its interest in its Canadian investment management
business in 1999, in order to facilitate its growth strategy. The results of
this realignment placed the Company's interest in BIM, GTS and LFB under IUAM,
which already held the interest of GAF. The purpose of the realignment was to
allow IUAM to implement its business plan and continue its acquisition program,
on a tax effective basis, of Canadian investment management companies and get
access to an institutional strategic alliance, as a consolidator of the Canadian
investment management business.

IUAM also issued 878,170 Common Shares for gross proceeds of C$10 million from
Working Venture Canadian Fund ("WVCF"). The effect of this transaction reduced
the Company's interest in IUAM to 44% from 100%. In addition, as part of the
transaction, IUAM and its subsidiaries will have the marketing support of WVCF's
marketing department, therefore adding an aggressive internal growth strategy to
its previous growth by acquisition only. This internal growth strategy is to be
implemented by having AILIS, a wholly owned subsidiary of IUAM and managed by
personnel from WVCF, create a family of mutual funds to be sold through WVCF's
distribution. IUAM's portfolio managers will manage these funds, therefore
leveraging its current infrastructure.


                                 Page 10 of 24
<PAGE>   11

The following table is a summary of IUAM's interest in the above mentioned
investment management firms.

<TABLE>
<CAPTION>

                                  Direct          Indirect           Total           Control
                                 -------          --------          -------          --------
         <S>                     <C>              <C>               <C>              <C>
         BIM                      50.50%            0.00%            50.50%           50.50%
         GTS                     100.00%            0.00%           100.00%          100.00%
         GAF                     100.00%            0.00%           100.00           100.00%
         LFB                      33.33%           16.10%            49.40%           65.28%
         AILIS                   100.00%            0.00%           100.00%          100.00%
</TABLE>


Although, IUAM's total interest in LFB is 49.4% (16.1% is through BIM's 31.9%
interest in LFB), IUAM controls 65.3% of LFB, as IUAM owns a majority of BIM.

Since the Company's interest in IUAM is 44% and it has three of the seven board
seats, IUAM will be accounted for on the equity method going forward, in
addition to being considered part of its investment banking activities.

         Revenues

Revenues are primarily comprised of success fees and work fees. The success fees
are for mandates related to the raising of funds and for merger and acquisition
activity. The Company also receives work fees for larger merger and acquisition
mandates in addition to special assignments that can include fairness opinions,
valuations, sponsorships, etc. The revenue that the Company receives is also a
factor to the amount of support InterUnion has had to date been required to lend
to the investment management companies. Until recently, InterUnion has dedicated
a very large percentage of its human and financial resources to the investment
management group without adequate compensation in order to allow its growth and
obtain financing. Now that IUAM is funded, the Company will be able to direct
its resources to its other activities and benefit from its interest in the
growth of IUAM. However, success depends on business and market conditions.

         Cost of Revenues

The principal elements comprising costs of revenues are, commissions paid out
and salaries paid to research analysts. In general, non-administrative personnel
within InterUnion are remunerated solely on performance, as this permits the
Company to keep overhead to a minimum and to maintain a high correlation between
its revenues and its personnel costs, as InterUnion and its subsidiaries are
extremely labor intensive. Therefore, commissions paid out are the most
important expense and generally rise and fall along with the revenues of the
Company.

Across all of the Company's subsidiaries, the contribution margin (contribution
margin is defined as revenues less variable expenses) was 69.1% in fiscal 1999
versus 48.4% and 43.0% in each of the previous two years. The substantial
increase in fiscal 1999 is due to the reduction in revenues and thus the
corresponding pay out to commission personnel. The previous increase in margin
is primarily due to a shift in CFSL's revenues from secondary market agency to
primary market revenue from corporate finance and underwriting activities. The
Company expects to maintain margins in this range due to the stability of its
commission pay out structure.

         Interest Income

The Company invests its cash in government issued treasury bills that give rise
to interest income. Additional interest income comes from the spread between the
interest that the Company receives over and above what is paid to its clients on
their deposits by its clearing agent. This amount is not expected to be
significant with respect to revenues on a yearly or quarterly basis.


                                 Page 11 of 24
<PAGE>   12

         Interest Expense

The Company's debt is the result of its investment management acquisition
program and the need for the investment management group of InterUnion's
personnel for its day to day administration and reporting requirements. A
substantial amount of this debt has been converted into common stock of the
Company, and therefore, such expense should be reduced during the following
fiscal year, subject to its merchant banking activities.

         Gain on Issuance of Security

The Company has recognized a gain of $486,099 on the issuance of the equity by
IUAM. This resulted from the increase in the value of the price paid for by the
purchaser over and above the cost of that of the Company's. The Company did not
receive any compensation of any kind for this transaction nor can it give any
assurance that it can realize this amount in the future should it seek to divest
itself of its investment, due to market conditions at the time of the sale.

         Discontinued Operations

In May 1995, Reeve, Mackay and Associates Ltd. was created to act as the
Company's auction subsidiary. Reeve, Mackay recorded operating losses of
$390,829 and $452,291 in 1997 and 1996 respectively, prior to recording a small
profit in the first quarter of 1998. The Company sold its interest in Reeve,
Mackay in July 1997.

         Exposure to International Operations

Although all of the Company's revenues are generated in North America, all of
its subsidiaries are located in Canada. Therefore the Canadian Dollar involves a
certain degree of foreign exchange risk. Due to the small size of the risk and
to the fact that each company within the InterUnion Group operates independently
of each other, the Company does not purchase any derivative products to offset
that risk. In addition, the Company considers North America as its domestic
market.

         Seasonal

InterUnion Financial Corporation and its subsidiaries do not operate in any
business that is affected by changes in season.

    (b)  RESULTS OF OPERATIONS

Fiscal 1997 marked a number of firsts for the Company.

     o The first year as a reporting company, as our Form 10-SB cleared the SEC;

     o The first year that the Company reports solely under US GAAP; and

     o The first year that the Company reported a profit from continuing
       operations.

Fiscal 1998 was no exception.

     o The first year with only finance services companies within its group;

     o The first year that investment management assets within the group
       exceeded that of investment banking, excluding treasury bills.

Fiscal 1999 continued the trend with InterUnion realizing a capital profit from
its foray in to the investment management business.


                                 Page 12 of 24
<PAGE>   13

Financial highlights are as follows:

<TABLE>
<CAPTION>
                                                               1999              1998             1997
         <S>                                                 <C>              <C>               <C>
         Revenues                                             1,463,884        3,115,407         5,737,848
         Income (loss) excluding
           discontinued operations                             (390,182)        (819,461)          160,676
         Discontinued Operations                                  --             804,174          (390,829)
         Net Loss                                              (390,182)         (15,287)         (230,153)

         Assets                                              29,448,186       48,743,732        38,820,507
         Shareholders' Equity                                 7,919,650        6,692,432         3,639,337
         Working Capital                                      1,773,590         (163,274)        1,750,889
         Common Shares Outstanding                            2,114,425        1,654,001           969,714
         Book Value per Common Share                               3.67             4.05              3.60
</TABLE>

         Fiscal Year 1999 Compared to Fiscal Year 1998

    (1)  Overview

Although revenues decreased by $1,651,523 (or 53%) over fiscal year 1998, most
other items on the income statement improved. Costs of revenues as a percentage
of sales decreased to 57.2% from 65.0% a year earlier, due to the reduction in
revenues and the various payout structure within the Company. Fixed overhead and
non cash expenses decreased by $932,079 or 53.5%, the management looked to match
costs to a declining revenue base. The Company's loss from operations was
improved to $390,182 from $819,461, or 52%, as a net result of both variable
costs and overhead being reduced at a faster rate than that of revenues.

In realigning the Company's investment management firms and the subsequent
issuance of stock by IUAM, the Company was able to record a gain of $486,099.
This gain was greater than the operating loss of $436,917 the Company had to
record from this investment. The Company does not expect to record future gains
of this type, but does expect continued losses from its interest in IUAM.
However, should IUAM apply itself significant cost savings can be made, as it
has not started to maximize the use of its capital and benefit from the
synergies a consolidator should have. The Company would like to state that such
potential cost saving is beyond its direct control, as it no longer controls
IUAM.

Additional, losses from unconsolidated affiliates were due to the Company's
interest in Receptagen Ltd. This amount is not expected to continue as the
Company's interest is below 20% and continues to decrease as Receptagen issues
its own Common Stock to meet its obligations.

Earnings per share for fiscal 1999 was a loss of $0.21 versus a loss of $0.01 a
year earlier. The basic average number of common shares outstanding for the year
ending March 31, 1999 is 1,855,386 versus 1,232,100 a year earlier.

    (2)  Revenues

Revenues decreased by $1,651,523 (or 53%) over fiscal year 1998 (from $3,115,407
to $1,463,884). CFSL's decrease in revenues can account for $1,544,230 or 93.4%
of the overall reduction. The cause of this reduction is two fold: (i) difficult
market conditions for raising capital for small companies; and (ii) the time and
effort spent, without compensation, to realign its investment management
interests into IUAM and raise the financing necessary for that affiliate; and
(iii) the de-consolidation of the Company's interest in its investment
management affiliates.


                                 Page 13 of 24
<PAGE>   14

    (3)  Cost of Revenues

Costs of revenues (Selling, General and Administrative expenditures) for the
year decreased by $2,169,589 or 59.0% to $1,504,959 from $3,674,548. This
decrease is due to the fact that the Company's main expense is commission earned
as a function of revenues and the de-consolidation of the Company's interest in
its investment management affiliates.

    (4)  Net Loss

Net loss for the period was $390,182 versus $15,287, a year earlier. Losses from
operations (revenues less expenses) was $383,364 versus $819,461 the year
before. The reduced operating loss is due to a faster reduction in compensation
expense and overhead costs versus the reduction in revenues. This year the
Company recorded a gain of $486,099 on the issuance of security by a subsidiary,
IUAM. The Company does not expect to record such gains in the future. The
Company also recorded a loss from operations from its equity investment in the
amount of $492,917 versus $8,310 a year earlier. The difference of $484,607 is
due to the fact that most of this loss, $263,600 is amortization for which this
is the first year, and is expected to continue. Of the balance, $173,017 is due
to the Company's share of IUAM's operating losses. It is the Company's hope that
IUAM's management team will strive to reduce its operating losses. In addition,
last year the Company recorded an accounting gain of $804,174 in fiscal 1998 on
the sale of Reeve, Mackay, for which the Company recorded a loss in fiscal 1997
of $390,829 as discontinued operations.

Basic losses per share before discontinued operations were $0.21 versus $0.66 a
year earlier. Basic weighted average common shares outstanding this year was
1,855,386 versus 1,232,100.

         Fiscal Year 1998 Compared to Fiscal Year 1997

    (1)  Overview

In fiscal 1998, revenues decreased by $2,622,411 (or 45.7%) over fiscal year
1997. For the year, costs of revenues as a percentage of sales decreased to
65.0% from 67.1% a year earlier. Fixed overhead and non cash expenses increased
by $311,322 or 22.0%. The reduction in revenues and the increase in non variable
expenses were too great to be over come by the reduction in cost of sales and
caused a loss from operations in the amount of $819,461 versus a profit of
$160,676 a year earlier. The Company reported a net loss of $15,287 versus
$230,153 in fiscal 1997. The reduction in the loss is due to the accounting gain
of the sale of Reeve, Mackay & Associates Limited. Earnings per share for fiscal
1998 was a loss of $0.01 versus a loss of $0.25 a year earlier. The average
number of common shares outstanding for the year ending March 31, 1998 is
1,232,100 versus 899,859 a year earlier.

