Attached files
Exhibit
99.2
FINANCIAL
STATEMENTS WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
FOR
ISLAND BREEZE INTERNATIONAL FOR YEARS ENDED DECEMBER 31, 2009 AND DECEMBER 31,
2008
AND
THE PERIOD FROM SEPTEMBER 27, 2006 (INCEPTION) TO DECEMBER 31,
2009.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
Island
Breeze International, Inc.
Bellmawr,
New Jersey
We
have audited the accompanying consolidated balance sheets of Island Breeze
International, Inc., and subsidiaries (“the Company”), a development stage
enterprise, as of December 31, 2009 and 2008 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board of the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have nor were we engaged to
perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2009 and 2008 and the results of its operations and its cash flows
for each of the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2, the Company
has incurred significant losses from operations since its inception and has a
working capital deficiency. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s plans
in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/
Bernstein & Pinchuk LLP
New
York, NY
April
5, 2010
F-2
ISLAND
BREEZE INTERNATIONAL, INC.
(A
Development Stage Enterprise)
Consolidated
Balance Sheets
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 77,333 | $ | 59,016 | ||||
|
Prepaid
Expenses
|
353,490 | 5,000 | ||||||
|
Total
current assets
|
430,823 | 64,016 | ||||||
|
Property
and Equipment - at cost, net of accumulated depreciation
|
8,860 | 10,771 | ||||||
|
Vessel
under renovation - m/v Island Breeze (ex Atlantis)
|
9,834,437 | 9,522,632 | ||||||
|
Vessel
under renovation - m/v Casino Royale
|
6,861,500 | 5,768,665 | ||||||
| $ | 17,135,620 | $ | 15,366,084 | |||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
Liabilities
|
||||||||
|
Accounts
Payable
|
$ | 529,140 | $ | 285,255 | ||||
|
Accrued
expenses
|
245,854 | 40,745 | ||||||
|
Notes
payable - related parties
|
358,700 | 90,371 | ||||||
|
Convertible
notes payable
|
412,452 | 4,849,643 | ||||||
|
Total
current liabilities
|
1,546,146 | 5,266,014 | ||||||
|
Convertible
notes payable - noncurrent
|
- | 500,000 | ||||||
|
Stockholders'
equity
|
||||||||
|
Preferred
stock, $ 0.001 par value or share, 1,000,000 authorized, none
issued
|
- | - | ||||||
|
Class
A common stock: $ 0.001 par value; authorized 100,000,000;
24,323,850 and 13,389,500 issued and outstanding at December 31,
2009 and 2008
|
24,324 | 13,889 | ||||||
|
Class
B common stock: $ 0.001 par value; 16,110,500
authorized, issued and outstanding at December 31, 2009 and
2008
|
16,111 | 16,111 | ||||||
|
Additional
paid-in capital
|
18,580,294 | 10,977,397 | ||||||
|
Accumulated
deficit during development stage
|
(3,031,255 | ) | (1,407,327 | ) | ||||
|
Total
stockholders' equity
|
15,589,474 | 9,600,070 | ||||||
| $ | 17,135,620 | $ | 15,366,084 | |||||
See
Accompanying Notes to Consolidated Financial Statements.
F-3
ISLAND
BREEZE INTERNATIONAL, INC.
(A
Development Stage Enterprise)
Consolidated
Statements of Operations
|
September,
2006
|
||||||||||||
|
(inception)
to
|
||||||||||||
|
Year
Ended December 31,
|
December
31,
|
|||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Revenues
|
$ | - | $ | - | $ | - | ||||||
|
Cost
of Revenues
|
- | - | - | |||||||||
|
Gross
Profit
|
$ | - | $ | - | $ | - | ||||||
|
General,
selling and administrative expenses
|
1,595,447 | 619,604 | 3,003,967 | |||||||||
|
Operating
loss
|
$ | (1,595,447 | ) | $ | (619,604 | ) | $ | (3,003,967 | ) | |||
|
Non-operating
income (expense)
|
||||||||||||
|
Interest
income
|
4 | 1,193 | 1,197 | |||||||||
|
Interest
expense
|
(28,485 | ) | - | (28,485 | ) | |||||||
|
Loss
before income tax expense
|
(1,623,928 | ) | (618,411 | ) | (3,031,255 | ) | ||||||
|
Income
tax expense
|
- | - | - | |||||||||
|
Net
Loss
|
$ | 1,623,928 | ) | $ | (618,411 | ) | $ | (3,031,255 | ) | |||
|
Net
loss per share, basic and diluted
|
$ | (0.05 | ) | $ | (0.02 | ) | ||||||
|
Average
number of shares of common stock outstanding, basic and
diluted
|
35,786,615 | 30,000,000 | ||||||||||
See
Accompanying Notes to Consolidated Financial Statements.
F-4
ISLAND
BREEZE INTERNATIONAL, INC.
(A
Development Stage Enterprise)
Consolidated
Statements of Stockholders’ Equity
|
Accumulated
|
||||||||||||||||||||||||||||
|
Deficit
|
||||||||||||||||||||||||||||
|
Common
Stock
|
Additional
|
During
|
||||||||||||||||||||||||||
|
Shares
|
Amount
|
Paid-In
|
Development
|
|||||||||||||||||||||||||
|
Class
A
|
Class
B
|
Class
A
|
Class
B
|
Capital
|
Stage
|
Total
|
||||||||||||||||||||||
|
September
27, 2006 (Inception)
|
13,889,500 | 16,110,500 | $ | 13,889 | $ | 16,111 | $ | (30,000 | ) | $ | - | $ | - | |||||||||||||||
|
Additional
cash contributions to equity
|
- | - | - | - | 5,003,926 | - | 5,003,926 | |||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | (172,009 | ) | (172,009 | ) | |||||||||||||||||||
|
Balance,
December 31, 2006
|
13,889,500 | 16,110,500 | 13,889 | 16,111 | 4,973,926 | (172,009 | ) | 4,831,917 | ||||||||||||||||||||
|
Additional
cash contributions to equity
|
- | - | - | - | 4,970,795 | - | 4,970,795 | |||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | (616,907 | ) | (616,907 | ) | |||||||||||||||||||
|
Balance,
December 31, 2007
|
13,889,500 | 16,110,500 | 13,889 | 16,111 | 9,944,721 | (788,916 | ) | 9,185,805 | ||||||||||||||||||||
|
Additional
cash contributions to equity
|
- | - | - | - | 1,032,676 | - | 1,032,676 | |||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | (618,411 | ) | (618,411 | ) | |||||||||||||||||||
|
Balance,
December 31, 2008
|
13,889,500 | 16,110,500 | 13,889 | 16,111 | 10,977,397 | (1,407,327 | ) | 9,600,070 | ||||||||||||||||||||
|
Stock
issued in recapitalization pursuant to reverse merger
|
3,500,000 | - | 3,500 | - | (3,500 | ) | - | - | ||||||||||||||||||||
|
Convertible
note issued for cancelled officer shares
|
2,000,000 | - | (2,000 | ) | - | (168,000 | ) | - | (170,000 | ) | ||||||||||||||||||
|
Shares
issued for convertible notes payable at $ 1.00 per
share
|
5,566,795 | - | 5,567 | - | 5,561,228 | - | 5,566,795 | |||||||||||||||||||||
|
Shares
issued for convertible notes payable at $ 0.50 per
share
|
300,049 | - | 300 | - | 149,725 | - | 150,025 | |||||||||||||||||||||
|
Shares
issued for convertible notes payable at $ 0.28 per
share
|
600,000 | - | 600 | - | 169,400 | - | 170,000 | |||||||||||||||||||||
|
Shares
issued for services
|
1,472,500 | - | 1,473 | - | 827,277 | - | 828,750 | |||||||||||||||||||||
|
Shares
issued for cash
|
915,000 | - | 915 | - | 456,585 | - | 457,500 | |||||||||||||||||||||
|
Shares
issued for notes payable at $ 0.25 per share
|
80,000 | - | 80 | - | 19,920 | - | 20,000 | |||||||||||||||||||||
|
Additional
cash contributions to capital
|
- | - | - | - | 590,262 | - | 590,262 | |||||||||||||||||||||
|
Net
loss
|
- | - | - | - | - | (1,623,928 | ) | (1,623,928 | ) | |||||||||||||||||||
|
Balance,
December 31, 2009
|
28,323,844 | 16,110,500 | $ | 24,324 | $ | 16,111 | $ | 18,580,294 | $ | (3,031,255 | ) | $ | 15,589,474 | |||||||||||||||
See
Accompanying Notes to Consolidated Financial Statements.
