<PAGE>
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________________
Commission File Number 0-20180
QUALTON, INC.
(FORMERLY KNOWN AS INTERNATIONAL REALTY GROUP, INC,)
(Exact name of registrant as specified in its charter)
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Delaware 62-1277260
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Av. Constituyentes 647
----------------------
Mexico, D.F. 11810
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(Address of principal executive office and zip code)
011-52-5277-9211
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter 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
----- -----
The number of shares outstanding of registrant's class of common equity as of
October 31, 2000.
<TABLE>
<CAPTION>
Common Stock, $0.001 par value per share 289,800,704
---------------------------------------- -----------
<S> <C>
Title of Class Number of Shares
</TABLE>
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE>
Qualton, Inc.
(Formerly Known as International Realty Group, Inc.)
Index
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of
September 30, 2000 2
Consolidated Statements of Operations for the Three Months and Nine Months
Ended September 30, 1999 and 2000 3
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1999 and 2000 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
1
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
QUALTON, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS INTERNATIONAL REALTY GROUP, INC.)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
<S> <C>
ASSETS
REAL ESTATE AT COST:
Property held for development or sale $ 5,273,013
ACCOUNTS RECEIVABLE 1,169
CASH AND CASH EQUIVALENTS 465
OTHER ASSETS 40,315
--------------
$ 5,314,962
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities $ 255,256
Due to stockholders 193,245
--------------
Total Liabilities 448,501
--------------
MINORITY INTEREST 82,148
--------------
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value per share; 450,000,000 shares
authorized; 126,260,704 shares issued and outstanding 126,260
Additional paid in capital 7,121,477
Accumulated deficit (2,217,608)
Accumulated other comprehensive income:
Currency translation adjustment (245,816)
--------------
Total Stockholders' Equity 4,784,313
--------------
$ 5,314,962
==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
<TABLE>
<CAPTION>
QUALTON, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS INTERNATIONAL REALTY GROUP, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Revenues from services provided $ - $ - $ - $ -
OPERATING COSTS AND EXPENSES:
General and administrative expenses 23,603 47,647 97,840 171,629
Interest expense - 419 - 6,447
Depreciation and amortization - 12,917 - 38,755
------------ ------------ ------------ ------------
Total Operating Expenses 23,603 60,983 97,840 216,831
(LOSS) BEFORE MINORITY INTEREST AND (23,603) (60,983) (97,840) (216,831)
PROVISION FOR INCOME TAXES
MINORITY INTEREST 2,677 4,311 13,683 15,509
------------ ------------ ------------ ------------
(LOSS) BEFORE PROVISION FOR INCOME TAXES (20,926) (56,672) (84,157) (201,322)
PROVISION FOR INCOME TAXES (BENEFIT) - 1,695 - (3,735)
------------ ------------ ------------ ------------
(LOSS) FROM CONTINUING OPERATIONS (20,926) (58,367) (84,157) (197,587)
DISCONTINUED OPERATIONS
Income (loss) from operation of discontinued subsidiary,
net of income taxes (benefit) of $1,695 and ($3,735) - (6,787) - 14,941
in 1999
------------ ------------ ------------ ------------
NET (LOSS) (20,926) (65,154) (84,157) (182,646)
Other comprehensive income:
Foreign currency translation adjustment 7,829 67,311 (33,703) 38,274
------------ ------------ ------------ ------------
COMPREHENSIVE (LOSS) $ (13,097) $ 2,157 $ (117,860) $ (144,372)
============ ============ ============ ============
PER SHARE INFORMATION
Weighted average number of shares 126,260,704 115,792,613 119,276,722 115,792,613
============ ============ ============ ============
Continuing operations $ (.00) $ (.00) $ (.00) $ (.00)
Operation of discontinued subsidiary (.00) (.00) (.00) (.00)
------------ ------------ ------------ ------------
(Loss) per share - basic and fully diluted $ (.00) $ (.00) $ (.00) $ (.00)
============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
QUALTON, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS INTERNATIONAL REALTY GROUP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net Cash Provided By (Used In) Operating Activities $ (5) $ (85,007)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net Cash Provided In (Used In) Investing Activities - -
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash Provided By (Used In) Financing Activities - -
----------------- ----------------
NET INCREASE (DECREASE) IN CASH (5) (85,007)
BEGINNING - CASH BALANCE 470 87,315
----------------- ----------------
ENDING - CASH BALANCE $ 465 $ 2,308
================= ================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
QUALTON, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS INTERNATIONAL REALTY GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
information and Item 310(b) of Regulation S-B. They do not include all of the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the financial statements of Qualton, Inc., a Delaware
corporation (the "Company"), as of December 31, 1999 and for the two years then
ended, including notes thereto included in the Company's Form 10-KSB.
