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

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

                     For the fiscal year ended      March 31, 1997
                                               ----------------------

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

          For the transition period from               to 
                                         -------------    ------------

             Commission file number 
                                    ------------------------------------

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

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

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

     (561) 820-0084
---------------------------
(Issuer's telephone number)


 ------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

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.  $5,712,183
                                                         -------------

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 asked prices of such stock, as of a specified date within the past 60
days.    $2,178,788 On June 16, 1997
      ---------------------------------

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes  [ ]  No  [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: $0.001 Par Value Common Shares -
969,714 as of June 16, 1997.

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



                                  Page 1 of 27
<PAGE>   2



                        INTERUNION FINANCIAL CORPORATION
                                   FORM 10-KSB
                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                  <C>
PART I .............................................................................................  3
    Item 1 DESCRIPTION OF BUSINESS..................................................................  3
    Item 2 DESCRIPTION OF PROPERTY.................................................................. 10
    Item 3 LEGAL PROCEEDINGS........................................................................ 10
    Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................... 10

PART II ............................................................................................ 10
    Item 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................. 10
    Item 6 MANAGEMENT'S DISCUSSION AND ANALYSIS..................................................... 13
    Item 7 FINANCIAL STATEMENTS..................................................................... 19
    Item 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..... 19

PART III ........................................................................................... 20
    Item 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH 
           SECTION 16(a) OF THE EXCHANGE ACT........................................................ 20
    Item 10 EXECUTIVE COMPENSATION.................................................................. 22
    Item 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................... 23
    Item 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................... 25
    Item 13 EXHIBITS AND REPORTS ON FORM 8-K........................................................ 26

</TABLE>



                                  Page 2 of 27
<PAGE>   3


PART I

Item 1   DESCRIPTION OF BUSINESS

    (a)  BUSINESS DEVELOPMENT

On February 7, 1994, the shareholders of AU 'N AG, INC., a Utah corporation,
approved without dissent, a proposal to change the domicile of the Company
through the merger of the Company into AU 'N AG, INC., a Delaware corporation to
be formed.

On February 15, 1994 a Certificate of Incorporation of AU 'N AG, INC., a
Delaware corporation, was filed with the office of the Secretary of State,
Division of Corporations, State of Delaware.

On February 15, 1994, the date of incorporation of AU 'N AG, Inc. of Delaware,
the directors of that corporation approved a Pre-Organization Subscription and
Letter of Non-Distributive Intent executed by the President of AU 'N AG, Inc.,
the Delaware corporation, for $10.00 with the understanding that the shares
would be immediately canceled upon the effective date of the merger between AU
'N AG, INC. of Delaware and AU 'N AG, INC. of Utah. These shares were issued by
the Company in reliance upon the exemption from the registration requirements of
the Securities Act of 1933, as amended, as provided by Section 4(2) of that Act
and upon a similar exemption contained in applicable state securities laws. The
shares received by AU 'N AG, INC. were restricted securities, subject to Rule
144 promulgated under the Securities Act of 1933, as amended. See Exhibits at
E-1 and E-4.

Further on February 15, 1994, a Plan and Agreement of Merger of AU 'NAG, INC.
(Utah) and AU 'N AG, INC. (Delaware) was executed. On the same day a Certificate
of Merger was executed by the above corporations. This Certificate of Merger was
filed in the office of the Secretary of Delaware on March 10, 1994. Under the
Certificate of Merger AU 'N AG, INC., the Delaware Corporation, was the
surviving corporation. See Exhibit E-5 and E-9.

Under the terms of the above-referenced merger each share of common stock of AU
'N AG, INC. (Utah) was converted into one share of AU 'N AG, INC.(Delaware). At
the time of its incorporation, AU 'N AG, Inc. (Delaware) had total authorized
capital stock in the amount of 50,000,000 shares at $.001 par value. Each holder
of AU 'N AG, INC. (Utah) upon surrender to AU 'N AG, INC.(Delaware) of one or
more certificates for such shares for cancellation received one or more
certificates for the number of shares of common stock of AU 'N AG, INC.
(Delaware) represented by the certificates of AU 'N AG, INC.(Utah) so
surrendered for cancellation by such holder.

As a result of the above-referenced merger, 23,297,800 shares of common stock of
AU 'N AG, INC. (Delaware) were issued to the shareholders of the corporation
formerly known as AU 'N AG, INC. (Utah). At the time of the merger, AU 'N AG,
INC. (Utah) had no assets and was an inactive corporation.

As provided in the Plan and Agreement of Merger, the sole purpose of the
above-referenced merger was to change the issuer's domicile from Utah to
Delaware and the exchange of securities from one corporation to another was, in
the opinion of management, therefore outside of the provisions of Rule 145 as
promulgated by the Securities & Exchange Commission. Further, it is the position
of management that the exchange of stock was a transaction by an issuer not
involving any public offering and thus was within the protection of Section 4(2)
of the Securities Act of 1933, and exempted from registration requirements.

On April 11, 1994, a Certificate of Amendment of the Certificate of
Incorporation of AU 'N AG, INC. (Delaware) was executed, providing that the name
of the Company be changed to: INTERUNION FINANCIAL CORPORATION ("IFC" or the
"Company"). This change of name was filed by the office of the Secretary of
State of Delaware on April 19, 1994.

Subsequent to a filing of information submitted to the National Association of
Securities Dealers, Inc. (NASD) pursuant to Schedule H of the NASD By-Laws and
Rule 15c 2-11 under the Securities Act of 


                                  Page 3 of 27
<PAGE>   4

1934, on July 27,1994 IFC was cleared for listing on the OTC Bulletin Board. The
Company currently trades under the symbol: IUFC.

Subsequent to approval by the required shareholders at a meeting held October
14, 1994, the common stock was reverse split at a ratio of ten (10) to one (1).
Further, based upon shareholder approval at that meeting, a Certificate of
Amendment was filed with the Secretary of State, State of Delaware, showing
capitalization as follows:

     (1)  100,000,000 shares of common voting stock at $.001 par value.

     (2)  1,500,000 shares of Class A preferred stock at $.10 par value.

     (3)  50,000,000 shares of Class B preferred stock with par value to be set
          by the Board of Directors.

     (4)  50,000,000 shares of Class C preferred stock with par value to be set
          by the Board of Directors.

On January 18, 1995 the Company acquired all of the stock of BEARHILL LIMITED, a
British Virgin Islands corporation, for the issuance of 22,262 shares of common
stock (adjusted for the 20 for 1 reverse stock split of May 1996). On January
18, 1995 the Company also acquired all of the stock of GUARDIAN TIMING SERVICES,
INC., a corporation organized under the laws of Ontario, Canada, for the
issuance of 5,566 shares of common stock (adjusted for the 20 for 1 reverse
stock split of May 1996).

Upon application to the Florida Department of State, on February 2, 1995, the
Company was qualified and authorized to transact business in the State of
Florida. The Company moved its principal office to 249 Royal Palm Way, Suite
301-H, Palm Beach, Florida 33480.

On March 20, 1995, the Company acquired all of the stock of I & B, INC., a
Delaware corporation, CREDIFINANCE CAPITAL INC., a corporation organized under
the laws of Ontario, Canada, CREDIFINANCE SECURITIES LIMITED, a corporation
organized under the laws of Ontario, Canada, and ninety-five percent (95%) of
the stock of ROSEDALE REALTY CORPORATION, a corporation organized under the laws
of Ontario, Canada, for the issuance of 75,000 shares of common stock (adjusted
for the 20 for 1 reverse stock split of May 1996). The Company further acquired
the remaining outstanding stock of ROSEDALE REALTY CORPORATION for the issuance
of 1,230 shares of common stock (adjusted for the 20 for 1 reverse stock split
of May 1996). It should be noted that in 1996 the Company disposed, by way of an
assignment in bankruptcy, of its shares in ROSEDALE REALTY CORPORATION. This
assignment was a voluntary petition filed by Credifinance Capital, Inc., the
owner of Rosedale, on September 29, 1995. The decision to file for bankruptcy
was made after negotiations for a merger of Rosedale with another firm were
unsuccessful. Rosedale had never been profitable subsequent to its acquisition
and Credifinance Capital, Inc. made the decision to cease financing Rosedale's
operations. The bankruptcy was concluded and there are no outstanding lawsuits
against either Credifinance Capital, Inc. or the parent, InterUnion Financial
Corporation. (See Note 9 of InterUnion Financial Corporation Notes to
Consolidated Financial Statements, March 31, 1997, Part II, Item 7).

At a special meeting of the shareholders held on May 17, 1996, the Board of
Directors was authorized to reverse split all authorized shares in a ratio of
twenty (20) to one (1). At the time of this authorization, the total of all
issued and outstanding voting shares of stock was 13,851,156.

REEVE, MACKAY & ASSOCIATES LTD was formed May 15, 1995 as a corporation
organized under the laws of Ontario, Canada. All capital stock of this
corporation was originally issued to InterUnion Financial Corporation. Reeve,
Mackay is a wholly-owned subsidiary of the Company. Due to Reeve, Mackay's
continued operating deficit and cash requirements, the Company has decided to
dispose of its investment. The Company is currently engaged in discussions
with potential buyers and anticipates to fully recover its cash advances and
investments in Reeve, Mackay.

On September 26, 1996, the Company acquired an option to purchase all of the
outstanding shares of NEW RESEARCHES CORPORATION (see Exhibit 10(vi), on page
E-59). NEW RESEARCHES is a 


                                  Page 4 of 27
<PAGE>   5

corporation organized under the laws of Panama. The Company has until December
15, 1997 to exercise its option.

On January 19, 1997, the Company entered into an agreement where it would act as
an investment banker in the recapitalization of RECEPTAGEN Ltd. (see Exhibit
(10(vii), on page E-61). RECEPTAGEN is a corporation incorporated under the laws
of Canada. RECEPTAGEN currently trades on the Toronto Stock Exchange (RCG) and
the NASDAQ Over-the-Counter (RCEPF). Upon completion of the recapitalization of
RECEPTAGEN, the Company will own over 40% of the outstanding common stock of
RECEPTAGEN.

Currently, it is not the intention of the Company to consider its investment in
RECEPTAGEN as an integral part of its business outside of its bridge financing
and special situation activities.

    (b)  BUSINESS OF ISSUER

         GENERAL

         The Company was formed to acquire a majority interest in existing
securities firms, banks, insurance companies, and other financial and brokerage
companies. The Company intends to actively engage in the business of the
companies in which it invests by serving as an "information link" between these
companies. The Company's goal in providing this information link is to improve
access to new markets and business opportunities for these companies.

         The Company also may provide bridge financing, which involves providing
capital to a private company, to assist the company in making a public offering
of its stock.

         In addition, the Company may invest up to 40% of its total assets
(exclusive of government securities and cash items), on an unconsolidated basis,
in debt or equity securities issued by privately held firms, and in securities
listed in markets that are open to public investment in Europe and North
America.

         InterUnion is both a holding company and an operating company engaging
in activities separate from the activities of its named subsidiaries.
Specifically, InterUnion derives independent revenues from financial consulting,
the bridge financing of pre-IPOs, and its participation in new ventures.

         PRODUCTS AND/OR SERVICES OF ACTIVE SUBSIDIARIES

         In addition to the operations of InterUnion Financial Corporation as
the parent, the Company owns operating subsidiary corporations. A description of
the business operations of these subsidiary corporations, each of which is
wholly-owned, is as follows:

    (1)  CREDIFINANCE SECURITIES LIMITED

         Credifinance Securities Limited. ("Credifinance") is an investment bank
with offices in Toronto and Montreal, and is a member of the Investment Dealers
Association of Canada, The Toronto Stock Exchange, Montreal Exchange and the
International Securities Market Association. Credifinance has 25 employees
engaged in fixed income and equity trading for Canadian institutions and in
corporate finance. Credifinance's six person research team provides perspective
on equity markets, companies and industries in Canada.

