<Page>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act 1934
Date of Report: March 13, 2002
TRAVLANG, INC.
--------------
(Exact name of registrant as specified in charter)
DELAWARE
--------
(State or other jurisdiction of incorporation)
0-14026 13-3174562
- ------------------------ --------------------------------
(Commission File Number) (IRS Employer Identification No.)
2 HASHILOACH ST., PETACH TIKVA, ISRAEL 49170
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011 972 397 10548
------------------
<Page>
Item 4. Changes in Registrant's Certifying Accountant
On March 13, 2002, the Registrant dismissed Daszkal Bolton LLP ("DB") as
its independent auditors, terminating the client-auditor relationship between
the Registrant and DB, and the Registrant engaged Chaikin Cohen Rubin & Gilboa
("CCRG") as its independent auditors of the Registrant's indirect wholly-owned
subsidiary, Sec2Wireless, Ltd., for the current fiscal year. On May 16, 2002,
the Registrant engaged SF Partnership, LLP ("SFP") as its independent auditors.
On the Registrant's Form 8-K dated March 13, 2002 and on the Registrant's Form
8-K/A dated May 9, 2002, the Registrant mistakenly reported that it had engaged
CCRG as its independent auditors. This Form 8-K/A is filed to correct such
mistake. CCRG remains as the independent auditors for Sec 2 Wireless, Ltd. The
decision to dismiss DB and engage SFP was approved by the Board of Directors of
the Registrant, upon the recommendation of the Audit Committee of the Board of
Directors. DB's reports on the consolidated financial statements of the
Registrant for fiscal years 2001 and 2000 and any subsequent interim period
preceding the dismissal did not contain any adverse opinion or a disclaimer of
opinion, and were not qualified or modified as to financial statement
disclosure, audit scope or procedure, or accounting principles or practices
except that the report was modified as to uncertainty and contained a disclosure
stating that the financial statements were prepared based on the assumption that
the Registrant would continue as a going concern. During fiscal years 2001 and
2000 and the subsequent interim period through March 13, 2002, there were no
disagreements with DB regarding any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of DB, would have caused DB
to make reference to the subject matter of the disagreements in connection with
its report. The Registrant requested that DB furnish it with a letter addressed
to the Securities and Exchange Commission stating whether it agrees with the
above statements. The letter, dated April 1, 2002, was filed as Exhibit 1 to the
Registrant's Form 8-K dated March 13, 2002.
<Page>
Item 7. Financial Statements, PRO FORMA Financial Information and Exhibits
(a) Financial Statements.
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
TOGETHER WITH REPORT OF INDEPENDENT AUDITORS
CONTENTS
Report of Independent Auditors 1
Consolidated Balance Sheet 2
Consolidated Statement of Deficit Accumulated During Development Stage 3
Consolidated Statement of Earnings 4
Consolidated Schedule of Research and Development Expenses 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 17
<Page>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
We have audited the accompanying consolidated balance sheet of
SEC2WIRELESS INC., DEVELOPMENT STAGE ENTERPRISE as at December 31, 2001 and 2000
and the consolidated statements of deficit accumulated during development stage,
earnings and cash flows for the year then ended. The consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform an 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 financial position of the company
as at December 31, 2001 and 2000, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As explained in Note
1 to the financial statements, the Company's ability to realize its assets and
to discharge its liabilities in the normal course of business depends upon the
Company's ability to obtain additional funding. This concern arises because the
Company has incurred negative cash flows from its operations and losses since
its inception. Management plans regarding those matters are also described in
Note 1. These consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
"SF PARTNERSHIP, LLP"