F-5
ISLAND
BREEZE INTERNATIONAL, INC.
(A
Development Stage Enterprise)
Consolidated
Statements of Cash Flows
|
Sept
27, 2006
|
||||||||||||
|
Year
ended December 31,
|
(inception)
to
|
|||||||||||
|
2009
|
2008
|
December
31, 2009
|
||||||||||
|
Cash
Flows From Operating Activities
|
||||||||||||
|
Net
loss
|
$ | (1,623,928 | ) | $ | (618,411 | ) | $ | (3,031,255 | ) | |||
|
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
|
Depreciation
|
2,660 | 3,353 | 10,488 | |||||||||
|
Stock
issued for services
|
828,750 | - | 828,750 | |||||||||
|
Stock
issued for interest
|
25 | - | 25 | |||||||||
|
Changes
in assets and liabilities
|
||||||||||||
|
Prepaid
expenses
|
(348,490 | ) | 3,775 | (353,490 | ) | |||||||
|
Accounts
Payable
|
243,885 | 273,439 | 529,141 | |||||||||
|
Accrued
interest
|
27,786 | 27,786 | ||||||||||
|
Accrued
expenses
|
205,109 | (23,461 | ) | 245,853 | ||||||||
|
Net
cash used in operating activities
|
(664,203 | ) | (361,305 | ) | (1,742,702 | ) | ||||||
|
Cash
Flows From Investing Activities
|
||||||||||||
|
Purchase
of furniture and equipment
|
(749 | ) | - | (20,097 | ) | |||||||
|
Acquisition
and renovation of property and equipment, m/v
|
||||||||||||
|
Island
Breeze and m/v Casino Royale
|
(1,187,488 | ) | (6,268,224 | ) | (16,497,384 | ) | ||||||
|
Net
cash used in investing activities
|
(1,188,237 | ) | (6,268,224 | ) | (16,517,481 | ) | ||||||
|
Cash
Flows From Financing Activities
|
||||||||||||
|
Proceeds
from issuance of convertable notes
|
557,000 | 5,440,014 | 6,016,362 | |||||||||
|
Proceeds
from issuance of notes
|
399,000 | - | 399,000 | |||||||||
|
Proceeds
from issuance of common stock cash
|
457,500 | - | 457,500 | |||||||||
|
Payments
of notes payable
|
(133,005 | ) | - | (133,005 | ) | |||||||
|
Contributed
capital
|
590,262 | 1,032,676 | 11,597,659 | |||||||||
|
Net
cash provided by financing activities
|
1,870,757 | 6,472,690 | 18,337,516 | |||||||||
|
Net
increase (decrease) in cash
|
18,317 | (156,839 | ) | 77,333 | ||||||||
|
Cash
and cash equivalents, beginning of period
|
59,016 | 215,855 | - | |||||||||
|
Cash
and cash equivalents, end of period
|
$ | 77,333 | $ | 59,016 | $ | 77,333 | ||||||
|
Cash
paid during the period for:
|
||||||||||||
|
Interest
Paid
|
$ | 1,005 | $ | - | $ | 1,005 | ||||||
|
Taxes
Paid
|
$ | - | $ | - | $ | - | ||||||
|
Supplemental
Information and Non-monetary Transactions:
|
||||||||||||
|
Issuance
of stock for convertible debt and accrued interest
|
$ | 5,886,820 | $ | - | $ | 5,886,820 | ||||||
|
Issuance
of stock for services
|
$ | 828,750 | $ | - | $ | 828,750 | ||||||
|
Capitalized
accrued interest
|
$ | 217,152 | $ | 349,643 | $ | 566,795 | ||||||
|
Issuance
of stock for notes converted
|
$ | 20,000 | $ | - | $ | 20,000 | ||||||
|
Issuance
of stock for interest converted
|
$ | 25 | $ | - | $ | 25 | ||||||
|
Issuance
of $600,000 convertible debt for stock
|
$ | 170,000 | $ | - | $ | 170,000 | ||||||
See Accompanying Notes to Consolidated
Financial Statements.
F-6
ISLAND
BREEZE INTERNATIONAL, INC.
(A
Development Stage Enterprise)
Notes
to Consolidated Financial Statements
NOTE
1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS
Basis
of Presentation
Island
Breeze International, Inc. (“IB International” or the “Company”) is the holding
company of Island Breeze International (“IBI”), a development-stage enterprise
under the provisions of ASC 915, “Development Stage
Enterprises.” Island Breeze’s core business is focused on developing
and operating gaming day cruises to nowhere. The mission of Island
Breeze is to develop the next generation entertainment product for the
discerning population, who demand excellence and an alternative closer to
home.
On June
12, 2009 IB International’s predecessor, Goldpoint Resources, Inc.
(“Goldpoint”), acquired all of the issued and outstanding capital stock of IBI,
a privately held exempt Cayman Islands company, which before closing was a
wholly-owned subsidiary of Olympian Cruises, LLC (“Olympian”), a Delaware
Limited Liability Company.