         Credifinance was started in 1991, engaging in institutional trading,
investment banking and research. The consolidation in the brokerage/investment
banking industry in Canada created opportunities for small companies to provide
better service to institutions. This unit began by specializing in the trading
of less than investment grade bonds. In 1991-92, it expanded into equity trading
for its institutional clients. Unlike the large brokerage firms, Credifinance
acts strictly as an agent, and does not take positions against its clients.


                                  Page 5 of 27
<PAGE>   6

         To enhance its service for the institutional clients, Credifinance has
developed research capability focusing on:

      -  biotechnology
      -  communications and media
      -  software
      -  telecommunications
      -  metals, minerals and precious metals mining
      -  oil and gas
      -  industrial products

         Credifinance's corporate finance activities consist primarily of
underwritings for small and medium-size companies. Between 1993 and 1995,
Credifinance was the sole underwriter in five transactions, ranging in value
from C (Canadian) $1.5 to $5.4 million; co-underwriter in two transactions of
C$32.5 million and C$11 million; participated in a C$135 million co-bought deal;
and was involved in two special transactions of C$10 and C$15 million.

         In fiscal 1996, Credifinance's corporate finance department
participated in 4 deals and raised in excess of C$15.3 million. In fiscal 1997,
Credifinance participated in 9 deals and raised in excess of C$150 million. The
firm is continuing an aggressive expansion in the underwriting of companies in
those sectors in which Credifinance's research specializes.

    (2)  GUARDIAN TIMING SERVICES INC.

         Guardian Timing Services, Inc. ("Guardian") is an investment management
firm located in Toronto, Canada, currently having approximately C$75 million in
assets under management. Guardian manages the Canadian Protected Fund, the
Protected American Fund and the First America Fund. It uses a proprietary ITM
market timing model owned by Bearhill Limited, Inc., another subsidiary of the
Company.

    (3)  CREDIFINANCE CAPITAL INC.

         Credifinance Capital, Inc. is an investment corporation located in
Toronto, Canada. The business activities of this subsidiary corporation are
limited to proprietary security investing using its own capital resources.

    (4)  BEARHILL LIMITED

         Bearhill Limited ("Bearhill") is an investment management firm.

         On September 9, 1994 Bearhill entered into an ITM SOFTWARE DEVELOPMENT
AGREEMENT with Guardian Timing Services, Inc. ("Guardian"). This Agreement
acknowledged that Bearhill owns the proprietary rights to certain computer
software known as ITM Software, which is a computer software program which is
used to generate buy and sell signals with respect to any stock market
monitored. The parties entered into the above-referenced agreement because
Bearhill wishes to market investment advisory services internationally and it
requires computer software in order to generate market timing signals. Guardian,
in turn, has agreed to perform the development of Release I of the ITM software
and the related documentation upon the terms and conditions of the Agreement.
See Exhibit 10(i), page E-29, for details of the ITM Software Development
Agreement.

         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. An earlier
version of the market timing model predicted the stock market downturn in
October, 1987, allowing Guardian's clients to get out of the market 10 days
prior to the downturn. 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.

                                  Page 6 of 27
<PAGE>   7

         On November 30, 1995 a Letter of Understanding was issued between the
Bank of Nova Scotia ("BNS") and Guardian Timing Services, Inc., InterUnion
Financial Corporation, Havensight Holdings Corp. and Bearhill Limited. This
Letter of Understanding was issued as a condition precedent to the execution of
an Investment Management Agreement pursuant to which BNS will retain the
services of Guardian Timing Services, Inc. with regard to the management of an
investment portfolio with a minimum size of $10,000,000 (Canadian).

         The material terms of the Letter of Understanding may be summarized as
follows:

     a. As a consideration of BNS entering into the Investment Management
        Agreement, Bearhill (the owner of the ITM software) grants to the BNS an
        irrevocable option to acquire the ITM. If BNS elects to exercise its
        option, BNS shall acquire 100% of the Class B shares of Bearhill (the
        Class B shares shall represent 30% of the equity of Bearhill) for
        $750,000 and shall enter into an agreement to acquire the ITM for $30
        million. This acquisition price of $30 million shall be financed by $10
        million in cash and a $20 million 15-year non-recourse promissory note,
        with principal payable at the end of the term. The option as amended on
        April 16, 1997, calls for renewal for a 4-year indefinite term at the
        discretion of the BNS, subject to the payment of an option fee annually
        (in advance) commencing on April 23, 1996. The option fee for the year
        commencing April 23, 1996 is C$25,000; the following year is C$25,000,
        the following year is C$50,000 and the final year is $50,000 (see
        Exhibit 10(vi), on page E-57).

     b. Even if the option is exercised, Guardian Timing Services, Inc.(GTS)
        retains the right (if J.P. Fruchet is in its employment) to be provided
        with the market signals generated by the ITM at no cost, provided that
        no more than $200 million of assets (or a larger amount as may be
        managed when notice to exercise the option is given) are managed using
        the ITM signals.

     c. If the option is exercised, Bearhill is to use the $750,000 obtained for
        the Class B shares as working capital. The $10 million paid in cash
        shall be divided with $1.6 million going to a trust account and $8.4
        million invested in Class 1 shares of the Nirvana Fund. All principal
        payments under the note are to be invested in Class 1 shares.

     d. Bearhill is to pay BNS for use of the timing signals generated by the
        ITM (exercise of the option) 15% of its gross revenue as a fee. If this
        fee is not sufficient to satisfy BNS's interest obligations under the
        note, any deficiency shall be satisfied by Bearhill.

     e. The only shares of Bearhill outstanding as of the date of this Letter of
        Understanding are Class A shares, now representing 100% of the equity of
        Bearhill, held currently by InterUnion.

  NOTE: The Letter of Understanding at Page E-42 incorrectly states that the
        Class A shares are held equally by InterUnion and Havensight. Actually,
        this equal ownership will occur at such time as the ITM software owned
        by Bearhill is to be sold to any party. This Letter of Understanding
        contemplates that such a sale is to occur. For a further explanation,
        see the Agreement starting at page E-55.

     f. If the Class B shares are issued upon the exercise of the option by BNS,
        the Class B shares shall receive 80% of all dividends paid by Bearhill
        until BNS has received $20 million, after which time the Class A and
        Class B shareholders are too share equally.

     g. Havensight and InterUnion each grant to BNS an immediate option to
        acquire their respective Class A shares at a price equal to 90% of the
        book value, upon the occurrence of one or more of the following events:

            i. the Note is satisfied in full prior to its maturity,

           ii. the Class B shareholders have received an aggregate of
               $25,000,000 in dividends from Bearhill,


                                  Page 7 of 27
<PAGE>   8

          iii. Bearhill defaults on any of its obligations to BNS, becomes
               insolvent or commits an act of bankruptcy, or

           iv. the Nirvana Fund under performs (meaning that the Fund's return
               averages less than 10% per annum compounded annually over any
               36-month period).

         The Letter of Understanding, including Schedule A, is included herein
as Exhibit 10(ii), commencing at page E-42.

         Subsequent to the execution of the above-referenced Letter of
Understanding, on December 20, 1995 an Investment Management Agreement was
issued between Guardian and BNS.

         This Agreement formally appoints Guardian as the investment manager of
an investment portfolio with an initial value of $10 million (Canadian).
Guardian is to use the market timing signals generated by the software developed
by Bearhill known as the "ITM Software" in handling the investment decisions of
the investment portfolio. The Agreement is to continue until either party gives
at least 30 days written notice of termination.

         Under the provisions of Schedule A, Guardian is to receive a management
fee of 1/2 of one percent per month of the net asset value of the Portfolio
determined at the end of each month and payable quarterly. There may be a bonus
payable to Guardian annually determined under the more restrictive of two
calculations, as specifically provided in Paragraph 4 of Schedule A of the said
Agreement. Schedule A provides that the minimum fee and bonus to be paid to
Guardian under the Agreement is $50,000 (Canadian).

         The Investment Management Agreement, including Schedule A and a
statement of the investment objectives and guidelines under the Guardian Timing
Services portfolio, is included herein as Exhibit 10(iii) commencing at page
E-46.

         Subsequent to the acquisition of Bearhill by InterUnion (as the result
of the purchase of all outstanding stock of Bearhill which was owned by
Havensight Holdings, Ltd.), on January 19, 1995 an Agreement was executed
between Havensight and InterUnion providing that if InterUnion should conclude
an agreement of sale of the ITM software owned by Bearhill, Havensight will have
the right to buy one-half of the Bearhill stock for a nominal
consideration ($1.00). This Agreement is included herein as Exhibit 10(iv)
starting at Page E-55.

         COMPETITION

         The search for potentially profitable investments is intensely
competitive. A list of actual and potential competitors would include the
multinational banks, regional banks, thrift institutions, investment banks,
brokerage firms, finance and leasing companies, merchant banks, venture
capitalists and other financial service companies. The Company may be at a
disadvantage when competing with firms with substantially greater financial and
management resources and capabilities than the Company.

         The issue of competition also directly impacts the subsidiary companies
owned by InterUnion Financial Corporation. Credifinance Securities Limited
concentrates on providing underwritings for small and medium-sized
technology-intensive companies. Credifinance must compete with underwriting
companies in Canada that are superior in asset strength and staff. Guardian
Timing Services Inc. and Bearhill Limited both operate as managers of funds. A
decline in their investment performance could cause the loss of these essential
accounts. If the ITM market timing model used by both of these companies should
not show an accurate forecast the companies could lose the managed accounts to
larger investment management firms.

         GROWTH STRATEGY

         The growth strategy consists of two complementary components:

                                  Page 8 of 27
<PAGE>   9


      o  Investing in the existing portfolio of financial services companies, 
and acquiring, when the appropriate opportunities arise, major positions in
investment managers, banks, thrifts, brokerage houses and other financial
services companies (e.g. leasing, insurance) positioned in niche markets; and

      o  Expansion of bridge financing and investment banking activities.

         However, any acquisition will represent the second phase in the
Company's growth strategy. The first phase involves building up the existing
operations to more completely utilize the existing resources and to capitalize
on each unit's competitive strengths. For example, the Montreal office of
Credifinance, where its President is located, has been expanded and is fully
bilingual, staffed by French Canadians to better serve Quebec institutions. The
corporate finance capabilities of Credifinance will continue to be expanded to
fully utilize the unit's research and corporate finance capabilities and trading
networks. Additional capital will enable InterUnion to participate in more
bridge financing opportunities that in turn, will provide more corporate finance
work for Credifinance; and will permit Credifinance to increase its block
trading activity.

         GOVERNMENT REGULATION

         The operating activities of InterUnion Financial Corporation are not
subject to governmental regulatory agencies. The investment management services
of Bearhill Limited are not subject to direct government regulation in Canada.

         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
rules, regulations, and administrative rulings of these entities.

         Guardian Timing Services Inc. is regulated by the Ontario Secuirties
Commission

         The auction firm of Reeve, Mackay is not subject to Canadian government
regulation.

         InterUnion Financial Corporation is not subject to the Investment
Company Act of 1940 (the "Act"). Section 3(a)(3) of the Act defines an
"investment company" as "any issuer which . . . owns or proposes to acquire
investment securities having a value exceeding 40 per cent of the value of such
issuer's total assets (exclusive of Government securities and cash items) on an
unconsolidated basis." "Investment securities" are defined for purposes of this
section as "all securities except (A) Government securities, (B) securities
issued by employees' securities companies, and (C) securities issued by
majority-owned subsidiaries of the owner which are not investment companies."

         The Company is not an investment company because it will invest no more
than 40% of its total assets (excluding government securities and cash items),
on an unconsolidated basis, in "investment securities" as defined in the Act.
The Company considers its primary business to be engaging in non-investment
company businesses through majority owned companies.

