U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB/A-2
X Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended January 31, 2001
Transition report under Section 13 or 15 (d) of the Exchange Act for
the Transition Period from _________ to _________.
Commission file number 0-14026
iiGroup, Inc.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3174562
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7000 West Palmetto Park Road, Suite 501, Boca Raton, Florida 33433
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(Address of Principal Executive Offices)
(561) 620-9202
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(Issuer's Telephone Number, Including Area Code)
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(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 for 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
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 court.
Yes____________ No___________
Number of shares of common stock outstanding as of March 13, 2001: 12,026,386
Reasons for amendment: The financial statements, the notes thereto and the
Management's Discussion and Analysis has been amended to write down the
Company's investment in GourmetMarket.com.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of
January 31, 2001
Condensed Consolidated Statements of Operations
for the six months And three months ended
January 31, 2001, and January 31, 2000
Condensed Consolidated Statement of Cash Flows for
the six months ended January 31, 2001, and
January 31, 2000
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Subsequent Events
Item 7. Exhibits and Reports on Form 8-K
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ii GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JANUARY 31, 2001
(UNAUDITED)
================================================================================
ASSETS
------- January 31, 2001
----------------
Current assets:
Cash and cash equivalents $ 251,500
Accounts receivable, net 104,875
Prepaid expenses 411,172
-----------
Total current assets 767,547
-----------
Property and equipment, net 9,389
-----------
Other assets:
Notes receivable, related party 188,235
Investment in common stock 957,233
Deposits 3,000
Goodwill, net 634,098
-----------
Total other assets 1,782,566
-----------
Total assets $ 2,559,502
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 15,015
Accrued expenses 64,431
Deferred revenue 305,421
-----------
Total current liabilities 384,867
-----------
Long term liabilities:
Note payable 15,000
-----------
Total liabilities 399,867
-----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value, 5,000,000 shares
authorized, -0- shares issued and outstanding --
Common stock, $0.01 par value, 50,000,000 shares
authorized, 11,604,933 shares issued and outstanding 116,049
Additional paid in capital 14,651,309
Accumulated deficit (12,008,972)
Unrealized loss on marketable securities (598,751)
-----------
Total stockholders' equity 2,159,635
----------
Total liabilities and stockholders' equity $ 2,559,502
===========
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ii GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED JANUARY 31, 2001 AND 2000
(UNAUDITED)
================================================================================
Six Months Ended January 31, Three Months Ended January 31,
2001 2000 2001 2000
------------ ------------ ------------ ----------
Revenues earned $ 129,714 $ -- $ 24,956 $ --
Cost of goods sold 44,121 -- 11,746 --
------------ ------------ ------------ ------------
Gross profit 85,593 -- 13,210 --
------------ ------------ ------------ ------------
Operating expenses:
General and administrative expenses 571,193 69,266 350,572 55,291
Depreciation and amortization 166,257 -- 83,139 --
Stock compensation for services 184,251 397,500 168,750 397,500
------------ ------------ ------------ ------------
Total operating expenses 921,701 466,766 602,461 452,791
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (300) -- (300) --
Forgiveness of debt 97,500 -- 97,500 --
Interest income 2,909 -- -- --
Loss on notes receivable 364,249 -- 364,249 --
------------ ------------ ------------ ------------
Total other income (expense) 100,109 -- 97,200 --
------------ ------------ ------------ ------------
Net loss (1,100,248) (466,766) (856,300) (452,791)
------------ ------------ ------------ ------------
Net (loss) applicable to common shareholders $ (1,100,248) $ (466,766) $ (856,300) $ (452,791)
============ ============ ============ ============
Basic loss per share $ (0.10) $ (0.26) $ (0.08) $ (0.14)
============ ============ ============ ============
Fully diluted loss per share $ (0.10) $ (0.26) $ (0.08) $ (0.14)
============ ============ ============ ============
Weighted average shares outstanding 10,978,634 1,752,979 11,215,887 3,133,304
============ ============ ============ ============
Fully diluted average shares outstanding 10,978,634 1,752,979 11,215,887 3,133,307
============ ============ ============ ============
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ii GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2001 AND 2000
(UNAUDITED)
================================================================================
Six Months Ended January 31,
----------------------------------
2001 2000
---------- ---------
Net cash used in operating activities $ (836,132) $ (37,901)
---------- ---------
Cash flows from investing activities:
Acquisition of Travlang -- (119,473)
Change in notes receivable 253,249 --
Purchases of property and equipment (1,265) --
------ --
Net cash used in investing activities 251,984 (119,473)
-------- ---------
Cash flows from financing activities:
Common stock issued for cash 573,950 345,000
Cost of issuance of common stock (2,782) --
Payments on loans payable (12,500) 20,000
------- -------
Net cash provided by financing activities 558,668 365,000
-------- --------
Net increase (decrease) in cash (25,480) 207,626
Cash at beginning of year 276,980 541
-------- ----
Cash at end of year $ 251,500 $ 208,167
========== =========
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iiGROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Company
iiGroup is a publicly traded merchant banking company that provides
capital and strategic directional assistance to companies. iiGroup invests in
companies that have either a good core business and/or assets, but are unable to
maximize shareholder value due to any number of reasons, including market
conditions, lack of skillful management, and/or depth of products or services
offered. By providing management services to such companies, iiGroup can
identify and provide the missing ingredients to increase the values of these
companies for both their principals and iiGroup shareholders.
