Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2010
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION FROM ____________ TO ____________
Commission File Number: 0-32323
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada 20-1217659
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
17800 Castleton Street, Suite 638
City of Industry, CA 91748
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (626) 581-8500
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 [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 9, 2010, there were
3,641,902,942 outstanding shares of the Registrant's Common Stock, $0.00001 par
value.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2010
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.............................................. 3
Condensed Consolidated Balance Sheets............................. 3
Condensed Consolidated Statements of Operations................... 5
Condensed Consolidated Statements of Cash Flows................... 7
Notes............................................................. 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 20
Item 4. Controls and Procedures........................................... 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................. 24
Item 1A. Risk Factors...................................................... 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....... 24
Item 3. Defaults Upon Senior Securities................................... 24
Item 4. (Removed and Reserved)............................................ 24
Item 5. Other Information................................................. 24
Item 6. Exhibits.......................................................... 25
SIGNATURES................................................................. 28
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2010 2009
-------- --------
(unaudited)
ASSETS
Cash $ 53,725 $ 12,514
Other current assets 1,011 1,011
-------- --------
Total current assets 54,736 13,525
-------- --------
Other assets 2,000 2,000
-------- --------
Total assets $ 56,736 $ 15,525
======== ========
See accompanying notes to condensed consolidated financial statements
3
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
June 30, December 31,
2010 2009
------------ ------------
(unaudited)
LIABILITIES & STOCKHOLDERS' (DEFICIT) EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 311,407 $ 305,897
Accrued expenses - related parties 283,548 207,321
Accrued pension 1,708 --
Derivative liability 1,294,781 2,105,829
Investor deposit 230,000 --
Notes payable 145,500 145,175
Notes payable to shareholders 588,314 668,411
------------ ------------
Total current liabilities 2,855,258 3,432,633
------------ ------------
COMMITMENTS & CONTINGENCIES -- --
STOCKHOLDERS' (DEFICIT) EQUITY
Preferred A stock, $250 par value, 10,000 shares authorized;
96 shares issued and outstanding 24,000 24,000
Preferred C stock, $.001 par value, 3,000,000 shares authorized;
2,000,000 and 1,000,000 shares issued and outstanding 2,000 2,000
Preferred D stock, $.001 par value, 10,000,000 shares authorized;
162,860 and 207,500 shares issued and outstanding 163 208
Preferred E stock, $.001 par value, 50,000,000 shares authorized;
30,800 shares issued and outstanding 25 25
Preferred F stock, $.001 par value, 3,000,000 shares authorized;
20,000 and 0 shares issued and outstanding 20 20
Common stock; $.00001 par value, 3,950,000,000 shares authorized;
3,410,817,981 and 2,307,177,093 issued and outstanding 34,108 23,072
Additional paid-in capital 9,971,634 9,882,383
Accumulated deficit - Prior to reentering development stage (5,534,336) (5,534,336)
Accumulated deficit - From inception of reentering development
stage on 4/1/2007 (7,293,281) (7,813,920)
Other comprehensive income / (loss) (2,855) (560)
Noncontrolling interest -- --
------------ ------------
Total stockholders' (deficit) equity (2,798,522) (3,417,108)
------------ ------------
Total liabilities and stockholders' (deficit) equity $ 56,736 $ 15,525
============ ============
See accompanying notes to condensed consolidated financial statements
4
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Cumulative Since
Re-entering
Development
Three Months Ended June 30, Six Months Ended June 30, Stage
---------------------------- ---------------------------- 4/01/2007 -
2010 2009 2010 2009 6/30/2010
------------ ------------ ------------ ------------ ------------
Revenues $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 123,508 128,956 242,078 223,955 1,990,548
Depreciation and amortization -- -- -- -- 1,306,935
------------ ------------ ------------ ------------ ------------
Total operating expenses 123,508 128,956 242,078 223,955 3,297,483
------------ ------------ ------------ ------------ ------------
Operating loss (123,508) (128,956) (242,078) (223,955) (3,297,483)
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income -- -- -- -- 374
Interest expense (19,352) (363,467) (48,377) (561,929) (2,546,700)
Loss on settlement -- -- -- -- (23,500)
Loss on investment -- -- -- -- (115,750)
Gain/(Loss) on extinguishment of debt -- (26,275) -- (56,275) 11,297
Gain on disposal of assets -- -- -- -- 2,565
Change in fair value of derivative liability 74,055 1,329,177 811,049 1,409,932 (1,294,780)
Minority interest in net loss of subsidiary -- -- -- -- 15,000
Other income (expense) -- -- 45 -- 3,855
------------ ------------ ------------ ------------ ------------
Total other income (expense) 54,703 939,435 762,717 791,728 (3,947,639)
------------ ------------ ------------ ------------ ------------
Income/(Loss) from continuing operations $ (68,805) $ 810,479 $ 520,639 $ 567,773 $ (7,245,122)
------------ ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements
5
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(CONTINUED)
Cumulative Since
Re-entering
Development
Three Months Ended June 30, Six Months Ended June 30, Stage
-------------------------------- ------------------------------- 4/01/2007 -
2010 2009 2010 2009 6/30/2010
-------------- -------------- -------------- -------------- --------------
Income/(Loss) from continuing operations $ (68,805) $ 810,479 $ 520,639 $ 567,773 $ (7,245,122)
-------------- -------------- -------------- -------------- --------------
Discontinued operations:
Income (loss) from operations of
discontinued business -- -- -- -- (20,063)
Income (loss) on disposal of assets -- -- -- -- 61,058
-------------- -------------- -------------- -------------- --------------
Income (loss) on discontinued operations -- -- -- -- 40,995
-------------- -------------- -------------- -------------- --------------
Net Income/(loss) (68,805) 810,479 520,639 567,773 (7,204,127)
Preferred dividend -- -- -- -- (89,154)
-------------- -------------- -------------- -------------- --------------
Net Income/(loss) attributable to common