         EMPLOYEES

         The employees of the Company and its subsidiaries are all full-time
employees. The total number of such employees is listed below:

         InterUnion Financial Corporation                               3
         Bearhill Limited                                               0
         Guardian Timing Services Inc.                                  2
         Credifinance Capital Inc.                                      2
         Credifinance Securities Limited                               25
                                                                      ---
         Total Employees                                               32
                                                                      ===



                                  Page 9 of 27
<PAGE>   10


Item 2   DESCRIPTION OF PROPERTY

         Neither the Company nor any of its subsidiaries owns real estate.

         The Company and certain of its subsidiaries do have leasehold interests
in real estate as shown below.

<TABLE>
<CAPTION>
    Lessee & Location of                          Gross Area                                Annual Rent
          Premises                                 (Sq. Ft.)               Term             Per Sq. Ft.
-------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>                    <C>  
InterUnion Financial Corporation
Suite 301
249 Royal Palm Way
Palm Beach, Florida                                   1,000           Mar. 97-Feb. 98        USD $4.52

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

Credifinance Securities Limited
Suite 3304
130 Adelaide Street W                                                 Feb. 93-Jul. 97          C$12.00
Toronto, Ontario                                        927           Jul. 97-Jan. 02          C$15.00

Credifinance Securities Limited
Suite 1580
1501 McGill College Ave.
Montreal, Quebec                                      1,386           Jun. 92-Jan. 98          C$16.00
</TABLE>


Item 3   LEGAL PROCEEDINGS

         Not applicable


Item 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.

PART II

Item 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    (a)  MARKET INFORMATION

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


                                 Page 10 of 27
<PAGE>   11


         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>      
         FY 96   Qtr 1       $    80.00        $   85.00        $    32.50        $   40.00
         FY 96   Qtr 2            40.00            50.00             15.00            30.00
         FY 96   Qtr 3            30.00            32.50             10.63            21.25
         FY 96   Qtr 4            21.25            21.25              5.00            13.75
         FY 97   Qtr 1            13.75            13.75              5.00             7.00
         FY 97   Qtr 2             7.00            15.00              4.75             5.00
         FY 97   Qtr 3             5.00             6.00              4.50             4.50
         FY 97   Qtr 4             4.50             6.00              4.50             5.00

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

</TABLE>

    (b)  HOLDERS

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

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

                    CLASS OF STOCK                    NUMBER OF HOLDERS
                   -----------------                  -----------------

                     Common Share                             385
                   Class A Preferred                            1
                   Class B Preferred                            0
                   Class C Preferred                            0

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

    (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, that limit the ability to payout all earnings as dividends. The
Board of Directors does not anticipate paying any dividends in the foreseeable
future; it intends to retain its distributable earnings, if any, for the
expansion and development of its business.


    (d)  RECENT SALES OF UNREGISTERED SECURITIES

    (i)  SALES PURSUANT TO REGULATION D

         The following sales 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 D, Rule 504,
promulgated by the Securities and Exchange Commission:

<TABLE>
<CAPTION>
=========================================================================================================
       Title of Class        Number Shares     Price per Share      Consideration          Date of Sale
       ---------------       -------------   ------------------     -------------          ------------ 
<S>                               <C>            <C>              <C>                      <C> 
         Common                   84,900         $  0.29          $    24,621               April 1994
         Common                    8,750            4.00               35,000               April 1994
         Common                    5,000            4.00               20,000                 May 1994
         Common                    6,250            4.00               25,000                July 1994
         Common                    5,000            2.00               10,000                July 1994

</TABLE>

                                  Page 11 of 27
<PAGE>   12

<TABLE>
<CAPTION>
=======================================================================================================
       Title of Class        Number Shares     Price per Share      Consideration        Date of Sale
       ---------------       -------------   ------------------     -------------        ------------ 
<S>                               <C>          <C>                <C>                   <C> 
         Common                   18,511       $    2.00          $    37,022             August 1994
         Common                   25,000            2.00               50,000             August 1994
         Common                   50,000            1.00               50,000            October 1994
         Common                   75,000            4.00              300,000              March 1994
         Common                   62,500            2.00              125,000               June 1995
         Common                  160,000            2.00              320,000              March 1996

=======================================================================================================
</TABLE>

NOTES TO SALES PURSUANT TO REGULATION D

    (1)  All sales of securities are shown based upon subsequent reverse stock
         splits as approved by the shareholders (1 for 10 in October 14, 1994
         and 1 for 20 in May 17, 1996).

    (2)  All sales were made directly by the Company as issuer. No commissions
         or underwriting discounts were paid in connection with the sales.

    (3)  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.

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

    (5)  The company specifically relied upon compliance with Rule 504 of
         Regulation D (Regulation Section 230.504). The Company qualified for
         Rule 504 because all offers and sales were made by the issuer, the
         Company was not subject to the reporting requirements of Section 13 or
         15(d) of the Exchange Act, the Company was not an investment company,
         and the Company was not a development stage company. Further, the
         Company was in compliance with the conditions as set forth in
         Regulation Section 230.504(b).

    (B)  SALES PURSUANT TO REGULATION S

         The following sales 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 Shares       Price per Share      Consideration    Commission         Date of Sale
     ---------------     -------------       ---------------      -------------  ---------------    ---------------
<S>                          <C>                 <C>              <C>               <C>                        <C> 
     Class A Preferred       1,500,000           0.10             $   150,000       $      nil        December 1994
     Common                    100,000           2.00                 200,000              nil         October 1995
     Common                      1,000          20.00                Services              nil
     Common                    151,500           1.00                 151,500              nil          August 1996
     Common                    105,642           5.00                 528,210           32,371         October 1996

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

</TABLE>


NOTES TO SALES PURSUANT TO REGULATION S

    (1)  All sales of securities are shown based upon subsequent reverse stock
         splits as approved by the shareholders (1 for 10 in October 14, 1994
         and 1 for 20 in May 17, 1996).

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


                                 Page 12 of 27
<PAGE>   13

    (3)  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.

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

    (5)  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).

    (6)  The 1,000 common shares issued for services in March 1996, was for work
         done in connection with the development of a business plan and market
         research for said business plan. These shares were given to a non
         related party.

Item 6   MANAGEMENT'S DISCUSSION AND ANALYSIS


    (a)  OVERVIEW

         InterUnion Financial Corporation (the "Company") was incorporated on
February 7, 1994. The underlying operational strategy of the Company is to
acquire a significant influence in operating companies primarily of a financial
nature on the basis of an exchange of stock, with certain additional incentives
(such as stock warrants) depending upon the particular company to be acquired,
and to actively participate in the management of these companies. Accordingly,
the Company has acquired the following operating subsidiary corporations as
outlined below:

<TABLE>
<CAPTION>
         Corporation Acquired                        Nature of the Company              Date Acquired
         --------------------                        ---------------------              -------------
<S>                                                   <C>                                  <C>  
         Bearhill Limited                            Investment Management                 1-18-95
         Guardian Timing Services, Inc.              Investment Management                 1-18-95
         Credifinance Capital Inc.                   Investment Company                    3-20-95
         Credifinance Securities Limited             Investment Bank                       3-20-95
         Rosedale Realty Corporation                 Real Estate Sales                     3-20-95
         Reeve, Mackay & Associates Ltd.             Auction Sales                         5-15-95

</TABLE>


         Note:    All of the above-listed subsidiaries are active, with the
                  exception of Rosedale Realty Corporation which was disposed of
                  by the Company pursuant to an assignment in bankruptcy in
                  1996. In addition, the Company is actively pursuing the sale
                  of Reeve, Mackay & Associates Ltd.

         Because of the nature of the Company as a holding company, it was to be
expected that no revenues would be realized initially after the date the Company
commenced business operations. All funding to the Company from its inception to
the date of its first subsidiary acquisition was derived from a series of
private (non-registered) sales of stock under Regulation D as promulgated by the
United States Securities and Exchange Commission.

         The Company commenced its revenues stream with its first acquisitions
on January 18, 1995. The following table shows the gross revenue from its
subsidiaries prior to consolidation and elimination for the completed years of
1995, 1996 and 1997. The table also includes gross revenues generated by
InterUnion, itself. The table does not include revenue from Rosedale Realty
Corporation due to its termination in 1996 or Reeve, Mackay & Associates as the
Company plans to divest itself of this entity.



                                 Page 13 of 27
<PAGE>   14

<TABLE>
<CAPTION>

         Company                            FY 1995        FY 1996         FY 1997
         -------                            -------        -------          ------
<S>                                         <C>            <C>             <C>   
         Bearhill                               -0-         30,000          14,000
         Guardian Timing                     65,000        355,000         365,000
         Credifinance Capital                   -0-         65,000         180,000
         Credifinance Securities          4,000,000      4,500,000       3,725,000
         InterUnion                           5,000        900,000       1,475,000
                                          ---------      ---------       ---------
                  Total                   4,070,000      5,850,000       5,759,000
                                          =========      =========       =========
</TABLE>


         Bearhill Limited is an investment management firm. However, the primary
asset of Bearhill remains its ownership of a computer software program, ITM
Software. If the Bank of Nova Scotia exercises an option to purchase the ITM
Software (see Exhibit 10(ii) at page E-42) this could produce major revenue for
the Company. If the option is not exercised, Bearhill will not be adversely
affected nor will the Company.

         Guardian Timing Services Inc. is an investment management firm. The
increase in revenues from $63,240 in fiscal 1995 to $355,904 in fiscal 1996 is
due primarily to the fact that income from Guardian is included in fiscal 1995
was for only 3 months. In addition, assets under management for Guardian have
risen from C$20 million in fiscal 1995 to C$80 million in fiscal 1996 and
maintained that level in fiscal 1997 which explains the low growth in fiscal
1997.

         Credifinance Capital Inc. primarily invests its own capital resources.
There is no reason to expect any consequential change in attained and projected
revenues.

         Credifinance Securities Limited is an investment bank. The revenues for
fiscal year 1997 were 17.2% lower than attained revenues in fiscal 1996. The
decrease is primarily attributable to the refocusing of its activities from
agency trading to corporate finance. Management expects revenues to return to
the $4 - 5 million level by the end of fiscal 1998.

         InterUnion Financial Corporation's increase in revenue from $900,000 in
fiscal 1996 to $1,475,000 is due to a stronger than expected return on its
marketable securities. As of March 31, 1997, this revenue had not been realized.
InterUnion derives its own revenues primarily from bridge financing and special
situations and some limited investment in marketable securities.

         Although the Company did secure certain bridge financing in the first
half of fiscal 1997, in the latter portion of the fiscal year it became heavily
involved in financial negotiations with two corporations:

     1. New Researches Corporation, a Geneva based company whose primary asset
is ownership of approximately 3.2 million shares and 200,000 warrants of Genesis
Microchip, Inc., a Canadian corporation.

         In early 1990, a decision was made to re-structure Genesis as a
"fabless" semiconductor company emphasizing engineering intensive and
video/image DSP oriented integrated circuits (ICs). At the same time, the ASIC
design business continued to grow. Genesis began investing heavily in research
and development in order to bring to market a number of ICs aimed at providing
new capabilities to the emerging multimedia/video networking/video editing/
projection system/high end display markets as well as the existing video/image
markets in the medical, industrial, broadcast, compression and commercial image
processing fields.

         Genesis is positioned to become an important supplier of leading edge
video/image resizing, de-interlacing and related video DSP ICs. With the
introduction of its GENESIS SCALING and GENESIS VIDEO LINE DOUBLING series of
ICs, board-level reference design and software solutions, Genesis has entered
the next state of its corporate development as a volume IC supplier, with almost
all of its revenues coming from the sale of IC product.


                                 Page 14 of 27
<PAGE>   15

         Audited financial statements of Genesis, dated May 31, 1996, show that
Genesis had revenue in FY 1995 of CDN $388,000 and revenue in FY 1996 of CDN
$1,892,000. Genesis anticipates that it will file a public registration within
the next 12 months.

