Northern Financial Corporation

Northern Financial Corporation is a provider of investment banking services to corporate, retail and institutional clients. The company, which was originally incorporated as Dolphin Explorations Ltd. in September 1982, subsequently underwent several name changes including American Gem Corp. in February 1994, and Digital Gem Corp. in October 1999. Northern Financial commenced a strategic shift from its previous mining and marketing sapphires business to focus on financial services and technology initiatives relating to the securities industry in mid-1998. On September 29, 2000, the company was renamed Northern Financial Corporation to reflect its new financial and investment business. The company currently has two wholly-owned subsidiaries, namely, Northern Securities Inc., a full service brokerage firm, and 1279514 Ontario Inc., the parent company of IPO Capital Corp., a registered securities dealer.

Through Northern Securities, the company provides trading and financial advisory services to retail and institutional investors. In addition, Northern Securities is engaged in providing investment banking services to small market capitalization, commonly referred to as small-cap, companies. Northern Securities’ traditional brokerage business can be categorized into four revenue generating streams, namely, retail sales, principal trading, financings, and financial advisory services such as acquisitions, informal restructurings, mergers, and sponsorships. Northern Securities also has an online division called eNorthern which offers online securities trading and financing services at www.eNorthern.com. eNorthern account holders are able to trade securities over the Internet, including Canadian and U.S.-listed equities, fixed income securities, and mutual funds. Furthermore, eNorthern’s public offering site enables clients to subscribe to IPOs that the company is acting as an agent or underwriter.

On December 20, 2002, Northern Financial completed the acquisition of Georgia Pacific Securities Corp. and assumed all of its existing clients and inventory accounts at the time. In exchange, Northern Financial issued approximately 5.24 million common shares and paid $150,000 in cash. Subsequently, the cash amount was settled by the issuance of 10 million Northern Financial common shares to Georgia Pacific shareholders. Pursuant to the purchase agreement, Georgia Pacific also acquired 37.5 million Northern Financial common shares for $750,000 as investment in the company. Georgia Pacific’s assets and revenues were consolidated with Northern Financial’s statements as of February 1, 2003.

On March 31, 2003, Northern Financial purchased 1279514 Ontario Inc. and its subsidiary IPO Capital Corp. for cash consideration of $343,106 and the issuance of approximately 26.25 million Northern Financial common shares. As at March 31, 2003, IPO Capital’s assets and revenues were recorded in Northern Financial’s consolidated financial statements.

The restructuring and integration of the businesses of Northern Securities, Georgia Pacific, and IPO Capital were completed in the summer of 2003. The integration involved a rationalization of Northern Financial's operations and the achievement of operational efficiencies.

On September 2, 2003, Northern Financial disposed of its long-term debt through the conversion of debentures into approximately 43.33 million common shares. The company stated that due to the conversion, the entire principal amount of the debentures, which had a face value of $650,000, was eliminated.

On September 23, 2003, Northern Financial shareholders approved the special resolution to consolidate the company’s common shares. As a result, Northern Financial directors have full discretion to implement the consolidation at a ratio of no less than one for two and no greater than one for every five shares at any time prior to September 23, 2004. Management believes that the implementation of the share consolidation could be utilized as one method of increasing the market price of the company’s shares and attracting new investor interest, thereby, improving liquidity. At this time, the directors have decided to postpone the implementation of the resolution until a later date.

In January 2004, Northern Financial completed a $1.08 million financing of debentures, a $2 million equity private placement, and a $3 million facility for bought deal underwritings and block trades. The $1.08 million financing consisted of unsecured debentures which had a three year term, a 9% interest rate, and 10 share purchase warrants for each dollar principal amount issued or a total of 12.1 million warrants for three years. Each warrant has an exercise price of $0.03 in the first two years and $0.05 in the third year. The $2 million equity private placement comprised of one common share at $0.065 per share and one-half warrant with a two year term at an exercise price of $0.10 per warrant. In addition, the company announced that its subsidiary, Northern Securities, had arranged a $3 million facility with an arms length investment company. The facility for bought deal underwritings and block trades allows Northern Securities to purchase all of the investment company’s securities for resale to other investors.

The company recently reported its operating and financial results for the 9 months ended December 31, 2003. During the period, Northern Financial continued to expand its investment banking business through participation in several significant material financings. The company acted as co-underwriter of a $25 million private placement with Constellation Copper Corp. (CCU:TSX), as co-underwriter of Lumina Copper Corp.’s (LUM:TSX-V) $10.6 million financing, and sole underwriter of a $3 million deal with TransGlobe Energy Corp. (TGL:TSX).