TORONTO, CANADA CHARTERED ACCOUNTANTS
May 16, 2002
1
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Consolidated Balance Sheet
December 31, 2001
<Table>
<Caption>
2001 2000
In thousands of
dollars
ASSETS
CURRENT
Cash and cash equivalents $ 102 $ 500
Other receivables and prepaid expenses 41 85
------- -------
143 585
CAPITAL ASSETS (note 3) 206 290
------- -------
$ 349 $ 875
======= =======
<Caption>
LIABILITIES
CURRENT
Accounts payable $ 156 $ 242
Other current liabilities (note 4) 1,152 596
Convertible loans (note 5) 1,585 --
------- -------
2,893 838
SEVERANCE PAY (note 6) 71 18
------- -------
2,964 856
------- -------
<Caption>
SHAREHOLDERS' DEFICIENCY
CAPITAL STOCK (note 7) 12 12
PAID IN CAPITAL 1,816 1,611
DEFERRED COMPENSATION (note 8) (59) (50)
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE (4,384) (1,554)
------- -------
(2,615) 19
------- -------
$ 349 $ 875
======= =======
</Table>
APPROVED ON BEHALF OF THE BOARD
"Shmuel Weiss" "Lucien Geldzahler"
- -------------------------------- --------------------------------
Director Director
2
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Consolidated Statement of Deficit Accumulated During Development Stage
Year Ended December 31, 2001
<Table>
<Caption>
2001 2000
In thousands of
dollars
------------------
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
- BEGINNING OF YEAR $(1,554) $ --
Net loss (2,830) (1,554)
------- -------
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
- END OF YEAR $(4,384) $(1,554)
======= =======
</Table>
3
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Consolidated Statement of Earnings
Year Ended December 31, 2001
<Table>
<Caption>
2001 2000
In thousands of
dollars
---------------------
EXPENSES
Research and development (page 5) $ 1,389 $ 939
General and administrative 810 540
Marketing 547 99
Financial expense 90 11
------- -------
2,836 1,589
FINANCIAL INCOME (6) (35)
------- -------
NET LOSS $(2,830) $(1,554)
======= =======
Basic and diluted net loss per share (note 9) (0.23) (0.15)
</Table>
4
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Consolidated Schedule of Research and Development Expenses
Year Ended December 31, 2001
<Table>
<Caption>
2001 2000
In thousands of
dollars
------------------
Salaries and employee benefits $1,081 $ 555
Subcontractors 5 106
Materials 7 33
Rent 27 43
Amortization 85 37
Vehicles 118 69
Communication and maintenance 61 26
Travelling and accommodation -- 25
Other 5 45
------ ------
$1,389 $ 939
====== ======
</Table>
5
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Consolidated Statement of Cash Flows
Year Ended December 31, 2001
<Table>
<Caption>
2001 2000
In thousands of
dollars
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,830) $(1,554)
Adjustments for non-cash working capital:
Amortization 115 40
Amortization of deferred compensation 49 --
------- -------
(2,666) (1,514)
Changes in non cash working capital
Other receivables and prepaid expenses 44 (85)
Accounts payables (86) 242
Other current liabilities 556 596
Provision for severance pay 53 18
------- -------
(2,099) (743)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions of capital assets (31) (330)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares -- 12
Paid in capital 147 1,561
Convertible loan received 1,585 --
------- -------
1,732 1,573
------- -------
NET (DECREASE) INCREASE IN CASH (398) 500
CASH - BEGINNING OF YEAR 500 --
------- -------
CASH - END OF YEAR $ 102 $ 500
======= =======
</Table>
6
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
1. GOING CONCERN ASSUMPTION
For the year ended December 31, 2001, the Company had a net cash outflow of
$2,099,000 from operations (year ending December 31, 2000 - $743,000)
substantially incurred in the development of its products. To date, the
Company has successfully raised funds through private offerings and private
financing to satisfy its working capital shortfall.
The Company requires additional funding to cover working capital
requirements and debt repayments. To address these funding requirements, the
Company is negotiating an agreement which will provide the Company with a
line of credit amounting to $5,000,000. As well, the Company continues to
raise capital through private share placings.
