10-Q 1 icc10q033107.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended: March 31, 2007 Commission File Number: 814-00716 INTERIM CAPITAL CORP. (Exact name of registrant as specified in its charter) Nevada 02-0638350 ------ ---------- (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 3960 Howard Hughes Parkway, Suite 500, Las Vegas, Nevada 89109 (Address of principal executive office) (zip code) Registrant's telephone number, including area code - (972) 745-3020 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods 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 [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ X ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The number of shares outstanding of registrant's common stock, par value $.001 per share, as of March 31, 2007, was 10,505,000 shares. Interim Capital Corp. INDEX Page No. Part I Financial Information (unaudited) Item 1. Condensed Financial Statements Statements of Net Assets as of March 31, 2007 and December 31, 2006 3 Statements of Operations - For the Three Months Ended March 31, 2007 and 2006 4 Statements of Cash Flows - For the Three Months Ended March 31, 2007 and 2006 5 Statements of Changes in Net Assets - For the Three Months Ended March 31, 2007 and 2006 6 Schedule of Investments as of March 31, 2007 and December 31, 2006 7-8 Financial Highlights 9 Notes to Financial Statements 10 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3. Quantitative and Qualitative Disclosure about Market Risk 25 Item 4. Controls and Procedures 25 Part II Other Information Item 1. Legal Proceedings 26 Item 1A. Risk Factors 26 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26 Item 3. Defaults Upon Senior Securities 26 Item 4. Submission of Matters to a Vote of Security Holders 26 Item 5. Other Information 26 Item 6. Exhibits 26 Signatures Exhibits 2

See accompanying notes to condensed financial statements. 3

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See accompanying notes to condensed financial statements. 6

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(1) Periods of less than one year are not annualized. See accompanying notes to condensed financial statements. 9 Interim Capital Corp. Notes to Condensed Financial Statements (Unaudited) NOTE 1: DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION BUSINESS AND OPERATIONS Interim Capital Corp. (the "Company") was incorporated under the laws of the state of Nevada on November 12, 2002. The Company was formed to assist emerging companies in capital formation. On February 14, 2006, the Company filed a notification on Form N54a with the U.S. Securities and Exchange Commission ("SEC"), indicating its election to be regulated as a Business Development Company ("BDC") under the Investment Company Act of 1940, as amended. Under this election, the Company has been organized to provide investors with the opportunity to participate, with a modest amount in venture capital, in investments that are generally not available to the public and that typically require substantially larger financial commitments. In addition, the Company will provide professional management and administration that might otherwise be unavailable to investors if they were to engage directly in venture capital investing. UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS Although the nature of the Company's operations and its reported financial position, results of operations, and its cash flows are dissimilar for the periods prior to and subsequent to its becoming an investment company, its financial position for the three months ended March 31, 2007 and year ended December 31, 2006, its operating results for the three months ended March 31, 2007 and 2006, and its cash flows and changes in net assets for the three months ended March 31, 2007 and 2006, are presented in the accompanying condensed financial statements pursuant to Article 6 of Regulation S-X. In addition, the accompanying footnotes, although different in nature as to the required disclosures and information reported therein, are also presented as they relate to each of the above referenced periods. Interim financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim periods have been included. The current period's results of operations are not necessarily indicative of results that ultimately may be achieved for the year. The interim unaudited condensed financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-KSB for the fiscal year ended December 31, 2006, as filed with the Securities and Exchange Commission. 10 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONVERSION TO A BUSINESS DEVELOPMENT COMPANY The operating results for the three months ended March 31, 2007, and the period from February 15, 2006, through March 31, 2006, reflect the Company's results as a BDC under the Investment Company Act of 1940, as amended, whereas the operating results for the period from January 1, 2006 through February 14, 2006, reflect the Company's results prior to operating as a BDC under the Investment Company Act of 1940, as amended. Accounting principles used in the preparation of the financial statements for these two periods are different, and therefore, the results of operations are not directly comparable. The primary differences in accounting principles relate to the carrying value of investments - see corresponding sections below for further discussions. On February 15, 2006, the date the Company began operating as a BDC, the board of directors of the Company determined the fair value of its investments was equal to the original cost. Accordingly, there was no cumulative effect recognition in the accompanying financial statements upon becoming an investment company. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS PER SHARE The basic earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted each period for any potentially dilutive debt or equity. The Company has outstanding options to acquire 3,555,000 shares of its common stock at $.001 per share. The Company had losses in all periods presented. Accordingly, basic and diluted loss per share is the same. INCOME TAXES The Company has not elected to be a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, the Company will be subject to U.S. federal income taxes on sales of investments for which the fair values are in excess of their tax basis. Income taxes are accounted for using an asset and liability approach for financial reporting. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the 11 financial statement carrying amount and the tax basis of assets and liabilities and net operating loss and tax credit carry forwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. None of the Company's cash is restricted. VALUATION OF INVESTMENTS (AS A BUSINESS DEVELOPMENT COMPANY) As a BDC under the Investment Company Act of 1940, all of the Company's investments must be carried at market value or fair value as determined by management for investments which do not have readily determinable market values. Prior to this conversion, only marketable debt and equity securities and certain derivative securities were required to be carried at market value. Beginning February 15, 2006, portfolio assets for which market prices are available are valued at those prices. Securities that are traded in the over-the-counter market or on a stock exchange generally will be valued at the prevailing bid price on the valuation date. However, potential future investments by the Company may be acquired through privately negotiated transactions and, therefore, have no readily determinable market values, thus these securities would be carried at fair value as determined by management and outside professionals as necessary under the Company's valuation policy. Currently, the valuation policy provides for management's review of the management team, financial conditions, and products and services of the portfolio company. In situations that warrant such an evaluation, an independent business valuation may be obtained. Value, as defined in Section 2(a)(41) of 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by management. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment. The Company must determine the fair value of each individual investment on a quarterly basis. The Company will record unrealized depreciation on investments when it believes that an investment has become impaired, including where realization of an equity security is doubtful. Conversely, the Company will record unrealized appreciation if the Company believes that the underlying portfolio company has appreciated in value and, therefore, its investment has also appreciated in value, where appropriate. As a BDC, the Company invests primarily in illiquid securities including equity securities of private companies. The structure of each equity security is specifically negotiated to enable the Company to protect its investment and maximize its returns. The Company generally includes many terms governing ownership parameters, dilution parameters, liquidation preferences, voting rights, and put or call rights. The Company's investments are generally subject 12 to some restrictions on resale and generally have no established trading market. Because of the type of investments that the Company makes and the nature of its business, the Company's valuation process requires an analysis of various factors. The Company's fair value methodology includes the examination of, among other things, the underlying investment performance, financial condition and market changing events that impact valuation. REVENUE RECOGNITION (PRIOR TO BECOMING A BUSINESS DEVELOPMENT COMPANY) Revenue for consulting is recorded when earned. Revenue from investment securities sold was recognized when the securities were sold. COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"), establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. It requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in financial statements and (b) display the accumulated balance of other comprehensive income separately in the equity section of the balance sheet for all periods presented. The Company's comprehensive income (loss) does not differ from its reported net income (loss). As a BDC, the Company must report changes in the fair value of its investments outside of its operating income on its statement of operations and reflect the accumulated appreciation or depreciation in the fair value of its investments as a separate component of its stockholders' equity. This treatment is similar to the treatment required by SFAS 130. RECLASSIFICATIONS Certain reclassifications have been made to the 2006 balances to conform to the 2007 financial statement presentation. NOTE 3: INVESTMENTS The Company's investments, all of which are unaffiliated, as of March 31, 2007 and December 31, 2006, are included in the