When we use the terms "iiGroup", the "Company", "we" or "us" or other
similar terms, we mean iiGroup, Inc., and any predecessor company, and each of
our subsidiaries and affiliated companies unless otherwise specified described
otherwise.
Significant Accounting Policies
The accounting policies followed by the Company are set forth in Note 1
to the Company's financial statements included in its Annual Report on Form
10-KSB for the fiscal year ended July 31, 2000.
NOTE 2: INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB of the Securities
and Exchange Commission and in accordance with generally accepted accounting
principles applicable to interim financial statements and do not include all of
the information and footnotes required by generally accepted accounting
principles for audited financial statements. The financial statements should be
read in conjunction with the audited consolidated financial statements and
accompanying notes of the Company for the year ended July 31, 2000, which are
included in its Annual Report on Form 10-KSB for the fiscal year ended July 31,
2000.
In the opinion of the Company, the accompanying condensed consolidated
financial statements reflect all adjustments necessary (consisting solely of
normal recurring adjustments) necessary to present fairly the financial position
of the Company as of January 31, 2001 and the results of its operations,
stockholders' equity and cash flows for the six month period then ended.
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The results of operations for the period ended January 31, 2001 are not
necessarily indicative of the results to be expected for the entire year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
NOTE 3: STOCKHOLDERS' EQUITY
In September 2000, the Company commenced a private offering to
accredited investors of the Company's common stock and warrants pursuant to Rule
506 of Regulation D of the Securities Act for up to 4,000,000 shares of our
common stock together with warrants, to provide working capital and funds for
additional acquisitions and investments. During the quarter ending January 31,
2001, we issued a total 683,905 shares for a total purchase price of $467,750.
To date, we have raised a gross of $573,950 at per share prices ranging from
$.50 to $1.72. We cannot assure anyone, however, that we will be successful in
raising sufficient equity to meet our business plans.
NOTE 4: RECLASSIFICATIONS AND PRIOR YEAR ADJUSTMENT
Certain amounts in the 2000 financial statements have been reclassified
to conform to the 2001 financial statement presentation. In addition, the six
months ended January 31, 2000 financial statements have been restated to reflect
the correction of an error in calculating the gain on extinguishments of certain
debts in exchange for preferred stock. The Company incorrectly included a gain
on the extinguishments of debt of $45,000. In the fourth quarter of fiscal year
ended July 31, 2000, management determined that these gains should have been
included in additional paid-in capital. The effect of this restatement was to
increase the net loss of $421,766 for the six months ended January 31, 2000 by
$45,000 and loss per share from $0.24 to $0.26.