    (2)  Revenues

Revenues decreased by $2,622,411 (or 45.7%) over fiscal year 1997 (from
$5,712,183 to $3,115,407). The decrease came from the activities of Credifinance
Securities Limited and the reversal of an unrealized gain of the Company's
portfolio of warrants, received as additional compensation for corporate finance
mandates. The value of these warrants decreased by approximately $825,000.
Revenues for InterUnion itself also decreased by about $600,000, due to its
concentrating its resources on the restructuring of RCG. Revenues for
Credifinance decreased almost $1,300,000 or 34.5% (from $3,727,292 to
$2,439,951). Credifinance's decrease in revenue was essentially due to the
market conditions affecting small cap underwriting.

    (3)  Cost of Revenues

Costs of revenues (Selling, General and Administrative expenditures) for the
year decreased by $1,539,929 or 29.5% to $3,674,548 from $5,214,477. This
decrease is due to the fact that the Company's main expense is commission earned
as a function of revenues.


                                 Page 14 of 24
<PAGE>   15

    (4)  Income

Income net of the provision for income taxes, decreased to a loss of $819,461,
or $0.66 per share, from a profit of $160,676, or $0.18 per share, a year
earlier. As discussed previously, the decrease in profitability has been
attributed to the decrease in the value of the warrant portfolio and reduction
in revenues due to investors lack of interest in small cap companies. The
average number of common shares outstanding for the year ending March 31, 1998
is 1,232,100 versus 899,859 a year earlier. These figures do no include an
accounting gain of $804,174 in fiscal 1998 on the sale of Reeve, Mackay, for
which the Company recorded a loss in fiscal 1997 of $390,829 as discontinued
operations.

Per share numbers are based on weighted number of shares outstanding of
1,232,100 in fiscal 1998 versus 899,859 for fiscal 1997.

    (c)  LIQUIDITY AND CAPITAL RESOURCES

In order to meet its growth plans and fund any operating cash requirements, the
Company's policy is to issue additional capital stock, when possible. To date
the Company has done this either through the issuance of Confidential Private
Placement Offerings under Regulation "D" or Regulation "S". The following are
details of these private placements during the previous three fiscal years:

<TABLE>
<CAPTION>

                 Date                           # of Shares               Amount        Type
             <S>                                <C>                    <C>              <C>
               July 1996                            20,000                80,000        Regulation "S"
              August 1996                          151,500               151,500        Regulation "S"
             October 1996                          105,642               528,210        Regulation "S"
              April 1997                           229,453             1,147,265        Regulation "S"
               June 1997                            60,000               180,000        Regulation "S"
              August 1997                           15,000                90,000        Regulation "S"
             February 1998                         213,194               852,776        Regulation "S"
              April 1998                           216,640               788,569        Regulation "S"
               May 1998                             17,002                68,008        Regulation "S"
               June 1998                            35,000               140,000        Regulation "S"
               July 1998                           262,142             1,048,568        Regulation "S"
             December 1998                          10,000                40,000        Regulation "S"
             February 1999                         180,000               630,000        Regulation "S"
              March 1999                            25,000                87,500        Regulation "S"
              March 1999                             1,140                 4,560        Regulation "S"
</TABLE>

In addition to the above, IUAM raised C$10 million directly, thereby reducing
the Company's interest to 44%. These funds were used to eliminate a bank loan of
approximately C$1 million and fund the AILIS venture, C$500,000. The balance of
the funds will be used for acquisitions and operations.

Shareholders received one Right for every four (4) common share. Each Right gave
the holder the right to acquire a common share of the Company at $2.80 per
share, subject to a minimum of $1,500,000 raised. The Company's controlling
shareholder, RIF Capital, had agreed to subscribe on a pro-rata basis. Due to
the minimum subscription level not being met, the right offering was not closed.

NASDAQ advised the Company that its application for listing on the SmallCap
market was declined, as the minimum bid price per share was not greater than
$4.00.

The Company is considering the listing of its Preferred Shares on the
Over-the-Counter Bulletin Board.

         New Accounting Pronouncements

Financial Derivatives and Hedging Activities: In June 1998, Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" was released. For fiscal years beginning after June 15,
1999, the statement requires the accounting and disclosure of gains and losses


                                 Page 15 of 24
<PAGE>   16

on certain financial instruments. Management does not believe that this
pronouncement will have any significant effect on the Company.

Start-up Costs: In April 1998, Statement of Position (SOP) 98-5 Accounting for
Costs of Start-up Activities was issued. For fiscal years beginning after
December 15, 1999, SOP requires that pre-opening costs be expensed as incurred.
Management has not yet determined the impact that this pronouncement will have
on the Company.

         Concluding Remarks

There are no other known trends, events or uncertainties that may have, or are
reasonably likely to have, a material impact on the Company's short-term or
long-term liquidity.

In addition, there is no significant income or losses that have risen from the
Company's continuing operations that has not been analyzed or discussed above.
Nor has there been any material change in any line item that is presented on the
financial statements that has also not been discussed above.

Year 2000 ("Y2K"): The Company is affected by both its own computer information
systems and by third parties with which it has business relations, in the
processing of data relating to the Y2K problem. The Company has either upgrading
or replaced 75% of its internal software systems and 60% of the hardware.
Management anticipates to finalize its preparation for the Y2K by September
1999, delays were cause due to analysis and testing of certain systems and
limited resources.

Recognizing that the Company can not give any assurances in regards to the
whether its own computer systems or those owned by third parties will be
operational after December 31,1999, even after taking all reasonable assurances,
the Company has developed a contingency plan. Such plans include the replacement
of the Company's own systems and / or changing its collaborating partners.

Irrespective of the outcome, the Company does not anticipate significant lost
revenues relating to the Y2K problem due to failure of its own systems or that
of its third party associates.

This Form 10-KSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. For this purpose any
statements contained in this Form 10-KSB that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within the Company's control. These
factors include but are limited to economic conditions generally and in the
industries in which the Company's customers & investee participate in;
competition within these industries and that of the Company's, including
competition from much larger competitors; technological advances which could
render the Company's services less competitive or absolete; failure by the
Company successfully to improve its skills or anticipate current or prospective
customers' needs; price increases or other limitations by the Company for use or
its services and delays, reductions or cancellations of mandates previously
placed with the Company


Item 7   FINANCIAL STATEMENTS

The audited consolidated financial statements for InterUnion Financial
Corporation, covering fiscal years ended March 31, 1999 and 1998 are submitted
in compliance with the requirements of Item 310 of Regulation S-B.


Item 8   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE


                                 Page 16 of 24
<PAGE>   17

Effective May 5, 1999, the Company retained BDO Dunwoody, LLP ("BDO") as its new
certifying accountants. BDO replaced Ahearn, Jasco + Company, P.A. ("AJC") as
reported on InterUnion's fiscal 1998 financial statements. The 1998 opinion
contained no adverse opinion or disclaimer of opinion, and was not qualified as
to uncertainty, audit scope or accounting principles. The decision to change
accountants was recommended by the Company's Audit Committee and approved by the
Company's Board of Directors.

During the last two fiscal years and subsequent interim period to the date
hereof, there were no disagreements between InterUnion and its certifying
accountants on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to satisfaction of the certifying accountants, would have caused it
to make a reference to the subject matter of the disagreements in connection
with its reports.

None of the reportable events described in Item 304(a)(1)(ii) occurred with
respect to InterUnion within the last two fiscal years and the subsequent
interim period to the date of change. During the last two fiscal years and the
subsequent interim period to the date of change, InterUnion did not consult BDO
regarding any matter or events set forth in Item 304(a)(2)(i) and (ii) of
Regulation S-B.


PART III

Item 9   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

    (a)  IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
Name, Municipality of Residence                     Age            Length of Service
-------------------------------                     ---         --------------------------------
<S>                                                  <C>        <C>
Robert W. Crosbie                                    69         Chairman of the Board and
Toronto, Ontario                                                Appointed Vice-President
                                                                September 3, 1998

Georges Benarroch                                    52         Member of the Board and
Paris, France                                                   Appointed as President and
                                                                Chief Financial Officer
                                                                March 21, 1994

Selwyn J. Kletz                                      53         Appointed as Vice-President
Toronto, Ontario                                                August 18, 1997
Canada

T. Jack Gary, III                                    57         Appointed as Secretary
West Palm Beach, Florida                                        January 30, 1995

Karen Lynn Bolens                                    51         Appointed as Member of the Board
Geneva, Switzerland                                             December 16, 1994
</TABLE>

ROBERT W. CROSBIE is the Chairman of the Board of the Company, as well as a
Vice-President and is a member of the IUAM board of Directors. Mr. Crosbie was
Chairman of the Board of Black Investment Management Limited from 1973 until
1998. Mr. Crosbie is also a member of Thistle Mining (THT).


                                 Page 17 of 24
<PAGE>   18

GEORGES BENARROCH is the President, Chief Executive Officer of the Company as
well as a Director and Chairman of the Audit Committee. He is also the Chief
Executive Officer, and Chairman of the Board of Credifinance Securities Limited,
President, Chief Executive Officer, and Chairman of the Board of Credifinance
Capital Inc. -- all wholly-owned subsidiaries of the Company and Chairman of
InterUnion Asset Management Limited. He is also the President of Equibank Inc.

SELWYN J. KLETZ is Vice-President of the Company. He is also President and a
member of the board of Guardian Timing Services, Inc. and InterUnion Asset
Management Limited, in addition to being a Director of Black Investment
Management Limited, The Glen-Ardith Frazer Corporation and Leon Frazer, Black &
Associates Limited. Mr. Kletz will be devoting 100% of his time to the
activities of InterUnion Asset Management Limited.

T. JACK GARY, III is the Secretary of the Company. He is Manager of the West
Palm Beach, Florida, office of Raymond James & Associates, a national brokerage
firm, having held that position since 1995 as well as a Director. Mr. Gary will
devote the time required to fulfill his duties as Secretary at InterUnion.

KAREN LYNN BOLENS serves as a Director of the Company. Since 1985 through and
including the present time, she has practiced as an associate attorney,
specializing in corporate, estate and family law for international clients. Ms.
Bolens' duties for InterUnion will be limited to her participation at Board
Meetings and as a member of the Audit Committee.

    (1)  No director of InterUnion is currently a director of any other
         reporting company, with the following exception: Georges Benarroch and
         Karen Lynn Bolens are directors of Receptagen Limited which is a
         publicly reporting company in the United States and Canada.

    (2)  Under Section 1, ARTICLE III, of the By-Laws, the directors shall serve
         until the next annual meeting of the stockholders, as prescribed by the
         Board of Directors, at which time directors are elected by the
         stockholders.