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation.
(2) EARNINGS PER SHARE
The Company calculates net income (loss) per share as required by SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of shares of the Company's
common stock, $0.001 par value per share, ("Common Stock"), outstanding for the
period. Diluted earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of shares and dilutive Common Stock
equivalents outstanding. During the periods presented, Common Stock equivalents,
if any, were not considered as their effect would be anti-dilutive.
(3) IMPAIRMENT OF LONG LIVED ASSETS
Long lived assets and certain identifiable intangibles held and used by the
Company are reviewed for possible impairment whenever events or circumstances
indicate the carrying amount of an asset may not be recoverable or is impaired.
Management has not identified any impairment losses as of September 30, 2000.
(4) RECLASSIFICATIONS
Certain amounts included in the accompanying financial statements from the
previous year have been reclassified to conform to the current year's
presentation.
(5) DISCONTINUED OPERATIONS
Effective December 31, 1999, the Company completed the sale of all of the
outstanding capital stock of Appraisal Group International, Inc., a Florida
corporation and a wholly-owned subsidiary of the Company ("AGII"). AGII had
accounted for 100% of the Company's consolidated revenue in 1999. The assets
disposed of consisted principally of cash, accounts receivable and furniture and
equipment.
5
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
The Company exchanged the net assets of AGII of $129,877 for 800,000 shares of
Common Stock previously held by an officer and director. Additionally, the
officer agreed to escrow an additional 400,000 shares of Common Stock as part of
the purchase price, which shares shall be released to the Company on March 1,
2003, provided however, that, if at any time prior to March 1, 2003 the
cumulative fair market value of the escrowed shares exceeds $200,000, the
officer shall have the right to adjust the number of escrowed shares deliverable
to the Company downward. If the cumulative fair market value exceeds $200,000,
the number of shares deliverable will be calculated by dividing $200,000 by the
fair market value per share. Concurrently with this exchange this officer
resigned from the Company.
The Company previously recorded as treasury stock the 800,000 shares of Common
Stock received with a cost of $129,877. No gain or loss was recognized on the
transaction, and these shares of treasury stock currently are retired.
Operating results for AGII for the three months and nine months ended September
30, 1999 are shown separately in the accompanying statement of operations. Net
sales of AGII for the three months and nine months ended September 30, 1999 were
$165,380 and $544,982. These amounts are not included in net sales in the
accompanying statement of operations.
The Company disposed of the following assets and liabilities at December 31,
1999:
<TABLE>
<S> <C>
Cash $ 1,016
Accounts receivable 77,915
Furniture and equipment 83,142
Other assets 15,258
----------
Total assets 177,331
Accounts payable (47,454)
----------
Net assets $ 129,877
==========
</TABLE>
Assets are shown at their net realizable values and liabilities are shown at
their face amounts.
(6) STOCKHOLDERS' EQUITY
Effective August 29, 2000, the Company acquired from DSC Corporation the
remaining 25% equity interest in Cluster Inmobiliaria de Ixtapa, S.A. de
C.V., a variable capital corporation formed under the laws of Mexico, in
exchange for 11,275,973 shares of Common Stock and the cancellation of
$1,166,604 of outstanding debt owed to the Company by ITD, S.A. de C.V., a
variable capital corporation formed under the laws of Mexico and a subsidiary
of DSC Corporation.
(7) SUBSEQUENT EVENT
On October 17, 2000, the Company acquired from Qualton Group Corporation, a
Marshall Islands corporation, all of the issued and outstanding shares of
capital stock of Qualton Hotels & Resorts Corporation, a Marshall Islands
corporation and wholly-owned subsidiary of Qualton Group Corporation. Pursuant
to the acquisition, the Company issued to Qualton Group Corporation One Hundred
Sixty-Three Million Five Hundred Forty Thousand (163,540,000) shares of Common
Stock.