shareholders (68,805) 810,479 520,639 567,773 (7,293,281)
-------------- -------------- -------------- -------------- --------------
Other comprehensive income
Foreign currency translation (2,306) (6) (2,295) (67) (2,855)
-------------- -------------- -------------- -------------- --------------
Comprehensive income/(loss) $ (71,111) $ 810,473 $ 518,344 $ 567,706 $ (7,296,136)
============== ============== ============== ============== ==============
Net income/(loss) per common share -
basic and diluted
Continuing operations $ (0.00) $ 0.00 $ 0.00 $ 0.00
============== ============== ============== ==============
Discontinued operations $ -- $ -- $ -- $ --
============== ============== ============== ==============
Net Income (loss) per common share $ (0.00) $ 0.00 $ 0.00 $ 0.00
============== ============== ============== ==============
Weighted average common shares outstanding:
Basic 340,829,865 179,188,651 340,829,865 1,066,138,627
============== ============== ============== ==============
Diluted 3,950,000,000 1,950,000,000 3,950,000,000 1,950,000,000
============== ============== ============== ==============
See accompanying notes to condensed consolidated financial statements
6
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative Since
Re-entering
Development
Six Months Ended June 30, Stage
---------------------------- 4/01/2007 -
2010 2009 6/30/2010
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(loss) from continuing operations $ 520,639 $ 567,773 $ (7,293,283)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation -- -- 3,660
Impairment of goodwill -- -- 1,303,277
Amortization of debt discounts -- -- 128,933
Loss/(Gain) on extinguishment of debt -- 56,275 (70,843)
Loss on Investments -- -- 115,750
Interest expense associated with beneficial
conversion feature 2,788 512,693 2,165,375
Change in fair value of derivative liability (811,049) (1,409,932) 1,294,780
Director stock based compensation -- -- 100,000
Common stock issued for services -- -- 394,519
Common stock issued for settlement -- -- 13,500
Gain on disposal of equipment -- -- (2,565)
Minority interest in net loss of subsidiary -- -- (15,000)
Changes in assets and liabilities:
Prepaid expenses and other assets -- 1,863 529
Accounts payable and accrued expenses 101,128 167,321 740,847
------------ ------------ ------------
Net cash used in continuing operations (188,789) (104,007) (1,120,521)
Net income (loss) from discontinued operations -- -- 40,995
Net cash used in discontinued operations -- -- (83,796)
------------ ------------ ------------
Net cash used in operating activities (188,789) (104,007) (1,163,322)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on investment -- -- (80,750)
------------ ------------ ------------
Net cash used in continuing operations -- -- (80,750)
------------ ------------ ------------
Net cash used in investing activities $ -- $ -- $ (80,750)
------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements
7
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
Cumulative Since
Re-entering
Development
Six Months Ended June 30, Stage
---------------------------- 4/01/2007 -
2010 2009 6/30/2010
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party notes payable $ -- $ -- $ 30,000
Proceeds from notes payable -- -- 628,876
Proceeds from line of credit 2,802 --
Proceeds from investor deposit 230,000 50,000 280,000
Repayments of notes payable -- -- (34,448)
Proceeds from issuance of preferred stock -- 50,000 144,301
Proceeds from issuance of common stock -- -- 180,464
Proceeds from issuance of common stock for asset purchase -- -- 6,206
Proceeds from exercise of stock options -- -- 4,375
---------- ---------- ----------
Net cash provided by financing activities 230,000 102,802 1,239,774
---------- ---------- ----------
Effect of exchange rate changes on cash (2,295) (67) (2,855)
CASH AND CASH EQUIVALENTS:
Increase (decrease) in cash 41,211 (1,272) (7,153)
CASH, beginning of period 12,514 1,567 60,878
---------- ---------- ----------
CASH, end of period $ 53,725 $ 295 $ 53,725
========== ========== ==========
SUPPLEMENTAL DISCLOSURES:
Tax paid $ -- $ -- $ 4,800
========== ========== ==========
Cash paid for interest $ 235 $ 57 $ 1,266
========== ========== ==========
NON-CASH DISCONTINUED OPERATION ACTIVITIES:
Employee stock based compensation $ -- $ -- $ 30,698
Issuance of common stock for debt $ -- $ 38,668 $ 389,360
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of note for accrued expenses $ -- $ -- $ 201,026
Issuance of common stock by conversion of preferred stock D $ 44,640 $ -- $ 120,990
Issuance of common stock for payment of debt $ 100,243 $ 76,876 $ 749,381
Issuance of common stock for settlement $ -- $ -- $ 13,500
Issuance of Preferred Stock for director fees $ -- $ -- $ 400,000
Cancelation of Rosetop project and related Preferred E Stock $ -- $ -- $ (315,000)
Issuance of common stock for Purchase of Company $ -- $ -- $1,300,000
See accompanying notes to condensed consolidated financial statements
8
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
NOTE 1: ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
International Building Technologies Group, Inc. (OTCBB: INBG) (the "Company")
has four total subsidiaries, two active subsidiaries and two dormant
subsidiaries.
Active Subsidiaries:
* International Building Technologies Co., Ltd. ("IBT Hong Kong") - a
Hong Kong Corporation with equity interest of 100%
Dormant Subsidiaries:
* Scottsdale Diecast, Inc. - a Nevada Corporation with equity interest
of 100%
* Quadriga Motorsports, Inc. - a Nevada Corporation with equity interest
of 100%
* International Building Technologies, Inc. ("IBT") - a Nevada
Corporation with equity interest of 80%
Currently the Company or its subsidiary is focusing its attention on several
viable businesses that could be well suited to possibly merge into the company.
Currently the Company has signed a letter of intent (LOI) with a Chinese company
and entered into the process of merge. The company believes it is in a position
of strength and is going to explore every opportunity to bring value assets,
revenue and profit back to its stockholders and investors.
The Company has engaged a Chinese law firm to conduct the due diligence, as well
an audit firm to conduct the audit as required for the merge. Result and
progress of such Due Diligent and audit will be announced once they are
completed.
On May 25, 2010, the Company signed a non-binding Letter of Intent to merge with
FHH Sino New Energies CO., Ltd., a Chinese company ("FHH Sino") located in
Weihai, Shandong Province of China. FHH Sino is a petroleum storage company that
offers petroleum storage tanks and facilities for rental to the petroleum
importers/exporters in Weihai, a coastal city in Shandong Province of Northern
China. Upon signing of the Letter of Intent on May 27, 2010 (effective date),
FHH Sino made a U.S. $230,000 deposit with the Company.