NOTE 5: INVESTMENTS
The Company had invested in approximately $491,000 of convertible
bridge notes of GourmetMarket.com, Inc. In January 2001, GourmetMarket.com
ceased active operations. Due to the possibility that the Company will not
recover the full value of these notes, the Company has written down the carrying
value of the notes to $121,000, which reflects the estimated value of the
underlying common stock if the notes were converted. At January 31, 2001, the
Company's total investment in GourmetMarket.com was approximately $150,000. The
Company calculated this estimated value based on the approximate value of
GourmetMarket.com of $500,000, assuming that the Company owned approximately 32%
on a fully diluted basis. The market value of GourmetMarket.com based on the
trading price on January 31, 2001 was approximately $2 million. Accordingly,
there is a charge of $364,249 in the three months ended January 31, 2001
relating to these notes.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
General
Forward-Looking Statements. When used in this report, press releases
and elsewhere by our management, we describe important factors, among others,
that could cause actual results to differ from those indicated in
forward-looking statements made in this document. Certain of our statements
contain some forward-looking statements made in this document. Forward-looking
statements give our current expectations or forecasts of future events. You can
identify these statements by the fact that they do not relate strictly to
historical or current facts. They use words such as anticipate, estimate,
expect, project, intend, plan, believe, and other words and terms of similar
meaning in connection with any discussion of future operating or financial
performance. In particular these include statements relating to our anticipated
operating results and our anticipated cash flow and to future actions, future
performance or results of current and anticipated sales and marketing efforts,
expenses, the outcome of contingencies, and other financial results. From time
to time, we may also provide oral or written forward-looking statements in other
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materials we release to the public. Any or all of our forward-looking statements
in this document and in any other public statements we make may turn out to be
wrong. They can be affected by inaccurate assumptions we might make or by known
or unknown risks and uncertainties. Among the factors that could cause actual
results to differ materially include the ability of the Company to meet its
working capital and liquidity needs, the status of relations between the
Company, its primary customers and distributors, the availability of long term
credit, unanticipated changes in the U.S. and international economies, business
conditions and growth in e-commerce and the timely development and acceptance of
new products, the impact of competitive products and pricing, and other risks
detailed from time to time in the Company's SEC reports. Certain of these
factors mentioned in the discussion below will be important in determining
future results. Consequently, no forward-looking statement can be guaranteed and
readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. Actual future results may
vary materially. We undertake no obligations to publicly update any
forward-looking statements, whether as a result of new information, future evens
or otherwise. You are advised, however, to consult any further disclosures we
make on related subjects in our future filings with the SEC.
Going Concern. The accompanying consolidated financial statements
and financial information was prepared assuming that the Company will continue
as a going concern. We have negative cash flows from our operations and an
accumulated deficit that raise substantial doubt about our ability to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. Additionally, our liquidity
needs could exceed the amount of the Company's future ability to obtain equity
financing. See "Liquidity and Capital Resources."
Overview
On January 14, 2000, the Company purchased the assets of Travlang.com,
Inc., an Internet foreign travel language website, from GourmetMarket.com, Inc.
(OTC: BB: WINE), a publicly-traded related party.
Travlang.com is a foreign language and travel web site that has existed
for nearly six years. It operates on the World Wide Web under the name
Travlang.com. Travlang is a World Wide Web presence offering foreign language
and travel information, products and services. With no advertising, Travlang has
become a leading portal on the World Wide Web, serving over 8,000,000 pages per
month and hosting 2,500,000 visitors per month, of which over 800,000 are
unique. Travlang draws visitors from all over the world and from all walks of
life. Travlang has achieved these high levels of traffic and diversity of
audience due to the uniqueness of its content. The four main language content
offerings are Travlang's Foreign Languages for Travelers in 74 languages,
Travlang's Translating Dictionaries, Travlang's Word of the Day e-mail, and
Travlang's downloadable vocabulary/dictionary files.
Travlang.com's main sources of revenue are from banner advertising and
e-mail advertising; licensing/syndication; commission based travel services;
product sales; affiliate relationships; Travlang website and e-mail services;
storefronts; databases; catalog and other e-Distribution; and online immersion
courses.
8
Travlang's commission-based travel-related services consist of the
following: airline information, reservations and booking; hotel information,
reservations and booking; automobile rental information, reservations and
booking; railway information, reservations and booking; cruise information,
reservations and booking; Travlang Travel Concierge; country specific hotels;
discount hotels; adventure travel and specialty travel.
The Travlang store sells travel aids and foreign language translation
products. Products available in the store are: travel/health aids; discounted
luggage, software, phone calling cards, credit cards and textbooks. In addition,
the Travlang store has a comprehensive offering of foreign language products.