    (3)  In accordance with Item 405 no director, executive officer and
         beneficial owner of more than ten percent (10%) of any class of equity
         securities of the Company failed to file on a timely basis reports
         required by section 16(a) of the Exchange Act during the most recent
         two fiscal years to the best of the Company's knowledge.

(b)      AUDIT COMMITTEE

The Audit Committee had three meetings since approving the financial statements
for the previous year. The first meeting was to approve the change in auditors.
The second meeting was to review the Company's accounting policies while the
third meeting was to recommend to the Board of Director that the March 31, 1999
Consolidated Financial Statements be approved and presented to the shareholders.

(c)      IDENTIFY SIGNIFICANT EMPLOYEES

The Company does not expect to receive a significant contribution from employees
that are not executive officers.

(d)      FAMILY RELATIONSHIPS

Currently, there are no directors, executive officers or persons nominated or
persons chosen by the Company to become a director or executive officer of the
Company who are directly related to an individual who currently holds the
position of director or executive officer or is nominated to one of the said
positions.

(e)      INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS


                                 Page 18 of 24
<PAGE>   19

There are no material events that have occurred in the last five years that
would affect the evaluation of the ability or integrity of any director, person
nominated to become a director, executive officer, promoter or control person of
the Company.

(f)      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

For the two fiscal years ended March 31, 1998, to the best of the Company's
knowledge no director, executive officer and beneficial owner of more than ten
percent (10%) of any class of equity securities of the Company failed to file on
a timely basis reports required by section 16(a) of the Exchange Act.

Item 10  EXECUTIVE COMPENSATION

    (A)  SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
       Name and             Fiscal          Base           Other        Long Term       All other         Total
  Principal Position         Year          Salary          Bonus       Compensation    Compensation   Compensation
----------------------      ------      -----------     -----------    ------------    ------------   ------------
<S>                         <C>         <C>             <C>            <C>             <C>            <C>
Georges Benarroch            1999             None            None            None      $30,000(1)        $30,000
President & CEO              1998             None            None            None      $30,000(1)        $30,000
                             1997             None            None            None            None           None

Robert W. Crosbie            1999       $18,230(2)      $87,500(3)            None      $83,044(2)       $188,774
Vice-President               1998       $45,885(2)            None            None      $27,097(2)        $72,980
                             1997             None            None            None            None           None

Selwyn J. Kletz (4)          1999       $27,621(5)            None     $259,763(6)     $197,794(7)       $485,178
Vice-President               1998          $75,245      $60,000(8)            None     $355,000(9)       $490,245
                             1997             None            None            None      $13,265(10)        $13,265

T. Jack Gary                 1999             None            None     $42,500(11)            None        $42,500
Corporate Secretary          1998             None            None            None            None           None
                             1997             None            None            None            None           None
</TABLE>


    (1)  This amount represents life, disability and medical insurance and
         certain expenses.

    (2)  This was paid by Black Investment Management Limited, a subsidiary of
         IUAM, for services unrelated to those offered to InterUnion Financial
         Corporation.

    (3)  This represents 25,000 Common Shares of the Company.

    (4)  Mr. Selwyn Kletz resigned as a Director of the Company on April 6,
         1999. He continues to be InterUnion Asset Management Limited's
         President and Chief Executive Officer, as well as an Officer of the
         Company.

    (5)  This amount was paid by IUAM to Mr. Kletz, as President and CEO.

    (6)  This represents long term stock options granted by IUAM to Mr. Kletz.
         The terms of these options are as follows: (i) 36,300 options to
         acquire one common share of IUAM at C$16.1284 prior to January 25,
         2009; and (ii) 11,000 options to acquire one common share of IUAM at
         C$0.001 prior to January 25, 2009. In addition, Mr. Kletz receive two
         other option series of 11,000 options to vested upon IUAM acquiring, by
         way of acquisition, $500,000,000 in assets under administration, if
         done prior to April 1, 2001. The second series is vested upon IUAM
         acquiring, by way of acquisition, $750,000,000 in assets under
         administration, if done after March 31, 2001 and prior to April 1,
         2002. Had these two series be vested immediately, Mr.
         Kletz's compensation would have risen by $235,217, to $716,395.

    (7)  This amount represents $64,900 for life, disability and medical
         insurance and $132,894 paid to a company controlled by Mr. Kletz for
         services.


                                 Page 19 of 24
<PAGE>   20

    (8)  This amount represents 60,000 short-term stock options, that was fully
         exercised.

    (9)  This amount represents $168,200 for life, disability and medical
         insurance and $186,800 paid to a company controlled by Mr. Kletz for
         services.

   (10)  This amount was paid to a company controlled by Mr. Kletz for services.

   (11)  This amount represents 50,000 stock option with an expiry date of
         September 3, 2001 and an exercise price of $4.00 per share.

    (B)  ALL COMPENSATION COVERED

The Company has no formal options, warrants, SARs, long-term incentive plans,
pension or profit-sharing plans, or other compensation plans, in effect
regarding any employees of the Company.

The Company feels that it does not have to include executive compensation for an
executive officer of any subsidiary because under Rule 3b-7 under the Exchange
Act (17 CFR 240.3b-7) no executive officer(s) of any subsidiary perform(s)
policy making functions for the registrant.

The Company has no agreement or understanding, express or implied, with any
officer or director, or any other person regarding employment with the Company
or compensation for services.

Section 14 of ARTICLE III of the By-Laws of InterUnion provides that directors
do not receive any stated salary for their services as directors. However, by
board resolution, a fixed fee and expenses of attendance may be allowed for each
meeting. These limitations do not affect compensation for a person serving as an
officer or otherwise for the Company and receiving compensation therefor. The
Company's Board of Directors has approved payment of $1,750 for the services of
each of its independent directors for the fiscal year ending March 31,1998 and
1999.

Item 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following persons (including any group as defined in Regulation S-B, Section
228.403) are known to InterUnion Financial Corporation, as the issuer, to be the
beneficial owner of more than five percent (5%) of any class of the said
issuer's voting securities.

<TABLE>
<CAPTION>

       Title of                     Name and Address of                 Amount and Nature of         Percentage
         Class                        Beneficial Owner                    Beneficial Owner            of Class
----------------------   -----------------------------------------      --------------------         ----------
<S>                      <C>                                            <C>                          <C>
Common                   RIF Capital Inc.(1)                                   310,449                  14.7%
                         Price Waterhouse Centre
                         PO Box 634C
                         St. Michael, Barbados, WI

Common                   William Tynkaluk &                                    259,142                  12.3%
                         George Frazer
                         8 King St. East
                         Toronto, Ontario
                         Canada
</TABLE>


                                 Page 20 of 24
<PAGE>   21

<TABLE>
<S>                      <C>                                            <C>                          <C>
Common                   Financiera Hispano-Suiza, SA                          255,490                  12.1%
                         10 Rue Pierre-Fatio
                         Geneva, Switerland  CH1204

Common                   Zephyr Trading Corporation                            180,000                   8.5%
                         c/o Jonston and Associates
                         P.M.B. #11, Arawak House
                         Turks and Caicos Island
                         British West Indies

Common                   Selwyn J. Kletz                                       100,000                   4.7%
                         499 Riverside Drive
                         Toronto, Ontario
                         Canada   M6S 4B6

Common                   Paul F. Black, Joyce D. Black, Gregory P.             109,890                   4.6%
                         Black, Paul F. Black Jr.
                         110 Yonge Street,  #1701
                         Toronto, Ontario
                         Canada   M5C 1T4

                                           Total                             1,202,549                  56.9%

Preferred A              RIF Capital Inc. (1)                                1,500,000                 100.0%
                         Price Waterhouse Centre
                         PO Box 634C
                         St. Michael, Barbados, WI
</TABLE>
------

    (1)  RIF Capital Inc. is wholly owned by Central Investment Trust.
         Safeguardian Limited is the sole protector of Central Investment Trust
         and is neither a beneficiary of the Trust or its subsidiaries.

(b)      SECURITY OWNERSHIP OF MANAGEMENT

The following information lists, as to each class, equity securities
beneficially owned by all directors and nominees, and of the directors and
nominees of the issuer, as a group.

<TABLE>
<CAPTION>
       Title of                     Name and Address of                 Amount and Nature of         Percentage
         Class                        Beneficial Owner                    Beneficial Owner            of Class
----------------------   -----------------------------------------      --------------------         ----------
<S>                      <C>                                            <C>                          <C>
Common                   Safeguardian Limited                                       310,449             14.7%
                         PO Box 316                                                 Trustee
                         Jardine House                                     (voting power of
                         1 Hesley Street                                 Central Investment
                         St. Helier, Jersey, UK  JE4 8UD                              Trust

Common                   Robert W. Crosbie                                           78,508              4.7%
                         110 Yonge Street,  #1701
                         Toronto, Ontario
                         Canada   M5C 1T4
</TABLE>


                                 Page 21 of 24
<PAGE>   22

<TABLE>
<S>                      <C>                                            <C>                          <C>
Common                   Selwyn J. Kletz                                          100,000                4.7%
                         499 Riverside Drive
                         Toronto, Ontario
                         Canada   M6S 4B6

Common                   Georges Benarroch                                              ---              0.0%
                         68 rue Spontini
                         Paris, France   75016

Common                   Karen Lynn Bolens                                              ---              0.0%
                         10 rue Pierre Fatio
                         Geneva, Switzerland   1204

Common                   T. Jack Gary, III                                              ---              0.0%
                         515 North Flagler Drive, #1500
                         West Palm Beach, Florida   33401

Preferred A              Safeguardian Limited                                     1,500,000            100.0%
                         PO Box 316                                                 Trustee
                         Jardine House                                     (voting power of
                         1 Hesley Street                                 Central Investment
                         St. Helier, Jersey, UK JE4 8UD                               Trust

Common                   Directors and Executive Officers                           388,957             18.4%
                         as a group (4 people)

Preferred A              Directors and Executive Officers                         1,500,000            100.0%
                         as a group (1 person)
</TABLE>


NOTE TO (A) AND (B):      As to the beneficial owner(s) of the securities
                          listed above in (a) and (b), no such owner has
                          any right to acquire within sixty (60) days or
                          otherwise, the right to acquire shares from options,
                          warrants, rights, conversion privileges or similar
                          obligations.

    (c)  CHANGES IN CONTROL

Currently, there is no such arrangement that may result in a change in control
of the Company.


Item 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    (a)  CERTAIN RELATED TRANSACTIONS

During fiscal 1999 the Company and IUAM were involved in the following related
party transactions:

         The Company paid $33,145 directly to Witpan Inc. ("Witpan") for
         various services and IUAM paid $132,582. Witpan also paid the Company
         $64,950, for investment research services. Mr. Selwyn J. Kletz
         controls Witpan.

         LFB paid Mr. William Tynkaluk and Mr. George Frazer C$250,000 each for
         their approval to have the management contract of the mutual fund
         Associate Investors, transferred from LFB to AILIS. LFB received the
         funds from AILIS, which borrowed them from IUAM.


                                 Page 22 of 24
<PAGE>   23

         In addition, LFB paid a firm controlled by Mr. Tynkaluk C$45,000 in
         consulting fees and C$11,000 to a firm controlled by Mr. Frazer, also
         for consulting services.