Schedule of Investments. Prior to February 15, 2006 and becoming a BDC, the Company carried its investments in equity securities at cost. These shares were purchased, for cash, in private transactions believed to be exempt from registration of the 1933 Act under Section 4 (1) or Section 4 (2). Due to the limited marketability and extremely volatile prices of theses thinly traded securities, the Company felt a reasonable fair market value was not readily available. However, the Company disclosed in the notes to the financial statements the potential unrealized gain or loss based on fair market value, as determined by the most recent close price as quoted on the balance sheet date, if available, otherwise valued at cost. 13 Investments at March 31, 2007 and December 31, 2006, may be summarized as follows: Cost Fair Value Balance, December 31, 2006 $ 66,112 $ 19,600 Acquisition - - Investment depreciation - (3,875) ------------- ------------- Balance, March 31, 2007 $ 66,112 $ 15,725 ============= ============= Investments are valued at fair value as determined by the board of directors. The values assigned to these securities are based upon available information and may not reflect amounts that could be realized if the Company found it necessary to immediately sell such securities, or amounts that ultimately may be realized. Accordingly, the fair values included in the accompanying schedules of investments may differ from the values that would have been used had a ready market existed for these securities and such difference could be material. NOTE 4: RELATED PARTY TRANSACTIONS The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities as they become available. The officers and directors may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts. The Company collected its advance to a related party in the amount of $4,234 during the three months ended March 31, 2007. NOTE 5: COMMITMENTS AND CONTINGENCIES From time-to-time, some of the Company's portfolio companies may receive correspondence or other notices of alleged breach of a license agreement or other contract. Some of these notifications provide a period of time in which to cure an alleged breach or default. The failure of the Company's portfolio companies to cure an alleged breach or default may have a material adverse impact on the Company's results of operations and financial position. The Company received notice that the staff of the Fort Worth District Office of the Securities and Exchange Commission intends to recommend that the Commission bring a civil injunctive action against Interim Capital Corp. and its President, Mark Lindberg, alleging that they violated Sections 5(a) and 5(c) of the Securities Act of 1933 by engaging in an unregistered, nonexempt distribution of Sniffex, Inc. stock. The Company may be subject to fines or disgorgement for certain potential violations upon resolution of this matter. In December 2004 and January 2005, the Company made loans to Sniffex in the total amount of $32,000. These loans were subsequently converted into Sniffex common stock and in May 2005, the shares were transferred to a consultant in exchange for consulting fees owed. The Company recognized a non-cash gain of $8,000 on the transaction, which amount has been accrued at March 31, 2007, as a result of the potential disgorgement. 14 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information statement contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. There are a number of factors that could cause our actual results to differ materially from those indicated by such forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this information statement to conform such statements to actual results. Management's discussion and analysis should be read in conjunction with our financial statements and the notes herein. OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS ------------------------------------------------- MANAGEMENT'S ANALYSIS OF BUSINESS OUR ABILITY TO DEVELOP OUR BUSINESS PLAN IS CONTINGENT UPON OUR ABILITY TO RAISE SUFFICIENT FUNDS TO INVEST IN PORTFOLIO COMPANIES AND TO COVER OUR OPERATING OVERHEAD REQUIREMENTS. We will have significant relative flexibility in selecting and structuring our investments. We will not be subject to many of the regulatory limitations that govern traditional lending institutions such as banks. We will seek to structure our investments so as to take into account the uncertain and potentially variable financial performance of our portfolio companies. This should enable our portfolio companies to retain access to committed capital at different stages in their development and eliminate some of the uncertainty surrounding their capital allocation decisions. We will calculate rates of return on invested capital based on a combination of up-front commitment fees, current and deferred interest rates and residual values, which may take the form of common stock, warrants, equity appreciation rights or future contract payments. We believe that this flexible approach to structuring investments will facilitate positive, long-term relationships with our portfolio companies and enable us to become a preferred source of capital to them. We also believe our approach should enable debt financing to develop into a viable alternative capital source for funding the growth of target companies that wish to avoid the dilutive effects of equity financings for existing equity holders. Longer