These include the following: dictionaries, keyboards, spell checkers,
encyclopedias, children's products, translations, movies and videos, localized
products, transliterations, fonts, OCR, tutorials, electronic translators,
computer operating systems, tutorials in ESL, Internet, religious studies, word
processing, phrase books and K - 12 materials in over 900 foreign languages.
Page views for Travlang have increased from 4.5 million in 1996 to over
100 million (estimated) in 2001. Total visitors have increased from 2.4 million
in 1996 to a projected 32 million in 2001. One-quarter to one-third of the
visitors are unique. Total requests (hits) are projected to be over 540 million
in 2001, up from 41 million in 1996 and 350 million in 2000.
To date, iiGroup has
- purchased Travlang.com,
- invested in Gourmetmarket.com, a former website for the sale of
gourmet food, wine and cookware,
- acquired an interest in SBN.com, an Internet Yellow Pages company
that caters to traditional as well as pure Internet companies, and
- acquired an interest in Nucell Wireless Corporation, a traditional
wholesale supplier of wireless telephones and accessories and
wireless access through AT&T.
The Company, through a wholly-owned subsidiary, executed a Letter of
Intent to acquire the assets of Nucell Wireless Corporation. The Letter of
Intent expired and the Company does not intend to complete the transaction.
On December 14, 2000, the Company entered into a Letter of Intent to
acquire TargitMail.com, a leading permission based e-mail marketing company. The
Letter of Intent required the Company to raise $3,000,000 prior to the
acquisition. Due to current market conditions, the Company was unable to raise
that amount, and has since terminated the Letter of Intent. However, the Company
has provided consulting and other services to TargitMail for which it will be
compensated.
9
On March 7, 2001, the Company announced that it would seek approval to
change its name to Travlang, Inc. to better indicate the Company's intention to
focus its attention on its wholly owned subsidiary.
GourmetMarket.com has executed an agreement to forward its traffic to
VirtualGourmet.com in exchange for certain cash and other considerations.
GourmetMarket has ceased operations and the Company is assisting GourmetMarket
to work out its debt with creditors and to seek other business opportunities.
Results of Operations
The discussion and analysis set forth below is for the three-month and
six-month periods ended January 31, 2001, and January 31, 2000. It should be
read in conjunction with our financial statements and the related notes thereto
appearing elsewhere in this quarterly report. The information presented for the
three months and six months ended January 31, 2001, and January 31, 2000, was
derived from unaudited financial statements which, in our opinion, reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation.
Results of Operations for the Three Month and Six Months Ended January 31, 2001,
and January 31, 2000.
Net sales for the three months ended January 31, 2001, increased by
$24,956 to $24,956 from $ 0 for the three months ended January 31, 2000. Net
sales for the six months ended January 31, 2001, increased by $129,714 to
$129,714 from $0 for the six months ended January 31, 2000. The increase was due
to the operations of Travlang.com.
Cost of goods sold for the three months ended January 31, 2001,
increased by $11,746 to $11,746 from $0 for the three months ended January 31,
2000. Cost of goods sold for the six months ended January 31, 2001, increased by
$44,121 to $44,121 from $0 for the six months ended January 31, 2000. The
increase in cost of sales comes from products and services sold by Travlang.com.
Web hosting, site management and business development are the highest operating
costs that the Company incurs.
Gross profit for the three months ended January 31, 2001, was $13,210,
or 53% of net sales, compared to $0 or 0% for the three months ended January 31,
2000. Gross profit for the six months ended January 31, 2001, was $85,593, or
66% of net sales, compared to $0 or 0% for the six months ended January 31,
2000. The increase in gross profit was due to products and services sold by
Travlang.
10
General and administrative expenses were $350,572 for the three months
ended January 31, 2001, compared with $55,291 for the three months ended January
31, 2000. General and administrative expenses were $571,193 for the six months
ended January 31, 2001, compared with $69,266 for the six months ended January
31, 2000. The increase in general and administrative expenses was due to the
fact that business has been developing, and iiGroup organized an infrastructure
of qualified staff, used a number of outside consultants, and had to amortize
its investments. In the six months ended January 31, 2001, the Company had a
non-cash charge of $184,251 for issuance of stock for services rendered.
The Company had invested in approximately $491,000 of convertible
bridge notes of GourmetMarket.com, Inc. In January 2001, GourmetMarket.com
ceased active operations. Due to the possibility that the Company will not
recover the full value of these notes, the Company has written down the carrying
value of the notes to $121,000, which reflects the estimated value of the
underlying common stock if the notes were converted. At January 31, 2001, the
Company's total investment in GourmetMarket.com was approximately $150,000.