6
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
As of October 17, 2000, the closing date of the Company's acquisition of Qualton
Hotels & Resorts Corporation:
- Qualton Hotels & Resorts Corporation is a wholly-owned subsidiary of
the Company;
- Qualton Hotels & Resorts Corporation owns 99% of the issued and
outstanding shares of capital stock of its subsidiaries, with the
remaining 1% in each case owned by the Company;
- Qualton Group Corporation owns approximately 56% of the total issued
and outstanding shares of Common Stock, with DSC Corporation, as the
controlling stockholder of Qualton Group Corporation, beneficially
owning approximately 78% of the total issued and outstanding shares of
Common Stock
This transaction has been accounted for as though it were a recapitalization
of Qualton Hotels & Resorts Corporation and sale by Qualton Hotels & Resorts
Corporation of 126,260,704 shares of Common Stock in exchange for the net
assets of the Company.
(8) AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
Effective October 18, 2000, the Company changed its name from "International
Realty Group, Inc." to "Qualton, Inc." to reflect the Company's acquisition of
all of the issued and outstanding shares of capital stock of Qualton Hotels &
Resorts Corporation.
(9) CHANGE IN TRADING SYMBOL ON THE OTC BULLETIN BOARD
In connection with the name change of the Company to "Qualton, Inc.," the
Company changed its trading symbol on the OTC Bulletin Board from "IRGR" to
"QLTN" effective October 30, 2000.
7
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis covers material changes in
financial condition since December 31, 1999 and material changes in the results
of operations for the three months and nine months ended September 30, 2000, as
compared to the same periods in 1999. This discussion and analysis should be
read in conjunction with "Management's Discussion and Analysis and Results of
Operations" included in the Company's Form 10-KSB for the year ended December
31, 1999.
RESULTS OF OPERATIONS
OVERVIEW
The Company was incorporated in the State of Delaware on April 13, 1970. The
Company's Common Stock is quoted on the OTC Bulletin Board under the symbol
"QLTN", and its fiscal year ends on December 31. The Company's principal offices
are located at Av. Constituyentes 647, Mexico, D.F. 11810, and its telephone
number is 011-52-5277-9211.
The Company, together with its subsidiaries, has operated in two business
segments: (i) land development; and (ii) real estate consulting services. The
Company intends to develop its real estate properties for use in resort,
residential and commercial applications. The Company's ability to achieve these
objectives depends on many factors, including its ability to raise the necessary
capital to develop, maintain and market its real estate properties. The Company
has no present understanding, agreement or commitment for financing any of its
real estate properties and there can be no assurance that financing will be
available to the Company on commercially reasonable terms, if at all.
Effective September 1, 2000, the Company entered into a stock purchase agreement
to acquire from Qualton Group Corporation all of the capital stock of Qualton
Hotels & Resorts Corporation. Qualton Hotels & Resorts Corporation, through its
subsidiary Hotelera Qualton, S.A. de C.V., operates hotel properties in the
Mexican cities of Ixtapa, Acapulco and Puerto Vallarta.
The Company currently owns a majority interest in the following four parcels of
vacant or partially developed land:
CLUSTER IXTAPA
Cluster Inmobiliaria de Ixtapa, S.A. de C.V., a variable capital corporation
formed under the laws of Mexico and a wholly-owned subsidiary of the Company
("CLUSTER IXTAPA"), owns 26 acres of partially developed property on the Pacific
coast of Mexico in Ixtapa, State of Guerrero, Mexico. This property is part of
the 208-acre "Marina Ixtapa" planned unit development located in the town of
Ixtapa-Zihuatanejo, approximately 240 kilometers northwest of the port of
Acapulco. The preliminary site work has been completed and this property is
being held for future development and/or sale of all or a portion of this
property.
If it receives sufficient financing to develop these real estate properties,
then Cluster Ixtapa intends to develop up to 14 commercial lots and 124
residential lots with an additional investment in infrastructure of
approximately $4 million. Cluster Ixtapa then would market developed lots to
local builders/developers for construction of townhomes, villas and/or
commercial use for sale to the general public.
8
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2
CAYE BOKEL
Caye Bokel, Limited, a wholly-owned subsidiary of the Company formed under the
laws of Belize, owns an 87-acre property on the Island of Caye Bokel in Belize.
The Company is holding this property for future development. If it receives
sufficient financing, then the Company intends to develop this property as a
marina resort for domestic and foreign tourists. This property is not subject to
a mortgage.
