<PAGE>
FORM 10-QSB
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 MARCH 31, 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
INTERNATIONAL REALTY GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1277260
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
AV. CONSTITUYENTES 647 MEXICO, D.F. 11810
----------------------------------- -----
(Address of principal executive office) (Zip Code)
011 (525) 277-9211
------------------
(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 each of Issuer's classes of common equity as
of May 8, 2000.
Common Stock, $0.001 par value per share 115,784,751
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Title of Class Number of Shares
Transitional Small Business Disclosure Format yes no X
----- -----
<PAGE>
International Realty Group, Inc.
Index
PART I
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<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of
March 31, 2000 2
Consolidated Statements of Operations for the Three Months Ended March 31,
2000 and 1999 3
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
1
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL REALTY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
REAL ESTATE AT COST:
Property held for development or sale $ 5,273,013
---------------
ACCOUNTS RECEIVABLE:
Due from stockholder 1,285,303
Accounts receivable 1,185
---------------
Total accounts receivable 1,286,488
---------------
CASH AND CASH EQUIVALENTS 92
OTHER ASSETS 45,815
---------------
$ 6,605,408
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities $ 260,199
Due to stockholders 193,245
---------------
Total Liabilities 453,444
---------------
MINORITY INTEREST 1,276,508
---------------
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value per share; 450,000,000 shares
authorized; 115,784,751 shares issued and outstanding 115,784
Additional paid in capital 7,258,584
Accumulated deficit (2,169,295)
Accumulated other comprehensive income:
Currency translation adjustment (184,268)
---------------
5,020,805
Treasury Stock, at cost 145,349
---------------
Total Stockholders' Equity 4,875,456
---------------
$ 6,605,408
===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
INTERNATIONAL REALTY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUE
Revenues from services provided $ - $ -
OPERATING COSTS AND EXPENSES:
Depreciation and amortization - 12,734
Interest expense - 5,295
General and administrative expenses 40,491 43,129
----------- -----------
Total Operating Expenses 40,491 61,158
(LOSS) BEFORE MINORITY INTEREST AND (40,491) (61,158)
PROVISION FOR INCOME TAXES
MINORITY INTEREST 4,647 5,509
(LOSS) BEFORE PROVISION FOR INCOME TAXES (35,844) (55,649)
PROVISION FOR INCOME TAXES (BENEFIT) - (200)
----------- -----------
(LOSS) FROM CONTINUING OPERATIONS (35,844) (55,449)
----------- -----------
DISCONTINUED OPERATIONS
Income from operation of discontinued subsidiary,
net of income taxes of $200 in 1999 - 854
----------- -----------
NET (LOSS) (35,844) (54,595)
Other comprehensive income:
Foreign currency translation adjustment 27,845 26,307
----------- -----------
COMPREHENSIVE (LOSS) $ (7,999) $ (28,288)
- -------------------- =========== ===========
PER SHARE INFORMATION
Weighted average number of shares - basic and fully diluted 115,784,751 115,792,613
=========== ===========
Continuing operations $ (.00) $ (.00)
Operation of discontinued subsidiary (.00) (.00)
----------- -----------
(Loss) per share - basic and fully diluted $ (.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.
INTERNATIONAL REALTY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash Provided By Operating Activities $ (378) $ (81,716)
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Cash flows from investing activities - -
Net Cash (Used In) Investing Activities
--------- -----------
Cash flows from FinANCing activities
Net Cash Provided By (Used In) Financing Activities - -
--------- -----------
NET INCREASE (DECREASE) IN CASH (378) (81,716)
BEGINNING - CASH BALANCE 470 87,315
--------- -----------
ENDING - CASH BALANCE $ 92 $ 5,599
========= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
INTERNATIONAL REALTY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 International Realty Group,
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 for the fiscal year ended December 31, 1999.
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 outstanding for the period. Diluted earnings (loss) per share is
calculated by dividing net income (loss) by the weighted average number of
shares of the Company's common stock and dilutive common stock equivalents
outstanding. During the periods presented, common stock equivalents 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 March 31, 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 on December 31, 1999, the Company completed the sale of all of the
outstanding capital stock of Appraisal Group International, Inc., a Florida
corporation ("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.
The Company exchanged the net assets of AGII of $129,877 for 800,000 shares of
its common stock previously held by Richard M. Bradbury, the Company's former
president and a former director. In addition, Mr. Bradbury agreed to deposit
into escrow an additional 400,000 shares of the Company's 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
5
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PART I: FINANCIAL INFORMATION, CONTINUED.
ITEM 1. FINANCIAL STATEMENTS, CONTINUED.
exceeds $200,000, then 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, then the number of shares deliverable will be
calculated by dividing $200,000 by the fair market value per share. Concurrently
with this exchange, the officer resigned from the Company.
The Company has recorded as treasury stock the 800,000 shares of the Company's
common stock received with a cost of $129,877. No gain or loss has been
recognized on the transaction.
Income from operations of AGII for the quarter ended March 31, 1999 is shown
separately in the accompanying statement of operations.
Net sales of AGII for the quarter ended March 31, 1999 were $151,418. This
amount is not included in net sales in the accompanying statement of operations.
Assets and liabilities disposed of at December 31, 1999 consisted of the
following :
<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) RECEIVABLE FROM RELATED PARTY
The Company is currently dependent upon the collection of the receivable from a
stockholder for the funding of its operations and settlement of its obligations.