Accordingly, there is a charge of $364,249 in the three months ended January 31,
2001 relating to these notes.
The Company's interest expenses for the three months ended January 31,
2001, was $300 as compared with $0 for the three months ended January 31, 2000.
The Company's interest expenses for the six months ended January 31, 2001 was
$300 compared with $0 for the six months ended January 31, 2000.
As a result of the foregoing, the Company's net loss for the three
months ended January 31, 2001, was $856,300 compared to a net loss of $452,791
for the three months ended January 31, 2000. The Company's net loss for the six
months ended January 31, 2001, was $1,100,248, compared to a net loss of
$466,766 for the six months ended January 30, 2000. The increase in net loss was
primarily attributable to an increase in general and administrative expenses and
depreciation and amortization and the write down of investments.
Liquidity and Capital Resources
The Company has limited expenditures in many areas, including
discretionary expenditures, in order to focus our resources in what we believe
are the most promising areas of the Company's business. However, there can be no
assurance that we will have sufficient funds to carry out these plans or to
remain in business. Although iiGroup has sufficient resources to carry out its
business plan for the remainder of this fiscal year, there can be no assurance
that iiGroup will be successful in meeting its long-term liquidity requirements.
The Company experienced a loss from operations in 2000 and had a working capital
deficit at July 31, 2000. The Company experienced a loss from operations of
$337,362 (this does not reflect depreciation, amortization, the stock
compensation and extraordinary consulting items and a credit for forgiveness of
debt) for the three months ended January 31, 2001. The Company experienced a
loss from operations of $485,600 for the six months ended January 31, 2001.
Also, our liquidity needs could exceed the amount of equity or debt financing
that the Company may be able to obtain.
In September 2000, the Company commenced a private offering to
accredited investors of the Company's common stock and warrants pursuant to Rule
506 of Regulation D of the Securities Act for up to 4,000,000 shares of our
common stock together with warrants to provide working capital and funds for
additional acquisitions and investments. During the quarter ended January 2001,
we issued a total 683,905 shares for a total purchase price of $467,750. To
date, we have raised a gross of $573,950 at per-share prices ranging in price
from $.50 to $1.72. We cannot assure anyone, however, that we will be successful
in raising sufficient equity to meet our business plans.
11
The Company may utilize cash derived from the sales of equity
securities, debt securities or bank or other borrowings or a combination thereof
as consideration in effecting future acquisitions, joint ventures or
investments. Also, iiGroup will, in all likelihood, issue additional shares in
connection with the consummation of transactions. To the extent that such
additional shares are issued, dilution of the interests of the Company's
shareholders will occur.
The Company had capital expenditures of $1,265 for the six months ended
January 31, 2001. The Company anticipates capital expenditures relating to
computers and furniture as the Company increases its personnel.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
In September 2000, the Company commenced a private offering to
accredited investors of the Company's common stock and warrants pursuant to Rule
506 of Regulation D of the Securities Act for up to 4,000,000 shares of our
common stock together with warrants, to provide working capital and funds for
additional acquisitions and investments. Each prospective investor has been
provided with or otherwise had access to information about the Company,
including financial information. During the quarter ending January 31, 2001, we
issued a total of 683,905 shares for a total purchase price of $467,750. To
date, we have raised a gross of $573,950 at per-share prices ranging in price
from $.50 to $1.72. We cannot assure anyone, however, that we will be successful
in raising sufficient equity to meet our business plans.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Subsequent Events
On February 20, 2001, the Company announced that its Letter of Intent
to acquire 100% of Nucell Wireless Corporation had expired and that its
president, J. Eric Kirkland, had resigned as an officer and director of the
Company.
On March 7, 2001, iiGroup announced that its Board of Directors had
approved changing the Company's name to Travlang, Inc., subject to necessary
approvals, and that Howard Brummer had been elected the Company's President and
Chief Executive Officer.
Item 7. Exhibits and Reports on Form 8-K
None
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SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: September 17, 2001 Travlang, Inc.
By: /s/ Howard Brummer
--------------------------------
Howard Brummer,
President and Chief Executive Officer
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