The Company intends to merge with FHH Sino by exchanging the Company's common
stock with FHH Sino's holding or subsidiary company. This merger will give the
Company the opportunity to switch its nature of business into the energy sector,
the ability to generate revenue and profit once the FHH Sino commences its
operation in early 2011, thus benefits our shareholders in the near future.
The Company had offices in Alameda, CA, and Shanghai, China in 2007. In
December, 2008, the Company closed the office in Shanghai, China. In January,
2009, the Company closed the office in Alameda, CA and moved to City of
Industry, CA.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in accordance with such
rules and regulations. The information furnished in the interim condensed
consolidated financial statements includes normal recurring adjustments and
9
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
reflects all adjustments, which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management believes
the disclosures and information presented are adequate to make the information
not misleading, these interim condensed consolidated financial statements should
be read in conjunction with the Company's most recent audited financial
statements and notes thereto included in its December 31, 2009 Annual Report on
Form 10-K. Operating results for the period ended June 30, 2010 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2010.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All intercompany accounts 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
and assumptions.
RECLASSIFICATION
Certain reclassifications, which have no effect on net income (loss), have been
made in the prior period financial statements to conform to the current
presentation.
INTANGIBLE ASSETS
The license agreement was abandoned in accordance with FASB Accounting
Codification Standards 360-10-20 (previous guidance Statement of Accounting No.
144, "Accounting for the Impairment or Disposal of Long Lived Assets") and
consequently the remaining value of the asset was fully amortized as of June 30,
2010 and 2009.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its long-lived assets in accordance with FASB Accounting
Codification Standards 360-10-20 by measuring the carrying amounts of assets
against the estimated undiscounted future cash flows associated with them. At
the time the carrying value of such assets exceeds the fair value of such
assets, impairment is recognized.
INCOMES TAXES
The Company accounts for income taxes under the liability method of accounting
for income taxes in accordance with the provisions of FASB Accounting
Codification Standards 740 - "Income Taxes" (previous guidance Statements of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," ("FAS
109") and related interpretations and guidance including FASB Interpretation No.
48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB
Statement No. 109" ("FIN 48")). Deferred income taxes are provided using the
liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit carry-forwards and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
10
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of the changes
in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would
be sustained upon examination by the taxing authorities, while others are
subject to uncertainty about the merits of the position taken or the amount of
the position that would be ultimately sustained. The benefit of a tax position
is recognized in the financial statements in the period during which, based on
all available evidence, management believes it is more likely than not that the
position will be sustained upon examination, including the resolution of appeals
or litigation processes, if any. Tax positions taken are not offset or
aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest amount of
tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheet along with any associated interest and penalties that
would be payable to the taxing authorities upon examination.
Interest and penalties associated with unrecognized tax benefits are classified
as additional income taxes in the statement of income.
TRANSLATION OF NON-U.S. CURRENCY AMOUNTS
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency
environment are translated to U.S. dollars at year-end exchange rates. Income
and expense items are translated at weighted-average rates of exchange
prevailing during the year. Translation adjustments are recorded in Other
Comprehensive Income not affecting retained earnings within Stockholders'
equity.
Inventories, plant, rental machines and other property-net, and other
non-monetary assets and liabilities of non-U.S. subsidiaries and branches that
operate in U.S. dollars, or whose economic environment is highly inflationary,
are translated at approximate exchange rates prevailing when the company
acquired the assets or liabilities. All other assets and liabilities are
translated at year-end exchange rates. Cost of sales and depreciation are
translated at historical exchange rates. All other income and expense items are
translated at the weighted-average rates of exchange prevailing during the year.
Current and historical exchange rates are not indicative of what future exchange
rates will be and should not be construed as such.
Relevant exchange rates used in the preparation of the financial statements of
the subsidiary are as follows for the quarters ended June 30, 2010 and 2009
(denoted in Hong Kong dollars per one U.S. dollar):
2010 2009
------ ------
Current exchange rate at June 30, HKD 7.7847 7.7504
Weighted average exchange rate 7.7794 7.7513
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts payable, and accrued expenses approximate
fair value because of the short maturity of these items.
11
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
LOSS PER COMMON SHARE
Basic net loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. Diluted
net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock and common stock equivalents outstanding during
the period. As the Company incurred net losses for the quarter ended June 30,
2010 and 2009, common stock equivalents were excluded from diluted net loss per
share as their effect would be anti-dilutive. As a result, for all periods
presented, the Company's basic and diluted net loss per share is the same.
STOCK-BASED COMPENSATION
FASB Accounting Codification Standards (ACS) Topic 825, "Compensation - Stock
Compensation" (previous guidance Statement of Accounting Standards SFAS No.
123R, "Share-Based Payment") requires all share-based payments to employees,
including grants of employee stock options to be recognized as compensation
expense in the financial statements based on their fair values. That expense is
recognized over the period during which an employee is required to provide
services in exchange for the award, known as the requisite service period
(usually the vesting period). During the quarter ended June 30, 2010 and 2009,
the Company did not recognize any of compensation expense associated with
stock-based compensation. Under FASB ACS Topic 825, the expense recognition for
variable awards is the same under the intrinsic value and the fair value
methods.
RECENT ACCOUNTING PRONOUNCEMENTS
On July 1, 2009, Financial Accounting Standards Board ("FASB") Accounting
Standards Codification(TM) ("ASC") became the sole source of authoritative
Generally Accepted Accounting Principles ("GAAP") literature recognized by the
Financial Accounting Standards Board for financial statements issued for interim
and annual periods ending after September 15, 2009. Rules and interpretive
releases of the Security Exchange Commission ("SEC") under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants.
Except for applicable SEC rules and regulations and a limited number of
grandfathered standards, all other sources of GAAP for nongovernmental entities
were superseded by the issuance of ASC. ASC did not change GAAP, but rather
combined the sources of GAAP and the framework for selecting among those sources
into a single source. Accordingly, the adoption of ASC had no impact on the
financial results of the Company.
NOTE 2: MATERIAL EVENTS
On May 25, 2010, the Company signed a non-binding Letter of Intent to merge with
FHH Sino New Energies CO., Ltd., a Chinese company ("FHH Sino") located in
Weihai, Shandong Province of China. FHH Sino is a petroleum storage company that
offers petroleum storage tanks and facilities for rental to the petroleum
importers/exporters in Weihai, a coastal city in Shandong Province of Northern
China. Upon signing of the Letter of Intent on May 27, 2010 (effective date),
FHH Sino made a U.S. $230,000 deposit with the Company.