         Spriter Investments Limited ("Spriter") received C$75,000 from IUAM for
         marketing services. Spriter is controlled by Mr. Bruce Taylor an
         executive of IUAM and GAF. Spriter received C$33,332 a year earlier.

         GTS paid Havensight Holdings Corp ("Havensight") C$85,488 for marketing
         and referral services. Havensight sold BHL to the Company in 1995. The
         Company has no documents to believe that Havensight is controlled by
         Mr. Jean-Pierre Fruchet, the developer of BHL's ITM software.

During fiscal 1998 the Company and IUAM were involved in the following related
party transactions:

         The Company paid $186,765 to Witpan for services render in the
         acquisition of Leon, Frazer, Black & Associates Limited, Cluster Asset
         Management Limited, The Glen-Ardith Frazer Corporation and Black
         Investment Limited. In addition, the Company received $135,000 from
         Witpan, for investment research services.

         For services rendered in the restructuring of RCG, the Company paid
         RIF Capital Inc. $300,000 in fiscal 1998.

         Spriter Investments Limited ("Spriter") received C$33,332 from GAF for
         marketing services. Spriter is controlled by Mr. Bruce Taylor an
         executive of IUAM and GAF. Spriter received C$33,332 a year earlier.

Item 13  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Listing of Exhibits

<TABLE>
<CAPTION>
  Exhibit                                                                                                  Page
Table Number                                           Exhibit Name                                       Number
<C>                     <S>                                                                               <C>
  (2)(i)          Unanimous Consent in Lieu of The First Meeting of the Board                                +
                     of Directors of AU 'N AG, INC. (A Delaware Corporation)

  (2)(ii)         Pre-Organization Subscription and Letter of Non-Distributive Intent                        +

  (2)(iii)        Plan and Agreement of Merger                                                               +

  (2)(iv)         Certificate of Merger, dated February 15, 1994                                             +

  (3)(i)          Certificate of Incorporation of AU 'N AG, INC. Dated February 15, 1994                     +

  (3)(ii)         Certificate of Amendment of Certificate of Incorporation of AU 'N                          +
                     AG, INC. Dated April 11, 1994

  (3)(iii)        Certificate of Amendment of Certificate of Incorporation of AU 'N                          +
                     AG, INC. Dated April 11, 1994

  (3)(iv)         Bylaws of InterUnion Financial Corporation                                                 +

    (4)           Instruments Defining the Rights of Security Holders Including Indentures                   +

    (21)          Subsidiaries of InterUnion                                                               E-1
</TABLE>


                                 Page 23 of 24
<PAGE>   24
<TABLE>
<C>               <S>                                                                               <C>

    (27)          Financial Data Schedule                                                                  E-2
</TABLE>

      + Incorporated by reference to the Company's Registration Statement on
        Form 10-KSB filed on June 20, 1997.

    (b) Reports on Form 8-K Subsequent to the Third Quarter

<TABLE>
<CAPTION>
  Exhibit                                                                                                  Page
Table Number                                           Exhibit Name                                       Number
<C>               <S>                                                                                     <C>
   (10)           Working Venture Canadian Fund's Investment in InterUnion Asset Management Limited          ++

   (16)           Letter on change in certifying accountant                                                 +++
</TABLE>

     ++ Incorporated by reference to the Company's Registration Statement on
        Form 8-K filed on March 16, 1999.

    +++ Incorporated by reference to the Company's Registration Statement on
        Form 8-K filed on April 27 1999 and May 6,1999.


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                               INTERUNION FINANCIAL CORPORATION

Date: July 13, 1999                            By: /s/ [Robert W. Crosbie]
------------------------                       ---------------------------------
                                               Robert W. Crosbie
                                               Chairman, Board of Directors

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in their capacities on the
dates indicated.

<TABLE>
<CAPTION>
          Signature                                           Title                               Date
------------------------------                   -------------------------------------      -------------------
<S>                                              <C>                                        <C>
s/s  [Georges Benarroch]                         President and Chief Executive Officer         July 13, 1999
------------------------------
Georges Benarroch

s/s  [Karen Lynn Bolens]                         Director                                      July 13, 1999
------------------------------
Karen Lynn Bolens
</TABLE>


                                 Page 24 of 24
<PAGE>   25


                            ====================================================

                                                INTERUNION FINANCIAL CORPORATION

                                               CONSOLIDATED FINANCIAL STATEMENTS

                                                         MARCH 31, 1999 and 1998
                            ====================================================



<PAGE>   26





                        INTERUNION FINANCIAL CORPORATION

                             MARCH 31, 1999 and 1998





                                    CONTENTS



<TABLE>
<CAPTION>
                                                                            Page



<S>                                                           <C>
Independent Auditoris Reports:
      March 31, 1999 - BDO Dunwoody LLP                                    F - 2
      March 31, 1998 - Ahearn, Jasco + Company, P.A.                       F - 3


Consolidated Financial Statements:

      Consolidated Balance Sheets                                          F - 4

      Consolidated Statements of Operations                                F - 6

      Consolidated Statements of Shareholders' Equity                      F - 7

      Consolidated Statements of Cash Flows                                F - 8

      Notes to Consolidated Financial Statements               F - 9  To  F - 22
</TABLE>















                                                                           F - 1


<PAGE>   27






================================================================================


                          INDEPENDENT AUDITORS' REPORT


================================================================================



To the Shareholders of
InterUnion Financial Corporation



We have audited the accompanying consolidated balance sheet of InterUnion
Financial Corporation as of March 31, 1999, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year
ended March 31, 1999. 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.
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 presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of InterUnion Financial
Corporation as of March 31, 1999, and the results of its operations and its cash
flows for the year ended March 31, 1999 in conformity with generally accepted
accounting principles.






BDO Dunwoody LLP

Toronto, Canada
May 27, 1999







                                                                           F - 2


<PAGE>   28



================================================================================


                          INDEPENDENT AUDITORS' REPORT


================================================================================



To The Board of Directors,
InterUnion Financial Corporation



We have audited the accompanying consolidated balance sheet of InterUnion
Financial Corporation and its subsidiaries (the "Company") as of March 31, 1998,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of InterUnion Financial
Corporation and its subsidiaries as of March 31, 1998, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.










Ahearn, Jasco + Company, P.A.

Pompano Beach, Florida
May 29, 1998



                                                                           F - 3


<PAGE>   29



                        INTERUNION FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,                                                                                1999                  1998
---------                                                                         -----------------     -----------------

                                                         A S S E T S

<S>                                                                               <C>                  <C>
CURRENT ASSETS

    Cash and cash equivalents                                                     $         285,706     $       2,873,731
    Marketable securities                                                                19,885,302            35,169,986
    Due from clients                                                                         93,183               715,871
    Due from brokers and dealers                                                                ---                 2,012
    Accounts receivable                                                                     690,374               882,491
    Refundable income taxes                                                                   5,046                 7,789
    Notes receivable, current portion                                                       973,315               616,579
    Prepaid expenses and other current assets                                                25,772                56,733
                                                                                  -----------------     -----------------

                  Total current assets                                                   21,958,698            40,325,192
                                                                                  -----------------     -----------------

OTHER NON-CURRENT ASSETS

    Property & equipment, net                                                             1,199,953             1,425,192
    Notes receivable, non-current portion                                                   619,992               952,106
    Other long-term assets                                                                   77,651                84,710
    Investment in unconsolidated affiliates                                               5,591,892             3,488,322
    Goodwill, net                                                                               ---             2,468,210
                                                                                  -----------------     -----------------

                  Total non-current assets                                                7,489,488             8,418,540
                                                                                  -----------------     -----------------








                  Total Assets                                                    $      29,448,186     $      48,743,732
                                                                                  =================     =================
</TABLE>













              See Notes to Consolidated Financial Statements               F - 4



<PAGE>   30


                        INTERUNION FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,                                                                              1999               1998
---------                                                                         --------------     --------------


                                                    L I A B I L I T I E S

<S>                                                                              <C>                <C>
CURRENT LIABILITIES

    Accounts payable and accrued liabilities                                      $      253,476     $    1,063,956
    Due to clients                                                                       979,783          3,057,747
    Due to brokers and dealers                                                        18,899,072         34,663,322
    Due to affiliates                                                                    776,213              ---
    Notes payables, current portion                                                          ---          1,703,441
                                                                                  --------------     --------------

                  Total current liabilities                                           20,908,544         40,488,466

OTHER LIABILITIES                                                                          ---               77,033
NOTES PAYABLE                                                                            619,992          1,485,801
                                                                                  --------------     --------------

                  Total liabilities                                                   21,528,536         42,051,300
                                                                                  --------------     --------------

COMMITMENTS AND CONTINGENCIES

                                            S H A R E H O L D E R S'  E Q U I T Y

CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
    Class A Preferred Stock, $0.10 par value
         Authorized - 1,500,000 shares
         Issued and outstanding - 1,500,000                                              150,000            150,000
    Class B Preferred Stock, $0.10 par value
         Authorized - 1,000 shares
         Issued and outstanding - None                                                       ---                ---
    Class C Preferred Stock, $0.10 par value
         Authorized - 1,000 shares
         Issued and outstanding - None                                                       ---                ---
    Common Stock, $0.001 par value
         Authorized - 5,000,000 in 1999, 2,500,000 in 1998
         Issued and outstanding - 2,114,425 in 1999, 1,654,001 in 1998                     2,114              1,654
    Additional Paid-In Capital                                                         9,750,249          8,119,397

CUMULATIVE TRANSLATION ADJUSTMENT                                                        (18,963)            (5,051)

ACCUMULATED DEFICIT                                                                   (1,963,750)        (1,573,568)
                                                                                  ---------------    --------------

                  Total shareholders' equity                                           8,402,811          6,692,432
                                                                                  --------------     --------------

                  Total Liabilities and Shareholders' Equity                      $   29,448,186     $   48,743,732
                                                                                  ==============     ==============
</TABLE>




              See Notes to Consolidated Financial Statements               F - 5


<PAGE>   31


                        INTERUNION FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,                                                              1999                  1998
-----------------------------                                                        --------------        --------------


<S>                                                                                 <C>                    <C>
REVENUES

    Investment Banking                                                               $    1,348,466        $    2,642,958
    Investment Management                                                                     ---                 370,871
    Interest income                                                                         115,418               101,578
                                                                                     --------------        --------------

                                                                                          1,463,884             3,115,407
                                                                                     --------------        --------------
EXPENSES

    Selling, General and Administrative                                                   1,504,959             3,674,548
    Depreciation and Amortization                                                           200,171               240,886
    Foreign exchange loss (gain)                                                           (104,493)               17,361
    Interest expense                                                                        246,611                76,627
                                                                                     --------------        --------------

                                                                                          1,847,248             4,009,422
                                                                                     --------------        --------------
LOSS BEFORE INCOME TAXES AND EQUITY IN NET
    EARNINGS (LOSSES) OF UNCONSOLIDATED AFFILIATES                                         (383,364)             (894,015)

GAIN ON SALE ON ISSUANCE OF SECURITY BY SUBSIDIARY                                          486,099                   ---

EQUITY IN NET LOSSES OF UNCONSOLIDATED AFFILIATES                                          (492,917)               (8,310)