As of
June 12, 2009, Olympian acquired control of Goldpoint in a transaction we
referred to herein as the Share Exchange. As of such date, Goldpoint
issued 30,000,000 shares of its common stock (or approximately 77.8 % of IB
International’s common stock outstanding on the date hereof) to
Olympian. In return for such issuances of shares, Goldpoint received
all of the outstanding shares of capital stock of IBI thus, IBI became
Goldpoint’s wholly-owned subsidiary and the business of the subsidiary
constitutes our only operations.
Since
this transaction resulted in existing shareholders of IBI acquiring control of
Goldpoint, for financial reporting purposes, the business combination has been
accounted for as an additional capitalization of Goldpoint (a reverse
acquisition with IBI as the accounting acquirer). As the operations
of IBI are the only continuing operations of the Company, in accounting for the
transaction, IBI is deemed to be the purchaser and parent company for financial
reporting purposes. Accordingly, its net assets were included in the
consolidated balance sheet at their historical value.
Under the
agreement relating to the Share Exchange (the “Exchange Agreement”), we were
required to merge into a newly formed Delaware corporation (the “Merger”),
thereby became a Delaware corporation, change our name to Island Breeze
International, Inc. and change our authorized capital stock to 100,000,000
shares of Class A Common Stock, par value $0.001 per share, 16,110,500 shares of
Class B Common Stock, par value $0.001 per share and 1,000,000 shares of
preferred stock, par value $0.001 per share .
It was
originally contemplated that the Merger would occur prior to the consummation of
the Share Exchange and that 13,889,500 shares of Class A Common Stock and
16,110,500 shares of Class B Common Stock would be issued to Olympian on
consummation of the Share Exchange. However, in order to facilitate
the closing of the Share Exchange, Goldpoint and Olympian agreed to effect the
Merger after the consummation of the Share Exchange rather than
beforehand.
As a
result of the Merger, Goldpoint Resources, Inc., our predecessor Nevada
Corporation, no longer exists, our name has changed to Island Breeze
International, Inc. and each outstanding share of Goldpoint’s common stock,
$0.001 par value, has been automatically converted into one share of Class A
Common Stock of IB International. Each outstanding stock certificate
representing Goldpoint common stock is deemed, without any action by the
shareholder to represent the same number of shares of Class A Common Stock of IB
International. Share holders do not need to exchange their stock
certificates as a result of the Merger.
Also, as
contemplated in the Exchange Agreement, Olympian exchanged 16,110,500 shares of
Class A Common Stock for and identical number of Class B Common
Stock. The Class A and Class B Common Stock are substantially
identical except that holders of Class A Common Stock will have the right to
cast one vote for each share held of record and holders of Class B Common Stock
have the right to cast ten votes for each share held of record on all matters
submitted to a vote of holders of common stock. The Class A Common Stock and
Class B Common Stock vote together as a single class on all matters on which
stockholders may vote, including the election of directors, except when class
voting is required by applicable law.
F-7
The
difference in voting rights described above increases the voting power of the
Class B Common stockholders and, accordingly, has an anti-takeover effect. The
existence of the Class B Common Stock may make the Company a less attractive
target for a hostile takeover bid or render more difficult or discourage a
merger proposal, an unfriendly tender offer, a proxy contest, or the removal of
incumbent management, even if such transactions were favored by the stockholders
of the Company other than the Class B Common stockholders. Thus, the
stockholders may be deprived of an opportunity to sell their shares at a premium
over prevailing market prices, in the event of a hostile takeover bid. Those
seeking to acquire the Company through a business combination will be compelled
to consult first with the Class B Common stockholders in order to negotiate the
terms of such business combination. Any such proposed business
combination will have to be approved by our Board of Directors, which may be
under the control of the Class B Common stockholders, and if stockholder
approval is required the approval of the Class B Common stockholders will be
necessary before any such business combination can be consummated.
On
September 15, 2009, the Company adopted its 2009 Stock Incentive Plan (the
”Plan”). We adopted the 2009 Plan to provide a means by which
employees, directors, and consultants of the Company and those of our
subsidiaries and other designated affiliates, which we refer to together as our
affiliates, may be granted awards of our Class A Common Stock, be given the
opportunity to purchase our Class A Common Stock and be granted other benefits
including those measured by increases in the value of our Class A Common Stock,
to assist in retaining the services of such persons, to secure and retain the
services of persons capable of filling such positions and to provide incentive
for such persons to exert maximum efforts for our success and the success of our
affiliates.
The total
number of shares of our Class A Common Stock that may be subject to awards under
the 2009 Plan is equal to 5,000,000 shares. Therefore, 5,000,000
shares of Class A Common Stock are available for awards under the 2009
Plan.
On August
14, 2009, IBI, the Company’s wholly-owned subsidiary, formed a new wholly-owned
subsidiary named Island Breeze International Asia Limited, a Hong Kong
corporation. IBI may utilize this corporation to operate certain entertainment
cruises in Asia, if such cruises are launched. From inception through the date
of this filing there has been no activity in this corporation.
Nature
of Business
Effective
on the closing of the Share Exchange mentioned above, we abandoned all
activities related to our mining business and our activities are conducted
exclusively through IBI.
IBI was
incorporated under the laws of the Cayman Islands as an exempt company on
September 27, 2006. We have had no revenue and have no
operations. Our efforts since our inception have been focused on
developing and operating entertainment day cruises. We own two
vessels, one of which we expect to substantially renovate and equip with gaming,
restaurant and entertainment related equipment. The ports that we
were previously primarily considering for the Company’s initial operations
included ports in Florida and Texas. Increasingly, we have focused on
international locations and we are currently evaluating port locations primarily
in East Asia for the establishment of our initial cruise operations, with a
particular focus on home port locations in Taiwan and the Hong Kong Special
Administrative Region of China This change in location is based on
our belief that the East Asian market presents greater opportunities for the
initial launch of our cruise business. In this effort, we have
established a registered branch office in Taipei, Taiwan.
We do not
have the cash reserves required to complete the renovations of our vessels or to
commence operations. We believe that we will need at least
$15,000,000 of outside funding for us to launch our first vessel and initiate
our business. Further funds, which we estimate to be not less than an
additional $15,000,000, will be required for us to launch our second vessel and
to expand our operations. We may also to decide to acquire another
vessel from which we may establish our initial operations, which will require an
undetermined amount of outside funding to acquire and initiate our entertainment
cruise operations.