The Company intends to merge with FHH Sino by exchanging the Company's common
stock with FHH Sino's holding or subsidiary company. This merger will give the
Company the opportunity to switch its nature of business into the energy sector,
the ability to generate revenue and profit once the FHH Sino commences its
operation in early 2011, thus benefits our shareholders in the near future
NOTE 3: GOING CONCERN
The Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and satisfaction of
12
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
liabilities in the normal course of business. The Company's continuation as a
going concern is dependent upon its ability to generate sufficient cash flow
from operations to meet its obligations on a timely basis and/or obtain
financing as may be required. As of June 30, 2010, the Company has incurred net
losses from operations prior to reentering the development stage and has a
stockholders' deficit of $5,534,336. Since the inception of reentering the
development stage on April 1, 2007, the Company has a stockholders' deficit of
$7,293,281 as of June 30, 2010. The Company has a working capital deficit of
$2,800,523 as of June 30, 2010. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
During the next 12 months, the Company's foreseeable cash requirements will
relate to continual development of the operations of its business, maintaining
its good standing and making the requisite filings with the Securities and
Exchange Commission, and the payment of expenses associated with reviewing or
investigating any potential business ventures. The Company may experience a cash
shortfall and be required to raise additional capital. Historically, it has
relied upon internally generated funds and funds from the sale of shares of
stock and loans from its shareholders and private investors to finance its
operations and growth. Management may raise additional capital through future
public or private offerings of the Company's stock or through loans from private
investors, although there can be no assurance that it will be able to obtain
such financing. The Company's failure to do so could have a material and adverse
affect upon it and its shareholders.
The Company has entered into negotiation with a private owned company in China
for a possible merger and joint venture and will announce the terms and
condition of such merger or joint venture if the transaction proceeds and when
there is a signed LOI, MOU or a binding agreement.
In the past 3 months, the Company funded operations through investor's deposit.
For the coming 12 months, the Company plans to continue to fund the Company
through debt and securities sales and issuances, focus on a possible joint
venture or merger until the company generates revenues through the operations of
such merged company or joint venture as stated above.
Note 4: Notes Payable & Debt Discounts
The chart below summarizes the Notes Payable & Debt Discounts of the Company as
of June 30, 2010. The Company is technically in default of its promissory notes
to the above persons or entities, most of which notes matured on December 31,
2009. The Company is currently working with the note holders to restructure the
terms of such notes and extend the maturity dates. The interest rate for these
loans will be at 12% in 2010 since they were default at the year end.
Terms Amount
----- ------
Short Term Notes Payable to Shareholders:
12% Interest; principal of $6,597; convertible to common stock
based on 75% of average price; due on 9/3/2009, net of
unamortized discount related to the debt discount of $0 $ 6,597
12% Interest; principal of $55,180; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 55,180
12% Interest; principal of $11,000; convertible to common stock
based on 75% of average price; due on 10/9/2009, net of
unamortized discount related to the debt discount of $0 11,000
12% Interest; principal of $31,925; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 31,925
12% Interest; principal of $10,269; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 10,269
13
12% Interest; principal of $12,500; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 12,500
12% Interest; principal of $15,000; convertible to common stock
based on 75% of average price; due on 8/1/2009, net of
unamortized discount related to the debt discount of $0 15,000
12% Interest; principal of $23,439; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 23,439
12% Interest; principal of $3,920; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 3,920
12% Interest; principal of $10,642; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 10,642
12% Interest; principal of $9,458; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 9,458
12% Interest; principal of $37,133; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 37,133
12% Interest; principal of $5,000; convertible to common stock
based on 75% of average price; due on 10/28/2009, net of
unamortized discount related to the debt discount of $0 5,000
12% Interest; principal of $10,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $3,271 10,000
12% Interest; principal of $13,000; convertible to common stock
based on 75% of average price; due on 8/1/2009, net of
unamortized discount related to the debt discount of $0 13,000
12% Interest; principal of $7,209; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 7,209
12% Interest; principal of $23,847; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 23,847
12% Interest; principal of $20,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 20,000
12% Interest; principal of $25,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 25,000
12% Interest; principal of $70,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 70,000
12% Interest; principal of $36,867; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 36,867
12% Interest; principal of $73,975; convertible to common stock
based on 75% of average price; due on 7/1/2009, net of
unamortized discount related to the debt discount of $0 73,975
14
12% Interest; principal of $1,112; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 1,112
12% Interest; principal of $10,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 10,000
12% Interest; principal of $15,000; convertible to common stock
based on 75% of average price; due on 10/29/2009, net of
unamortized discount related to the debt discount of $0 15,000
12% Interest; principal of $50,240; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 50,241
--------
Total Short Term Notes Payable to Shareholders $588,314
========
Short Term Notes Payable:
12% Interest; principal of $50,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 50,000
12% Interest; principal of $50,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 50,000
12% Interest; principal of $15,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 15,000
12% Interest; principal of $10,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 10,000
12% Interest; principal of $20,500; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 20,500
--------
Total Short Term Notes Payable $145,500
========
NOTE 5: STOCKHOLDERS' EQUITY
PREFERRED STOCK
On April 23, 2010, CEPA Group Pacific Holdings Ltd. exchanged 12,320 shares of
Preferred D Stock into 88,000,000 shares of Common Stock at a $0.00014
conversion price as of April 15, 2010.
On June 7, 2010, Jade C. Uno exchanged 20,000 shares of Preferred D Stock into
105,263,157 shares of Common Stock at a $0.00019 conversion price based upon the
20-day trading average of the Company.