There is uncertainty associated with the ability of the Company to raise
funds as described above. The Company faces a number of business risks,
including uncertainties regarding demand and market acceptance of the
Company's product, the effect of technological changes, competition,
dependence on proprietary technology and the continued development of the
products. Accordingly, these consolidated financial statements have been
prepared using generally accepted accounting principles applicable to a
going concern. If the going concern assumption were not appropriate,
adjustments would be necessary to the carrying values of assets and
liabilities, the expenses, and the balance sheet classifications used, and
such adjustments could be material.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Sec2Wireless Inc., a development stage enterprise, was incorporated on
January 27, 2000 and operates in the United States and in Israel through
its wholly owned subsidiary, Sec2Wireless Israel Ltd.
The principle business activities of the Company are research and
development in the field of Wireless Security Technologies of software
products and initiating commercial relations with potential customers. The
Company has not yet commenced its production and sales activities.
The Company is a development stage enterprise. Most of the Company's
activities are research and development, developing markets and starting up
production. Accordingly, the financial statements of the Company are
prepared in conformity with the reporting standards set by FAS No. 7
"Accounting and Reporting by Development Stage Enterprises".
7
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
Basis of Consolidation
These consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Sec2Wireless Israel Ltd., after
elimination of all intercompany transactions and balances.
Cash and Cash Equivalents
Cash and cash equivalents include cash and highly-liquid investments with
original maturities of 90 days or less.
Capital Assets and Amortization
Capital assets are stated at cost. Amortization, based on the estimated
useful lives of the assets, is provided using the undernoted annual rates
and methods:
Computer equipment and software 33% Straight-line
Electronic equipment 15% Straight-line
Office furniture 6% Straight-line
Leasehold improvements Lease term Straight-line
Additions during the year are amortized at the normal rate prorated to
reflect the period of use during the year.
Research and Development
The Company expenses research and development costs as incurred.
Stock-based Compensation
The Financial Accounting Standards Board ("FASB") issued Statements of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation", in October 1995. This accounting standard
permits the use of either a fair value based method of accounting or the
method prescribed in Accounting Principles Board Opinion 25 ("APB 25"),
"Accounting for Stock Issued to Employees" to account for stock-based
compensation arrangements. In accordance with APB 25, deferred compensation
is recorded if there is a difference between the exercise price and the
fair market value of the ordinary share on the date of the grant. Companies
that elect to employ the method prescribed by APB 25 are required to
disclose the pro forma net loss that would have resulted from the use of
the fair value based method. The Company has elected to account for its
share-based compensation arrangements under the provisions of APB 25, and
accordingly, has included in Note 8 the pro forma disclosures required
under SFAS No. 123.
Options granted to non-employees are recognized at their fair market value
at date of grant in accordance with SFAS No. 123.
8
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
Foreign Currency Translation
Monetary assets and liabilities denominated in currencies other than US
dollars are translated at rates in effect at the balance sheet dates. The
resulting translation gains and losses are included in the consolidated
statement of operations.
The Company's Israeli subsidiary is classified as integrated for accounting
purposes. Monetary assets and liabilities of the subsidiary are translated
into US dollars at exchange rates in effect at the balance sheet dates.
Non-monetary items in foreign currency are translated at historical rates
of exchange. Revenues and expenses are translated at the average rate of
exchange for the period, except for amortization and depreciation, which
are translated at historic rates. Translation gains and losses arising are
included in the consolidated statement of operations.
Earnings Per Share
Basic and diluted earnings per share is computed pursuant to SFAS No. 128.
Basic earnings per share are computed by dividing net earnings by the
weighted average shares outstanding during the reporting period. Diluted
earnings per share are computed similar to basic earnings per share except
that the weighed average shares outstanding are increased to include
additional shares from the assumed exercise of stock options, if dilutive.
The number of additional shares is calculated by assuming that outstanding
stock options were exercised and that the proceeds from such exercises were
used to acquire shares of common stock at the option price during the
reporting period.
Use of Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, 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 revenue and expenses
during the reporting period. The most significant estimates for the Company
include: the fair values of identifiable assets acquired in business
combinations; provisions for the credit risk exposure in amounts of capital
assets, goodwill and product development costs; and valuation allowances
against future income tax assets. Actual results could differ from those
estimates.