Investment Horizon - We will not be subject to periodic capital return 15 requirements. These requirements, which are standard for most private equity and venture capital funds, typically require that these funds return to investors the initial capital investment after a pre-agreed time, together with any capital gains on such capital investment. These provisions often force such funds to seek the return of their investments in portfolio companies through mergers, public equity offerings or other liquidity events more quickly than they otherwise might, which can result in a lower overall return to investors and adversely affect the ultimate viability of the affected portfolio companies. Because we may invest in the same portfolio companies as these funds, we are subject to these risks if these funds demand a return on their investments in the portfolio companies. We believe that our flexibility to take a longer-term view should help us to maximize returns on our invested capital while still meeting the needs of our portfolio companies. Established Deal Sourcing Network - We believe that, through our management and directors, we have solid contacts and sources from which to generate investment opportunities. These contacts and sources include: o public and private companies, o investment bankers, o attorneys, o accountants, o consultants, and o commercial bankers However, we cannot assure you that such relationships will lead to the origination of debt or other investments. INVESTMENT CRITERIA As a matter of policy, we will not purchase or sell real estate or interests in real estate or real estate investment trusts except that we may: o purchase and sell real estate or interests in real estate in connection with the orderly liquidation of investments, or in connection with foreclosure on collateral; o own the securities of companies that are in the business of buying, selling or developing real estate; or o finance the purchase of real estate by our portfolio companies. We will limit our investments in more traditional securities (stock and debt instruments) and will not, as a matter of policy: o sell securities short except with regard to managing the risks associated with publicly-traded securities issued by our portfolio companies; o purchase securities on margin (except to the extent that we may purchase securities with borrowed money); or o engage in the purchase or sale of commodities or commodity contracts, including futures contracts except where necessary in working out 16 distressed loans; or in those investment situations where hedging the risks associated with interest rate fluctuations is appropriate, and, in such cases, only after all necessary registrations or exemptions from registration with the Commodity Futures Trading Commission have been obtained. Prospective Portfolio Company Characteristics - We have identified several criteria that we believe will prove important in seeking our investment objective with respect to target companies. These criteria will provide general guidelines for our investment decisions; however, we caution readers that not all of these criteria will be met by each prospective portfolio company in which we choose to invest. Experienced Management - We will generally require that our portfolio companies have an experienced president or management team. We will also require the portfolio companies to have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests. We intend to provide assistance in this area either supervising management or providing management for our portfolio companies. Products or Services - We will seek companies that are involved in products or services that do not require significant additional capital or research expenditures. In general, we will seek target companies that make innovative use of proven technologies or methods. Proprietary Advantage - We expect to favor companies that can demonstrate some kind of proprietary sustainable advantage with respect to their competition. Proprietary advantages include, but are not limited to: o patents or trade secrets with respect to owning or manufacturing its products, and o a demonstrable and sustainable marketing advantage over its competition. Marketing strategies impose unusual burdens on management to be continuously ahead of its competition, either through some kind of technological advantage or by being continuously more creative than its competition. Profitable or Nearly Profitable Operations Based on Cash Flow from Operations - We will focus on target companies that are profitable or nearly profitable on an operating cash flow basis. Typically, we would not expect to invest in start-up companies unless there is a clear exit strategy in place. Potential for Future Growth - We will generally require that a prospective target company, in addition to generating sufficient cash flow to cover its operating costs and service its debt, demonstrate an ability to increase its revenues and operating cash flow over time. The anticipated growth rate of a prospective target company will be a key factor in determining the value that we ascribe to any warrants or other equity securities that we may acquire in connection with an investment in debt securities. Exit Strategy - Prior to making an investment in a portfolio company, we will analyze the potential for that company to increase the liquidity of its common 17 equity through a future event that would enable