We
currently expect to commence our initial cruise operations upon completion of
the renovation of the m/v Island Breeze (the “Island Breeze”), a 410 foot vessel
currently located in Greece which we acquired on September 12,
2007. After renovations are complete, we expect the Island Breeze to
have a passenger capacity of approximately 1,200 passengers. Further,
we expect that after the completion of renovations, the Island Breeze will
feature a contiguous gaming area measuring approximately 15,000 square feet with
15 to 16 foot high ceilings. The Island Breeze will also offer a 300 seat buffet
restaurant, a fine dining restaurant, a full service spa/salon, a VIP lounge and
a 400 seat showroom, although the final configuration may vary. Upon
completion of renovations of the Island Breeze, we intend to place the Island
Breeze in service and establish our planned entertainment cruise operation from
a yet to be determined port location. We believe that after it is
renovated
the Island Breeze will be better suited for our East Asian operations than our
second vessel, the m/v Casino Royal (the “Casino Royale”), since the Island
Breeze has an enclosed entertainment area and the gaming area is concentrated on
one level. We also believe that based on our current renovation
plans, the Island Breeze will require less capital investment and take less time
to renovate versus the Casino Royale. Alternatively, we may decide to
acquire another vessel from which we can commence our initial
operations. It would be anticipated that such a vessel will have a
sufficient amount of cabins to accommodate passengers on overnight or multi-day
cruises versus the shorter duration cruises that can be operated by either the
Island Breeze or the Casino Royale.
F-8
Our
second vessel is the Casino Royale, a 430 foot vessel currently located in the
Bahamas, which the Company acquired on May 23, 2008. We have
developed renovation designs for the Casino Royale which would result in a
passenger capacity of approximately 1,200 passengers; a main gaming deck area
measuring approximately 11,000 feet with 12 to 14 foot high ceilings; and two
upper level gaming salons. The renovation plans also provide for
dining and entertainment facilities including a 300 seat buffet restaurant, a
100 seat fine dining restaurant, a VIP lounge and a covered outdoor
entertainment area. When compared to the Island Breeze, we do not
believe that the Casino Royale is as well suited to likely ports we are
considering in East Asia. Further, given our current renovation plans
for each vessel, excluding equipment costs, we believe that the Casino Royale
will cost substantially more to renovate versus the Island
Breeze.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
Generally
Accepted Accounting Principles
The
Company uses the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
In
June 2009, the Financial Accounting Standards Board (FASB) issued the
Accounting Standards Codification (“Codification” or “ASC”) which became the
single official source of authoritative, nongovernmental U.S. generally accepted
accounting principles (GAAP). The Codification did not change GAAP but
reorganized the literature and changed the naming mechanism by which topics are
referenced. Companies were required to begin using the Codification for interim
and annual periods ending after September 15, 2009. As required, references
to pre-codification accounting literature have been changed throughout this
Annual Report on Form 10-K to appropriately reference the Codification. The
consolidated results of the Company were not impacted by this
change.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of IB
International and its subsidiary. All significant intercompany
balances and transactions have been eliminated.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
and Cash Equivalents
For the
purposes of the statement of cash flows, cash equivalents include highly liquid
debt instruments with original maturities of three months or less which are not
securing any corporate obligations. We had no cash equivalents
at December 31, 2009 and December 31, 2008, respectively.
Prepaid
Expenses
Prepaid
expenses are primarily comprised of advance payments made to vendors for
inventory and services. The Company records prepaid expenses at the
expected recovery amount.
F-9
Property
and Equipment
Property
and equipment is stated at the historical cost, less accumulated depreciation.
Depreciation on property, plant and equipment is provided using the
straight-line method over the estimated useful lives of the assets for both
financial and income tax reporting purpose as follows:
|
Years
|
|
|
Vessel
|
30
|
|
Vessel improvement
|
3-28
|
|
Machinery and equipment
|
10
|
|
Computer hardware and software
|
3-5
|
We
capitalize costs that are directly related to the purchase and renovation of the
vessels. We capitalize interest as part of vessel acquisition costs
and other capital projects during their renovation period. Upon
placing the vessels into service, the vessels will be depreciated over their
useful lives and the costs of repairs and maintenance, including minor
improvement costs, will be charged to expenses as incurred. Further, upon
placing vessels into service, specifically identified or estimated cost and
accumulated depreciation of previously capitalized vessel components will be
written off upon replacement.
Dry-dock
costs primarily represent planned major maintenance activities that are incurred
when a vessel is taken out of service for scheduled maintenance. These costs
will be expensed as incurred.
Long-lived
Assets
Long-lived
assets primarily include property and equipment and intangible assets with
finite lives. Long-lived assets are reviewed on a regular basis for the
existence of facts and circumstances that may suggest that the carrying amount
of an asset or group of assets may not be recoverable. Recoverability of
long-lived assets or groups of assets is assessed based on a comparison of the
carrying amount to the estimated undiscounted future cash flows. If estimated
future undiscounted net cash flows are less than the carrying amount, the asset
is considered impaired and expense is recorded at an amount required to reduce
the carrying amount to fair value. Determining the fair value of long-lived
assets includes significant judgment by management, and different judgments
could yield different results.
From inception to December 31, 2009 the
Company recognized no impairment of long-lived assets.
Advertising
expense
The
Company expenses advertising costs as incurred. Advertising expense for the
years ended December 31, 2009 and 2008 were $8,370 and $0,
respectively.
Income
Taxes
The
Company accounts for income taxes under ASC 740 "Income Taxes" which codified
SFAS 109, "Accounting for
Income Taxes" and FIN 48 “Accounting for Uncertainty in
Income Taxes – an Interpretation of FASB Statement No. 109.”
Under the asset and liability method of ASC 740, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under ASC 740, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period the
enactment occurs. A valuation allowance is provided for certain deferred tax
assets if it is more likely than not that the Company will not realize tax
assets through future operations.
Comprehensive
Income
Comprehensive
income includes net income and also considers the effect of other changes to
stockholders’ equity that are not required to be recorded in determining net
income, but are rather reported as a separate component of stockholders’ equity.
During the years ended December 31, 2009 and 2008 there were no terms of other
comprehensive income.
F-10
Fair
Value of Financial Instruments
The
Company's financial instruments as defined by FASB ASC 825-10-50 include cash,
trade accounts receivable, and accounts payable and accrued
expenses. All instruments are accounted for on a historical cost
basis, which, due to the short maturity of these financial instruments,
approximates fair value at December 31, 2009.
FASB ASC
820 defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. ASC 820 establishes a three-tier fair
value hierarchy which prioritizes the inputs used in measuring fair value as
follows:
Level 1.
Observable inputs such as quoted prices in active markets;
Level 2.
Inputs, other than the quoted prices in active markets, that are observable
either directly or indirectly; and
Level 3.
Unobservable inputs in which there is little or no market data, which requires
the reporting entity to develop its own assumptions.
The
Company does not have any assets or liabilities measured at fair value on a
recurring basis at December 31, 2009 and 2008. The Company did not have any fair
value adjustments for assets and liabilities measured at fair value on a
nonrecurring basis during the periods ended December 31, 2009 and
2008.
