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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 31, 2000
Transition report under Section 13 or 15 (d) of the Exchange Act for
the Transition period from _________ to ________.
Commission file number 0-14026
ii GROUP, 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
(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 December 11, 2000: 11,239,589
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INDEX
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Balance Sheet as of October 31, 2000
Statement of Condensed Consolidated Operations for the three
month period ended October 31, 2000 and October 31, 1999
Statements of Condensed Consolidated Cash Flows for the three
months ended October 31, 2000 and October 31, 1999
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
SIGNATURE
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ii GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 31, 2000
(UNAUDITED)
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ASSETS
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October 31, 2000
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Current assets:
Cash and cash equivalents $ 76,227
Accounts receivable, net 129,420
Prepaid expenses 414,368
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Total current assets 620,015
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Property and equipment, net 19,000
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Other assets:
Notes receivable, related party 532,484
Investment in common stock 1,235,981
Deposits 3,000
Goodwill, net 716,807
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Total other assets 2,488,272
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Total assets $3,127,287
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See accompanying notes to condensed consolidated financial statements
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ii GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 31, 2000
(UNAUDITED)
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LIABILITIES AND STOCKHOLDERS' EQUITY
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October 31, 2000
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Current liabilities:
Accounts payable $ 15,015
Accrued expenses 28,667
Loans payable, related parties 5,000
Note payable 100,000
Deferred revenue 17,044
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Total current liabilities 165,726
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Long term liabilities:
Note payable 15,000
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Total liabilities 180,726
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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, 10,771,028 shares issued and outstanding 107,710
Additional paid in capital 14,023,148
Accumulated deficit (11,184,297)
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Total stockholders' equity 2,946,561
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Total liabilities and stockholders' equity $ 3,127,287
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See accompanying notes to condensed consolidated financial statements
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ii GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 31, 2000
(UNAUDITED)
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<TABLE>
<CAPTION>
Three Months Ended October 31,
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2000 1999
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<S> <C> <C>
Revenues earned $ 104,757 $ --
Cost of goods sold 48,500 --
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Gross profit 56,257 --
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Operating expenses:
General and administrative expenses 204,245 13,975
Depreciation and amortization 83,118 --
Stock compensation for services 15,501 --
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Total operating expenses 302,864 13,975
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Other income (expense):
Impairment of investment -- --
Interest expense (250) --
Miscellaneous expense -- --
Interest income 2,909 --
Losses from equity investment (11,088) --
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Total other income (expense) (8,429) --
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Net loss (255,036) (13,975)
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Net income (loss) applicable to common shareholders $ (255,036) $ (13,975)
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Basic and diluted loss per share $ (0.02) $ (0.04)
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Weighted average shares outstanding 10,711,815 372,654
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</TABLE>
See accompanying notes to condensed consolidated financial statements
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ii GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2000 AND 1999
(UNAUDITED)
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Three Months Ended October 31,
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2000 1999
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Net cash used in operating activities $(195,225) $ (4,140)
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Cash flows from investing activities:
Change in notes receivable (91,000) --
Purchases of property and equipment (10,446) --
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Net cash used in investing activities (101,446) --
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Cash flows from financing activities:
Common stock issued for cash 106,198 --
Costs of issuance of common stock (2,780) --
Proceeds from loans payable -- 10,000
Payments on loans payable (7,500) --
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Net cash provided by financing activities 95,918 10,000
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Net increase (decrease) in cash (200,753) 5,860
Cash at beginning of year 276,980 541
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Cash at end of year $ 76,227 $ 6,401
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See accompanying notes to condensed consolidated financial statements
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ii GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Company
ii Group, Inc. is an Internet strategic management company that invests
in operating Internet companies and relevant technologies. We also invest in
"bricks and mortar" companies if we determine that a company can benefit from
having an Internet presence. We look for undervalued properties that can utilize
and benefit from the collaborative network of our portfolio companies. The
network has been designed so that the portfolio companies can share information,
advertising and personnel, and take maximum advantage of the synergies inherent
in the network. The ability to share resources reduces the cost of attracting
users and personnel. It also gives the executives of the portfolio companies the
opportunity to benefit from their collective skills and expertise.
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 October 31, 2000 and the results of its operations,
stockholders' equity and cash flows for the three month period then ended.
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The results of operations for the period ended October 31, 2000 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 and October 1999, the Company issued 6% Convertible Notes
in the principal amount of $40,000 to five accredited investors pursuant to Rule
506 to Regulation D of the Securities Act of 1933, as amended (the "Securities
Act"). The conversion rate is $.50 per share. These notes and the shares of
common stock issuable upon conversion of the notes have not been registered
under the Securities Act or qualified under any other applicable federal or
state securities laws. As a result, no sale or transfer of these notes or
underlying shares of common stock may be made except in compliance with or
pursuant to an exemption from such laws.
On June 30, 2000, holders of $25,000 principal amount of notes plus
accrued interest were converted into 52,054 shares of iiGroup common stock.
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 October 31,
2000, we issued a total 82,336 shares for a total purchase price of $106,200. To
date, we have raised a gross of $307,500 at per share prices ranging in price
from $.74 to $1.95. 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 1999 financial statements have been reclassified
to conform to the 2000 financial statement presentation. In addition, the 1999
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 reduce the net income of
$31,025 by $45,000 and earnings per share from $0.08 to $(0.04).