         After extensive negotiation, InterUnion entered into a Letter of
Understanding with New Researches Corporation et al. as of September 26, 1996
which granted to InterUnion an irrevocable option to acquire 3,216,667 common
shares and 200,000 common share purchase warrants of Genesis Microchip, Inc. The
terms of this option may be summarized as follows:

     a.  InterUnion paid $80,000 (US) to the Vendors, as defined in The Letter
         of Understanding (see Exhibit 10(vi), on page E-59), for the option
         rights.

     b.  The option has an expiration date of December 15, 1997.

     c.  If the option is exercised, InterUnion shall pay to the Vendors the sum
         of $2 million (US) and upon sales of the Genesis stock, InterUnion is
         to pay to the Vendors 80% of the proceeds of such sales in excess of
         CDN $1.00 per share.

     d.  If the Vendors receive a bona fide offer from a third party to purchase
         the New Researches shares, InterUnion shall then have the right to
         counter the offer or exercise its option. The Letter of Understanding
         is included herein as Exhibit 10(vi) at page E-59.

     2.  Receptagen Ltd. is a Canadian public corporation involved in
biotechnology (drug discovery and development) and the sales of its products.
InterUnion has entered into an agreement (subject to the approval by creditors
of Receptagen) to provide a secured bridge loan to that company exchangeable
into a convertible debenture. Also, the Company will give trade creditors of
that company its common stock in exchange for their debt and then plan to
convert the debt into shares of Receptagen. Creditors approval was received in
April 1997.

         An agreement between InterUnion and Receptagen was executed as a Letter
of Agreement on January 7, 1997 (see Exhibit 10(vii), on page E-61). This
agreement was subsequently modified to reflect the creditors approval and may be
summarized as follows:

     a.  The recapitalization of Receptagen will be done in three stages.

     b.  The first stage involves a bridge loan from InterUnion of CDN $400,000
         to maintain the Company's operations until the proceeds from the
         proposed Special Warrants Offering are released to the Company. CDN
         $100,000 is available to the Company as of February 7, 1997. The bridge
         loan is secured by a security agreement, granting security in patents
         and patent rights, and is convertible into units at CDN $0.105 per unit
         for a period of five years. Each unit consists of common shares and
         common share purchase warrants of Receptagen Ltd. pursuant to a secured
         convertible debenture.

     c.  In stage two, the trade creditors will exchange their debt of
         approximately CDN $9 million for shares of stock of InterUnion. The
         creditors will received CDN $0.20 per CDN $1.00 in InterUnion shares,
         amounting to approximately 260,000 shares and 213,000 share purchase
         warrants with an exercise price of USD $4.00. InterUnion will then
         receive units of Receptagen at CDN $0.07 per unit, the amount of which
         depends upon the settlement amount with the creditors. Each unit
         consists of one common share and one non-transferable common share
         purchase warrant with an exercise price of CDN $0.14.

     d.  The third stage involves an agreement between Receptagen Ltd. and
         Credifinance Securities Limited, a Canadian investment dealer based in
         Toronto with seats on both The Montreal and Toronto Stock Exchanges,
         and a wholly-owned subsidiary of Credifinance Capital Inc., for a
         $2,500,000 Special Warrants Offering priced at CDN $0.116 per Special
         Warrant. Receptagen was successful in raising the funds as the
         subscription was closed on May 23, 1997.

                                 Page 15 of 27
<PAGE>   16

         The Letter of Agreement is included herein, as Exhibit 10(vii),
starting at page E-61.

         In the event that InterUnion should decide to exercise its option to
purchase the stock of New Researches Corporation, it will obtain the necessary
cash by a private placement offering of its stock under Rule 506. However, if
Central Investment Trust, acting for RIF Capital, is agreeable, this acquisition
may be achieved by the issuance of a promissory note to the vendor and the
issuance of InterUnion stock.

         There is no assurance that the Company will find acceptable companies
for bridge financing in the future and there is no method of forecasting this
probability except on a historical basis.

         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. The only exception to this
remuneration policy was Reeve, Mackay, where the salaries are fixed but the
marketing and research expense can fluctuate with the size of the auction.
Therefore, commissions paid out and marketing expenditures are the most
important expense and generally rise and fall along with revenues of the
Company.

         Across all of the Company's subsidiaries, the contribution margin
(contribution margin is defined as Revenues less variable expenses) was 43.0% in
fiscal 1997 versus 36.1% in 1996 versus 33.4% in 1995. The increase in margin is
primarily due to a shift in Credifinance revenue from secondary market agency to
primary market revenue from corporate finance and underwriting activities. The
Company expects to maintain these margins due to the growth in revenues
summarized above and the stability of its commission payout structure.

         Interest Income Net of Interest Expense

         The Company's only debt that causes a revenue or an expense arises from
its broker/dealer operation and from funds borrowed on a short term basis for
its trading activity. This amount is not expected to be significant with respect
to revenues on a yearly or quarterly basis.

         Discontinued Operations

         The Company acquired Rosedale Realty Corporation in March 1995.
Rosedale recorded operating losses of $94,253 in 1996. As a result of continuing
losses and further analysis, Management felt that the prospect of future profit
was not sufficient for Rosedale to be retained as a subsidiary. Therefore,
fiscal 1996 will be the last year in which the income statement will carry any
item regarding Rosedale, as the Company disposed of it.

         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. Due to the competitive
nature of the auction industry and the difference in the compensation philosophy
of the Company, management has decided to divest itself of its investment in
Reeve, Mackay. The Company expects to complete this process within the first
half of fiscal 1998.

         Exposure to International Operations

         Although all of the Company's revenues are generated from North
America, 26% was derived from the United States in 1997 and less then 15% in
1996; the balance is primarily earned in Canada. Therefore, a small foreign
exchange risk does exist. Due to the size of the risk and that each company
within the InterUnion Group operates independently of each other, the Company
does not purchase any derivative products to offset this risk. In addition, the
Company considers North America as its domestic market.


                                 Page 16 of 27
<PAGE>   17

         Seasonal

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

    (b)  RESULTS OF OPERATIONS

         Fiscal 1997 marks 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 is reporting profit from
                   continuing operations.

         Financial highlights are as follows:

<TABLE>
<CAPTION>
                                                                   1997              1996              1995
                                                               ----------         ---------         ---------
<S>                                                             <C>               <C>               <C>      
                  Revenues                                      5,712,183         5,857,157         4,028,068
                  Income from continuing operations               160,676           (75,378)         (179,468)
                  Discontinued Operations                        (390,829)         (429,248)         (184,845)
                  Net Loss                                       (230,153)         (504,626)         (364,313)

                  Assets                                       38,820,507         9,364,007        40,404,190
                  Shareholders' Equity                          3,639,337         3,033,848         2,983,475
                  Working Capital                               1,750,889           928,268           775,965
                  Book Value per Share                               3.75              4.38              8.08

                  Common Shares Outstanding                       969,714           692,558           369,058
</TABLE>


         Fiscal Year 1997 Compared to Fiscal Year 1996

    (1)  Overview

         In fiscal 1997, revenues decreased by $144,974 (or 2.5%) over fiscal
year 1996. For the year, costs of revenues as a percentage of sales decreased to
67.1% from 71.8% a year earlier. Fixed overhead and non cash expenses also
decreased by 61,082 or 4.2%. These three factors contributed to the Company
realizing income from continuing operations of $160,676 versus a loss of $75,378
a year earlier. The Company reported a net loss of $230,153 in 1997 versus a net
loss of $504,626 due to the losses the Company recorded in relation to Rosedale
Realty Corporation and Reeve, Mackay & Associates as discontinued operations.
Excluding these discontinuned operations, the Company's earnings per share from
continuing operations was $0.18 versus a loss of $0.15 a year earlier.

    (2)  Revenues

         Revenues decreased by $144,974 (or 2.5%) over fiscal year 1996
(from $5,857,196 to $5,712,183). The majority of the decrease came from the
activities of Credifinance Securities Limited, the Company's main operating
subsidiary, as its revenue decreased almost $800,000 or 17.8% (from $4,532,482
to $3,727,292). The reason why Credifinance Securities' revenues decreased was
due to the firm restucturing its efforts from agency activities to corporate
finance activities. This decrease was offset by an increase in InterUnion's
revenues of almost $0.6 million or 62.1% (from $911,094 to $1,477,062).

    (3)  Cost of Revenues

         Costs of revenues (Selling, General and Administrative expenditures)
for the year decreased by $515,520 or 9.0% to $5,214,477 from $5,729,997. This
decrease is due to the fact that the Company's revenues are generated more from
underwritings then from buy and sell orders, where it retains a greater
percentage, as variable costs decreased to 57.2% of revenues from 63.9% a year
earlier. In addition 


                                 Page 17 of 27
<PAGE>   18

cost cutting of fixed overhead contributed a savings of approximately $125,000.
The Company was able to cut personnel due to the change in target market.

    (4)  Income from Continuing Operations

         Income from continuing operations net of the provision for income
taxes, increased to $160,676, or $0.18 per share, from a loss of $75,378, or
$0.15 per share, a year earlier. As discussed above the increase in
profitability has been attained by the combination of two things. The Company is
deriving its revenues from sources where the commissions to be paid out are less
(underwriting versus agency) and the cost saving discussed above. The average
number of common shares outstanding for the year ending March 31, 1997 is
907,097 versus 501,335 a year earlier. These figures do not include an losses of
$390,829 and $429,248 in 1997 and 1996 respectively due to the discontinued
operations of Reeve, Mackay & Associates Ltd. and Rosedale Realty Corporation.

         Fiscal Year 1996 Compared to Fiscal Year 1995

    (1)  Overview

         In fiscal 1996 revenues increased by over $1.8 million (or 45.4%) over
fiscal year 1995. For the year, costs of revenues as a percentage of sales
decreased to 63.9% from 66.6%. Fixed overhead and non cash expenses increased
$128,334 or 9.7% to $1,452,313 from $1,323,979. The loss from continuing
operations decreased to $75,378 from $179,468. The Company overall reported a
Net Loss of $504,626 in 1996 versus a loss of $364,313 after discontinued
operations. Excluding these discontinued operations, the Company's loss per
share from continuing operations was $0.15 versus $1.14 a year earlier.

    (2)  Revenues

         Revenues increased by over $1.8 million (or 45.4%) over fiscal year
1995 (from $4,028,067 to $5,857,196). The majority of the increase came from the
activities of InterUnion itself, as it had almost $1 million in revenues on its
own in 1996 versus only interest income of $5,270 a year earlier. In addition,
Guardian Timing's contribution to the Company increased to $355,904 from
$63,240. Without these two revenue sources, InterUnion's growth in revenue would
have been just 13.2%.

    (3)  Cost of Revenues

         Costs of revenues (Selling, General and Administrative expenditures)
for the year increased by $1,538,042 or 36.7% to $5,729,997 from $4,191,955.
This increase is due to additional commissions to be paid out due to increased
revenues and the fact that the Company hired additional staff in anticipation of
the increasing business that the bull market was providing. The hiring was done
in advance of the business in order to be prepared for the higher volume.

    (4)  Loss from Continuing Operations

         Loss from continuing operations net of provision for income taxes for
the year was $75,378 or $0.15 per share versus $179,468 or $1.14 per share a
year earlier. The average number of common shares outstanding for the year
ending March 31, 1996 is 501,335 versus 157,531a year earlier. These figures do
not include losses of $429,248 and $184,845 in 1996 and 1995 respectively due to
the discontinued operations of Reeve, Mackay & Associates Ltd. and Rosedale
Realty Corporation.