COMMON STOCK
During the quarter ended June 30, 2010, the Company issued a total of
895,640,888 shares of common stock valued at $25,400 for repayment of debt
detailed in the following chart:
15
Number of Aggregate
Date of Issue Shares Issued Sales Price Nature of Transaction
------------- ------------- ----------- ---------------------
4/23/2010 88,000,000 $ 12,320 In exchange of Preferred D Stock
5/4/2010 130,000,000 $ 12,220 In exchange for debt repayment
5/17/2010 132,490,203 $ 10,930 In exchange for debt repayment
5/28/2010 139,101,464 $ 11,998 In exchange for debt repayment
6/7/2010 105,263,157 $ 20,000 In exchange of Preferred D Stock
6/9/2010 154,000,000 $ 16,786 In exchange for debt repayment
6/22/2010 146,786,064 $ 35,229 In exchange for debt repayment
----------- --------
Total 895,640,888 $119,483
=========== ========
NOTE 6: DERIVATIVE LIABILITY
As of June 30, 2010, the common stock equivalents of the Company on all
convertible debentures and preferred stock exceeded the total common stock
available for issuance by approximately by 18,083,573,516 shares. The Company's
Chief Executive Officer, Kenneth Yeung, holds 2,000,000 shares of Series C
Preferred Stock that are convertible into 14,842,300,557 common shares of the
Company.
Unless and until there is enough authorized common stock available to cover all
common stock equivalents, Mr. Yeung will not convert any of his preferred
shares. Furthermore, the stock is only convertible upon management's discretion.
Management currently does not intend on converting such stock. Also, warrant
options are not included in common stock equivalents since the exercise price of
$0.25 for the warrant is more than the fair value of common stock of $0.0004 per
share on June 30, 2010. The remaining common stock equivalent of 3,241,212,959
shares has been accounted for as a derivative liability. Accordingly, the excess
common stock equivalents exceeding the total common stock available for issue is
marked to market through earnings at the end of each reporting period. Utilizing
the Black-Scholes valuation model and the following assumptions: estimated
volatility of 633.69%, a contractual life of approximately a year, a zero
dividend rate, 0.32% risk free interest rate, exercise price of $0.00028307 and
the fair value of common stock of $0.0004 per share as of June 30, 2010, the
Company determined the allocated fair value of the derivative liability. The
Company reflected an income of $74,054 in the quarter ended June 30, 2010 to
adjust the derivative liability to $1,294,781 as of June 30, 2010, representing
the initial fair value of excess common stock equivalents exceeding the total
common stock available for issuance.
NOTE 7: SUBSEQUENT EVENTS
STOCK ISSUANCES
The Company issued the following Common Stocks in subsequent of the quarter
ended June 30, 2010 and prior to the filing of these financial statements.
* The Company issued 90,427,769 shares of common stock valued at $22,697
for repayment of debt on July 21, 2010.
* 12,680 shares of Preferred Series "D" Convertible Stock were converted
into 50,720,000 shares of common stock on July 28, 2010.
* 22,500 shares of Preferred Series "D" Convertible Stock were converted
into 90,000,000 shares of common stock on July 28, 2010.
Management has reviewed material subsequent events in accordance with FASB ASC
855 "Subsequent Events". No additional disclosures are required.
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CAUTIONARY FORWARD - LOOKING STATEMENT
The following discussion should be read in conjunction with our financial
statements and related notes.
Certain matters discussed herein may contain forward-looking statements
that are subject to risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the following:
* the volatile and competitive nature of our industry,
* the uncertainties surrounding the rapidly evolving markets in which we
compete,
* the uncertainties surrounding technological change of the industry,
* our dependence on its intellectual property rights,
* the success of marketing efforts by third parties,
* the changing demands of customers and
* the arrangements with present and future customers and third parties.
Should one or more of these risks or uncertainties materialize or should
any of the underlying assumptions prove incorrect, actual results of current and
future operations may vary materially from those anticipated.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THREE
MONTHS ENDED JUNE 30, 2009
Since discontinuing the prior business and re-entering the development
stage as of April 1, 2007 the Company's results of operations has changed. There
are no revenues during the current development stage as we are in the process of
starting our manufacturing process.
For the quarter ended June 30, 2010, Operating Expenses for current
operations totaled $123,508 is less than the quarter ended June 30, 2009's
Operating Expenses of $128,956. The minor decrease of $5,448 in Operating
Expenses between quarters ended 2010 and 2009 was mostly attributed to the
decrease in accounting fees.
One of the significant changes in our results of operations is interest
Expense which was $19,352 and as of June 30, 2009, Interest Expense was
$363,467. The $344,115 drop in Interest Expense was due to the change in
beneficial conversion feature of the notes. There is also a significant change
in the fair value of derivative. As of June 30, 2010, change in fair value of
derivative resulting in a decrement from $1,329,177 to $74,055. This decrease in
the fair value of derivative is resulted from the liability of derivative that
was less than that at June 30, 2010. The change in the fair value of derivative
is resulted from the common stock equivalents of the Company on all convertible
debentures and preferred stock exceeded the total common stock available for
issuance by approximately by 18,083,513,516 shares. The Company's Chief
Executive Officer, Kenneth Yeung, holds 2,000,000 shares of Series C Preferred
Stock that are convertible into 14,842,300,557 common shares of the Company.
Unless and until there is enough authorized common stock available to cover all
common stock equivalents, Mr. Yeung will not convert any of his preferred
shares. Furthermore, the stock is only convertible upon management's discretion.
Management currently does not intend on converting such stock. Also, warrant
options are not included in common stock equivalents since the exercise price of
$0.25 for the warrant exceeds the fair value of common stock of $0.0004 per
share on June 30, 2010. The remaining common stock equivalent of 3,241,212,959
shares has been accounted for as a derivative liability. The fair value of the
derivative of $1,294,781 was determined by utilizing the Black-Scholes valuation
model.
LIQUIDITY AND CAPITAL RESOURCES
Our future success and viability is primarily dependent upon our ability to
increase operating cash flows and develop new business opportunities.
17
During the next 12 months, the Company's foreseeable cash requirements will
relate to continual development of the operations of its business, maintaining
its good standing and making the requisite filings with the Securities and
Exchange Commission, and the payment of expenses associated with reviewing or
investigating any potential business ventures.
Additionally, we may experience a cash shortfall and be required to raise
additional capital. In the three months ended June 30, 2010 we relied on funds
from the investor deposit. Management may raise additional capital through
future public or private offerings of our stock or through loans from private
investors, although there can be no assurance that we will be able to obtain
such financing. Our failure to do so could have a material and adverse affect
upon us and our shareholders.
The Company has entered into negotiation with a private owned company in
China for a possible merger and joint venture and will announce the terms and
condition of such merger or joint venture if the transaction proceeds and when
there is a signed LOI, MOU or a binding agreement.