NUEVA TIERRA
Nueva Tierra, S.A. de C.V., a variable capital corporation formed under the laws
of Mexico and a wholly-owned subsidiary of the Company ("NUEVA TIERRA"), is the
general partner of the following joint ventures in Mexico:
- HACIENDA DE FRANCO. Nueva Tierra has an approximate 81% interest in
Hacienda de Franco, a joint venture formed under the laws of Mexico, that
owns a residential development project located near Silao in the State of
Guanajuato, Mexico. This property consists of approximately 236 acres of
land and includes a traditional colonial style hacienda. The Company is
holding this property for future development that will be centered around
the hacienda. This property is not subject to a mortgage.
- BAHIA DE CORTES. Nueva Tierra has an approximate 78% interest in Bahia de
Cortes, a joint venture formed under the laws of Mexico, that owns a resort
development project located in Baja California near La Paz. The Company is
holding this property for future development. This property consists of
approximately 3,451 acres of land, including over five kilometers of
beachfront property. This property is not subject to a mortgage.
The Company believes that each of these real estate properties is suitable
for future development as either a resort, residential or commercial
property. The Company is currently formulating its plans with respect to
these properties, and has preliminarily identified the property in Ixtapa as
the first candidate for development. The Company did not undertake additional
steps to develop or determine a comprehensive or definitive plan relating to
any of these properties during 2000. Any significant development of these
properties is contingent upon the Company obtaining necessary financing and a
review of the applicable market conditions at the time of financing.
Potential sources of financing include mortgage financing from financial
institutions located in the United States or Mexico, or the issuance of
equity securities by the Company. The Company has no present understanding,
agreement or commitment for financing any property and there can be no
assurance that financing will be available to the Company on commercially
reasonable terms, if at all. If the Company is unable to obtain financing
necessary to develop some or all of these real estate properties, then the
Company may elect to sell one or more of these properties. Regardless of the
availability of financing sources, the Company may sell one or more of its
properties if the related terms are favorable to the Company.
9
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2
DISCONTINUED OPERATIONS
Effective December 31, 1999, the Company sold all of the outstanding capital
stock of AGII to Richard M. Bradbury, the Company's former president and a
director. Net sales of AGII for the three months and nine months ended September
30, 1999 were $165,380 and $544,982. These amounts are not included in net sales
in the accompanying statements of operations for 1999. AGII accounted for 100%
of the Company's consolidated revenue in 1999. The results of operations for
AGII have been separately classified in the consolidated statements of
operations.
CONTINUING OPERATIONS
The Company did not record any revenues from operations in 1999 or the nine
months ended September 30, 2000 as a result of its sale of AGII at the end of
1999.
General and administrative expenses were $23,603 and $97,840, for the three
months and nine months ended September 30, 2000, as compared to $47,647 and
$171,629 for the three months and nine months ended September 30, 1999. The
change in the expenses is due mainly to a reduction on the activity of the
Company.
As of January 1, 1999, the peso is recognized as the functional currency for the
Company's local operations and any adjustments are as a component of equity.
During the three months and nine months ended September 30, 2000, currency
translation adjustments of $7,829 and $(33,703), were recognized in
stockholder's equity. During the three months and nine months ended September
30, 1999, currency translation adjustments of $67,311 and $38,724, were
recognized in stockholders' equity.
NET LOSSES
As a result of the above, the Company had a consolidated net losses of $20,926
and $84,157 during the three months and nine months ended September 30, 2000,
compared to net losses of $65,154 and $182,646 during the three months and nine
months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Effective August 29, 2000, the outstanding debt owed to the Company
by ITD, S.A. de C.V., which constituted the Company's primary source of funds,
was cancelled in connection with the Company's acquisition from DSC Corporation
of the remaining 25% equity interest in Cluster Inmobiliaria de Ixtapa, S.A. de
C.V. Since June 2000, Hotelera Qualton, S.A. de C.V., a subsidiary of Qualton
Hotels & Resorts Corporation, has provided working capital to the Company for
operating expenses.
The Company has no material commitments for capital expenditures at September
30, 2000.
To date, the Company has financed its operations principally through borrowings
and revenues derived from its previous real estate appraisal and consulting
services. Since the Company's sale of AGII in December 31, 1999, however, the
Company has financed its operations solely through borrowings. The Company will
need additional capital to continue its operations for the next twelve months
and may raise funds through the sale of equity shares, issuance of debt and
revenues from operations. There can be no assurance that additional private or
public financing, including debt or equity financing, will be available as
needed, or on terms favorable to the Company. Any additional equity financing
may be dilutive to stockholders and these additional equity securities may have
rights, preferences or privileges that are senior to those of Common Stock.