                                 Page 18 of 27
<PAGE>   19


    (c)  LIQUIDITY AND CAPITAL RESOURCES

The Company does not have any long term debt. In order to meet its growth plans
and any operating cash requirements the Company's current policy is to issue
additional capital stock. 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:

<TABLE>
<CAPTION>
                 Date                           # of Shares              Amount             Type
              -----------                       -----------             --------        --------------
<S>                                                <C>               <C>                              
              April 1994                            2,500               $ 10,000        Regulation "D"
               May 1994                             5,000                 20,000        Regulation "D"
               July 1994                           11,250                 35,000        Regulation "D"
              August 1994                          43,511                 87,022        Regulation "D"
             October 1994                           5,000                 50,000        Regulation "D"
              March 1995                           75,000                300,000        Regulation "D"
               June 1995                           62,500                125,000        Regulation "D"
             October 1995                         100,000                200,000        Regulation "D" & "S"
              March 1996                          160,000                320,000        Regulation "D"
            September 1996                        277,142                759,710        Regulation "S"

</TABLE>

         Currently all operating units with the exception of Reeve, Mackay are
contributing positive cash flows. Therefore, the Company does not anticipate the
need to raise further funds unless required to conclude an acquisition. Previous
cash requirements were needed to fund the operations of Reeve. Mackay &
Associates Ltd and Rosedale Realty Corporation. As stated earlier, the Company
has started to search for a purchaser of Reeve, Mackay and the Company has
already divested itself of Rosedale.

         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 which has also not been discussed above.

         Certain statements constitute "forward looking statements" within the
meaning of the Private Securities Litigations Reform Act of 1995. Such forward
looking statements involve risks, uncertainties and other factors which may
cause the actual results, performance and achievements of the Corporation to be
materially different from future results, performance or achievement expressed
or implied by such forward looking statements.


Item 7   FINANCIAL STATEMENTSFINANCIAL STATEMENTS

         The audited consolidated financial statements for InterUnion Financial
Corporation, covering fiscal years ended March 31, 1997 and 1996 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

         Effective March 4, 1997, InterUnion Financial Corporation
("InterUnion") has retained Goldstein, Golub, Kessler & Company, P.C. ("GGK") of
New York as its new certifying accountants. GGK, a member of Nexia
International, replaces Mintz & Partners ("MP") of Toronto, also a member of
Nexia International. MP's report on InterUnion's financial statements during the
two most recent fiscal years and all subsequent interim periods preceding the
date hereof contained no adverse opinion or a 


                                 Page 19 of 27

<PAGE>   20

disclaimer of opinion, and was not qualified as to uncertainty, audit scope or
accounting principles. The decision to change accountants was approved by
InterUnion'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 MP on any
matters of accounting principles or practices, financial disclosure, or auditing
scope or procedure, which disagreements, if not resolved to satisfaction of
Mintz, 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 hereof.

         Effective March 04, 1997, InterUnion engaged GGK as its principal
independent accountants. During the last two fiscal years and the subsequent
interim period to the date hereof, InterUnion did not consult GGK regarding any
matter or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

         In accordance with Item 304(a)(3), a letter from the Company's former
principal independent accountants agreeing with the statement set forth is
enclosed as Exhibit 16, on page E-67.


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

Name, Municipality
of Residence                          Age           Length of Service
------------------------------------------------------------------------------

Georges Benarroch                     50            Appointed as President and
Toronto, Ontario                                    Chairman of the Board,
Canada                                              March 21, 1994

T. Jack Gary, III                     56            Appointed as Secretary
West Palm Beach, Florida                            January 30, 1995

Ann Glover                            47            Appointed to Board
Toronto, Ontario                                    of Directors
Canada                                              February 17, 1995

Jacques Meyer de Stadelhofen          49            Appointed to Board
Geneva, Switzerland                                 of Directors
                                                    December 16, 1994

Karen Lynn Bolens                     50            Appointed to Board
Geneva, Switzerland                                 of Directors
                                                    December 16, 1994

Selwyn J. Kletz                       52            Nominated to the Board and
Toronto, Ontario                                    Vice-President
Canada


         GEORGES BENARROCH is the President, Chief Executive Officer and Chief
Financial Officer of the Company. He is also the Chief Executive Officer, and
Chairman of the Board of Credifinance 

                                 Page 20 of 27
<PAGE>   21

Securities Limited, President, Chief Executive Officer, and Chairman of the
Board of Credifinance Capital Inc. and Chief Executive Officer, and Chairman of
the Board of Reeve, Mackay & Associates, Ltd. -- all wholly-owned subsidiaries
of the Company. He is also the President of Equibank.

         Since 1977, Mr. Benarroch has held the position of officer and
partner/director with various investment firms and private/public companies in
the United States, Canada and Europe. He has been a senior partner and/or seat
holder of a member firm of The Toronto Stock Exchange since 1982. His experience
covers Euro-financings, venture capital, mining and high tech financings and
bridge financings.

         T. JACK GARY, III is the Secretary of the Company. He is also Branch
Manager of the West Palm Beach, Florida, office of Raymond James & Associates, a
national brokerage firm, having held that position since 1995. He is the
President of Crown Financial Advisors, Inc., an investment advisory firm. From
April, 1988 to 1992 Mr. Gary was President and Chief Executive Officer of Crown
Capital Advisors, Inc., a company registered as an investment advisor with the
Securities and Exchange Commission and with the State of Florida under the
Florida Securities and Investor Protection Act. From 1992, until his appointment
with Raymond James, Mr. Gary served as Chief Executive Officer of Crown
Financial and Executive Vice President of Crown Capital Advisors, Inc. Mr. Gary
will devote approximately 10% of his time to his duties as Secretary at
InterUnion.

         ANN GLOVER serves as a Director of the Company. She is a Director,
Secretary/Treasurer of Credifinance Securities Limited a subsidiary of the
Company. Ms. Glover has been an employee of Credifinance Securities Limited
since 1991, having held the position of a Director, Secretary/ Treasurer, and
Chief Compliance Officer. Ms. Glover will devote approximately 10% of her time
to InterUnion as she is also a director and officer of Credifinance Securities
Limited.

         JACQUES MEYER DE STADELHOFEN serves as a Director of the Company. Since
1981 through and including the present time, he has practiced as an attorney,
specializing in tax and financial matters for international corporations and
charitable organizations. Mr. Stadelhofen's duties for InterUnion will be
limited to his participation at Board Meetings.

         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.

         SELWYN J. KLETZ has held the position of officer and partner/director
with various investment firms and private/public companies in Canada and South
Africa. His experience in the investment industry covers research, investment
banking, merchant banking, corporate finance and investment management. Mr.
Kletz will be devoting 100% of his time to InterUnion.

     (1)  No director of InterUnion is currently a director of any other
          reporting company.
     
     (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.


                                 Page 21 of 27
<PAGE>   22


    (b)  IDENTIFY SIGNIFICANT EMPLOYEES

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

    (c)  FAMILY RELATIONSHIPS

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

    (d)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

         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.

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

         For the two fiscal years ended March 31, 1997, 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 & PRINCIPAL          FISCAL                   OTHER         LONG TERM         ALL OTHER
POSITION                   YEAR       SALARY       BONUS        COMPENSATION      COMPENSATION      COMPENSATION
----------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>         <C>            <C>               <C>               <C>   
Georges Benarroch          1996        None        None           $50,000*           None               None
President  & CEO           1997        None        None              None            None               None


Selwyn J. Kletz            1996        None        None              None            None               None
Vice-President             1997        None        None              None          13,265               None

</TABLE>

*Georges Benarroch was paid $50,000 as compensation for services subsequent to
the end of the fiscal year ending March 31, 1996. No other officer was paid
compensation. Mr. Benarroch was paid his compensation in the form of cash.

    (B)  ALL COMPENSATION COVERED

         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, 1997.

         As of the date of this registration statement, the Company has no
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.



                                 Page 22 of 27
<PAGE>   23

         As of the date of this registration statement, 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.


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 of any class of the
said issuer's voting securities.

<TABLE>
<CAPTION>
       Title                     Name and Address                   Amount and Nature           Percent
     of Class                   of Beneficial Owner                of Beneficial Owner         of Class
-----------------------------------------------------------------------------------------------------------------------------------

<S>                         <C>                                         <C>                    <C>   
     Common                RIF Capital Inc. (1)                          532,499                54.91%
                           Price Waterhouse Centre
                           PO Box 634C
                           St. Michael, Barbados, WI

     Common                Capital Securities & Credit Corp.              50,919                 5.25%
                           114 Belmont Street
                           Toronto, Ontario, Canada M5R 1P8

     Common                Finance Research Development                   50,500                 5.21%
                           (FRD) Trust
                           Icaza, Ruiz-Gonzalez & Alemen
                           Vanterpool Plaza, 2nd Floor
                           Wickhams Cay, PO Box 873
                           Road Town, Tortola, BVI

     Common                Financiera Hispano-Suiza, SA                   50,050                 5.16%
                           10 Rue Pierre-Fatio
                           Geneva, Switzerland  CH1204

                                                                       ---------               ------  
                           TOTAL                                         506,815                73.18%
                                                                       =========               ======  

     Preferred A           RIF Capital Inc.                            1,500,000               100.00%
                           Price Waterhouse Centre
                           PO Box 634C
                           St. Michael, Barbados, WI

</TABLE>

--------------------

    (1) RIF Capital Inc. is a wholly-owned subsidiary of Equibank Inc. which is
        wholly-owned by Central Investment Trust. Georges Benarroch is the sole
        protector of Central Investment Trust and is not a beneficiary of the
        Trust nor its subsidiaries.


                                 Page 23 of 27
<PAGE>   24

    (2) The principal and 100% beneficial owner of Capital Securities and
        Credit Corp. is Mrs. S. Benarroch, 68 Rue Spontini, 75116 Paris,
        France.

    (3) The principal and 100% beneficial owner of Finance Research Development
        Trust is Mr. G. Serfati, Cogeser S.A.R.L., 11 bis Ave de Versaile,
        75116 Paris, France.

    (4) The principal and 100% beneficial owner of Financiera Hispano-Suiza, SA
        is Mrs. N. Balloul, 21 rue Curial, 75019.

    (5) Mrs. S. Benarroch is the mother of Georges Benarroch. The 532,499
        shares as listed for RIF Capital, Inc. do not include the 52,144 shares
        owned by Capital Securities & Credit Corp. Mr. Benarroch disclaims
        ownership of the 52,144 shares, directly or indirectly and does not
        hold voting power of these shares.

    (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                      Name and Address                     Amount and Nature            Percent
of Class                   of Beneficial Owner                of Beneficial Owner           of Class
--------------------------------------------------------------------------------------------------------
<S>                        <C>                                <C>                          <C>   
Common                     Georges Benarroch                          532,499                54.91%
                           Suite 3303                         Trustee (voting
                           130 Adelaide Street              power) of Central
                           Toronto, Ontario                  Investment Trust
                           Canada, M5H 3P5

Common                     Selwyn J. Kletz                             40,000                 4.10%
                           499 Riverside Drive
                           Toronto, Ontario
                           Canada, M6S 4B6

Preferred A                Georges Benarroch                        1,500,000               100.00%
                           Suite 3303                         Trustee (voting
                           130 Adelaide Street              power) of Central
                           Toronto, Ontario                  Investment Trust
                           Canada, M5H 3P5

Common                     Directors and                              572,499                59.01%
                           Executive Officers
                           as a group
                           (2 person)

Preferred A                Directors and                            1,500,000               100.00%
                           Executive Officers
                           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.


                                 Page 24 of 27
<PAGE>   25


    (c)  CHANGES IN CONTROL

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


Item 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In the proposed acquisition of New Researches Corporation (see Exhibit
10(vi), on page E-59), the vendors are Rif Capital Inc. and Central Investment
Trust. Both are related parties as Rif Capital Inc. controls the Company and
Central Investment Trust owns all of the issued and outstanding common shares of
Rif Capital Inc.