Earnings
Per Share Information
FASB ASC
260, “Earnings Per
Share” provides for calculation of "basic" and "diluted" earnings per
share. Basic earnings per share includes no dilution and is computed
by dividing net income (loss) available to common shareholders by the weighted
average common shares outstanding for the period. Diluted earnings
per share reflect the potential dilution of securities that could share in the
earnings of an entity similar to fully diluted earnings per
share. Basic and diluted loss per share were the same, at the
reporting dates, as there were no common stock equivalents
outstanding.
Share
Based Expenses
ASC 718
"Compensation - Stock
Compensation" codified SFAS No. 123 prescribes accounting and reporting
standards for all stock-based payments award to employees, including employee
stock options, restricted stock, employee stock purchase plans and stock
appreciation rights, may be classified as either equity or liabilities. The
Company should determine if a present obligation to settle the share-based
payment transaction in cash or other assets exists. A present obligation to
settle in cash or other assets exists if: (a) the option to settle by
issuing equity instruments lacks commercial substance or (b) the present obligation is
implied because of an entity's past practices or stated policies. If a present
obligation exists, the transaction should be recognized as a liability;
otherwise, the transaction should be recognized as equity.
The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to
Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force
consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring or in Conjunction with
Selling, Goods or Services". Measurement of share-based payment
transactions with non-employees shall be based on the fair value of whichever is
more reliably measurable: (a) the goods or services
received; or (b) the
equity instruments issued. The fair value of the share-based payment transaction
should be determined at the earlier of performance commitment date or
performance completion date.
Going
Concern
The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements the Company incurred losses from operations of
$1,623,928 and $618,411 for the years ended December 31, 2009 and 2008,
respectively and $3,031,255 from inception (September 27, 2006) through December
31, 2009. In addition, the Company’s current liabilities exceed its current
assets by $1,115,322 as of December 31, 2009. These factors among others,
including the Company’s current cash position, which was $77,333 as of December
31, 2009, may indicate that the Company may be unable to continue as a going
concern for a reasonable period of time absent the infusion of substantial
additional capital.
F-11
If
adequate funds are raised upon a debt or equity financing transaction and
operations results improve significantly, management believes that the Company
can meets its ongoing obligations and continue to operate. However,
no assurance can be given that management’s actions will result in the
resolution of its liquidity problems or its eventual emergence as a profitable
company.
The
accompanying consolidated financial statements do not include any adjustments
that might be necessary should the Company be unable to continue as a going
concern.
Recent
Accounting Pronouncements
Recently Implemented
Standards
ASC 105,
“Generally Accepted Accounting Principles” (ASC 105) (formerly Statement of
Financial Accounting Standards No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles is a
replacement of FASB Statement No. 162)” reorganized by topic existing accounting
and reporting guidance issued by the Financial Accounting Standards Board
("FASB") into a single source of authoritative generally accepted accounting
principles ("GAAP") to be applied by nongovernmental entities. All guidance
contained in the Accounting Standards Codification ("ASC") carries an equal
level of authority. Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. Accordingly, all other
accounting literature will be deemed "non-authoritative". ASC 105 is effective
on a prospective basis for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company has implemented the
guidance included in ASC 105 as of July 1, 2009. The implementation of this
guidance changed the Company's references to GAAP authoritative guidance but did
not impact the Company's financial position or results of
operations.
ASC 855,
“Subsequent Events”
(ASC 855) (formerly Statement of Financial Accounting Standards No. 165, Subsequent Events) includes
guidance that was issued by the FASB in May 2009, and is consistent with current
auditing standards in defining a subsequent event. Additionally, the guidance
provides for disclosure regarding the existence and timing of a company's
evaluation of its subsequent events. ASC 855 defines two types of subsequent
events, "recognized" and "non-recognized". Recognized subsequent events provide
additional evidence about conditions that existed at the date of the balance
sheet and are required to be reflected in the financial statements.
Non-recognized subsequent events provide evidence about conditions that did not
exist at the date of the balance sheet but arose after that date and, therefore;
are not required to be reflected in the financial statements. However, certain
non-recognized subsequent events may require disclosure to prevent the financial
statements from being misleading. This guidance was effective prospectively for
interim or annual financial periods ending after June 15, 2009. The Company
implemented the guidance included in ASC 855 as of April 1, 2009. The effect of
implementing this guidance was not material to the Company's financial position
or results of operations.
The
Company refers to FASB ASC 605-25 “Multiple Element Arrangements”
in recognizing revenue from agreements with multiple deliverables. This
statement provides principles for allocation of consideration among its
multiple-elements, allowing more flexibility in identifying and accounting for
separate deliverables under an arrangement. The EITF introduces an estimated
selling price method for valuing the elements of a bundled arrangement if
vendor-specific objective evidence or third-party evidence of selling price is
not available, and significantly expands related disclosure requirements. This
standard is effective on a prospective basis for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15,
2010. Alternatively, adoption may be on a retrospective basis, and early
application is permitted. The Company does not expect the adoption of this
statement to have a material effect on its consolidated financial statements or
disclosures.
In
August 2009, the FASB issued Accounting Standards Update No. 2009-05,
“Measuring Liabilities at Fair Value,” (“ASU 2009-05”). ASU 2009-05 provides
guidance on measuring the fair value of liabilities and is effective for the
first interim or annual reporting period beginning after its issuance. The
Company’s adoption of ASU 2009-05 did not have an effect on its disclosure of
the fair value of its liabilities.
Recently Issued
Standards
In
September 2009, the FASB issued ASC Update No. 2009-12, “Fair Value Measurements and
Disclosures (Topic 820): Investments in Certain Entities that Calculate Net
Asset Value per Share (or Its Equivalent)” (ASC Update No. 2009-12). This
update sets forth guidance on using the net asset value per share provided by an
investee to estimate the fair value of an
alternative investment. The amendments in this update are effective for interim
and annual periods ending after December 15, 2009 with early application
permitted. The Company does not expect that the implementation of ASC Update No.
2009-12 will have a material effect on its financial position or results of
operations.
F-12
ASC Topic
810, “Consolidation”
was amended in June 2009, by Statement of Financial Accounting Standards
No. 167, Amendments to FASB
Interpretation No. 46(R) ("Statement No. 167"). Statement No. 167 amends
FASB Interpretation No. 46R, Consolidation of Variable Interest
Entities an interpretation of ARB No. 51 ("FIN 46R") to require an
analysis to determine whether a company has a controlling financial interest in
a variable interest entity. This analysis identifies the primary beneficiary of
a variable interest entity as the enterprise that has a) the power to direct the
activities of a variable interest entity that most significantly impact the
entity's economic performance and b) the obligation to absorb losses of the
entity that could potentially be significant to the variable interest entity or
the right to receive benefits from the entity that could potentially be
significant to the variable interest entity. The statement requires an ongoing
assessment of whether a company is the primary beneficiary of a variable
interest entity when the holders of the entity, as a group, lose power, through
voting or similar rights, to direct the actions that most significantly affect
the entity's economic performance. This statement also enhances disclosures
about a company's involvement in variable interest entities. Statement No. 167
is effective as of the beginning of the first annual reporting period that
begins after November 15, 2009. The Company does not expect the
adoption of Statement No. 167 to have a material impact on its financial
position or results of operations
In June
2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of
Financial Assets an amendment of FASB Statement No. 140 ("Statement No.