6
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2
Item 2. Management's Discussion and Analysis or Plan of Operations.
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 ended March 31, 2000, as compared to the same
period 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
"IRGR," 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, or at all.
The Company currently owns a majority interest in the following four parcels of
vacant or partially developed land:
CLUSTER IXTAPA
The Company has a 75% interest in Cluster Inmobiliaria de Ixtapa, S.A. de C.V.,
a company formed under the laws of Mexico ("CLUSTER IXTAPA"). 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.
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.
7
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PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2
NUEVA TIERRA
Nueva Tierra, S.A. de C.V., a wholly-owned subsidiary of the Company formed
under the laws of Mexico ("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 properties in Ixtapa and La Paz as the first
candidates 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 1999. 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.
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
former director. Net sales of AGII for the three months ended March 31, 1999
were $151,418. This amount is not included in net sales in the accompanying
statement of operations for 1999. AGII accounted for 100% of the Company's
consolidated revenue in 1999. The income from operations of AGII has been
classified separately in the consolidated statements of operations.
8
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2
CONTINUING OPERATIONS
The Company did not record any revenues from operations in 1999 or the first
quarter of 2000 as a result of its sale of AGII at the end of 1999.
General and administrative expenses were $40,491 for the three months ended
March 31, 2000 compared with $43,129 for the three months ended March 31, 1999.
As of January 1, 1999, the peso is recognized as the functional currency for the
Company's local operations and any adjustments are components of equity. During
the three months ended March 31, 1999 and 2000, currency translation adjustments
of $27,845 and $26,307, respectively, were recognized in stockholders' equity.
NET LOSSES
Due to the above results, the Company had a consolidated net loss of $35,844 in
2000 compared to a consolidated net loss of $54,595 in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of financing is receivables in the aggregate amount
of $1,285,303 that is due from a significant stockholder. The Company currently
has no revenue producing activities and is dependent on this receivable to
finance its operations. The Company had no material commitments for capital
expenditures at March 31, 2000.
9
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2, CONTINUED
To date, the Company has financed its operations principally through borrowings
and revenues derived from its previous real estate appraisal and consulting
services. 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
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 the Company's
common stock. Furthermore, debt financing, if 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 $184,268 over an eight-year period)
for its foreign operations, recognized as a component of stockholders'
deficiency. 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
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. All forward-looking statements are inherently uncertain as they are
based on current expectations and assumptions concerning future events or future
performance of the Company. These uncertainties include, among others, 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) a downturn in general or local economic conditions where the Company owns
real property; (vii) the delay or failure to properly manage growth and
successfully integrate acquired companies and operations; (viii) lack of
geographic diversification; (ix) effect of uninsured loss; (x) the financial
condition of the Company's clients; (xi) imposition of new regulatory
requirements affecting the Company; and (xii) other factors that are described
in further detail in this report and the Company's other filings with the
Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which are only predictions and speak only as of the date hereof.
Forward-looking statements usually contain the words "estimate," "anticipate,"
"believe," "expect," "plan" or similar expressions, and are subject to numerous
known and unknown risks and uncertainties. Any forward-looking statement speaks
only as of the date on which the 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. Because new factors emerge from
time to time, the Company's management cannot predict all of these factors.
Furthermore, management cannot assess the impact of each 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.
10
<PAGE>
PART I: FINANCIAL INFORMATION, CONTINUED
ITEM 2, CONTINUED
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
BIRNHOLZ V. INTERNATIONAL REALTY GROUP, INC., THE APPRAISAL
GROUP, INC. AND APPRAISAL GROUP INTERNATIONAL, INC. On or
about April 20, 2000, Jack Birnholz, a former employee of the
Company, filed a complaint against the Company and The
Appraisal Group, Inc. and Appraisal Group International, Inc.
in the Circuit Court of the Eleventh Judicial Circuit of
Miami-Dade County, Florida. The complaint alleges a breach of
an oral employment agreement and demands payment of
outstanding wages of $193,245. The Company currently is
evaluating the merits of this claim and intends to defend it
vigorously.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.1* Stock Purchase Agreement, dated as of
December 31, 1999, by and between Richard M.
Bradbury and the Company.
27.1 Financial Data Schedule
- ----------
* Incorporated by reference to the similarly described exhibit included with the
Company's Current Report on Form 8-K, filed on March 15, 2000.
B. Reports on Form 8-K
On March 6, 2000, the Company filed a Current Report on Form
8-K relating to a change in accountants from Tubbs & Bartnick,
P.A. to Stark Tinter & Associates, LLC.
On March 15, 2000, the Company filed a Current Report on Form
8-K relating to the sale of all of the outstanding capital
stock of AGII to Richard M. Bradbury.
11
<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.
INTERNATIONAL REALTY GROUP, INC.
DATE: MAY 15, 2000 By: /s/ JAIME SERRA
------------------------------------
Jaime Serra
CEO and Acting Chief Financial Officer
(Principal Executive and Financial Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 92
<SECURITIES> 0
<RECEIVABLES> 1,286,488
<ALLOWANCES> 0
<INVENTORY> 5,273,013
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,605,408
<CURRENT-LIABILITIES> 453,444
<BONDS> 0
115,784
0
<COMMON> 0
<OTHER-SE> 4,875,456
<TOTAL-LIABILITY-AND-EQUITY> 6,605,408
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 40,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (35,844)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,844)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,844)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