us to realize appreciation, if any, in the value of our equity interest. Liquidity events may include: o an initial public offering, o a private sale of our equity interest to a third party, o a merger or an acquisition of the portfolio company, or o a purchase of our equity position by the portfolio company or one of its stockholders. We may acquire warrants to purchase equity securities and/or convertible preferred stock of the eligible portfolio companies in connection with providing financing. The terms of the warrants, including the expiration date, exercise price and terms of the equity security for which the warrant may be exercised, will be negotiated individually with each eligible portfolio company, and will likely be affected by the price and terms of securities issued by the eligible portfolio company to other venture capitalists and other holders. We anticipate that most warrants will be for a term of five to ten years, and will have an exercise price based upon the price at which the eligible portfolio company most recently issued its equity securities or, if a new equity offering is imminent, the price at which such new equity securities will be offered. The equity securities for which the warrant will be exercised generally will be common stock of which there may be one or more classes or convertible preferred stock. Substantially all the warrants and underlying equity securities will be restricted securities under the 1933 Act at the time of the issuance. We will generally negotiate for registration rights with the issuer that may provide: o "piggyback" registration rights, which will permit us under certain circumstances, to include some or all of the securities owned by us in a registration statement filed by the eligible portfolio company, or o in circumstances, "demand" registration rights permitting us under certain circumstances, to require the eligible portfolio company to register the securities under the 1933 Act, in some cases at our expense. We will generally negotiate net issuance provisions in the warrants, which will allow us to receive upon exercise of the warrant without payment of any cash a net amount of shares determined by the increase in the value of the issuer's stock above the exercise price stated in the warrant. Liquidation Value of Assets - Although we do not intend to operate as an asset-based lender, the prospective liquidation value of the assets, if any, collateralizing any debt securities that we hold will be an important factor in our credit analysis. We will emphasize both tangible assets, such as: o accounts receivable, o inventory, and o equipment, and intangible assets, such as: o intellectual property, o customer lists, 18 o networks, and o databases. INVESTMENT PROCESS Due Diligence - If a target company generally meets the characteristics described above, we will perform initial due diligence, including: o company and technology assessments, o evaluation of existing management team, o market analysis, o competitive analysis, o evaluation of management, risk analysis and transaction size, o pricing, and o structure analysis. Much of this work will be done by management and professionals who are well known by management. The criteria delineated above provide general parameters for our investment decisions. We intend to pursue an investment strategy by further imposing such criteria and reviews that best insures the value of our investments. As unique circumstances may arise or be uncovered, not all of such criteria will be followed in each instance but the process provides a guideline by which investments can be prudently made and managed. Upon successful completion of the preliminary evaluation, we will decide whether to deliver a non-binding letter of intent and move forward towards the completion of a transaction. In our review of the management team, we look at the following: o Interviews with management and significant shareholders, including any financial or strategic sponsor; o Review of financing history; o Review of management's track record with respect to: o product development and marketing, o mergers and acquisitions, o alliances, o collaborations, o research and development outsourcing and other strategic activities; o Assessment of competition; and o Review of exit strategies. In our review of the financial conditions, we look at the following: o Evaluation of future financing needs and plans; o Detailed analysis of financial performance; o Development of pro forma financial projections; and o Review of assets and liabilities, including contingent liabilities, if 19 any, and legal and regulatory risks. In our review of the products and services of the portfolio company, we look at the following: o Evaluation of intellectual property position; o Review of existing customer or similar agreements and arrangements; o Analysis of core technology; o Assessment of collaborations; o Review of sales and marketing procedures; and o Assessment of market and growth potential. Upon completion of these analyses, we will conduct on-site visits with the target company's management team. Also, in cases in which a target company is at a mature stage of development and if other matters that warrant such an evaluation, we will obtain an independent appraisal of the target company. ONGOING RELATIONSHIPS WITH PORTFOLIO COMPANIES Monitoring - We will continuously monitor our portfolio companies in order to determine whether