9
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
<Table>
<Caption>
3. CAPITAL ASSETS
2001 2000
ACCUMULATED Accumulated
COSTAMORTIZATION CostAmortization
-----------------------------------------------
IN THOUSANDS OF DOLLARS In thousands of dollars
-----------------------------------------------
Computer equipment and software $249 $100 $225 $ 19
Electronic equipment 44 10 38 3
Office furniture 25 2 25 1
Leasehold improvements 43 43 43 18
---- ---- ---- ----
$361 $155 $331 $ 41
---- ---- ---- ----
Net carrying amount $206 $ 290
---- ----
<Caption>
4. OTHER CURRENT LIABILITIES
2001 2000
In thousands of dollars
-------------------------
Employee and related expenses $1,018 $ 538
Government institutions -- 20
Accrued expenses 109 14
Other 25 24
------ ------
$1,152 $ 596
====== ======
<Caption>
5. CONVERTIBLE LOANS
2001 2000
In thousands of dollars
-------------------------
Loan #1 $1,500 $ --
Loan #2 85 --
- ------ -----
$1,585 $ --
====== =====
</Table>
10
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
5. CONVERTIBLE LOANS (CONT'D.)
Loan #1
On March 6, 2001 the Company entered into a convertible loan agreement with
a private lender. In accordance with the agreement, the lender advanced an
amount of $1,000,000. On August 16, 2001 the lender advanced an additional
$500,000. The loan bears interest of 7% per annum compounded semi-annually
and is due on March 6, 2002. The lender has the sole right to extend the
repayment date.
Any time before maturity, the lender has a right to convert the loan plus
accrued interest into Series B preferred shares. The conversion price is
based on the Company being valued at 50% of the market value of the Company
to be determined by an independent third party. The maximum market price is
stipulated to be $6,000,000. The loan will automatically be converted to
Series B preferred shares if the Company achieves equity financing of at
least $5,000,000, converted using the above formula and a market value
based on the equity financing.
All the Company's assets and rights including its intellectual rights are
pledged to the lender in order to secure the repayment of the loan
As described in Note 14, to date, the lender has not demanded repayment of
the loan.
Loan #2
On December 26, 2001 the Company entered into a convertible loan agreement
with a private lender. The lender advanced an amount of $85,000. The loan
bears interest of 6 1/2% per annum, compounded semi-annually and is due on
December 31, 2002. The lender has the sole right to extend the repayment
date.
At any time before the maturity date, the lender has a right to convert the
loan plus accrued interest into Series A preferred shares. The conversion
price is calculated according to a valuation of the Company based on 90% of
the valuation of the Company last used, prior to the conversion on a fully
diluted basis.
Upon achieving equity financing of $1,000,000, the loan will automatically
be converted into: (a) securities issued on the equity financing at a
conversion price calculated according to a valuation of the Company equal
to 90% of valuation of the Company utilized in the equity financing on a
fully diluted basis or (b) at the lenders option, common shares of the
Company at a conversion price of $0.4769 per share, whose price is subject
to reduction in the same manner as an antidilution adjustment would occur
under the terms of the Series A preferred shares.
11
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
6. SEVERANCE PAY
The Company's subsidiary is subject to Israeli law and labour agreements,
under which it is required to make severance payments to dismissed employees
and employees leavings its employment in certain other circumstances. The
subsidiary's severance pay liability to its employees, which is calculated
on the basis of the salary of each employee for the last month of the
reported year multiplied by the years of such employee's employment is
included in the Company's balance sheet on the accrual basis.