166"). Statement No. 166 revises FASB Statement of Financial Accounting
Standards No. 140, Accounting
for Transfers and Extinguishment of Liabilities a replacement of FASB Statement
125 ("Statement No. 140") and requires additional disclosures about
transfers of financial assets, including securitization transactions, and any
continuing exposure to the risks related to transferred financial assets. It
also eliminates the concept of a "qualifying special-purpose entity", changes
the requirements for derecognizing financial assets, and enhances disclosure
requirements. Statement No. 166 is effective prospectively, for annual periods
beginning after November 15, 2009, and interim and annual periods thereafter.
Although Statement No. 166 has not been incorporated into the Codification, in
accordance with ASC 105, the standard shall remain authoritative until it is
integrated. The Company does not expect the adoption of Statement No. 166 will
have a material impact on its financial position or results of
operations.
NOTE
3 – STOCKHOLDERS’ EQUITY
Preferred
Stock
The
Company has authorized 1,000,000 shares of blank check preferred
stock. To date, the Company has issued no preferred
stock.
Common
Stock
The
Company’s capitalization is 100,000,000 Class A common shares and 16,110,500
Class B common shares each class with a par value of $0.001 per share. As of
December 31, 2009 the Company had 24,323,850 Class A common shares and
16,110,500 Class B common shares issued and outstanding.
During
October, 2009, we sold to an investor 20,000 Class A Common shares for $0.50 per
share and realized total proceeds of $10,000.
During
October, 2009, a holder of our promissory note converted $20,000 of the
principal outstanding on this note into 80,000 Class A Common
shares.
During
November, 2009, we issued an aggregate of 142,500 Class A Common shares valued
at $0.50 per share in connection with the purchase by two investors of our
promissory notes in the aggregate amount of $372,000.
During
December, 2009, we issued an aggregate of 10,000 Class A Common shares valued at
$0.50 per share in connection with the purchase by three investors of our
promissory notes in the aggregate amount of $225,788.
During
the period from October 1, 2009 to December 31, 2009, we issued an aggregate of
500,000 Class A common shares valued at $0.50 per share to three consultants as
payment to implement and maintain digital advertising as well as future
promotional and marketing services.
The
Company believes all of the issuances of securities referred to in this Note
were exempt from registration under the Securities Act of 1933 pursuant to
Section 4(2) thereof and other available exemptions.
F-13
NOTE
4 - PROPERTY AND EQUIPMENT
Property
and equipment as of December 31, 2009 and 2008 were as follows:
|
2009
|
2008
|
|||||||
|
Furniture and fixtures
|
$ | 3,844 | $ | 3,844 | ||||
|
Office equipment
|
11,931 | 11,182 | ||||||
|
Computer software
|
3,573 | 3,573 | ||||||
| 19,348 | 18,599 | |||||||
|
Less accumulated depreciation
|
10,488 | 7,828 | ||||||
|
Property and equipment, net
|
$ | 8,860 | $ | 10,771 | ||||
Depreciation
expense was $2,660 and $3,533 for the years ended December 31, 2009 and 2008,
respectively and $10,488 since inception.
NOTE
5 – NOTES AND LOANS PAYABLE
Notes and
loans payable consist of the following at December 31, 2009 and December 31,
2008:
|
2009
|
2008
|
|||||||
|
Loans payable to officers, directors, (a)
|
$
|
94,871
|
$
|
90,371
|
||||
|
Loans payable – others, (b)(c)(d)
|
263,829
|
-
|
||||||
|
Convertible Promissory Notes, (e)(f)(g)(h)(i)(j)
|
412,452
|
5,349,643
|
||||||
|
771,152
|
5,440,014
|
|||||||
|
Less current portion
|
771,152
|
4,940,014
|
||||||
|
Long-term portion
|
$
|
-
|
$
|
500,000
|
||||
|
(a)
|
On
December 1, 2008 and December 5, 2008 the Company borrowed an aggregated
sum of $90,000 from officers and directors of the Company. The
Company issued Promissory Notes with a term of one year at an interest
rate of five percent that accrues to term. The Notes were
subsequently reissued under the original terms of the Notes for a period
of one year from the respective original term dates. On
December 31, 2009, the aggregated Note balance was $94,871 which included
principal and accrued interest.
|
|
(b)
|
On
June 4, 2009, the Company borrowed $50,000 and issued a Promissory Note to
a lender affiliated with one of our directors. The Promissory
Note provides for interest at the rate of 5% per annum and is payable
along with principal, sixty days from date of issue. On August
5, 2009 the Company reissued the Promissory Note under the original terms,
for $50,411, which included the original principle plus accrued
interest. We also issued 10,000 shares of Class A common stock
in connection with this loan. The Promissory Note is payable 60
days from date of issue. On October 13, 2009, the Company made
a principal payment of $17,000 and reissued the Promissory Note under the
original terms for $33,797, which included the remaining principal plus
accrued interest. The Promissory Note is payable 60 days from
date of issue. On November 10, 2009 and December 4, 2009, the
Company made a principal payment of $17,000 and $8,000 respectively, on
this note. On December 31, 2009, the Note balance was $9,072
which includes outstanding principal and accrued
interest.
|
|
(c)
|
On
June 18, 2009, the Company borrowed $250,000 and issued a Promissory Note
evidencing this loan. This loan, plus interest at the rate of
12% per annum and is payable 90 days from the date of issue. We
also issued 25,000 shares of Class A common stock in connection with this
loan. On September 17, 2009 the Company issued the Promissory
Note under the original terms, for $227,479, which included the original
principle amount less
a $30,000 principal pay down plus accrued interest. The
Promissory Note is payable 90 days from date of issue. We also
issued 25,000 shares of Class A common stock in connection with the
extension of this loan. On December 17, 2009 the Company
reissued the Promissory Note under the original terms, for $200,788, which
included the original principle amount less a $30,000 principal pay down
plus accrued interest. The Promissory Note is payable 104 days
from date of issue. We also issued 5,000 shares of Class A
common stock in connection with the extension of this loan. On
December 31, 2009, the Note balance was $205,200 which includes
outstanding principal and accrued
interest.
|
F-14
|
(d)
|
On
October 9, 2009, the Company borrowed $49,000 and issued a Promissory Note
to Olympian Cruises, LLC. The Promissory Note provides for interest at the
rate of 5% per annum and is payable along with principal, one year from
the date of issue. On December 31, 2009, the Note balance was
$49,557 which includes outstanding principal and accrued
interest.