BENEFIT (PROVISION) FOR INCOME TAXES                                                            ---                82,864
                                                                                     --------------        --------------
LOSS                                                                                       (390,182)             (819,461)

GAIN FROM DISCONTINUED OPERATIONS                                                               ---                   691
GAIN ON DISPOSITION OF SUBSIDIARY                                                               ---               803,483
                                                                                     --------------        --------------

NET LOSS                                                                             $     (390,182)       $      (15,287)
                                                                                     ==============        ==============


EARNINGS (LOSS) PER COMMON SHARE - Basic and Diluted
    Continuing operations                                                            $        (0.21)        $       (0.66)
                                                                                     ==============         =============
    Discontinued operations                                                          $          N/A         $        0.65
                                                                                     ==============         =============
    Net loss                                                                         $        (0.21)        $       (0.01)
                                                                                     ==============         =============
    Weighted average common shares outstanding                                            1,855,386             1,232,100
                                                                                     ==============         =============
    Weighted average preferred shares outstanding                                         1,500,000             1,500,000
                                                                                     ==============         =============
</TABLE>








              See Notes to Consolidated Financial Statements               F - 6


<PAGE>   32


                        INTERUNION FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


<TABLE>
<CAPTION>
                                                          Number                           Additional           Share
                                                            of                               Paid-in           Capital
                                                          Shares           Amount            Capital           Totals
<S>                                                  <C>              <C>               <C>               <C>
Preferred Shares
    Balances,
      March 31, 1999 & 1998                              1,500,000    $       150,000   $         ---     $       150,000
                                                     =============    ===============   =============     ===============

Common Shares
    Balance, March 31, 1997                                969,714                970       5,055,845           5,056,815
    Issued during the year
      Exercise of warrants                                  15,000                 15          89,985              90,000
      Exercise of options                                   60,000                 60         179,940             180,000
      Investments                                          659,287                659       3,002,327           3,002,986
    Cancellation                                           (50,000)               (50)       (268,700)           (268,750)
    Compensation related to
      stock options                                            ---                ---          60,000              60,000
                                                     -------------    ---------------   -------------     ---------------
    Balance, March 31, 1998                              1,654,001              1,654       8,119,397           8,121,051
    Issued during the year
      Net of issue costs                                    35,000                 35         132,965             133,000
      Investments                                           48,366                 48         193,416             193,464
      In cancellation of debt                              411,918                412       1,494,648           1,495,060
      For Services                                          35,000                 35         127,465             127,500
    Cancellation                                           (69,860)               (70)       (317,642)           (317,712)
                                                     -------------    ---------------   -------------     ---------------
    Balance, March 31, 1999                              2,114,425              2,114       9,750,249           9,752,363
Total Share Capital                                      3,614,425    $       152,114   $   9,750,249     $     9,902,363
                                                     =============    ===============   =============     ===============
</TABLE>

<TABLE>
<CAPTION>
                                                                         Cumulative
                                                                           Foreign
                                                                          Currency
Deficit and Foreign currency                                             Translation                        Comprehensive
translation adjustment                                                   Adjustment          Deficit           Income

<S>                                                                   <C>               <C>               <C>
    Balance, March 31, 1997                                           $        (9,197)  $  (1,558,281)    $
    Foreign currency translation
      adjustment                                                                4,146             ---               4,146
    Net loss for fiscal 1998                                                      ---         (15,287)            (15,287)
                                                                      ---------------   -------------     ---------------

    Balance, March 31, 1998                                                    (5,051)     (1,573,568)            (11,141)
                                                                                                          ===============
    Foreign currency translation
      adjustment                                                              (13,912)            ---             (13,912)
    Net loss for fiscal 1999                                                      ---        (390,182)           (390,182)
                                                                      ---------------   -------------     ---------------

    Balance, March 31, 1999                                           $       (18,963)  $  (1,963,750)    $      (404,094)
                                                                      ===============   =============     ===============
</TABLE>



              See Notes to Consolidated Financial Statements               F - 7


<PAGE>   33


                        INTERUNION FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,                                                                1999                1998
-----------------------------                                                           --------------      --------------


<S>                                                                                     <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                              $     (390,182)     $      (15,287)
    Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities
      Depreciation and amortization                                                            200,171             240,886
      Loss on equity investments                                                               492,917               ---
      Gain on sale of securities by subsidiary                                                (486,099)              ---
      Gain on disposal of discontinued operations                                                ---              (804,174)
      Non cash compensation                                                                     87,500              60,000
      Non cash expenses                                                                         40,000               ---
      Deferred income taxes                                                                      ---               (85,000)
      Unrealized loss (gain) in marketable securities                                          (11,814)            159,831
                                                                                        --------------      --------------

                                                                                               (68,243)           (443,744)
Changes in operating assets and liabilities net of effects from
    the purchase/divestiture of InterUnion Asset Management Limited
      Increase in due to/from brokers and dealers, net                                     (15,762,238)          1,814,508
      Decrease (increase) in due to/from client, net                                        (1,455,276)          6,988,991
      Decrease (increase) in marketable securities                                          15,242,302          (5,871,852)
      Increase in accounts receivable and other assets                                         124,263            (452,610)
      Increase (decrease) in accounts payable and accrued liabilities                         (572,359)            633,103
      Increase (decrease) in assets and liabilities related to
        discontinued operations                                                                  ---              (287,734)
                                                                                        --------------      ---------------

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                         (2,490,815)          2,380,662
                                                                                        --------------      --------------

CASH FLOWS FROM FINANCING ACTIVITIES
      Net proceeds on issuance of capital stock                                                133,000             270,000
      Proceeds of due to related parties                                                       771,109               ---
      Proceeds (repayment) of notes payable                                                   (103,448)          1,508,712
                                                                                        --------------      --------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                                      800,661           1,778,712
                                                                                        --------------      --------------

CASH FLOWS FROM INVESTING ACTIVITIES
      Purchase of property and equipment, net                                                   (7,438)             (2,032)
      Purchase of long-term investments, net                                                  (437,363)           (485,336)
      Cash acquired on acquisition of subsidiary                                                 ---               151,922
      Cash divested on sale of security by subsidiary                                         (195,304)              ---
      Investment in notes receivable                                                          (257,767)         (1,299,935)
                                                                                        --------------      --------------

NET CASH USED IN INVESTING ACTIVITIES                                                         (897,872)         (1,635,381)
                                                                                        --------------      --------------

NET INCREASE (DECREASE) IN CASH                                                             (2,588,026)          2,523,993

CASH AND CASH EQUIVALENTS - Beginning of Year                                                2,873,731             349,738
                                                                                        --------------      --------------

CASH AND CASH EQUIVALENTS - End of Year                                                 $      285,705      $    2,873,731
                                                                                        ==============      ==============
</TABLE>

For supplemental disclosure information for the Consolidated Statement of Cash
flows, see note 15.

              See Notes to Consolidated Financial Statements               F - 8


<PAGE>   34


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998



     1.  ORGANIZATION AND BASIS OF PRESENTATION

         Description of Business: InterUnion Financial Corporation ("IUFC") and
its subsidiaries (collectively the "Company") are engaged in financial services
with activities in investment banking, securities brokerage, and money
management.

         Principles of Consolidation: The consolidated financial statements
include the accounts of IUFC and all wholly owned and majority owned
subsidiaries from their respective dates of acquisition, after the elimination
of all significant inter-company transactions and balances. The consolidated
subsidiaries of IUFC are Bearhill Limited, Credifinance Capital Inc.,
Credifinance Realty Corp., Credifinance Securities Limited, I & B Inc., and
Marbury Trading Corporation. Investments in affiliates, representing 20% to 50%
of the ownership, are accounted for under the equity method. Under the equity
method, the Company records its proportionate share of income (loss) of the
affiliate (net of the amortization of the excess of the purchase price over the
net assets acquired) to results of operations, with this amount either added to
(deducted from) the cost of the investment. Dividends received from affiliates
who are accounted for on the equity basis are deducted from the carrying value
of the investment. Equity method affiliates are InterUnion Asset Management
Limited and its subsidiaries; Black Investment Management Limited, Guardian
Timing Services Limited, Leon Frazer, Black & Associates Limited and The Glen
Ardith-Frazer Corporation. Investments in affiliates representing less than 20%
ownership are accounted for under the cost method.

         Use of Estimates: The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates and assumptions.

     2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Cash and Cash Equivalents: Cash and cash equivalents include demand
deposits with banks, money market accounts, and other short term investments
with original maturities of 90 days or less. Balances of cash and cash
equivalents in financial institutions may at times exceed the government-insured
limits.

         Marketable Securities: The Company classifies its marketable securities
into one of three categories: trading, held to maturity, or available for sale.
Trading securities, which are bought and held primarily for the purpose of
selling them in the near term, are recorded at fair value with gains and losses
included in earnings. Held-to-maturity securities, which are securities that the
Company has the ability and the intent to hold until maturity, are recorded at
amortized cost and adjusted for amortization or accretion of premiums or
discounts. All other investments in marketable securities not classified as
either trading or held-to-maturity are classified as available-for-sale and are
reported at fair value. Unrealized gains and losses on securities classified as
available for sale are reported as a separate component of shareholders' equity
until realized. Market values of marketable securities are based on the last day
of the fiscal year. A decline in market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary is
charged to earning, resulting in the establishment of a new cost basis for the
security.

         Security Transactions: Security transactions are recorded in accordance
with industry practice in the accounts on trade date. Commission income and
related expenses for transactions executed but not yet settled are accrued as of
the financial statement date.

/Continued...                                                              F - 9


<PAGE>   35


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


         In accordance with Canadian industry practice, the balances due from
and to brokers, dealers and clients may include the trading balances of clients
at the end of the reporting period and may not be an indication of the
investment activity of the Company. These balances are due to the Company's
ownership of Credifinance Securities Limited, a Canadian broker/dealer. These
balances may fluctuate significantly.

         Property and Equipment: Property and equipment are stated at cost less
accumulated amortization. Amortization is computed using straight line and
accelerated methods over the estimated useful lives of the asset.

         Other Long Term Assets: Stock exchange seats are recorded at cost and
are included in other long-term assets. Declines in market value are only
recorded when there is an indication of permanent decline in value.

         Goodwill: Following purchase accounting for businesses acquired,
goodwill represents the excess of the purchase price over the fair value of
the net assets acquired, and is being amortized over a period of 20 years on a
straight line basis. Accumulated amortization as of March 31, 1999 and 1998 was
$0 and $74,240, respectively.

         Long-lived Assets: As prescribed by the Statement of Financial
Accounting (SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of," the Company assesses the
recoverability of its long-lived assets (including goodwill) by determining
whether the asset balance can be recovered over the remaining depreciation or
amortization period through projected undiscounted future cash flows. As of
March 31, 1999, no impairment of any asset was recognized.

         Fair Value of Financial Assets: The carrying value of cash and cash
equivalents, due from (to) clients, accounts receivable, accounts payable,
accrued liabilities, notes receivable, notes payable and due to affiliates
approximates the fair value. In addition, unless described elsewhere, the
carrying value of all financial assets approximate the fair value based on terms
and interest rates currently available to the Company.

         Income Recognition: Revenues are recognized once the mandate is
completed. Gains and losses resulting from the issuance of shares by
subsidiaries is recorded as income or loss in the year the transaction gains and
losses are realized.