         The terms of the acquisition is as follows:

     a. InterUnion shall pay to the Vendors, or at their direction, a
        non-refundable Option fee of US$80,000 on or before December 15, 1996.

     b. The Option shall expire on December 15, 1997 ("Closing Date").

     c. InterUnion shall provide written notice of its intention to exercise the
        Option to the Vendors and NRC.

     d. The purchase price paid by InterUnion to the Vendors, upon exercise of
        the option shall be:

         i) US$2,000,000 payable on or before the Closing Date (4:00 p.m. Palm
            Beach time); and

        ii) upon the sale of any of the common shares of Genesis, including any
            shares issued pursuant to the exercise of the common share purchase
            warrants of Genesis, after the Closing Date, InterUnion shall pay to
            the Vendors eighty percent (80%) of the proceeds realized from such
            sales, in excess of C$1.00 per share. This condition shall not
            expire except by mutual agreement of all parties to this Agreement.

     e. In the event that NRC receives a bona fide offer from a third party to
        purchase its common shares during the term of the Option and, if NRC
        should desire to accept said offer, NRC shall immediately forward a copy
        of the offer to InterUnion. InterUnion shall have a period of ten
        calendar days from the receipt of the offer to counter the offer or
        exercise the Option by giving notice, at its sole discretion, in
        accordance with term c. If InterUnion fails to match the offer or
        exercise the Option, NRC shall have the absolute right to accept the
        offer from the third party and to declare the Option to be null and
        void.

         During the fiscal year ended March 31, 1997, the Company paid to Rif
Capital Inc. $1.4 million for research and recomendation services, in addition
to management services.



                                 Pagae 25 of 27
<PAGE>   26


Item 13  EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

    Exhibit Table
       Number                            Exhibit                                                        Page No.
    ------------                         -------                                                        --------
<S>                   <C>                                                                                <C>
        (2)(i)      Unanimous Consent in Lieu of The First Meeting of the Board
                     of Directors of AU 'N AG, INC. (A Delaware Corporation)                               E-1

       (2)(ii)      Pre-Organization Subscription and Letter of Non-Distributive Intent                    E-4

      (2)(iii)      Plan and Agreement of Merger                                                           E-5

       (2)(iv)      Certificate of Merger, dated February 15, 1994                                         E-9

        (3)(i)      Certificate of Incorporation of AU 'N AG, INC. Dated February 15, 1994                E-11

       (3)(ii)      Certificate of Amendment of Certificate of Incorporation of AU 'N
                    AG, INC. Dated April 11, 1994                                                         E-13

      (3)(iii)      Certificate of Amendment of Certificate of Incorporation of
                    InterUnion Financial Corporation dated October 17, 1994                               E-14

       (3)(iv)      Bylaws of InterUnion Financial Corporation                                            E-16

           (4)      Instruments Defining the Rights of Security Holders Including Indentures              E-24

       (10)(i)      ITM Software Development Agreement                                                    E-29

      (10)(ii)      Letter of Understanding ("ITM Option Agreement") dated
                    November 30, 1995                                                                     E-42

     (10)(iii)      Investment Management Agreement                                                       E-46

      (10)(iv)      Agreements (Havensight/InterUnion)                                                    E-55

       (10)(v)      Amendment to the Letter of Understanding
                    ("ITM Option Agreement"), dated April 16, 1997                                        E-57

      (10)(vi)      Letter of Understanding (New Researches Corporation)                                  E-59

     (10)(vii)      Letter Agreement (Receptagen, Ltd.)                                                   E-61

          (16)      Letter on change in certifying accountant                                             E-67

          (21)      Subsidiaries of InterUnion                                                            E-68

          (27)      Financial Data Schedule                                                               E-69

</TABLE>


                                 Page 26 of 27
<PAGE>   27




                                   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
                                             (Registrant)

Date: June 20, 1997                          By: /s/ Georges Benarroch
------------------------                     -----------------------------------
                                             Georges Benarroch
                                             President, Chief Executive Officer
                                             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/ Georges Benarroch                            President, Chief Executive                June 20, 1997
------------------------------------------       Officer, Chairman, Board of            ---------------------
Georges Benarroch                                Directors

/s/ Georges Benarroch                            Chief Financial Officer                   June 20, 1997
------------------------------------------                                              ---------------------
Georges Benarroch

/s/ Jacques Meyer de Stadelhofen                 Director                                  June 20, 1997
------------------------------------------                                              ---------------------
Jacques Meyer de Stadelhofen

/s/ Ann Glover                                   Director                                  June 20, 1997
------------------------------------------                                              ---------------------
Ann Glover

</TABLE>



                                 Page 27 of 27
<PAGE>   28



















                        INTERUNION FINANCIAL CORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1997











<PAGE>   29


                        INTERUNION FINANCIAL CORPORATION

                                 MARCH 31, 1997



                                    CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
<S>                                                                                                            <C>
Independent Auditor's Reports                                                                                     F-2


Consolidated Financial Statements:

      Consolidated Balance Sheet                                                                                  F-4

      Consolidated Statement of Operations                                                                        F-6

      Consolidated Statement of Shareholders' Equity                                                              F-7

      Consolidated Statement of Cash Flows                                                                        F-8

      Notes to Consolidated Financial Statements                                                        F-9  To  F-18



</TABLE>







                                                                             F-1


<PAGE>   30





                          INDEPENDENT AUDITOR'S REPORT





To The Directors and Shareholders,
InterUnion Financial Corporation



We have audited the accompanying consolidated balance sheet of InterUnion
Financial Corporation as of March 31, 1997 and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended. 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 financial statements referred to above present fairly, in
all material respects, the financial position of InterUnion Financial
Corporation as of March 31, 1997 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.





/s/ GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.

May 14, 1997







                                                                             F-2


<PAGE>   31







                          INDEPENDENT AUDITOR'S REPORT





To The Directors and Shareholders,
InterUnion Financial Corporation



We have audited the accompanying consolidated statement of operations,
shareholders' equity and cash flows of InterUnion Financial Corporation and
subsidiaries for the year ended March 31, 1996. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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 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 results of operations and its cash flows
of InterUnion Financial Corporation for the year ended March 31, 1996 in
conformity with generally accepted accounting principles.





/s/ Mintz Partners

Toronto, Ontario
May 14, 1997







                                                                             F-3


<PAGE>   32


                        INTERUNION FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

MARCH 31,                                                                           1997
==========================================================================================
<S>                                                                            <C>        
                                  ASSETS
                                  ------

CURRENT ASSETS

    Cash (Note 2(b))                                                           $   349,738
    Due from brokers and dealers (Note 2(c))                                       166,062
    Due from clients (Note 2(c))                                                 5,967,989
    Marketable securities (Notes 2(b) and 3)                                    29,457,965
    Accounts receivable                                                            226,663
    Income tax receivable                                                           22,197
    Prepaid expenses and other current assets                                      151,483
                                                                               -----------

                  Total current assets                                          36,342,097
                                                                               -----------

OTHER ASSETS

    Property & equipment, net (Note 2(d) and 4)                                  1,609,905
    Long-term investments (Note 2(e))                                              256,945
    Goodwill, net of accumulated amortization of $43,816 (Note 2(f))               394,332
    Deferred income tax asset, net of valuation allowance
       of $60,000 (Note 10)                                                             --
    Assets related to discontinued operations (Note 9(b))                          217,228
                                                                               ----------- 
                                                                                 2,478,410
                                                                               -----------


                  Total Assets                                                 $38,820,507
                                                                               ===========
</TABLE>






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

              See Notes to Consolidated Financial Statements                F-4


<PAGE>   33



                        INTERUNION FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEET



<TABLE>
<CAPTION>
MARCH 31,                                                                   1997
=====================================================================================
<S>                                                                    <C>         
                              LIABILITIES
                              -----------
CURRENT LIABILITIES

    Due to brokers and dealers (Note 2(c))                             $ 33,012,864
    Due to clients (Note 2(c))                                            1,320,874
    Accounts payable and accrued liabilities                                257,470
                                                                       ------------

                  Total current liabilities                              34,591,208

LIABILITIES RELATED TO DISCONTINUED OPERATIONS (Note 9(b))                  504,962
DEFERRED INCOME TAX LIABILITY (Note 10)                                      85,000
                                                                       ------------  
                  Total liabilities                                      35,181,170
                                                                       ------------
COMMITMENTS AND CONTINGENCIES (Note 7)


                         SHAREHOLDERS' EQUITY
                         --------------------


CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Note 5)                     5,206,815

ACCUMULATED DEFICIT                                                      (1,567,478)
                                                                       ------------
                  Total shareholders' equity                              3,639,337
                                                                       ------------

                  Total Liabilities and Shareholders' Equity           $ 38,820,507
                                                                       ============


</TABLE>


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

              See Notes to Consolidated Financial Statements                F-5


<PAGE>   34


                        INTERUNION FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>

FOR THE YEAR ENDED MARCH 31,                                                                  1997              1996
=====================================================================================================================
<S>                                                                                       <C>               <C>        
REVENUES

    Commissions, trading and investment income                                            $ 4,843,951       $ 4,500,899
    Fee revenue                                                                               868,232         1,356,297
                                                                                          -----------       -----------

                                                                                            5,712,183         5,857,157
                                                                                          -----------       -----------
EXPENSES

    Selling, General and Administrative                                                     5,214,477         5,729,997
    Loss (Gain) on foreign exchange                                                            31,067           (33,057)
    Interest income (net of interest expense of 2,631 and 30,272, respectively)               (23,034)          (37,337)
    Depreciation and Amortization                                                             240,912           244,739
                                                                                          -----------       -----------

                                                                                            5,463,422         5,904,341
                                                                                          -----------       -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE PROVISION FOR INCOME TAXES                                                         248,761           (47,146)
                                                                                          -----------       -----------

PROVISION FOR INCOME TAXES                                                                     88,085            28,232
                                                                                          -----------       -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS                                                      160,676           (75,378)

LOSS FROM DISCONTINUED OPERATIONS (Note 9 (a) & (b))                                         (390,829)         (546,544)
GAIN ON DISPOSITION OF SUBSIDIARY (Note 9 (a))                                                     --           117,296
                                                                                          -----------       -----------

NET LOSS                                                                                     (230,153)         (504,626)
                                                                                          ===========       ===========

EARNINGS (LOSS) PER COMMON SHARE (Note 2(h))
    Continuing operations                                                                 $      0.18       $     (0.15)
                                                                                          ===========       ===========
    Discontinued operations                                                               $     (0.43)      $     (0.86)
                                                                                          ===========       ===========
    Net loss                                                                              $     (0.25)      $     (1.01)
                                                                                          ===========       ===========
    Weighted average common shares outstanding                                                907,097           501,335
                                                                                          ===========       ===========




=====================================================================================================================
</TABLE>




              See Notes to Consolidated Financial Statements                F-6


<PAGE>   35




                        INTERUNION FINANCIAL CORPORATION
                  CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY


<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
=============================================================================================================================
                                                                                              Cumulative
                                                                                               Foreign
                                              Number                           Additional      Currency
                                                of                              Paid-in       Translation
                                              Shares          Amount            Capital        Adjustment           Total
<S>                                         <C>            <C>               <C>              <C>               <C>        
Preferred Shares
    Balance, March 31, 1996                  1,500,000      $   150,000       $        --      $        --       $   150,000
                                           -----------      -----------       -----------      -----------       -----------

Common Shares
    Balance, March 31, 1995                    369,058              369         3,656,607               --         3,656,976
    Issued during the year
      net of issue costs                       323,500              324           554,676               --           555,000
                                           -----------      -----------       -----------      -----------       -----------
    Balance, March 31, 1996                    692,558              693         4,211,283               --         4,211,976
    Adjustment, reverse split                       14               --                --               --                --
    Issued during the year
      net of issue costs                       277,142              277           727,062               --           727,339
    Compensation related to
      stock options (Note 6)                        --               --           117,500               --           117,500
                                           -----------      -----------       -----------      -----------       -----------
    Balance, March 31, 1997                    969,714              970         5,055,845               --         5,056,815
                                           -----------      -----------       -----------      -----------       -----------

Share Capital                                2,469,714          150,970         5,055,845               --         5,206,815
                                           -----------      -----------       -----------      -----------       -----------