The chart below summarizes our debt (see Note 4 - Notes Payable & Debt
Discounts of the Consolidated Financial Statements - Notes Payable and
Beneficial Conversions):
Terms Amount
----- ------
Short Term Notes Payable to Shareholders:
12% Interest; principal of $6,597; convertible to common stock
based on 75% of average price; due on 9/3/2009, net of
unamortized discount related to the debt discount of $0 $ 6,597
12% Interest; principal of $55,180; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 55,180
12% Interest; principal of $11,000; convertible to common stock
based on 75% of average price; due on 10/9/2009, net of
unamortized discount related to the debt discount of $0 11,000
12% Interest; principal of $31,925; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 31,925
12% Interest; principal of $10,269; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 10,269
12% Interest; principal of $12,500; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 12,500
12% Interest; principal of $15,000; convertible to common stock
based on 75% of average price; due on 8/1/2009, net of
unamortized discount related to the debt discount of $0 15,000
12% Interest; principal of $23,439; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 23,439
12% Interest; principal of $3,920; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 3,920
12% Interest; principal of $10,642; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 10,642
12% Interest; principal of $9,458; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 9,458
12% Interest; principal of $37,133; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 37,133
18
12% Interest; principal of $5,000; convertible to common stock
based on 75% of average price; due on 10/28/2009, net of
unamortized discount related to the debt discount of $0 5,000
12% Interest; principal of $10,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $3,271 10,000
12% Interest; principal of $13,000; convertible to common stock
based on 75% of average price; due on 8/1/2009, net of
unamortized discount related to the debt discount of $0 13,000
12% Interest; principal of $7,209; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 7,209
12% Interest; principal of $23,847; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 23,847
12% Interest; principal of $20,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 20,000
12% Interest; principal of $25,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 25,000
12% Interest; principal of $70,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 70,000
12% Interest; principal of $36,867; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 36,867
12% Interest; principal of $73,975; convertible to common stock
based on 75% of average price; due on 7/1/2009, net of
unamortized discount related to the debt discount of $0 73,975
12% Interest; principal of $1,112; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discounted related to the debt discount of $0 1,112
12% Interest; principal of $10,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 10,000
12% Interest; principal of $15,000; convertible to common stock
based on 75% of average price; due on 10/29/2009, net of
unamortized discount related to the debt discount of $0 15,000
12% Interest; principal of $50,240; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 50,241
--------
Total Short Term Notes Payable to Shareholders $588,314
========
Short Term Notes Payable:
12% Interest; principal of $50,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 50,000
12% Interest; principal of $50,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 50,000
12% Interest; principal of $15,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 15,000
19
12% Interest; principal of $10,000; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 10,000
12% Interest; principal of $20,500; convertible to common stock
based on 75% of average price; due on 12/31/2009, net of
unamortized discount related to the debt discount of $0 20,500
--------
Total Short Term Notes Payable $145,500
========
SIX MONTHS ENDED JUNE 30, 2010
As of June 30, 2010, the Company's current assets were $54,736 and its
current liabilities were $2,855,258, resulting in a working capital deficit of
$2,800,522. As of June 30, 2010, current assets were comprised of (i) $53,725 in
cash; (ii) $1,011 in other current assets.
As of June 30, 2010, current liabilities were comprised of (i) $1,294,781
in derivative liability; (ii) $588,314 in notes payable to stockholders and
$145,500 in notes payable; (ii) $311,407 in accounts payable and accrued
expenses and $283,548 of other amounts due to shareholders.
As of June 30, 2010, the Company's total assets were $56,736 and its total
liabilities were $2,855,258, with a net stockholder's deficit of $2,798,522.
For the six months ended June 30, 2010, net cash flows used in operating
activities were $188,789 compared to net cash flows used in operating activities
of $104,007, before the net cash used in and provided by discontinued
operations, for the quarter ended June 30, 2009. The increase of $82,487 during
the twelve-month period ended June 30, 2010 was primarily due to the change in
fair value of derivative liability.
For the six months ended June 30, 2010 and June 30, 2009, net cash flows
used in investing activities were both $0.
For the six months ended June 30, 2010, net cash flows provided by
financing activities was $230,000 compared to net cash flows provided by
financing activities of $102,802 for the six months period ended June 30, 2009.
Cash inflow for in 2010 consisted of the investor deposit of $230,000 while cash
inflows in 2009 consisted of the sale of preferred stock.
Our financial statements have been prepared assuming that we will continue
as a going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classifications of liabilities that
might be necessary should we be unable to continue our operations.
As of the date of this Annual Report, the Company has generated no revenues
from operations since it entered the development stage on April 1, 2007.
Therefore, the Company's auditors have expressed substantial doubt about the
Company's ability to continue as a going concern. Management believes that it
can maintain its status as a going concern based on its ability to raise funds
pursuant to future public and private offerings and to obtain advances and
minimize operating expenses by not duplicating or incurring needless expenses.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
20
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation
of our management, including Kenneth Yeung, our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. The term "disclosure controls and
procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by the company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures also include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company's management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate, to allow timely decisions regarding required
disclosure. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded as of December 31, 2009, and again as of June 30,
2010, that our disclosure controls and procedures have been improved and were
maintained effectively at the reasonable assurance level in our internal
controls over financial reporting discussed immediately below.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Our internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Our
internal control over financial reporting includes those policies and procedures
that:
(1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with U.S. GAAP, and that our receipts and expenditures are being made
only in accordance with the authorization of our management and
directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
21
Management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2009, and again at June 30, 2010. In
making this assessment, management used the framework set forth in the report
entitled Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework
summarizes each of the components of a company's internal control system,
including (i) the control environment, (ii) risk assessment, (iii) control
activities, (iv) information and communication, and (v) monitoring. This annual
report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permits us to provide only management's report in this annual
report.
IDENTIFIED MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the financial statements will not be prevented or detected.
Management identified the following internal control deficiency which we had
assessed as a material weakness as of June 30, 2010, December 31, 2009 and 2008
during its assessment of our internal control over financial reporting as
follows:
1. We did not have adequate segregation of duties over certain areas of
our financial reporting process.