         Income Taxes: The Company provides for federal and state income taxes
currently payable, as well as for those deferred because of timing differences
between reporting income and expenses for financial statement purposes versus
tax purposes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of a change in
tax rates is recognized as income or expense in the period that includes the
enactment date.

         The Company and its U.S. subsidiaries file U.S. federal and state
income returns. Non-U.S. subsidiaries, which are consolidated for financial
reporting, file tax returns outside the U.S., and therefore separate provisions
for income taxes have been determined for these entities. Except for return of
capital and selected dividends, the Company intends to reinvest the unremitted
earnings of its non-U.S. subsidiaries and postpone their remittance
indefinitely. Accordingly, no provision for U.S. income taxes for non-U.S.
subsidiaries was required for any year presented.


/Continued...                                                             F - 10


<PAGE>   36


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


         Translation of Foreign Currencies: In accordance with SFAS No.52,
"Foreign Currency Translation", the financial statements of certain subsidiaries
of the Company are measured using local currency as the functional currency.
Assets and liabilities have been translated at current exchange rates and
related revenue and expenses have been translated at average monthly exchange
rates. Gains and losses resulting from the translation of subsidiaries financial
statements are included as a separate component of shareholders' equity. Any
gains or losses resulting from foreign currency transactions are included in
results of operations.

         Earnings per Share: Net Income (loss) per share is reported in
accordance with SFAS No. 128, "Earnings Per Share". SFAS No. 128 requires dual
presentation of basic earnings per share ("EPS") and diluted EPS on the face of
all statements of earnings issued for periods ending after December 15, 1997,
for all entities with complex capital structures. Diluted EPS reflects the
potential dilution that could occur from common shares issuable through the
exercise or conversion of stock options, restricted stock awards, warrants and
convertible securities. In certain circumstances, the conversion of these
options, warrants and convertible securities are excluded from diluted EPS if
the effect of such inclusion is anti-dilutive. No reconciliation of the
numerators and denominators of basic and diluted earnings per share is provided
since the effect would be anti-dilutive.

         Stock Based Compensation: The Company accounts for employee stock
options accordance with Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees". Under APB No. 25, the Company
applies the intrinsic value method of accounting. SFAS No. 123, "Accounting for
Stock-Based Compensation", prescribes the recognition of compensation expense
based on fair value of options determined on the grant date. However, SFAS No.
123 allows companies currently applying APB No. 25 to continue applying the
intrinsic value method under APB No. 25. For companies that continue in applying
the intrinsic value method, SFAS No. 123 mandates certain pro forma disclosures
as if the fair value method had been utilized.

         Comprehensive Income: As of April 1, 1998, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income is net income plus
certain items that are recorded directly to shareholders' equity bypassing net
income. The adoption of this Statement had no effect on the Company's results of
operations or financial position as the only item that is added to Net income
(loss) is foreign currency adjustments.

         Segmented Information: In fiscal 1999, the Company adopted SFAS No. 131
"Disclosures About Segments of an Enterprise and Related Information". SFAS No.
131 requires that the Company discloses its operations by business segments as
viewed by management: Investment Banking which includes its merchant banking
activities and Investment Management. Previously reported segmented information
has been restated.

         Financial Derivatives and Hedging Activities: In June 1998, Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was released. For fiscal years beginning
after June 15, 1999, the statement requires the accounting and disclosure of
gains and losses on certain financial instruments. Management does not believe
that this pronouncement will have any significant effect on the Company.

         Start-up Costs: In April 1998, Statement of Position (SOP) 98-5
Accounting for Costs of Start-up Activities was issued. For fiscal years
beginning after December 15, 1999, SOP requires that pre-opening costs be
expensed as incurred. Management has not yet determined the impact that this
pronouncement will have on the Company.

/Continued...                                                             F - 11


<PAGE>   37


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1998 AND 1997


         Other: All amounts in these financial statements are in United States
dollars unless indicated with a "C" to represent Canadian dollar presentation.
Certain information on the 1998 financial statements has been reclassified to
conform to the 1999 presentation.

     3.  MARKETABLE SECURITIES

<TABLE>
<CAPTION>
                                                               Original            Carrying             Market
                                                                 Cost                Value               Value
                                                           ---------------      ----------------   ----------------
<S>                                                         <C>                 <C>                <C>
         As of March 31, 1999
               Trading securities                           $    19,932,518     $    19,885,302    $     19,885,302
               Available for Sale                                     ---                 ---                 ---
               Held to maturity                                       ---                 ---                 ---
                                                            ---------------     ---------------    ----------------
               Total                                        $    19,932,518     $    19,885,302    $     19,885,302
                                                            ===============     ===============    ================
         As of March 31, 1998
               Trading securities                           $    35,335,725     $    35,169,986    $     35,169,986
               Available for Sale                                     ---                 ---                 ---
               Held to maturity                                       ---                 ---                 ---
                                                            ---------------     ---------------    ----------------
               Total                                        $    35,335,725     $    35,169,986    $     35,169,986
                                                            ===============     ===============    ================
</TABLE>

         The majority of marketable securities are pledged as security to the
due to brokers and dealers.

<TABLE>
<CAPTION>
         For the year ending March 31,                                               1999                1998
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
         Proceeds from securities classified as available for sale              $         ---      $          ---
         Gross realized gains (losses) from securities
           classified as available for sale                                               ---                 ---
         Gross realized gains (losses) due to change
           in classification to trading from available for sale                           ---                 ---
         Change in net unrealized gains (losses)
           on available for sale securities                                               ---                 ---
         Change in net unrealized gains (losses) on trading
           securities included in revenues                                              (11,814)           (159,831)
</TABLE>

     4.  PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                                            March 31
                                                                                -----------------------------------
                                                                                      1999               1998
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
         Computer hardware and software                                         $        82,120    $        126,595
         ITM Computer software                                                        1,924,443           1,924,443
         Furniture, fixtures and equipment                                               58,409              70,650
         Leasehold improvements                                                           1,735               1,735
                                                                                ---------------    ----------------
                  Total cost                                                          2,066,707           2,123,423
         Less: accumulated amortization                                                 866,754             692,231
                                                                                ---------------    ----------------
                                                                                $     1,199,953    $      1,425,192
                                                                                ===============    ================
</TABLE>

         Amortization expense amounted to $200,171 and $210,462, respectively,
for the years ended March 31, 1999 and 1998.


/Continued...                                                             F - 12


<PAGE>   38


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


     5.  NOTES RECEIVABLE

<TABLE>
<CAPTION>
                                                                                             1999             1998
                                                                                        -------------     -------------
<S>                                                                                     <C>              <C>
         Note receivable from Receptagen Ltd. with no minimum periodic
           payment, due June 30, 1999 plus interest at the rate of
           11%, loan is secured by a pledge on all assets                               $     973,315     $     616,579

         Note receivable from Receptagen Ltd. with no minimum periodic
           payment, no maturity and no rate of interest($292,229 + C$494,431);
           see notes payable for corresponding obligation                                     619,992           641,255

         Note receivable from the purchaser of the Company's auction subsidiary
           with no minimum periodic payment, due June 30,2002 plus interest at
           the
           rate of 5.5%; purchaser may prepay any amount with no penalty                        ---             310,851
                                                                                        -------------     -------------
         Total                                                                              1,593,503         1,568,685
         Less: current portion                                                                973,315           616,579
                                                                                        -------------     -------------
         Non-current portion                                                            $     619,992     $     952,106
                                                                                        =============     =============
</TABLE>

         The fair value of the non-interest bearing notes receivable from
Receptagen Ltd., as well as the corresponding obligation described in note 6,
cannot be determined because of the unique nature of these instruments.

     6.  NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                                              1999              1998
                                                                                        ---------------   --------------
<S>                                                                                     <C>               <C>
         Note payable to a related party in the amount of C$75,000 plus
           interest at the rate of 9%, due July 31, 1999                                $        52,777   $        ---
         Note payable to a related party in the amount of $695,000 plus
           interest at the rate of 11%, due July 31, 1999                                       723,436            ---
         Note payable, non-interest bearing, to the former shareholders of The
           Glen-Ardith Frazer Corporation with no minimum periodic payment,
           $662,412 and $476,857 originally due June 2, 1998 and August
           29, 2000 respectively; discounted for recording using a rate of 8%                     ---          1,139,269
         Note payable with no minimum periodic payment, originally due
           September 15, 1998 plus interest at the rate of 11%, 265,750
           common shares were issued as collateral                                                ---            616,579
         Note payable to the co developer of Receptagen Ltd.'s research with
           no minimum periodic payment, no maturity and no rate of interest
            ($292,229 + C$494,431); see note receivable for corresponding asset                 619,992          641,255
         Note payable, non-interest bearing, to the former shareholders of
           Leon Frazer, Black & Associates Limited with no minimum periodic
           payment, $414,964 and $377,205 originally due July 2, 1998
           and 1999 respectively; discounted for recording using a rate of 8%                     ---            792,169
                                                                                        ---------------   --------------
         Total                                                                                1,396,205        3,189,242
         Less: current portion                                                                  776,213        1,703,441
                                                                                        ---------------   --------------
         Long-term portion                                                              $       619,992   $    1,485,801
                                                                                        ===============   ==============
</TABLE>



/Continued...                                                             F - 13


<PAGE>   39


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


     7.  ACQUISITIONS AND EQUITY INVESTMENTS

         Leon Frazer, Black & Associates Ltd.: On July 2, 1997, IUFC acquired a
one third interest in all of the issued and outstanding shares of Leon Frazer,
Black & Associates Ltd. ("LFB") for cash of C$650,000, notes payable of
C$550,000 and acquisition costs of $170,000.

         This investment will be accounted for using the equity method. The
difference between the carrying value of this investment and the underlying
equity in net assets is $1 million, and this amount will be amortized to equity
in earnings of unconsolidated affiliates over 20 years.

         InterUnion Asset Management Limited: Effective March 1, 1998, IUFC
acquired a 91.55% direct interest in all of the issued and outstanding shares of
InterUnion Asset Management Limited ("IUAM") for 213,194 IUFC common shares and
106,597 share purchase warrants of valued at $852,776, assumption of debt valued
at $1,197,924 and acquisition costs of $59,768. Each share purchase warrant
entitles the holder to acquire an additional share of IUFC common stock at $5.00
within two years. The acquisition has been accounted for using the purchase
method and, accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based upon the fair values at the date of
acquisition. The excess of the purchase price over the fair value of the net
assets acquired was $2.07 million. This amount was recorded as goodwill in
fiscal 1998 and will be amortized over 20 years. Goodwill previously recorded in
fiscal 1998 has been reclassified as a component of Investment in unconsolidated
affiliated, as the Company will be accounting for its interest in IUAM on the
equity method.

  The net purchased price was allocated as follows:

<TABLE>
           <S>                                                        <C>
           Working capital                                            $   19,945
           Property and equipment                                         21,085
           Excess Purchase Price Over Net Tangible Assets              2,069,438
                                                                      ----------
             Purchase price                                           $2,110,468
                                                                      ==========
</TABLE>

         IUAM's sole asset at the time of acquisition was a Canadian money
management firm, The Glen Ardith-Frazer Corporation ("GAF"), which was acquired
by IUAM in September 1997. In July 1998, IUFC acquired the remaining 8.45% of
IUAM, which was previously owned by LFB for 27,224 Common Shares at a value of
$108,896. This amount will be amortized over the remaining period of the
original excess purchase price of assets acquired.