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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. 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 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 our 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 events 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 raises 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 for equity financing.
See "Liquidity and Capital Resources."
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Overview
On January 14, 2000, the Company purchased the assets of Travlang.com,
Inc., an Internet foreign travel language web site 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 and is recognized as the leader in providing free access to
over 74 foreign language translation dictionaries to over two million unique
visitors a month. Travlang.com's main source of revenue is from the sale of
advertising on its site. The Company currently has a contract with 24/7 Media
and Sonar Network, and has a number of affiliate relationships with travel
companies and foreign language product companies.
To date, we have
-- purchased Travlang.com,
-- invested in GourmetMarket.com, Inc. that sells gourmet food,
wine and cookware over the Internet,
-- invested in SBN.com, an Internet Yellow Pages company that caters
to traditional as well as pure Internet companies, and
-- 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, has executed a Letter
of Intent to acquire the assets of Nucell Wireless Corporation. We had also
acquired interests in Solutions Media, Inc. and its related companies, which
internet sites have closed, and which investment was written off as of July 31,
2000.
Results of Operations
The discussion and analysis set forth below is for the three months
ended October 31, 2000 and October 31, 1999. 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 ended
October 31, 2000, and October 31, 1999, was derived from unaudited financial
statements which, in our opinion, reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation.
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Three Months Ended October 31, 2000 Compared to the Three Months Ended
October 31, 1999
Net sales for the three months ended October 31, 2000 increased by
$104,757 to $104,757 from $0 for the three months ended October 31, 1999. The
increase in sales resulted primarily from the Company's purchase of Travlang.
Cost of goods sold for the three months ended October 31, 2000
increased by $485,500 to $48,500 from $0 for the three months ended October 31,
1999. The increase in cost of sales comes from the purchase of Travlang. Web
hosting, site management and business development are the highest operating
costs that the company incurs.
Gross profit for the three months ended October 31, 2000 was $56,257 or
53.7% of net sales, compared to $0 or 0% of net sales for the three months ended
October 31, 1999. The increase in gross profit was primarily due to the
acquisition of Travlang.
General and administrative expenses were $204,245 for the three months
ended October 31, 2000, compared with $13,975 for the three months ended October
31, 1999. The increase in the general and administrative expenses was due to the
fact that business has been developing, and iiGroup organized an infrastructure
of qualified staff. In the three months ended October 31, 2000, the Company had
a non-cash charge of $15,501 for issuance of stock for services rendered.
The Company's interest expense for the three months ended October 31,
2000 was $250 as compared with $0 for the three months ended October 31, 1999.
The increase in interest expenses was primarily due to increase of loans by
related parties and loans by third parties.
As a result of the foregoing, the Company's net loss for the three
months ended October 31, 2000 was $255,036 compared to a net loss of $ 13,975
for the three months ended October 31, 1999. The increase in net loss was
primarily attributable to an increase in general and administrative expenses and
depreciation and amortization.
Liquidity and Capital Resources
The Company has limited expenditures in many areas, including
discretionary expenditures; in order to focus our resources in what we believes
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 2000, 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, 2001. The Company experienced a loss from operations of $204,245 (this
does not reflect depreciation, amortization, the stock compensation and
extraordinary items), for the three months ended October 31, 2000. Also, our
liquidity needs could exceed the amount of the Company's future ability for
equity financing.
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In January and February 2000, the Company raised $1.15 million from a
private placement offering to accredited investors in connection with the sale
of 2.30 million shares of ii common stock at $.50 per share. This offering was
not registered under the Securities Act, and the Shares were offered in reliance
upon the exemption under Section 4(2) of the Securities Act, including but not
limited to Rule 506 of Regulation D.
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 October 31,
2000, we issued a total 82,336 shares for a total purchase price of $106,200. To
date, we have raised a gross of $307,500 at per share prices ranging in price
from $.74 to $1.95. We cannot assure anyone, however, that we will be successful
in raising sufficient equity to meet our business plans.
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 no capital expenditures for the three months ended
October 31, 2000. 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 investors has been
provided with or otherwise had access to information about the Company,
including financial information. During the quarter ending October 31, 2000, we
issued a total 82,336 shares for a total purchase price of $106,200. To date, we
have raised a gross of $307,500 at per share prices ranging in price from $.74
to $1.95. We cannot assure anyone, however, that we will be successful in
raising sufficient equity to meet our business plans.
The Company has also issued 150,000 shares for consulting services
pursuant to an S-8 and 250,000 restricted shares to Wall Street Marketing Group,
Inc., the Company's Investor and Media Relations Counsel.
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 November 15, 2000, iiGroup signed a Letter of Intent to acquire the
assets and assume certain liabilities of Nu-Cell Wireless Corporation
("Nu-cell") for 1,200,000 shares of iiGroup common stock. Nu-Cell is a privately
held wholesale retailer of wireless communication devices and accessories.
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Item 7. Exhibits
27 Financial Data Schedule.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
iiGroup, Inc.
Date: December 15, 2000
By: /s/ Neil Swartz
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Neil Swartz, CEO