2. We had a substantial number of journal entries.
The internal control deficiency identified above will only be completely
corrected if the company expands and has the capacity to adequately segregate
the duties to mitigate risk in financial reporting. Expansion will depend mostly
on the ability of management to begin operations and generate enough income to
warrant growth in personnel.
We did not have effective comprehensive entity-level internal controls
specific to the structure of our board of directors and organization of critical
committees. Due to our expected expansion, as disclosed in this Form 10-Q,
without correcting this significant deficiency and ensuring that our board of
directors has the proper oversight and committees are properly established, the
control environment in subsequent years may not be effective.
We had engaged a regionally-recognized independent consulting firm assisted
management with its assessment of the effectiveness of our internal control over
financial reporting, including scope determination, planning, staffing,
documentation, testing, remediation and retesting and overall program management
of the assessment project. In conclusion, our Chief Executive Officer and Chief
Financial Officer surmised that the Company has improved the effective internal
control over financial reporting as of December 31, 2009, and again as of June
30, 2010.
MANAGEMENT'S REMEDIATION INITIATIVES
We are in the further process of evaluating our material and significant
deficiencies. We have already begun to remediate many of the deficiencies.
However, others will require additional people, including adding to our board of
directors, which will take longer to remediate.
22
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
1. Identify and retain one or two new directors for our board of
directors including a member who is appropriately credentialed as a
financial expert with a goal of having sufficient independent board of
directors oversight;
2. Ensure all entity level controls are applied at all levels of the
organization and are scalable for acquisition or merge targets;
3. Establish comprehensive formal general accounting policies and
procedures and require directors or employees to sign off such
policies and procedures as documentation of their understanding of and
compliance with company policies;
4. Make all directors or employees subject to our Code of Ethics
(including those employees in acquisition targets) and require all
employees and directors to sign our Code of Ethics on an annual basis
and retain the related documentation; and,
5. Implement better segregation of duties given the size of our company.
We believe that the above five initiatives had been at least partially, if
not fully, implemented by the end of 2009. Additionally, we plan to test our
updated controls and remediate our deficiencies by December 31, 2010.
CONCLUSION
The above identified improvement, material weaknesses and deficiency did
not result in material audit adjustments to our 2009 financial statements.
However, it is reasonably possible that, if not re-mediated, one or more of the
identified material weaknesses noted above could result in a material
misstatement in our reported financial statements that might result in a
material misstatement in a future annual or interim period.
In light of the identified material weaknesses, management, performed (1)
significant additional substantive review of those areas described above, and
(2) performed additional analyses, including but not limited to a detailed
balance sheet and statement of operations analytical review that compared
changes from the prior period's financial statements and analyzed all
significant differences. These procedures were completed so management could
gain assurance that the financial statements and schedules included in this Form
10-Q fairly present in all material respects the Company's financial position,
results of operations and cash flows for the periods presented.
The changes noted above, are the only changes during our most recently
completed fiscal quarter that have materially affected or are reasonably likely
to materially affect, our internal control over financial reporting, as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Our Annual Report on Form 10-K for 2009 did not include an attestation
report of the Company's registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to
attestation by the Company's registered public accounting firm pursuant to
23
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only management's report in its Annual Report.
(b) Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2010, we did not make any changes in
Internal Control over Financial Reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not aware of any threatened or pending litigation against
the Company.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Since March 31, 2010, the Company has issued the following securities
without registration under the Securities Act of 1933:
Number of Aggregate
Date of Issue Shares Issued Sales Price Nature of Transaction
------------- ------------- ----------- ---------------------
4/28/2010 88,000,000 $25,000.00 Conversion of Series D Preferred
Stock
5/5/2010 130,000,000 $12,220.00 Debt Conversion
5/17/2010 132,490,203 $10,930.44 Debt Conversion
6/1/2010 139,101,464 $11,987.50 Debt Conversion
6/10/2010 105,263,157 $20,000.00 Conversion of Series D Preferred
Stock
6/15/2019 154,000,000 $16,786.00 Debt Conversion
6/23/2010 146,786,064 $35,228.66 Debt Conversion
7/21/2010 90,427,769 $22,697.37 Debt Conversion
7/28/2010 50,720,000 $12,680.00 Conversion of Series D Preferred
Stock
7/28/2010 90,000,000 $22,500.00 Conversion of Series D Preferred
Stock
Management believes the above shares of common stock were issued pursuant
to the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. (REMOVED AND RESERVED).
ITEM 5. OTHER INFORMATION.
None.
24
ITEM 6. EXHIBITS.
See Exhibit Index below for exhibits required by Item 601 of regulation
S-K.
EXHIBIT INDEX
List of Exhibits attached or incorporated by reference pursuant to Item 601
of Regulation S-K:
Exhibit Description
------- -----------
2(i)* Agreement and Plan of Merger (Appendix D of the Company's Definitive
Proxy Statement on Form DEF 14A filed with the Commission on June 25,
2004).
3(i)(1)* Restated Articles of Incorporation filed with the Secretary of State
of Colorado on August 10, 2004 (Appendix A of the Company's Definitive
Proxy Statement on Form DEF 14A filed with the Commission on June 25,
2004).
3(i)(2)* Articles of Incorporation of Ten Stix, Inc. filed with the Secretary
of State of Nevada on May 28, 2004 (Appendix F of the Company's
Definitive Proxy Statement on Form DEF 14A filed with the Commission
on June 25, 2004).
3(i)(3)* Certificate of Amendment to Articles of Incorporation of Ten Stix,
Inc. filed with the Secretary of State of Nevada on December 1, 2004
(Exhibit 3.1 to the Company's Current Report on Form 8-K filed with
the Commission on December 6, 2004).
3(i)(4)* Certificate of Amendment to the Articles of Incorporation of the
Company filed with the Secretary of State of Nevada on October 12,
2006 (Exhibit 3 (1) to the Company's Quarterly report on Form 10-QSB
filed with the Commission on November 14, 2006).
3(i)(5)* Certificate of Amendment to the Articles of Incorporation of the
Company filed with the Secretary of State of Nevada on July 17, 2007
(Exhibit 3 (i) (5) to the Company's form 10-KSB Annual Report for the
Fiscal Year Ended December 31, 2007, filed with the Commission on
April 3, 2008).