Furthermore, debt financing, if
10
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2
available, will require payment of interest and may involve restrictive
covenants that could impose limitations on the operating flexibility of the
Company. The failure of the Company to obtain additional funding may jeopardize
the Company's ability to continue its business and operations.
CURRENCY RISK
The Company is subject to risk in changes of foreign exchange rates for its
subsidiaries that use a foreign currency as their functional currency, or for
assets or liabilities that are foreign currency denominated and are translated
to U.S. dollars at each reporting period. The Company has made quarterly
currency translation adjustments (totaling $245,816 over an eight-year period)
for its foreign operations, recognized as a component of stockholder's
deficiency. During 1998, the Company used the U.S. dollar as the functional
currency for its operations in Mexico because the Company considered Mexico to
operate in a highly inflationary economy. The Company has not engaged in the
purchase of forward contracts, or other hedging techniques, to manage this
foreign exchange risk to protect against earnings and cash flow volatility
resulting from changes in foreign exchange rates.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made by
or on behalf of the Company herein or orally, whether in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "will result", "are expected to", "will continue", "is
anticipated", "estimated", "projection" and "outlook") are not historical facts
and may be forward-looking and, accordingly, such statements involve estimates,
assumptions, and uncertainties which could cause actual results to differ
materially from those expressed in the forward-looking statements. Such
uncertainties include, among other, the following: (i) the Company's ability to
obtain additional financing to implement its business strategy; (ii) real estate
investment risks, including the potential for increases in real property taxes;
(iii) real estate development risks, including obtaining building permits or
necessary zoning changes, construction delays strikes, adverse weather
conditions and other conditions beyond the control of the Company; (iv)
illiquidity of real estate investments; (v) the financial condition of the
Company's clients; (vi) imposition of new regulatory requirements affecting the
Company; (vii) a downturn in general or local economic conditions where the
Company owns real property; (viii) the delay or failure to properly manage
growth and successfully integrate acquired companies and operations; (ix) lack
of geographic diversification; (x) effect of uninsured loss and (ix) other
factors which are described in further detail in the Company's filings with the
Securities and Exchange Commission, including the Company's definitive
information statement, dated December 17, 1998.
The Company cautions that actual results or outcomes could differ materially
from those expressed in any forward-looking statements made by or on behalf of
the Company. Any forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for management to predict all of such factors. Further, management
cannot assess the impact of each such factor on the business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
11
<PAGE>
PART II: OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS.
Effective August 29, 2000, the Company issued 11,275,973 shares of Common
Stock to DSC Corporation in exchange for the remaining 25% interest in
Cluster Inmobiliaria de Ixtapa, S.A. de C.V. and the cancellation of
$1,166,604 of outstanding debt owed to the Company by ITD, S.A. de C.V. These
securities were not registered under the Securities Act of 1933, as amended,
because the subject transaction involved a non-public offering exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended,
and Regulation D promulgated thereunder.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the quarter ended September 30, 2000.
ITEM 5: OTHER INFORMATION
Effective October 18, 2000, the Company changed its name from "International
Realty Group, Inc." to "Qualton, Inc." to reflect the Company's acquisition of
all of the issued and outstanding shares of capital stock of Qualton Hotels &
Resorts Corporation.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27.1 Financial Data Schedule (For SEC purposes
only)
B. Reports on Form 8-K
Current report on Form 8-K, as filed with the
Securities and Exchange Commission on September 8,
2000, regarding: (i) the Company's signing of a stock
purchase agreement to acquire from Qualton Group
Corporation all of the issued and outstanding shares
of capital stock of Qualton Hotels & Resorts
Corporation; and (ii) the Company's acquisition from
DSC Corporation of the remaining 25% equity interest
in Cluster Inmobiliaria de Ixtapa, S.A. de C.V., in
exchange for 11,275,973 shares of Common Stock and
the cancellation of $1,166,604 of outstanding
intercompany debt owed to the Company by ITD, S.A. de
C.V.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
QUALTON, INC.
DATE: NOVEMBER 14, 2000 By: /s/ Jaime Serra
--------------------------------
Jaime Serra
Chief Financial Officer
(Principal Financial Officer)
13