|
|
(e)
|
On
November 6, 2009, the Company borrowed $300,000 and issued a Convertible
Promissory Note evidencing this loan. This loan, plus interest
at the rate of 10% per annum and is payable twelve months from the date of
issue. On or before the maturity date, upon written notice to
the Company, the Lender may elect to convert the principal amount of this
Note into shares of Class A common stock at a conversion price of $0.50
per share. The Company also issued 120,000 shares of Class A
common stock in connection with this loan. On December 31, 2009, the Note
balance was $304,521 which includes outstanding principal and accrued
interest.
|
|
|
|
|
(f)
|
On
November 17, 2009, the Company borrowed $72,000 and issued a Convertible
Promissory Note evidencing this loan. This loan, plus interest
at the rate of 10% per annum and is payable twelve months from the date of
issue. On or before the maturity date, upon written notice to
the Company, the Lender may elect to convert the principal amount of this
Note into shares of Class A common stock at a conversion price of $0.50
per share. The Company also issued 22,500 shares of Class A
common stock in connection with this loan. On December 31,
2009, the Note balance was $72,868 which includes outstanding principal
and accrued interest.
|
|
(g)
|
On
December 18, 2009, the Company borrowed $10,000 and issued a Convertible
Promissory Note evidencing this loan. This loan, plus interest
at the rate of 10% per annum and is payable twelve months from the date of
issue. On or before the maturity date, upon written notice to
the Company, the Lender may elect to convert the principal amount of this
Note into shares of Class A common stock at a conversion price of $0.50
per share. On December 31, 2009, the Note balance was $10,063 which
includes outstanding principal and accrued interest.
|
|
(h)
|
On
December 31, 2009, the Company borrowed $10,000 and issued a Convertible
Promissory Note evidencing this loan. This loan, plus interest
at the rate of 10% per annum and is payable twelve months from the date of
issue. On or before the maturity date, upon written notice to
the Company, the Lender may elect to convert the principal amount of this
Note into shares of Class A common stock at a conversion price of $0.50
per share. The Company also issued 2,000 shares of Class A
common stock in connection with this loan. On December 31, 2009, the Note
balance due on this note was $10,000 which includes outstanding principal
and accrued interest.
|
|
(i)
|
On
December 31, 2009, the Company borrowed $15,000 and issued a Convertible
Promissory Note evidencing this loan. This loan, plus interest
at the rate of 10% per annum and is payable twelve months from the date of
issue. On or before the maturity date, upon written notice to
the Company, the Lender may elect to convert the principal amount of this
Note into shares of Class A common stock at a conversion price of $0.50
per share. The Company also issued 3,000 shares of Class A
common stock in connection with this loan. On
December 31, 2009, the Note balance was $15,000 which includes outstanding
principal and accrued interest.
|
|
(j)
|
In
May 2008 and September 2008, we borrowed an aggregate of $5,000,000 and
issued convertible notes due on different dates commencing in November,
2009 and ending in March, 2010, eighteen months from the date of each loan
together with interest at the rate of 12% per annum. The principal amount
and accrued interest due on the notes automatically converted into shares
of our Class A common stock, at $1.00 per share, after the consummation of
the reverse acquisition on June 12, 2009, on which date we issued
5,566,795 shares of our common stock in satisfaction of the
notes.
|
In June
2009, we borrowed an aggregate of $150,000 from three individuals and issued a
Convertible Promissory Note evidencing this loan. This loan, plus
interest at the rate of 6% per annum was payable twelve months from the date of
each loan. The principal amount and accrued interest due on the notes
automatically converted into shares of our common stock, at $0.50 per
share, after the consummation of the reverse acquisition on June 12, 2009, on
which date we issued 300,049 shares of our Class A common stock in satisfaction
of the notes.
F-15
On June
8, 2009, the Company borrowed $50,000 and issued a Promissory Note evidencing
this loan. This loan, plus interest at the rate of 5% per annum was
payable August 8, 2009. We also issued 10,000 shares of Class A
common stock in connection with this loan. On August 9, 2009 the Company
reissued the Promissory Note under the original terms, for $50,411, which
included principle plus accrued interest. The Promissory Note was
payable 60 days from date of issue. We also issued 10,000 shares of
Class A common stock in connection with the extension of this
loan. On October 8, 2009, the lender converted $20,000 of the
principal outstanding on this note into 80,000 shares of Class A common stock
and we reissued the Promissory Note under the original terms for $30,832, which
included principal plus accrued interest. On October 10, 2009 we paid
the lender $31,1005 which included $30,000 of remaining principal on the loan
and $1,005 of accrued interest.
On June
12, 2009, immediately prior to the Share Exchange, we redeemed 2,000,000 shares
of our common stock from Patrick Orr, our former President, and in consideration
we issued a $600,000 non interest bearing Convertible Note which matured on
September 12, 2009. On or before the Maturity Date, Mr. Orr
could convert the principal amount of the note into 600,000 shares of Class A
common stock. Upon written notice to Mr. Orr, we could convert the
principal amount of the note into shares of Class A common stock at the
conversion price of $1.00 per share, provided we pay Mr. Orr a conversion fee of
$50,000. On September 11, 2009, we paid Mr. Orr the conversion fee
and exercised our right to convert the note into 600,000 shares of our Class A
common stock
NOTE
6 – COMITTMENTS AND CONTINGENCIES
Leasing
Arrangements
On
December 6, 2009 the Company terminated its facility leasing agreement with the
Port of Miami. Subsequently, the Company entered into an agreement to
sub-lease office space at the Port of Miami with a term expiring in June
2010. The lease rental was prepaid in full and may be cancelled by
either party with 30-days prior written notice. The Company is
in the process of locating and leasing office space near Marlton, New
Jersey.
On
December 1, 2009 the Company entered into an agreement to lease office space in
Taipei, Taiwan with a term expiring on November 30, 2012.
Future
minimum rental payments under this operating lease are as follows:
|
Year ending December 31,
|
2010
|
2,268 | |||
|
2011
|
2,268 | ||||
|
2012
|
2,079 | ||||
| $ | 6,615 |
Rent expense for leased facilities for the years ended December 31, 2009
and 2008 were $38,659 and $39,991, respectively.
Vessel
Purchase
On
September 12, 2007, the Company completed the purchase of the passenger ship
m/v Atlantis, and subsequently
renamed it the m/v Island
Breeze. The total costs related to the purchase of the vessel
were $8,039,645. As of December 31, 2009, the Company has paid an
additional $1,794,792 in renovation costs for a total cost of
$9,834,437.