3(i)(6)* Certificate of Amendment to the Articles of Incorporation of the
Company filed with the Secretary of State of Nevada on May 22, 2008,
changing par value of common stock to $.00001 (Exhibit 3.1 to the
Company's Quarterly Report for the Period Ended June 30, 2008, filed
with the Commission on August 13, 2008).
3(i)(7)* Certificate of Amendment to Articles of Incorporation to change the
total authorized shares and conversion terms of the Company's Series E
Preferred Stock filed with the Secretary of State of Nevada on July
28, 2008 (Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q
for the Period Ended June 30, 2008, filed with the Commission on
August 13, 2008).
3(i)(8)* Certificate of Amendment to Articles of Incorporation to change the
total authorized capital stock of the Company filed with the Secretary
of State of Nevada on August 11, 2008 (Exhibit 4.3 to the Company's
Quarterly Report on Form 10-Q for the Period Ended June 30, 2008,
filed with the Commission on August 13, 2008).
25
3(i)(9)* Certificate of Amendment to Articles of Incorporation to change the
total authorized capital stock of the Company filed with the Secretary
of State of Nevada on October 13, 2009.
3(ii)* By-laws of the Company (Exhibit 3. II to the Company's Registration
Statement on Form 10SB filed with the Commission on February 8, 2001).
4(i)* Certificate of Designation of Series A Preferred Stock of Ten Stix,
Inc. (Appendix G of the Company's Definitive Proxy Statement on Form
DEF 14A filed with the Commission on June 25, 2004).
4(ii)* Certificate of Designation of Series C Preferred Stock of the Company
(Exhibit 99.1 to the Company's Current report on Form 8-K filed with
the Commission on September 14, 2006).
4(iii)* Certificate of Amendment to Certificate of Designation of Series B
Preferred Stock of the Company filed with the Secretary of State of
Nevada on May 30, 2007 (Exhibit 4 (iii) to the Company's Annual Report
on Form 10-KSB for the Fiscal Year Ended December 31, 2007, filed with
the Commission on April 3, 2008).
4(iv)* Certificate of Amendment to Certificate of Designation of Series C
Preferred Stock of Company filed with the Secretary of State of Nevada
on May 30, 2007 (Exhibit 4 (iv) to the Company's Annual Report on Form
10-KSB for the Fiscal Year Ended December 31, 2007, filed with the
Commission on April 3, 2008).
4(v)* Certificate of Amendment to Certificate of Designation of Series D
Preferred Stock of the Company filed with the Secretary of State of
Nevada on December 10, 2007 (Exhibit 4 (v) to the Company's Annual
Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007,
filed with the Commission on April 3, 2008).
4(vi)* Certificate of Designation of Series E Preferred Stock of the Company
filed with the Secretary of State of Nevada on December 10, 2007
(Exhibit 4 (vi) to the Company's Annual Report on Form 10-KSB for the
Fiscal Year Ended December 31, 2007, filed with the Commission on
April 3, 2008).
4(vii)* Certificate of Designation of Series F Preferred Stock of the Company
filed with the Secretary of State of Nevada on April 23, 2008 (Exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for the Period
Ended June 30, 2008, filed with the Commission on August 13, 2008).
4(viii)* Amendment to Certificate of Designation After Issuance of Class or
Series to change the total authorized shares and conversion terms of
the Company's Series E Preferred Stock filed with the Secretary of
State of Nevada on August 28, 2008 (Exhibit 4.4 to the Company's
Quarterly Report on Form 10-Q for the Period Ended June 30, 2008,
filed with the Commission on August 13, 2008).
26
10.1* Stock Sale and Purchase Agreement dated March 14, 2007, by, between
David Keaveney, Kenneth Yeung and the Company (Exhibit 10.1 to the
Company's Current Report on Form 8-K filed with the Commission on
March 27, 2007).
10.2* Asset Sale and Purchase Agreement dated July 8, 2007, by and between
International Building Technologies Co., Ltd. and Suining Yinfa
Construction & Engineering Co., Ltd. (Exhibit 10.1 to the Company's
Current Report on Form 8-K filed with the Commission on July 23,
2007).
10.3* Amendment to Asset Sale and Purchase Agreement by and between the
Company and Suining Yinfa Construction and Engineering, Ltd., executed
on December 5, 2007 (Exhibit 10.2 to the Company's Current Report on
Form 8-K, filed with the Commission on April 29, 2008).
10.4* Rescission to the Asset Sale and Purchase Agreement by and between the
Company and Suining Yinfa Construction and Engineering, Ltd., executed
on April 23, 2008 (Exhibit 10.1 to the Company's Current Report on
Form 8-K, filed with the Commission on April 29, 2008).
10.5* Twelve Month Convertible Note Amendment dated March 14, 2007 (Exhibit
10.2 to the Company's Current Report on Form 8-K filed with the
Commission on March 27, 2007).
10.6* Employment Agreement between the Company and Kenneth Yeung dated May
21, 2007, effective May 1, 2007 (Exhibit 10.8 to the Company's Annual
Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007,
filed with the Commission on April 3, 2008).
10.7* Employment Agreement between the Company and Kenneth Yeung dated
February 1, 2010, effective May 1, 2010 (Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
2009, filed with the Commission on March 31, 2010).
10.8* Stock Sale and Purchase Agreement by and between the Company and Wuhan
Intepower Co., Ltd., executed on April 17, 2008 (Exhibit 10.1 to the
Company's Current Report on Form 8-K, filed with the Commission on
April 21, 2008)
10.9* Compensation Agreement between the Company and Peter Chin dated
September 30, 2009 (Exhibit 10.9 to the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 2009, filed with the
Commission on March 31, 2010).
14* Code of Ethics (Exhibit 14 to the Company's Annual Report on Form
10-KSB for the Fiscal Year Ended December 31, 2007, filed with the
Commission on April 3, 2008).
31.1** Certification under Section 302 of Sarbanes-Oxley Act of 2002.
32.1** Certification under Section 906 of Sarbanes-Oxley Act of 2002.
----------
* Exhibits incorporated herein by reference. File No. 0-32323.
** Filed herewith
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
Date: August 11, 2010 /s/ Kenneth Yeung
-----------------------------------------------
Kenneth Yeung
President, Chief Executive Officer and
Chief Financial Officer (Principal
Accounting, Executive and Financial Officer)
2