         Black Investment Management Limited.: Effective March 31, 1998, IUFC
acquired a 45% direct interest in all of the issued and outstanding shares of
Black Investment Management Limited ("BIM") for cash of $202,480, 216,640 shares
of IUFC common stock valued at $788,570, assumption of notes payable of $430,806
and acquisition costs of $67,151. BIM also owns 31.7% of LFB directly.

         This investment will be accounted for using the equity method. The
difference between the carrying value of this investment and the underlying
equity in net assets is $1.3 million, and this amount will be amortized to
equity in earnings of unconsolidated affiliates over 20 years.





/Continued...                                                             F - 14


<PAGE>   40


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


         The following table summarizes, on an un-audited pro-forma basis, the
combined results of the Company had the acquisition of consolidated affiliates
had taken place at the beginning of fiscal 1998. Appropriate pro-forma
adjustments have been made to reflect the accounting used in recording these
acquisitions. This pro-forma information does not purport to be indicative of
the results of operations that would have been resulted had the acquisitions
been in effect for the entire periods presented, and is not intended to be a
projection of future results or trends.

  Pro-forma earnings data, 12 months to March 31, 1998
<TABLE>
      <S>                                                           <C>
      Revenue                                                        $4,057,806
      Loss from continuing operations                                  (821,212)
      Net loss                                                          (17,083)
      Loss per share                                                      (0.01)
</TABLE>

         The following table reflects, on an audited and un-audited pro-forma
basis, certain summarized financial information with regards to IUFC's equity
method affiliates.

<TABLE>
<CAPTION>
                                 LFB                              BIM
                            12 Months Ended                12 Months Ended
                      Dec 31/97        Mar 31/98      Dec 31/97        Mar 31/98
                       Audited         Unaudited       Audited         Unaudited
                      ---------        ---------      ---------        ---------
  <S>              <C>             <C>             <C>              <C>
  Assets           $    250,747    $    357,134    $    816,759     $    730,269
  Liabilities           206,824         300,513         883,257          291,938
  Revenues              909,170         811,051         918,856          929,233
  Net Income             58,292          41,206          14,903           45,022
</TABLE>

         On January 25th, 1999, the Company reorganized its investment
management interest in order to have them all under one holding company,
InterUnion Asset Management Limited ("IUAM"). The Company's interest at the time
of the reorganization were:

<TABLE>
<CAPTION>
                                                      Directly        Indirectly
                                                      --------        ----------
         <S>                                            <C>           <C>
         Black Investment Management Limited            45.0%
         Guardian Timing Services Limited              100.0%
         Leon, Frazer, Black & Associates Ltd.          33.3%            14.4%
         The Glen Ardith-Frazer Corporation            100.0%
</TABLE>

         Thereafter, IUAM issued 310,010 convertible preferred shares for
C$5,000,000 to Working Ventures Canadian Fund ("WVCF"). Each of these shares is
exchangeable into one common share of IUAM. Thus reducing the Company's interest
to 69%. This transaction will be accounted for as of January 1, 1999.

         On March 9th, 1999, WVCF converted their convertible preferred shares
in to common shares and subscribed for an additional 569,160 common shares for
C$5,000,000, thereby diluting the Company's interest to 44%. This transaction
will be accounted for as of March 31, 1999.

         On April 13, 1999, IUAM acquired an additional 5,978 common shares of
BIM C$209,230 in cash bring their interest in BIM up to 50.5%.

         The Company is amortizing the excess purchase price paid over net
tangible assets, at the rate of $263,600 per year for all acquisitions. In
fiscal 1998, $37,800 was amortized against equity earnings and $30,424 as
goodwill.

/Continued...                                                             F - 15


<PAGE>   41


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


         The following is summarized information from IUAM's Audited
Consolidated Statements

<TABLE>
<CAPTION>
                                                                  March 1999               March 1998
                                                                 -----------              -----------
         <S>                                                     <C>                      <C>
         Current assets                                           $5,990,243              $   218,886
         Non-current assets, excluding goodwill                      354,832                   21,381
         Goodwill                                                  5,432,327                1,813,895
         Current liabilities                                         765,506                  999,661
         Non-current liabilities                                     331,652                   98,211
         Redeemable preferred stock                                        0                        0
         Minority interests                                          154,542                        0
         Revenues                                                  3,272,158                  447,913
         Expenses                                                  4,066,241                  465,171
         Income from continuing operations                          (583,594)                 (17,258)
         Net Income                                                 (430,008)                 (13,638)
</TABLE>

     8.  CAPITAL STOCK

         On September 4,199, the shareholders voted to increase the authorized
number of Common Shares to 5,000,000 from 2,500,000.

         Currently, the number of shares that the Company is authorized to
issued under each class of stock is:
           1,500,000  Class A Preferred Shares, ($0.10 par value), entitled to
                      100 votes for every one share issued, annual dividends, if
                      declared by the directors, at a rate of $0.01 per share,
                      non-cumulative
               1,000  Class B Preferred Shares, ($0.10 par value), non-voting,
                      annual dividends, if declared by the directors, at a rate
                      to be determined by the directors at the first issuance of
                      these shares, non-cumulative
               1,000  Class C Preferred Shares, ($0.10 par value), non-voting,
                      annual dividends, if declared by the directors, at a rate
                      to be determined by the directors at the first issuance of
                      these shares, non-cumulative. These shares are convertible
                      into common stock at terms determined by the directors
                      when these shares are issued.
           5,000,000  Common shares ($0.001 par value), each share has one vote

         During fiscal 1998, the Company issued 659,287 shares of Common Stock
and 106,597 Common Stock purchase warrants for investments in affiliates. The
Company issued 60,000 and 15,000 shares of Common Stock upon the exercise of
stock options and warrants. In addition, the Company cancelled 50,000 Common
Shares that it received in reduction of the note receivable from the purchaser
of Reeve, Mackay & Associates Ltd, which were acquired in the open market. Value
on cancellation was based on the quoted price the day of cancellation.

         During fiscal 1999, the Company issued 35,000 shares of Common Stock
and 17,500 Common Stock purchase warrants for net proceeds of $133,000 and
21,142 shares of Common Stock as per its debt assumption agreement with
Receptagen Ltd at the market price at the time of the agreement. The Company
issued 27,224 shares of Common Stock for investments in affiliates, 411,918
shares of common stock for the cancellation of debt in the amount of $1,494,260
and 35,000 shares of Common Stock in lieu of payment for an aggregate amount of
$127,500. In addition, the Company cancelled 69,860 shares that it received in
reduction of the note receivable amounting to $318,000 from the purchaser of
Reeve, Mackay & Associates Ltd, which were acquired in the open market. Value on
cancellation was based on the quoted price the day of cancellation.



/Continued...                                                             F - 16


<PAGE>   42


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


     9.  STOCK OPTIONS AND WARRANTS

         The Company currently issues stock options at the direction of the
Board of Directors. To date, non-qualified stock options have been granted to
select key employees under terms and conditions determined by the Board of
Directors at the time the options are issued. Presented below is a summary of
stock option plan activity:

<TABLE>
<CAPTION>
                                                                        Wt. Avg.                                 Wt. Avg.
                                                                        Exercise            Options              Exercise
                                                        Number            Price           Exercisable              Price
                                                     -----------       -----------      ------------          -----------
         <S>                                           <C>             <C>               <C>                  <C>
         Balance, April 1,1997                           190,000       $      4.00           190,000          $      4.00
         Cancelled                                      (145,000)             4.00          (145,000)                4.00
         Granted                                         135,000              3.56           135,000                 3.56
         Exercised                                       (60,000)             3.00           (60,000)                3.00
                                                     ------------      -----------      -------------         -----------
         Balance, April 1, 1998                          120,000              4.00           120,000                 4.00
         Cancelled                                       (10,000)             4.00           (10,000)                4.00
         Granted                                         250,000              4.00           150,000                 4.00
                                                     -----------       -----------      ------------          -----------
         Balance, March 31,1999                          360,000       $      4.00           260,000          $      4.00
                                                     ===========       ===========      ============          ===========
</TABLE>

         Options and warrants outstanding and exercisable at March 31, 1999 are
as follows:

<TABLE>
<CAPTION>
                                    Outstanding                                             Exercisable
         ---------------------------------------------------------------------      --------------------------
                                                 Wt. Avg.          Wt. Avg.                           Wt. Avg.
                                    Expiry       Remaining         Remaining                          Exercise
           Price      Number         Date          Life         Exercise Price       Number             Price
           -----      ------         ----          ----         --------------       ------             -----
         <S>          <C>         <C>               <C>         <C>                  <C>            <C>
         $  5.00      215,323      April 1999       *1           $   5.00             215,323        $   5.00
            4.00      106,597     February 2000     *1               4.00             106,597            4.00
            5.00       17,500      March 2000       *1               5.00              17,500            5.00
            4.00      110,000      August 2001      *2               4.00             110,000            4.00
            4.00       50,000    September 2003     *5               4.00              50,000            4.00
            4.00      200,000       May 2005        *6               4.00             100,000            4.00
</TABLE>

* = Less than.


         SFAS No.123 requires entities that account for awards for stock-based
compensation to employees in accordance with APB No.25 to present pro forma
disclosures of net income and earnings per share as if compensation cost was
measured at the date of grant based on fair value of the award. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                                              1999              1998
                                                                              ----              ----
                  <S>                                                      <C>                <C>
                  Expected life of the option                              5 - 7 years           2 years
                  Risk free interest rate                                    5.0 %             5.5 %
                  Expected volatility                                       20.0 %            20.0 %
                  Expected dividend yield                                    0.0 %             0.0 %
</TABLE>

         The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

/Continued...                                                             F - 17
<PAGE>   43


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


         Had the compensation cost for the Company's stock option plan been
recognized based upon the fair value on the grant date under the methodology
prescribed by SFAS No. 123, the Company's income from continuing operations and
earnings per share for the year ended March 31, 1999 and 1998 would have been
impacted as indicated in the following table. The proforma results below reflect
only the impact of the options granted. EPS is presented following SFAS No. 128.

<TABLE>
<CAPTION>
                                                                      1999                                 1998
                                                          ---------------------------           -------------------------
                                                            Reported         Proforma            Reported        Proforma
                                                          -------------  -------------          ------------- -----------
     <S>                                                  <C>            <C>                    <C>           <C>
     Income (loss)                                        $   (390,182)  $   (493,857)          $   (819,461) $  (852,806)
     Net loss                                                 (390,182)      (493,857)               (15,287)     (48,632)
     Basic EPS from continuing operations                       (0.21)          (0.27)                (0.66)        (0.69)
     Basic EPS                                                  (0.21)          (0.27)                (0.01)        (0.04)
     Diluted EPS from continuing operations                     (0.21)          (0.27)                (0.66)        (0.69)
     Diluted EPS                                                (0.21)          (0.27)                (0.01)        (0.04)
</TABLE>

    11.  DISCONTINUED OPERATIONS

         During fiscal 1997, the Company adopted a formal plan to dispose of its
auction subsidiary, Reeve, Mackay & Associates Ltd. As a result, the Company
reclassified the operating losses and the net assets of the subsidiary as
separate items on the financial statements. No loss on disposition was accrued
at March 31,1997.