Deficit
    Balance, March 31, 1995                         --               --                --               --          (823,502)
    Net Loss for fiscal 1996                        --               --                --               --          (504,626)
                                           -----------      -----------       -----------      -----------       -----------
    Balance, March 31, 1996                         --                                                            (1,328,128)
    Foreign currency translation
      adjustment (Note 2(g))                        --               --                --           (9,197)           (9,197)
    Net loss for fiscal 1997                        --               --                --               --          (230,153)
                                           -----------      -----------       -----------      -----------       -----------

    Balance, March 31, 1997                         --               --                --               --        (1,567,478)
                                           -----------      -----------       -----------      -----------       -----------


Total Shareholders' Equity                   2,469,714      $   150,970       $ 5,055,845      $    (9,197)      $(3,639,337)
                                           ===========      ===========       ===========      ===========       ===========




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

</TABLE>

              See Notes to Consolidated Financial Statements                F-7


<PAGE>   36



                        INTERUNION FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31                                             1997                1996
=====================================================================================================
<S>                                                                  <C>                <C>   
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                           $   (230,153)      $   (504,626)
    Adjustments to reconcile net loss to net cash
     used in operating activities
      Depreciation and Amortization                                       240,912            244,739
      Non cash compensation - stock options (Note 6)                      117,500                 --
      Deferred income taxes (Note 10)                                      85,000                 --
      Gain on disposition of subsidiary                                        --           (117,296)
                                                                     ------------       ------------

                                                                          213,259           (377,182)
Changes in operating assets and liabilities
    Increase (decrease) in due to/from brokers and dealers, net        31,515,327        (28,663,907)
    Decrease (increase) in due to/from client, net                     (5,588,459)        15,720,553
    Increase (decrease) in marketable securities                      (26,882,380)        13,056,486
    Increase in accounts receivable and other assets                     (184,970)          (136,916)
    Increase in accounts payable and accrued liabilities                  (56,560)            30,571
    Increase in assets and liabilites related to
      discontinued operations (Note 9)                                    129,296             31,629
                                                                     ------------       ------------

NET CASH USED IN OPERATING ACTIVITIES                                    (854,487)          (338,767)
                                                                     ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES

    Net proceeds on issuance of capital stock                             727,339            555,000
    Proceeds (Repayment) of loans payable                                (119,462)            18,589
                                                                     ------------       ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                 607,877            573,589
                                                                     ------------       ------------


CASH FLOWS FROM INVESTING ACTIVITIES

    Purchases of long-term investments                                    (66,945)           (13,472)
    Purchase of property and equipment                                    (10,866)           (37,872)
                                                                     ------------       ------------

NET CASH PROVIDED BY INVESTING ACTIVITIES                                 (77,811)           (51,344)
                                                                     ------------       ------------

NET INCREASE (DECREASE) IN CASH                                          (324,421)           183,478

CASH - Beginning of Year                                                  674,159            490,681
                                                                     ------------       ------------

CASH - End of Year                                                   $    349,738       $    674,159
                                                                     ============       ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid during the period for interest                         $      2,631       $     30,272
    Cash paid during the period for income taxes                           15,160             15,406



=====================================================================================================
</TABLE>

       See Notes to Consolidated Financial Statements                F-8


<PAGE>   37



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


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

     1.  BASIS OF FINANCIAL STATEMENT PRESENTATION

         During the year, InterUnion Financial Corporation ("the Company")
decided to report solely as per U.S. Generally Accepted Accounting Principles.
In prior years, the Company reported in accordance with Canadian Generally
Accepted Accounting Principles.

     2.  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The Company was formed to acquire a majority interest in financial
companies located in the United States and Canada, as well, to provide bridge
financing and special situation investments. Currently, the Company's operating
interests are a broker/dealer and investment management firm.

         The preparation of financial statements in conformity with Generally
Accepted Accounting Principles used in the United States of America ("GAAP")
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of financial statements and the reported amounts of
operating revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

     a)  Principles of Consolidation

         The consolidated financial statements of the Company, a Delaware
Corporation, contains the financial position, results of operations and cash
flows of InterUnion Financial Corporation and its subsidiaries, Bearhill
Limited, Credifinance Capital Inc., Credifinance Securities Limited, Guardian
Timing Services Inc. and I & B Inc. All intercompany balances and transactions
have been eliminated in consolidation.

     b)  Cash and Marketable Securities

         The Company maintains its cash and investments in financial
institutions which, at times, may exceed federally insured limits in the United
States and Canada. The Company has not experienced any losses in such accounts.

         Marketable securities carried on a short-term basis are classified as
either "trading" or "available for sale" (Note 3). Marketable securities being
held as long-term investments are classified as "held-to-maturity" (Note 3) and
are carried at cost. All gains and losses are calculated using the average cost
basis.

     c)  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.

         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 may fluctuate significantly.


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

/Continued...                                                              F-9


<PAGE>   38


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

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


     2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     d)  Property and Equipment

         Property and equipment are stated at cost less accumulated
depreciation. It is the company's policy to provide depreciation using straight
line and accelerated methods over the estimated useful lives of the property and
equipment.

     e)  Long-Term Investments

         Long-term investments, in non-marketable securities where a controlling
interest or significant influence is not exercised, are recorded at cost.

         Stock exchange seats are recorded at cost and are included in long-term
investments. Declines in market value are only recorded when there is an
indication of permanent decline in value.

     f)  Goodwill

         In accordance with U.S. Generally Accepted Accounting Principles,
goodwill is being amortized over a period of 20 years on a straight line basis.
At each balance sheet date, the Company evaluates the period of amortization of
intangible assets. The factors used in evaluating the period of amortization
include: (i) current operating results, (ii) projected operating results, and
(iii) any other material factors that effect the continuity of the business.

     g)  Translation of Foreign Currencies

         In accordance with SFAS 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. The aggregate effect of
translation gains and losses has been deferred and is relocated as a separate
component of shareholders' equity until there is a sale or liquidation of the
underlying foreign investment.


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

/Continued...                                                              F-10


<PAGE>   39


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

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

     2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     h)  Earnings Per Share

         Earnings per common share and common share equivalent share are
calculated by dividing the net income available to holders of common stock by
the weighted average number of common shares and common equivalent shares
outstanding.

         The number of common shares outstanding is increased by the number of
shares issuable on the exercise of options or warrants when the market price of
the common stock exceeds the exercise price of the warrant or option and the
effect would not be antidilutive. This increase in the number of common shares
is reduced by the number of common shares that are assumed to have been
purchased with the proceeds from the exercise of the warrants or options at the
average market price during the period.

         In February 1997, the Financial Accounting Standards Board issued 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. Basic EPS is computed by dividing the weighted
average number of common shares outstanding for the period. 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. The Company does not anticipate that the adoption of
SFAS No. 128 will have a material effect on EPS.

     i)  Stock Based Compensation

     The Company accounts for employee stock options in accordance with APB 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 applying the intrinsic value method, SFAS No. 123
mandates certain pro forma disclosures as if the fair value method had been
utilised. (Note 6)



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

/Continued...                                                              F-11


<PAGE>   40


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

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

     3.  MARKETABLE SECURITIES

<TABLE>
<CAPTION>
         As of March 31, 1997                Original         Carrying          Market
                                               Cost             Value            Value
                                            -----------      -----------      -----------
<S>                                         <C>              <C>              <C>        
               Trading securities           $29,006,131      $29,457,965      $29,457,965
               Available for Sale                    --               --               --
               Held to maturity                      --               --               --
                                            -----------      -----------      -----------
               Total                        $29,006,131      $29,457,965      $29,457,965
                                            ===========      ===========      ===========

</TABLE>

<TABLE>
<CAPTION>
                  For the year ending March 31,                                       1997           1996
                                                                                   ----------     ----------
<S>                                                                                <C>            <C>       
               Proceeds from Securities classified as Available for sale           2,500,000      16,032,500
               Gross Realized Gains (Losses) from securities
                  classified as Available for sale                                       335          67,585
               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                                    529,854              --

</TABLE>


     4.  PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                                  Accumulated       Net Carrying Amount
                                                                  Cost            Amortization            1997
                                                               ----------         ------------      -------------------
<S>                                                               <C>                  <C>                 <C>   
               Computer hardware and software                     104,046              67,838              36,208
               ITM Computer software
                 (Notes 2(d) and 8)                             1,924,443             384,888           1,539,555
               Furniture, fixtures and equipment                   69,786              35,644              34,142
               Leasehold improvements                               1,735               1,735                  --
                                                               ----------          ----------          ----------

                                                               $2,100,010          $  490,105          $1,609,905
                                                               ==========          ==========          ==========
</TABLE>

         In applying SFAS 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be disposed of", the Company periodically
evaluates its property and equipment for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. As of the date of these financial statements no reduction in the
carrying value of any asset was required.


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

/Continued...                                                              F-12


<PAGE>   41


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

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

     5.  CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL

         On May 17, 1996, shareholders' approved a twenty (20) to one (1)
reverse stock split. All references to number of shares and exercise prices
have been adjusted accordingly.

<TABLE>
<CAPTION>
         Authorized

<S>                         <C>                                      
         1,500,000         Non-cumulative, non-participating, ($0.10 par value) Class A Preference
                           shares entitled to 100 votes for every one share issued

         50,000,000        Non-cumulative, non-participating, non-voting Class B preference shares with
                           a par value to be determined at the date of first issuance

         50,000,000        Non-cumulative, non-participating, non-voting, convertible into common
                           shares at a conversion rate to be determined at the date of first issuance

         100,000,000       Common shares ($0.001 par value)

</TABLE>

         The changes to capital stock and additional paid-in capital are
summarized as follows:

<TABLE>
<CAPTION>
                                                             Year Ended March 31, 1997          Year Ended March 31, 1996
                                                          ----------------------------          --------------------------
                                                            Shares            Amounts            Shares           Amounts
                                                          --------           ---------          --------          --------
<S>                                                        <C>               <C>                 <C>              <C>     
               For cash                                    277,142           $ 759,710           322,500          $645,000
               For services                                                                        1,000            20,000
               Adjustment for reverse split                     14
               Issuing costs                                                   (32,371)                           (110,000)
                                                          --------           ---------           -------          --------

               Total                                       277,156           $ 727,339           323,500          $555,000
                                                          ========           =========           =======          ========
</TABLE>

         During July 1996, the Company issued 277,142 shares for gross proceeds
of $759,142. Of these shares, 105,642 had warrants attached to them. Each
warrant entitles the holder to purchase 1 additional common share at $6.00
within one year. A value of $78,175 was assigned to the warrants.

     6.  OPTIONS AND WARRANTS

         The Company applies APB No. 25 in accounting for stock option issued to
employees. Accordingly, the intrinsic value of the option as of the grant date
has been recognized as compensation. 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, 1997
would have been impacted as indicated in the following table. The proforma
results below reflect only the impact of the options granted. No options were
granted during the year ended March 31, 1996.