The m/v Island Breeze is
currently moored in Elefsina Bay, near Piraeus, Greece. We estimate
that the full scale renovation of the Island Breeze will cost an additional
$6,400,000 and will take approximately three months from the commencement of
full scale renovations, which will occur after the required financing is
secured. Additionally, we anticipate that we will incur an additional
$2,800,000 of costs related to the purchase and installation of gaming
equipment, IT equipment, and other furniture, fixtures &
equipment. However, we believe that such costs can be reduced if we were to utilize, in part or
in whole, the gaming equipment, IT equipment, and other furniture and fixtures
currently onboard the Casino Royale. Further, we will continue to
incur additional carrying costs related to the Island Breeze while we seek to
secure the financing necessary to renovate and refit the vessel. We
may modify the scope of the renovations if we are unable to secure the financing
we require to complete the contemplated renovations.
F-16
On May
23, 2008, the Company acquired the m/v Casino Royale from
Catino, S.A. The total costs related to the purchase of the vessel
were $4,622,164. As of December 31, 2009, the Company has paid
an additional $2,215,820 in renovation related costs for a total cost of
$6,837,984.
The m/v Casino Royale is
currently moored in Freeport, Bahamas. The Company estimates that the
full scale renovation of the Casino Royale would cost an additional $8,400,000
and would take approximately five months from the commencement of full scale
renovations. Additionally, we anticipate that we would incur an
additional $1,200,000 in costs related to the purchase and installation of
additional gaming equipment, IT equipment, and other furniture, fixtures &
equipment. We are re-evaluating our plans for the vessel and may sell
the vessel rather than renovate it. Should we decide to sell the
Casino Royale, it is possible that we may decide to retain the equipment and
furniture presently onboard the vessel for use on the Island Breeze, thereby
reducing the anticipated equipment costs that will be associated with the launch
of the m/v Island Breeze. Alternatively, if we do decide to sell the
Casino Royale we may also decide to sell or store such equipment and furniture
presently onboard the Casino Royale.
NOTE
7 - RELATED PARTY TRANSACTIONS
During
the period of January 1, 2009 to December 31, 2009, the Company engaged in the
following related party transactions as noted in sub-notes below:
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(1)
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On
June 12, 2009, immediately prior to the Share Exchange, IB International
redeemed 2,000,000 shares of its common stock from Patrick Orr, IB
International’s former President and one of two members of its Board of
Directors prior to the Share Exchange, in consideration for a convertible
promissory note in the amount of $600,000 (the Orr Note). The Orr Note
matures on September 12, 2009, unless sooner converted by the holder at a
conversion price of $1.00 per share. We had the right to force the
conversion of the Orr Note on or before the maturity date on written
demand, provided we paid Mr. Orr $50,000. On September
11, 2009, the Company made the payment to Mr. Orr and exercised its option
to convert the Orr Note to 600,000 shares of Class A common
shares.
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(2)
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On
June 12, the Company issued 30,000,000 shares of its common stock to
Olympian Cruises, LLC. in consideration for 100% of the capital stock of
IBI which represented on the date of closing approx 80.3% of our
outstanding common stock. Upon completion of the transaction,
the financial statements became those of IBI and the balance sheet and
consolidated equity accounts were restated for the transaction retroactive
to the period ending December 31, 2008.
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(3)
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Immediately
after the closing of the Share Exchange we issued 5,566,795 shares of
common stock to Catino, SA in satisfaction of $5,566,795 in promissory
notes (inclusive of accrued interest) which shares represented 17.1% our
common stock outstanding on such date. On the same day we
issued warrants to purchase 1,000,000 shares of our common stock to
Catino, SA in exchange for a warrant substantially similar that which had
been initially issued to Catino, SA by IBI.
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(4)
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On
June 4, 2009, the Company borrowed $50,000 and issued a Promissory Note to
a lender affiliated with one of our directors. The Promissory
Note provides for interest at the rate of 5% per annum and is payable
along with principal, 60 days from date of issue. We also
issued 10,000 shares of Class A common stock in connection with this
loan. On August 5, 2009, the Company reissued the Promissory
Note under the original terms, for $50,411, which included the original
principle plus accrued interest. The Promissory Note is payable
60 days from date of issue. We also issued 10,000 shares of
Class A common stock in connection with the extension of this
loan. On October 13, 2009, the Company made a principal payment
of $17,000 and reissued the Promissory Note under the original terms for
$33,797, which included the remaining principal plus accrued
interest. The Promissory Note is payable 60 days from date of
issue. On November 10, 2009 and December 4, 2009, the Company
made a principal payment of $17,000 and $8,000 respectively. On
December 31, 2009 the Note balance was $9,072, which includes outstanding
principal and accrued interest.
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(5)
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On
August 14, 2009, IBI, the Company’s wholly-owned subsidiary, formed a new
wholly-owned subsidiary named Island Breeze International Asia Limited, a
Hong Kong corporation. IBI may utilize this corporation to operate certain
entertainment cruises in Asia, if such cruises are launched. From
inception through the date of this filing there has been no activity in
this corporation.
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F-17
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(6)
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On
October 9, 2009, the Company borrowed $49,000 and issued a Promissory Note
to Olympian Cruises, LLC, evidencing the loan. The Promissory Note
provides for interest at the rate of 5% per annum is payable along with
principal, one year from the date of issue. On December 31, 2009,
the Note balance was $49,557 which includes outstanding principal and
accrued interest.
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(7)
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On
December 1, 2009 and December 5, 2009, the Company re-issued promissory
notes for an aggregated sum of $9,871, which includes principal and
accrued interest, to officers and directors of the
Company. These Promissory Notes have a term of one year and
bear interest at a rate of five percent that accrues to
term.
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NOTE
8 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the date of this Annual Report
on Form 10-K for the year ended December 31, 2009, and has disclosed such items
in this note herein.
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(1)
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On
January 6, 2010, the Company entered into a drawdown equity financing
agreement and registration rights agreement with Auctus Private Equity
Fund, LLC (“Auctus”). Under the terms of the agreement, Auctus
has committed, subject to certain conditions, to purchase up to $10
million of the Company’s Class A Common stock over a term of three
years. Although the Company is not obligated to sell shares
under the equity financing facility, the Financing Agreement
gives the Company the option to sell Auctus Class A Common Shares at a per
share purchase price of equal to 95% of the lowest closing bid
price during the five trading days following the Company’s deliver
of notice to Auctus (the “Notice”). At its option,
the Company may set a floor price under which Auctus may not sell the
shares which were the subject of the
Notice. The maximum number of shares of Class
A Common Stock that the Company can include in any Notice is the greater
of: (i) shares with a purchase price of $150,000 or (ii) 200% of the
average daily trading volume based on ten days preceding the drawdown
notice date.
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(2)
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On
January 14, 2010, IBI, the Company’s wholly-owned subsidiary, was granted
approval by the Taiwan Ministry of Economic Affairs to open a branch
office in Taipei, Taiwan. The new Company is registered under
the name of Island Breeze International Taiwan Branch. The
office will be utilized for the administration and management of proposed
East Asia operations.
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F-18