7. CAPITAL STOCK
a) Authorized
17,200,000 common shares $0.001 par value
2,800,000 preferred shares, issuable in series, par value $0.001
b) Changes in issued and outstanding common and preferred shares were as
follows:
<Table>
<Caption>
NUMBER OF
NUMBER OF SHARE PREFERRED SHARE
COMMON SHARES CAPITAL SHARES CAPITAL
------------------------------------------------------
In thousands In thousands
of dollars of dollars
------------------------------------------------------
Outstanding at January 1, 2000 -- $ -- -- $ --
Shares issued for cash during the year 10,000,000 10 1,512,513 2
---------- ---------- --------- ----------
Outstanding at December 31, 2000 10,000,000 10 1,512,513 2
Shares issued on exercise of options 475,338 -- 907,678 --
---------- ---------- --------- ----------
Outstanding at December 31, 2001 10,475,338 $ 10 2,420,191 $ 2
========== ========== ========= ==========
</Table>
12
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
7. CAPITAL STOCK (CONT'D.)
c) Stock-based compensation plan
The Company has a fixed stock option plan, pursuant to which the Company
may grant options to its employees, consultants and directors for up to
10% of the shares of common stock outstanding. Under the plan, the
exercise price of each option varies and an option's maximum term is
three years. Options have been granted at various times at the
discretion of the Board of Directors and vest over different terms. All
stock options are exercisable on or before five years from the date of
the grant, or one year following the date the optionee ceases to be a
director, officer or employee of the Company by reason of death, or 90
days after ceasing to be a director, officer or employee for any reason
other than death.
Transactions related to these plans are summarized in the following
table:
<Table>
<Caption>
WEIGHTED
AVERAGE
OUTSTANDING EXERCISE PRICE
OPTIONS PER SHARE
Options granted at inception 526,316 $ 0.10
Options granted 195,000 2.00
Options forfeited (40,000) --
--------- -------
Outstanding - December 31, 2000 681,316 0.65
Options granted 918,776 1.21
Options forfeited (286,333)
--------- -------
Outstanding - December 31, 2001 1,313,759 $ 0.88
========= =======
</Table>
8. DEFERRED COMPENSATION
On its inception, the Company granted 526,316 options to a key employee
with an exercise price of $0.1 per share. The options are vested ratably
over a 3 year period.
Options to purchase 184,110 shares have been issued to non-employees. The
Company has accounted for these options in accordance with SFAS No. 123
utilizing the Black-Scholes options pricing model with the following
assumptions: (1) expected life of the options is 3 years; (2) non dividend
yield; (3) expected volatility of 60%; (4) risk-free interest rate of 6%.
The aggregate value of non-employee options was $326,260.
The amounts of deferred compensation recognized arising from the difference
between the exercise price and the fair market value at the date of the
grant for options granted in the year ended December 31, 2001 and 2000 was
$59,000 and $50,000 respectively. The amounts of the deferred compensation
are included in shareholders equity and are being amortized over the
vesting period.
13
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
8. DEFERRED COMPENSATION (CONT'D.)
The following tables summarizes information about options outstanding and
exercisable at December 13, 2001:
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING AVERAGE AVERAGE OUTSTANDING AVERAGE
EXERCISE AT DECEMBER REMAINING EXERCISE AT DECEMBER AT DECEMBER
PRICE 31, 2001 CONTRACTUAL LIFE PRICE 31, 2001 31, 2001
- ---------------------------------------------------------------------------------------------
0.5 - 0.1 866,316 6.16 0.26 175,333 0.10
2.0 - 1.7 447,443 5.66 2.00 261,938 1.66
- ---------------------------------------------------------------------------------------------
1,313,759 437,271
=============================================================================================
</Table>
If compensation had been determined under the alternative fair value accounting
method provided for under SFAS No. 123, the Company's net loss would be changed
to the following pro-forma amounts:
<Table>
<Caption>
CUMULATIVE
FROM
INCEPTION
THROUGH
YEAR ENDED DEC. 31, DEC. 31,
2001 2000 2001
----------------------------------
In thousands of dollars
----------------------------------
As reported (2,830) (1,554) (4,384)
Pro-forma (2,961) (1,603) (4,564)
</Table>
14
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
9. BASIC AND DILUTED LOSS PER SHARE
Basic and diluted loss per share is calculated using the weighted average
number of common shares outstanding as well as commitments to issue common
shares, and common shares issuable under Stock Based Compensation. The
exercise of stock options could potentially dilute earnings per shares in
the future, but were not reflected in diluted loss per share for 2001 and
2000 because to do so would be anti-dilutive.