they are meeting our financing criteria and their respective business plans. We may decline to make additional investments in portfolio companies that do not continue to meet our financing criteria. However, we may choose to make additional investments in portfolio companies that do not do so, but we believe that they will nevertheless perform well in the future. We will monitor the financial trends of each portfolio company to assess the appropriate course of action for each company and to evaluate overall portfolio quality. Our management team and consulting professionals, who are well known by our management team, will closely monitor the status and performance of each individual company on at least a quarterly and, in some cases, a monthly basis. We will use several methods of evaluating and monitoring the performance and fair value of our debt and equity positions, including but not limited to the following: o Assessment of business development success, including product development, financings, profitability and the portfolio company's overall adherence to its business plan; o Periodic and regular contact with portfolio company management to discuss financial position, requirements and accomplishments; o Periodic and regular formal update interviews with portfolio company management and, if appropriate, the financial or strategic sponsor; o Attendance at and participation in board meetings; o Review of monthly and quarterly financial statements and financial projections for portfolio companies. Managerial Assistance - As a business development company, we will offer, and in 20 many cases may provide, significant managerial assistance to our portfolio companies. This assistance will typically involve: o monitoring the operations of our portfolio companies o participating in their board and management meetings, o consulting with and advising their officers, and o providing other organizational and financial guidance. INVESTMENT AMOUNTS The amount of funds committed to a portfolio company and the ownership percentage received will vary depending on the maturity of the portfolio company, the quality and completeness of the portfolio company's management team, the perceived business opportunity, the capital required compared to existing capital, and the potential return. Although investment amounts will vary considerably, we expect that the average investment, including follow-on investments, will be between $25,000 and $1,000,000. 21 COMPETITION Our primary competitors to provide financing to target companies will include private equity and venture capital funds, other equity and non-equity based investment funds and investment banks and other sources of financing, including traditional financial services companies such as commercial banks and specialty finance companies. Many of these entities have substantially greater financial and managerial resources than we will have. We believe that our competitive advantage with regard to quality target companies relates to our ability to negotiate flexible terms and to complete our review process on a timely basis. We cannot assure you that we will be successful in implementing our strategies. CRITICAL ACCOUNTING POLICIES AND ESTIMATES ------------------------------------------ Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we will evaluate our estimates and judgments, including those related to revenue recognition, valuation of investments in portfolio companies, accrued expenses, financing operations, contingencies and litigation. We will base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, such as the investments in portfolio companies. RESULTS OF OPERATIONS ------------------------------------- Comparison of three months ended March 31, 2007 and March 31, 2006 - During the three months ended March 31, 2007, we operated as a BDC; whereas, during the three months ended March 31, 2006, we operated as a business consulting company until February 14, 2006 and a BDC from February 15, 2006 until March 31, 2006. We are in the infancy stage of operating as a BDC and have not established any revenue from our investments in portfolio companies. In 2006, before becoming a BDC, we had $40,000 in consulting income. During 2006, we had $20,424 in compensation and benefits, before becoming a BDC. Our officers have discontinued any salary while we establish our business as a BDC. 22 Other general and administrative expenses were $5,693 before becoming a BDC in 2006, $1,910 after becoming a BDC in 2006 and $102 in 2007. Professional fees amounted to $4,663 in 2006 before becoming a BDC, $1,977 in 2006 after becoming a BDC and $6,334 in 2007. In total costs are approximately the same in both quarterly periods. Travel and entertainment costs amounted to $13,971 in 2006 before becoming a BDC and $3,043 in 2006 after becoming a BDC. There were no travel and entertainment costs in 2007. In March 2007, we accrued $8,000 as a potential disgorgement loss as a result of a possible claim proposed by the SEC (Note 5). The above activity, less related deferred tax benefit, resulted in a net loss from operations of $16,916 in 2006 before becoming a BDC, $6,068 after becoming a BDC and $11,558 in 2007. We recorded unrealized depreciation of $33,363 during the 2006 period after becoming a BDC and unrealized depreciation of $3,875 in 2007. We recorded a valuation allowance equal to the expected deferred tax benefit from the unrealized loss. LIQUIDITY