<TABLE>
<CAPTION>
                                                                          1997
                                                               --------------------------
                                                               Reported         Pro forma
                                                               --------         ---------
<S>                                                             <C>              <C>     
               Income (loss) from continuing operations         160,676          (50,888)
               Net loss                                        (230,153)        (441,718)
               EPS from continuing operations                      0.18            (0.05)
               EPS                                                (0.25)           (0.47)

</TABLE>

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

/Continued...                                                              F-13


<PAGE>   42


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

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

     6.  OPTIONS AND WARRANTS - continued

         The fair value of the options granted, which is charged to operations
over the option vesting period in determining the proforma impact, is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:

                  Expected life of the option                  2 years
                  Risk free interest rate                       5.2%
                  Expected volatility                            50%
                  Expected dividend yield                         0%

         Presented below is a summary of stock option plan activity for the
periods shown:

<TABLE>
<CAPTION>
                                                             Wt. Avg.                 Wt. Avg.
                                                             Exercise      Options    Exercise
                                                  Number       Price     Exercisable    Price
                                                  ------     --------    -----------  --------
<S>                                               <C>         <C>          <C>         <C>   
               Balance, April 1, 1995             40,250      $40.00       42,250      $40.00
               Cancelled                          40,250       40.00       42,250       40.00
                                                 -------      ------      -------      ------
               Balance, April 1, 1996                 --          --           --          --
               Granted                           190,000        4.00      190,000        4.00
                                                 -------      ------      -------      ------
               Balance, March 31, 1997           190,000      $ 4.00      190,000      $ 4.00
                                                 =======      ======      =======      ======
</TABLE>

         The following table summarizes information for options and warrants
currently outstanding and exercisable at March 31, 1997

<TABLE>
<CAPTION>
                                                 Outstanding                                 Exercisable
                                 ---------------------------------------------       --------------------------
                                                 Wt. Avg.          Wt. Avg.                           Wt. Avg.
                                                 Remaining         Remaining                          Exercise
                  Price          Number            Life         Exercise Price       Number             Price
                  -----          ------         -----------     --------------       ------           ---------
<S>                              <C>             <C>             <C>                <C>                <C>  
                  $4.00          190,000            2               $4.00           190,000            $4.00


</TABLE>

<TABLE>
<CAPTION>
                                 Number                  Exercise                 Expire
                               of Options                  Price                   Date
                           -----------------         ------------------         ------------
<S>                                                   <C>                       <C> 
                                 100,000                    $4.00               December 1998
                                  90,000                    $4.00               February 1999

</TABLE>

     7.  COMMITMENTS AND CONTINGENCIES

         The Company leases warehouse and office space under a number of 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 1998. 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:

                                    1998             161,000
                                    1999              74,000
                                    2000              74,000
                                    2001              63,000
                                    2002              53,000

         Payments under the above mentioned leases that have been charged to
operations for the periods ending March 31, 1997 and 1996 amount to $414,539 and
$388,234, respectively.

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

/Continued...                                                              F-14


<PAGE>   43



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

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

     7.  COMMITMENTS AND CONTINGENCIES - continued

         The Company is a defendant in several unrelated lawsuits arising out of
the ordinary course of business. Management believes these actions are without
merit and intends to defend them vigorously. An estimate of the Company's
liability, if any, associated with these matters cannot be made at this time.

     8.  SALES COMMITMENT

         The company entered into an option agreement in fiscal 1996 with a
major international financial institution whereby software ("ITM Software")
owned by its subsidiary, Bearhill Limited ("Bearhill") may be sold for proceeds
to the Company of approximately $15,000,000 CDN (March 31, 1997 - $11,000,000
USD). The company's interest in this software is through its interest in
Bearhill and is carried at $1,539,555 which is included in property and
equipment (Note 4).

         During the life of the non-transferable option, Bearhill will receive
an option fee from the option holder annually in order to maintain the option.
The decision to exercise this option is at the full and unlimited discretion of
the option holder. Subsequent to year end, on April 16, 1997, the agreement had
been modified solely with regards to the option premium that is to be paid. It
was agreed that the annual option fee would be paid at the beginning of the
corresponding periods as follows:

<TABLE>
<CAPTION>
                                                                          CDN               USD
                                                                        -------           -------
<S>                                                                     <C>               <C>    
                  For the year beginning April 23, 1996                 $25,000           $18,060
                  For the year beginning April 23, 1997                  25,000            18,060
                  For the year beginning April 23, 1998                  50,000            36,120
                  For the year beginning April 23, 1999                  50,000            36,120

</TABLE>

     9.  DISCONTINUED OPERATIONS

    (a) During fiscal 1996, the Company disposed, by way of an assignment in
bankruptcy, its real estate subsidiary, Rosedale Realty Corporation.

         The Company reported an extra ordinary gain upon disposition. The gain
is the result of the excess of the forgiveness of the debt exceeded the carrying
cost of the investment in and advances to Rosedale Realty Corporation.

    (b) During fiscal 1997, the Company decided to dispose of its auction
subsidiary, Reeve, Mackay & Associates Ltd. A formal plan has been adopted and
the Company has entered into a discussion with regards to the sale of the
Company's auction business which is carried out by Reeve, Mackay & Associates
Ltd. As per APB No. 30, the Company has recorded the operating losses as a
separate item on the Consolidated Statement of Operations. No loss has been
accrued at March 31, 1997 as the Company does not expect to incur a loss upon
disposition.

         Reeve, Mackay has been named as a defendant in a lawsuit. Reeve,
Mackay's potential liability ranges from $5,000 to $175,000. Management
believes, however, that the ultimate outcome of this lawsuit will not have a
material adverse effect on the Company's financial position.





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

/Continued...                                                              F-15



<PAGE>   44



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

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



    10.  INCOME TAXES

         The provision for income taxes consists of:

<TABLE>
<CAPTION>
                   Year Ended March 31,                     1997        1996
                                                            ----        ----
<S>                                                       <C>          <C>  
                        Domestic
                          Current                         $    --      $    --
                          Deferred                         85,000           --
                        Foreign
                          Current                           3,085       28,232
                          Deferred                             --           --
                                                          -------      -------
               Total provision for income taxes           $88,085      $28,232
                                                          =======      =======
</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 reason for these
differences are as follows:

<TABLE>
<CAPTION>
               Year Ended March 31,                                      1997                 1996
                                                                 ----------------       ------------------ 
                                                                  Amount       %         Amount         %
                                                                 -------      ---       --------       ---
<S>                                                              <C>           <C>      <C>             <C>
               Statutory income tax rate (recovery)              $84,500       34       $(16,000)       34
               Other non-deductible items                         10,500        4         31,500       (67)
               Other                                               6,915       (3)        12,732       (27)
                                                                 -------      ---       --------       ---
               Net taxes (recovery) and effective rate           $88,085       35       $ 28,232       (60)
                                                                 =======      ===       ========       ===
</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
carryforwards. Temporary differences and carryforwards which give rise to
deferred tax assets and liabilities are as follows at March 31, 1997:

<TABLE>
<CAPTION>
                                                         Component       Tax Effect
                                                         ---------       ----------
<S>                                                      <C>             <C>
               Net operating losses - foreign            $ 150,000         60,000
               Less valuation allowance                   (150,000)       (60,000)
                                                         ---------       --------
                 Net deferred asset                      $      --             --
                                                         =========       ========

               Net operating losses - domestic           $  90,000         15,000
               Unrealized gains - domestic                (550,000)      (100,000)
                                                         ---------       --------
                 Net deferred liability                  $(460,000)       (85,000)
                                                         =========       ========
</TABLE>


         At March 31, 1997, the Company had cumulative net operating loss
carryforwards of approximately $90,000 and $150,000 in the United States and
Canada, respectively. These amounts will expire in various years through 2012.
In addition, the Company had net capital loss carryforwards available to offset
future capital gains of approximately $550,000.

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

/Continued...                                                              F-16


<PAGE>   45



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

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


    11.  GEOGRAPHICAL AREA SEGMENTATION

         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, 1997

         Revenue from
           unaffiliated customers                      $  4,220,784     $ 1,477,062    $14,337    $      --     $ 5,712,183
         Revenue from
           intersegments                                    292,567              --         --     (292,567)             --
                                                       ------------     -----------    -------    ---------     -----------
         Total revenue                                    4,513,351       1,477,062     14,337           --       5,712,183
                                                       ============     ===========    =======    =========     ===========
         Depreciation & Amortization                         25,986             574          0      214,352         240,912
                                                       ============     ===========    =======    =========     ===========
         Operating profit                                   104,931         550,424      8,680     (238,308)        425,727
                                                       ============     ===========    =======    =========                
         General corporate
           expenses                                                                                                 200,000
         Interest expenses, net                                                                                     (23,034)
         Income from continuing                                                                                 ----------- 
           Operations before provision
           for income taxes                                                                                         248,761
                                                                                                                =========== 
         Identifiable assets                             12,792,699      25,990,456     37,352           --      38,820,507
                                                       ============     ===========    =======    =========     ===========

         For the year ended and as of March 31, 1996

         Revenue from
           unaffiliated customers                      $  4,915,350     $   911,094    $30,751    $      --     $ 5,857,195
         Revenue from
           intersegments                                     17,606              --         --      (17,606)             --
                                                       ------------     -----------    -------    ---------     -----------
         Total revenue                                    4,932,956         911,094     30,751      (17,606)      5,857,195
                                                       ============     ===========    =======    =========     ===========
         Depreciation & Amortization                         28,153           2,234         --      214,352         244,739
                                                       ============     ===========    =======    =========     ===========
         Operating profit                                   209,969         116,961     27,939     (214,352)        140,517
                                                       ============     ===========    =======    =========                
         General corporate
           expenses                                                                                                 225,000
         Interest expenses, net                                                                                     (37,337)
         Loss from continuing                                                                                   -----------
           Operations before provision     
           for income taxes                                                                                         (47,146)
                                                                                                                ===========
         Identifiable assets                              6,462,306       2,873,162     28,539           --       9,364,007
                                                       ============     ===========    =======    =========     ===========


</TABLE>



         For both fiscal years ended March 31, 1997 and March 31, 1996 the
company did not have any customers that represented revenues in excess of 10%
nor did it have any operating company outside of the financial services business
segment.

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

/Continued...                                                              F-17


<PAGE>   46



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

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


    12.  SUBSEQUENT TRANSACTIONS

         During fiscal 1997, the Company entered into an agreement where it
would act as an investment banker in the recapitalization of Receptagen Ltd.,
whereby, the Company made available to Receptagen a credit facility of C$400,000
(USD$290,000). This credit facility will be exchangeable for a convertible
debenture of Receptagen which converts into units of Receptagen at a rate of
C$0.105 per unit. Each unit is itself exchangeable, after the private placement
outlined below, into one common share and one share purchase warrant at C$0.14
within two years. The credit facility was fully subscribed by investors other
then the Company.

         On April 7, 1997, all creditors of Receptagen agreed to exchange debt
of approximately C$9 million for shares of the Company issued under Regulation
"S" of the United State Securities Act of 1933, at a rate of C$0.20 per C$1.00
of debt. The Company expects to issue approximately 260,000 shares valued at
USD$4.00 per share for this transaction in addition to 213,000 share purchase
warrant at USD$4.00. In exchange, the Company will receive C$0.20 per C$1.00 of
debt of Receptagen acquired from creditors in the form of convertible debenture.
This debenture is convertible into unit "A" of Receptagen at a rate of C$0.07
per unit. Each unit `A' is exchangeable into one common share and one share
purchase warrant at C$0.14 within two years.

         The third phase of the recapitalization of Receptagen involves a
private placement of C$2.5 million in Special Warrants, which is expected to
close May 21, 1997. The offering price of these Special Warrants is C$0.116 and
they are exchangeable into one common share and one share purchase warrant at
C$0.14 within two years.

         Each Receptagen unit is exchangeable for one common share and one
common share purchase warrant at C$0.14 for two years. All securities issued by
Receptagen under its recapitalization plan will be qualified under a prospectus
to be filed with the Ontario Securities Commission (the "Qualifying
Jurisdiction") on or before September 23, 1997. Receptagen is currently traded
on the Toronto Stock Exchange ("RCG") and the NASD Over-the-Counter Bulletin
Board ("RCEPF").

    13.  RELATED PARTY TRANSACTION

         During fiscal 1997, the Company paid a company owned by a director
approximately $40,000 which has been included as rent expense. In turn, this
company has paid an unrelated party $40,000 as rent for these same premises that
only the Company is occupying.

         On September 26,1996. the Company paid $80,000 to acquire an option to
purchase all of the outstanding shares of New Research Corporation. The option
to acquire all of the outstanding shares of New Research Corporation expires on
December 15, 1997. New Research is owned by the majority shareholder of the
Company.


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

                                                                            F-18