<Table>
<Caption>
2001 2000
In thousands of dollars
--------------------------
Numerator
Net loss $ (2,830) $ (1,554)
----------- -----------
Denominator
Weighted average common shares outstanding 12,498,329 10,257,537
----------- -----------
Basic and diluted loss per share $ (0.23) $ (0.15)
=========== ===========
</Table>
Due to the fact that those issuances are antidilutive, all outstanding
share options and convertible loans were excluded from the calculation of
diluted net loss per share. The total number of shares related to the
outstanding options excluded from the calculation of diluted net loss per
share was 3,413,320 and 222,140 as of December 31, 2001 and 2000,
respectively.
10. INCOME TAXES
The Company recorded no future income tax assets due to uncertainty
associated with the Company's ability to utilize realized losses in the
future.
11. FINANCIAL INSTRUMENTS
a) Fair value
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
The carrying amounts of cash and equivalents, other receivables,
accounts payable and other current liabilities approximate fair values
because of the short-term maturity of these instruments.
15
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
11. FINANCIAL INSTRUMENTS (CONT'D.)
The fair value of convertible loans is based on the net present
value of the related future cash flows calculated using borrowing
rates currently available to the Company for loans with similar
terms and average maturities.
There were no significant differences between the carrying values
and fair values of the Company's financial instruments at December
31, 2001.
b) Credit Risk
The Company's maximum credit risk exposure arising in relation to
its financial assets is equivalent to their carrying amounts at
December 31, 2001 and 2000. The Company performs regular credit
assessments and records allowances for potentially uncollectable
amounts of other receivables.
c) Interest Rate Risk
The Company's other receivables and accounts payable and other
current liabilities are non-interest bearing. The Company's interest
bearing assets and liabilities at December 31, 2001 are as follows:
Assets
Cash and short-term deposits Interest bearing at various rates
equivalent to 30-90 day bankers'
acceptance
Liabilities
Convertible loans Note 5
12. RELATED PARTY TRANSACTIONS
a) The Company incurred debts to its related parties amounting to
$403,000 (in 2000 - $305,000). The balance bears no interest and
have no specific terms of repayment.
b) During the year the Company paid salaries to its related parties
which amounted to $603,000 (in 2000 - $324,000).
These transactions were in the normal course of business and recorded at
an exchange value established and agreed upon by the above mentioned
parties.
16
<Page>
SEC2WIRELESS INC.
DEVELOPMENT STAGE ENTERPRISE
Notes to Consolidated Financial Statements
December 31, 2001
13. COMMITMENTS
The Company has entered into brokerage and consulting agreements. Under
the agreements the broker or consultant is entitled to receive from the
Company a commission of 4% of any Equity Funding transaction initiated by
them and to receive 2% of the Company's outstanding shares in the event
that the Company achieves an Equity Funding of $5,000,000. This percentage
is modified proportionately to reflect Equity Funding raised by the
Company under $5,000,000.
14. SUBSEQUENT EVENTS
a) Subsequent to the year end the Company issued 40,891 additional
common shares for approximately $20,000.
b) On March 6, 2002, the first anniversary date, the convertible Loan
#1 as described in Note 5 matured. The lender did not demand
repayment of the loan and in April 2002 advanced an additional
$250,000 to the Company.
c) On March 12, 2002 all outstanding preferred shares of the company
were converted to common shares in a 1:1 ratio.
d) On March 12, 2002 the Company was acquired by Travlang, Inc., a
publicly traded company listed on the Nasdaq Over The Counter
bulletin board. In a reverse takeover, all the Company's outstanding
shares amounting to 12,936,420 common shares were acquired by
Travlang, Inc. in consideration for 80,380 preferred shares of
Travlang, Inc., each convertible to 1,000 common shares. After this
transaction, the former shareholders of the Company held
approximately 80% ownership of Travlang, Inc.