AND CAPITAL RESOURCES --------------------------------- At March 31, 2007, we had total assets of $31,188 as compared to total assets of $41,423 at December 31, 2006. During the first three months of 2007, cash decreased $5,004 to $62 and investments decreased $3,875 from $19,600 to $15,725, which represents the majority of the decline in total assets of $10,235. Liabilities have increased $5,198 during 2007 from $27,802 at year-end 2006 to $33,000 as of March 31, 2007. This change is the result of the net increase in accounts payable and accrued expenses during the three months ended March 31, 2007. Accordingly, net assets (liabilities) decreased from $13,621 to $(1,812) during the three months ended March 31, 2007. This decline includes an operating loss of $11,558 and an increase in unrealized depreciation of $3,875. NET ASSET (LIABILITY) VALUE --------------------------- As a Business Development Company, certain of our activities and disclosures are made in reference to Net Asset Value which is the value of our portfolio assets less debt and preferred stock. This may be viewed, simply and generalized, as the value of our assets to our common shareholders. As of the date of the financial information in this report, the value of our portfolio of assets including investments in equity securities and cash is $31,188 and from this, are subtracted liabilities and debts of $33,000. There are no shares of preferred stock outstanding but the rights of preferred stockholders would be included if there were. The Net Asset (Liability) Value is therefore $(1,812). The Net Asset (Liability) Value per Share is $(.0002). 23 OFF BALANCE SHEET ARRANGEMENTS ------------------------------- o None. CONTRACTUAL OBLIGATIONS ------------------------- o None. 24 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices. We are primarily exposed to equity price risk. Equity price risk arises from exposure to securities that represent an ownership interest in our portfolio companies. The value of our equity securities and our other investments are based on quoted market prices or our Board of Directors' good faith determination of their fair value (which is based, in part, on quoted market prices). Market prices of common equity securities, in general, are subject to fluctuations, which could cause the amount to be realized upon sale or exercise of the instruments to differ significantly from the current reported value. The fluctuations may result from perceived changes in the underlying economic characteristics of our portfolio companies, the relative price of alternative investments, general market conditions and supply and demand imbalances for a particular security. ITEM 4: CONTROLS AND PROCEDURES Evaluation of Controls and Procedures Our board of directors and management, including the Chief Executive Officer ("CEO"), evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) and 15(d)-15(e) of the Exchange Act. Based upon that evaluation, our board of directors and management, including the CEO, concluded that, as of March 31, 2007, our disclosure controls and procedures were effective in alerting management on a timely basis to material information that would be required to be included in our periodic filings with the SEC. Based on their most recent evaluation as of the Evaluation Date, the CEO has also concluded that the other controls and procedures, that are designed to ensure that information required to be disclosed in our periodic filings with the SEC, are adequate. Changes in Internal Control At the time of its election as a business development company, we updated our internal controls; the controls were adopted by our board of directors on February 13, 2006. No failures or shortcomings were discovered and the updating related to insuring that safeguards appropriate for an investment company were included in our internal controls. There were no significant changes made in our internal controls over financial reporting since that time that have materially affected, or are reasonably likely to materially affect, these internal controls. Thus, no corrective actions, with regard to significant deficiencies or material weaknesses, were necessary. 25 PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS The Company received notice that the staff of the Fort Worth District Office of the Securities and Exchange Commission intends to recommend that the Commission bring a civil injunctive action against Interim Capital Corp. and its President, Mark Lindberg, alleging that they violated Sections 5(a) and 5(c) of the Securities Act of 1933 by engaging in an unregistered, nonexempt distribution of Sniffex, Inc. stock. The Company may be subject to fines or disgorgement for certain potential violations upon resolution of this matter ITEM 1A: RISK FACTORS Not applicable. ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3: DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5: OTHER INFORMATION None. ITEM 6: EXHIBITS The following exhibits are filed with this report on Form 10-Q. Exhibit 31 Certifications pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32 Certifications pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 26 SIGNATURE ---------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERIM CAPITAL CORP. Date: May 9, 2007 By: /s/ Mark Lindberg ------------------------ Mark Lindberg, Chief Executive Officer and Chief Financial Officer 27

INTERIM CAPITAL CORP/NV 10-Q