         In July 1997, the Company sold the auction subsidiary. The operating
loss that was incurred by Reeve, Mackay until the date of sale is recorded as
operating losses from discontinued operations. The gain from discontinued
operations is equal to the excess of the liability over the assets carried by
the Company, resulted from the investment in and advances to Reeve, Mackay.

    12.  INCOME TAXES

         IUFC files US Federal income tax returns for its US operations and its
US subsidiaries. Separate returns are filed, as locally required, for each of
its foreign subsidiaries. The provision for income taxes consists of:

<TABLE>
<CAPTION>
         Year Ended March 31,                         1999             1998
         --------------------                         ----             ----
         <S>                                    <C>              <C>
             Domestic
                 Current                        $         ---    $          ---
                 Deferred                                 ---           (85,000)
             Foreign
                 Current                                  ---             2,136
                 Deferred                                 ---               ---
                                                -------------    --------------
         Total provision for income taxes       $         ---    $      (82,864)
                                                =============    ==============
</TABLE>

         The total provision for income taxes differs from that amount which
would be computed by applying the United States federal income tax rate to
income (loss) before provision for income taxes. The reasons for these
differences are as follows:



/Continued...                                                             F - 18


<PAGE>   44


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


<TABLE>
<CAPTION>
         Year Ended March 31,                                          1999                           1998
         --------------------                              -----------------------        ----------------------
                                                              Amount            %            Amount           %
                                                           ------------       ----        -----------      -----
<S>                                                        <C>                 <C>        <C>                <C>
         Statutory income tax rate (recovery)              $   (132,700)       (34)       $  (300,000)       (34)
         Foreign taxes payable                                    ---            0              2,136          0
         Gain on issuance of security by subsidiary             165,000         42              ---            0
         Use of losses carried forward                         (165,000)       (42)             ---            0
         Effect of non taxable gain on
           disposition of subsidiary                                ---          0            275,000         31
         Non-deductible items                                    30,000          8             17,500          2
         Other, including valuation
           allowance adjustment                                 102,700         26            (77,500)        (9)
                                                           ------------     ------        -----------      -----
         Net taxes (recovery) and effective rate           $      ---            0        $   (82,864)       (10)
                                                           ============     ======        ===========      =====-
</TABLE>

         The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities and net operating loss
carry-forwards. Temporary differences and carry-forwards, which give rise to,
deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                          March 31, 1999                     March 31, 1998
                                                  ------------------------------     ------------------------------
                                                  Component        Tax Effect        Component         Tax Effect
                                                  ------------     -------------     ------------      ------------
<S>                                               <C>              <C>               <C>               <C>
         Net operating losses - domestic          $    376,000     $     150,000     $    310,000      $     45,000
         Unrealized gains - domestic                       ---               ---           (6,000)             (900)
         Less valuation allowance                     (376,000)         (150,000)        (304,000)          (44,100)
                                                  ------------     -------------     ------------      ------------
           Net deferred asset                     $        ---     $         ---     $        ---      $        ---
                                                  ============     =============     ============      ============

         Net operating losses - foreign           $    336,000     $     134,000     $    363,000      $    145,000
         Less valuation allowance                     (336,000)         (134,000)        (363,000)         (145,000)
                                                  ------------     -------------     ------------      ------------
           Net deferred asset                     $        ---     $         ---     $        ---      $        ---
                                                  ============     =============     ============      ============
</TABLE>

         At March 31, 1999, the Company had cumulative net operating loss
carry-forwards of approximately $376,000 and $336,000 in the United States and
Canada, respectively. These amounts will expire in various years through 2014.
In addition, the Company has capital loss carry-forward of approximately
$700,000 for tax purposes. The related deferred tax asset has been completely
offset by a valuation allowance. This amount will expire in various years
beginning in 2001. The Company has no significant deferred tax liabilities

    13.  RELATED PARTY TRANSACTIONS

         Directors, officers or employees of the Company may also be officers of
and serve on the board of directors of companies in which IUFC or its
subsidiaries have invested. This is considered to be in the normal course of
IUFC's business.

         During the period ending March 31, 1999, the Company paid an entity
owned by one a director and officer of IUAM approximately $33,145 directly and
$132,582 by IUAM. This same entity received $186,765 the year before. The
Company received $64,950 and $135,000, from the same entity for advisory
services for the period ending March 31, 1999 and 1998, respectively.

/Continued...                                                             F - 19


<PAGE>   45

                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


         During the period ending March 31, 1998, the Company paid an entity
related common ownership approximately $300,000 for advisory fees.

         The Company paid an entity related by common ownership approximately
$26,500 and $35,000, during fiscal 1999 and 1998 respectively, which has been
included as rent expense. In turn, this related company has paid an unrelated
entity $26,500 and $40,000 as rent for these same premises.

    14.  COMMITMENTS AND CONTINGENCIES

         The Company leases office space under a number of operating leases
expiring at various dates through to January 2002. The Company also has a number
of commitments with regards to information suppliers that expire at various
dates through to January 2001. The total minimum annual rentals, exclusive of
additional operating costs, under the leases for the company's premises and
information systems in each of the next five fiscal years are approximately:

<TABLE>
                                    <S>          <C>
                                    2000         $    90,000
                                    2001              60,000
                                    2002              50,000
                                    2003               ---
                                    2004               ---
</TABLE>

         Payments under the above mentioned leases that have been charged to
operations for the periods ending March 31, 1999 and 1998 amount to $246,597 and
$352,666, respectively.

         From time to time the Company is exposed to claims and legal actions in
the normal course of business, some of which are initiated by the Company. At
March 31, 1999, management believes that any such outstanding issues will be
resolved without significantly impairing the financial condition of the Company.


    15.  SUPPLEMENTAL CASH FLOW DISCLOSURE

         The following is additional information regarding the Consolidated
Statement of Cash Flows:

         Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
                                                                                             1999               1998
                                                                                        ---------------    --------------

           <S>                                                                          <C>                <C>
           Cash paid during the period for interest                                     $       111,887    $       76,627
           Cash paid during the period for income taxes                                           ---              11,231

         Supplemental disclosure of non-cash financing and investing:

           Stock issued for long-term investments                                               108,868         3,002,986
           Notes payable assumed in acquisitions                                                  ---             430,896
           Liabilities paid by issuing common stock                                           1,622,172             ---
           Common stock cancelled                                                               317,712           268,750
</TABLE>



/Continued...                                                             F - 20


<PAGE>   46


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


    16.  SEGMENTED INFORMATION

         The following tables summaries the revenues, operating profits (losses)
from continuing operations and identifiable assets by geographical area.

<TABLE>
<CAPTION>
                                                                                            Adjustments
                                                             United                              &
                                             Canada          States            Other        Elimination      Consolidated
                                       ---------------    ------------   -------------   ----------------  --------------

         <S>                           <C>                <C>            <C>             <C>               <C>
         For the year ended and as of March 31, 1999
         Revenue from
           unaffiliated customers      $     1,011,995    $    357,468   $      94,421   $         ---     $    1,463,884
         Revenue from
           inter-segments                      119,494          42,179           ---            (161,673)             ---
                                       ---------------    ------------   -------------   ----------------  --------------
         Total revenue                       1,131,489         399,647          94,421          (161,673)       1,463,884
                                       ===============    ============   =============   ===============   ==============
         Depreciation
         & Amortization                          6,997             730         192,444             ---            200,171
                                       ===============    ============   =============   ===============   ==============
         Operating profit                      256,182         (67,410)       (197,343)            ---             (8,571)
                                       ===============    ============   =============   ===============
         General corporate
           expenses                                                                                               135,000
         Interest expenses, net                                                                                   246,611
         Income from continuing
           Operations before provision
            for income taxes                                                                                     (390,182)
                                                                                                           ==============
         Identifiable assets                 6,506,729         751,718      22,189,739             ---         29,448,186
                                       ===============    ============   =============   ===============   ==============

         For the year ended and as of March 31, 1998
         Revenue from
           unaffiliated customers      $     3,343,052    $   (262,065)  $      34,420   $         ---     $    3,115,407
         Revenue from
           inter-segments                      312,745          50,000           ---            (362,745)           ---
                                       ---------------    ------------   -------------   ----------------  --------------
         Total revenue                       3,655,797         212,065          34,420             ---          3,115,407
                                       ===============    ============   =============   ===============   ==============
         Depreciation
           & Amortization                       47,450             992         192,444             ---            240,886
                                       ===============    ============   =============   ===============   ==============
         Operating profit                      198,085        (693,742)       (248,309)            ---           (743,966)
                                       ===============    ============   =============   ===============
         General corporate
           expenses                                                                                               175,000
         Interest expenses, net                                                                                   (24,951)
                                                                                                           ==============
         Income from continuing
           Operations before provision
            for income taxes                                                                                     (894,015)
                                                                                                           ==============
         Identifiable assets                 9,102,875       1,679,781      37,961,076             ---         48,743,732
                                       ===============    ============   =============   ===============   ==============
</TABLE>




/Continued...                                                             F - 21


<PAGE>   47


                        INTERUNION FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 1999 AND 1998


         The following tables summaries the revenues, operating profits (losses)
from continuing operations and identifiable assets by business segments for
fiscal 1998. For fiscal 1999, the Company did not have any activities outside
the investment banking segment with the exception of its interest in IUAM. Such
interest is accounted for on the equity basis.

<TABLE>
<CAPTION>
                                                                                            Adjustments
                                                           Investment       Investment           &
                                                             Banking        Management      Elimination      Consolidated
                                                        --------------   -------------   ----------------  --------------

         <S>                                            <C>              <C>             <C>               <C>
         For the year ended and as of March 31, 1998
         Revenue from
           unaffiliated customers                       $    2,726,695   $     388,712   $         ---     $    3,115,407
         Revenue from
           inter-segments                                       79,600           ---             (79,600)             ---
                                                        --------------   -------------   ----------------  --------------
         Total revenue                                       2,806,295          94,421           (79,600)       3,115,407
                                                        ==============   =============   ===============   ==============
         Depreciation
         & Amortization                                         18,034         222,852             ---            240,886
                                                        ==============   =============   ===============   ==============
         Operating profit                                     (499,051)       (244,915)            ---           (743,966)
                                                        ==============   =============   ===============
         General corporate
           expenses                                                                                               175,000
         Interest expenses, net                                                                                   (24,951)
                                                                                                           --------------
         Income from continuing
           Operations before provision
            for income taxes                                                                                     (894,015)
                                                                                                           ==============
         Identifiable assets                                46,275,406       2,468,326             ---         48,743,732
                                                        ==============   =============   ===============   ==============
</TABLE>

         For the fiscal year ended March 31, 1999, the Company had two customers
that generated over 10% of revenues. The first customer represented 38.9%, while
the second represented 11.4%. There were no customers that represented in excess
of 10% for the fiscal year ended March 31, 1998.







                                                                          F - 22