17
<Page>
(b) Pro Forma Financial Information
TRAVLANG, INC.
PRO-FORMA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
UNAUDITED
CONTENTS
Pro-forma Consolidated Balance Sheet 19
Pro-forma Consolidated Statement of Earnings 20
Notes to Pro-forma Consolidated Financial Statements 21 -22
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<Page>
TRAVLANG, INC.
Pro-forma Consolidated Balance Sheet
December 31, 2001
Unaudited
<Table>
<Caption>
TRAVLANG, TRAVLANG,
TRAVLANG, CONSOLIDATED PRO- INC. PRO- INC. PRO-
INC. SEC2WIRELESS FORMA FORMA FORMA
MARCH 12, INC. ADJUST- DEC. 31, DEC. 31,
2002 DEC 31. 2001 MENTS NOTE 2001 2000
----------------------------------------------------------------
IN THOUSANDS OF DOLLARS
----------------------------------------------------------------
ASSETS
CURRENT
Cash and cash
equivalents $ -- $ 102 $ -- $ 102 $ 500
Other receivables
and prepaid expenses -- 41 -- 41 85
-------- -------- -------- -------- --------
-- 143 -- 143 585
CAPITAL -- 206 -- 206 290
GOODWILL -- -- 625(1(A)) 625 625
-------- -------- -------- -------- --------
$ -- $ 349 $ 625 $ 974 $ 1,500
-------- -------- -------- -------- --------
<Caption>
LIABILITIES
CURRENT
Accounts payable -- 156 -- 156 242
Other current liabilities $ -- $ 1,152 $ 50(2) $ 1,202 $ 646
Convertible loans -- 1,585 -- 1,585 --
-------- -------- -------- -------- --------
-- 2,893 50 2,943 888
SEVERANCE PAY -- 71 -- 71 18
-------- -------- -------- -------- --------
-- 2,964 50 3,014 906
-------- -------- -------- -------- --------
<Caption>
SHAREHOLDERS' EQUITY
CAPITAL STOCK - PAR VALUE 258 12 (258)(1(B)) 12 12
PAID IN CAPITAL 15,628 1,817 (15,628)(1(B)) 2,391 2,186
625(1(A))
(50)(2)
DEFERRED COMPENSATION -- (59) -- (59) (50)
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE (15,886) (4,385) 15,886 (4,384) (1,554)
-------- -------- -------- -------- --------
-- (2,615) 575 (2,040) 594
-------- -------- -------- -------- --------
$ -- $ 349 $ 625 $ 974 $ 1,500
======== ======== ======== ======== ========
</Table>
APPROVED ON BEHALF OF THE BOARD
"Shmuel Weiss" "Lucien Geldzahler"
- ------------------------------- ---------------------------------
Director Director
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<Page>
TRAVLANG, INC.
Pro-Forma Consolidated Statement of Earnings
Year Ended December 31, 2001
<Table>
<Caption>
TRAVLANG, TRAVLANG,
TRAVLANG, CONSOLIDATED PRO- INC. PRO- INC. PRO-
INC. SEC2WIRELESS FORMA FORMA FORMA
MARCH 12, INC. ADJUST- DEC. 31, DEC. 31,
2002 DEC 31, 2001 MENTS 2001 2000
-------------------------------------------------------------
IN THOUSANDS OF DOLLARS
-------------------------------------------------------------
EXPENSES
Research and
development $ -- $ 1,389 $ -- $ 1,389 $ 500
General and
administrative -- 810 -- 810 540
Marketing -- 547 -- 547 99
Financial expense -- 90 -- 90 11
----- ------- ----- ------- -------
-- 2,836 -- 2,836 1,589
FINANCIAL INCOME -- (6) (6) (35)
----- ------- ----- ------- -------
NET LOSS $ -- $(2,830) $ -- $(2,830) $(1,554)
===== ======= ===== ======= =======
</Table>
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TRAVLANG, INC.
Notes to Pro-Forma Consolidated Financial Statements
December 31, 2001
1. BASIS OF PRESENTATION:
These unaudited pro-forma consolidated financial statements have been
prepared to give effect to the following:
a) The reverse takeover at March 12, 2002 whereby Travlang, Inc.
("Travlang"), (the legal parent), issued 80,380 class B convertible
preferred shares (each share is convertible into 1,000 common shares) in
return for all the 12,936,420 outstanding common shares of Sec2Wireless
Inc. Development Stage Enterprise ("Sec2Wireless"), (the acquirer for
accounting purposes). As a result of this transaction, the former
shareholders of Sec2Wireless received approximately 80% ownership of
Travlang.
b) Prior to the acquisition, Travlang distributed all the assets of the
company net of all its liabilities to its' shareholders by way of dividend
resulting in no remaining assets or liabilities of the company.
The pro-forma consolidated financial statements are based on the balance
sheets of the following:
a) Travlang as at March 12, 2002 (unaudited)
b) Consolidated Sec2Wireless as at December 31, 2001 and 2000 (audited)
which consists of Sec2Wireless Inc. and its wholly-owned subsidiary,
Sec2Wireless Israel Ltd.
The pro-forma consolidated financial statements include the statement of
earnings for the following:
a) Consolidated Sec2Wireless for the year ended December 31, 2001 and for
the year ended December 31, 2000.
The pro-forma consolidated balance sheet as at December 31, 2001 and 2000
gives effect to the transactions as at March 12, 2002 and the pro-forma
consolidated statement of earnings for the years ended December 31, 2001
and December 31, 2000 gives effect to the transactions as if they had
taken place at the beginning of each period. As a pre-existing condition
of the reverse takeover Travlang was required to distribute all its assets
net of all its liabilities to its' shareholders prior to the acquisition
(see note 1b). As such, only the operations of Sec2Wireless remains and
are reported on a pro forma basis.
The pro-forma consolidated financial statements are not necessarily
indicative of the actual results that would have occurred had the proposed
transactions occurred on the dates indicated and not necessarily
indicative of future earnings or financial position.
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TRAVLANG, INC.
Notes to Pro-Forma Consolidated Financial Statements
December 31, 2001
2. PRO-FORMA ADJUSTMENTS:
1) To record the consolidation of Travlang with Sec2Wireless including:
a) Recognize goodwill of $625,000 representing the fair value of
the common shares of Travlang (the accounting subsidiary)
immediately prior to acquisition in excess of the net assets
of Travlang. In calculating goodwill, the 25,000,000
outstanding Travlang common shares prior to acquisition were
valued at $0.025 per share and there were no net assets of the
Company which resulted in goodwill of $625,000.
b) To eliminate the pre-acquisition shareholders' equity of the
Company which totaled to nil value.
2) To record the estimated acquisition costs.
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(c) Exhibits.
Attached as Exhibit 1 is a letter dated April 1, 2002 from Daszkal Bolton
LLP (Filed as an exhibit to the Registrant's Form 8-K dated March 13, 2002).
Attached as Exhibit 2 is a letter dated March 29, 2002 from Daszkal Bolton
LLP (Filed as an exhibit to the Registrant's Form 8-K dated March 13, 2002).
Attached as Exhibit 3 is a letter dated May 9, 2002 from Daszkal Bolton
LLP (Filed as an exhibit to the Registrant's Form 8-K/A dated May 9, 2002).
Attached as Exhibit 4 is a letter dated May 24, 2002, from Daszkal Bolton
LLP.
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SIGNATURES
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 hereunto duly authorized.
TRAVLANG, INC.
By: /s/ Lucien Geldzahler
-----------------------------------------
Name: Lucien Geldzahler
Title: President
Dated: May 27, 2002
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