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 March 31, 2011
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 May 2, 2011, there were
4,269,947,486 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 March 31, 2011
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............................................. 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 21
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................................... 25
Item 4. Removed and Reserved.............................................. 25
Item 5. Other Information................................................. 25
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
March 31, 2011 December 31, 2010
-------------- -----------------
(unaudited)
ASSETS
Cash $ 435 $ 1,605
Other current assets 1,011 1,011
-------- --------
Total current assets 1,446 2,616
-------- --------
Other assets 2,000 2,000
-------- --------
Total assets $ 3,446 $ 4,616
======== ========
See accompanying notes to condensed consolidated financial statements
3
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
March 31, 2011 December 31, 2010
-------------- -----------------
(unaudited)
LIABILITIES & STOCKHOLDERS' DEFICIT
LIABILITIES
Accounts payable and accrued expenses $ 359,860 $ 193,822
Accrued expenses - related parties and shareholders 419,755 362,382
Accrued interest 80,107 62,183
Accrued interest - related parties and shareholders 100,019 100,019
Derivative liability 979,949 802,102
Investor deposit 220,000 220,000
Notes payable 145,500 145,500
Notes payable to shareholders 495,679 495,679
------------ ------------
Total current liabilities 2,800,869 2,381,687
------------ ------------
STOCKHOLDERS' DEFICIT
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;
3,000,000 and 2,000,000 shares issued and outstanding 3,000 3,000
Preferred D stock, $.001 par value, 10,000,000 shares authorized;
145,000 and 172,680 shares issued and outstanding 245 195
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 shares issued and outstanding 20 20
Common stock; $.00001 par value, 5,950,000,000 shares authorized;
4,269,947,486 and 3,927,674,124 issued and outstanding 42,700 42,700
Additional paid-in capital 10,220,832 10,170,883
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 (7,550,481) (7,080,130)
Other comprehensive loss (3,428) (3,428)
Noncontrolling interest -- --
------------ ------------
Total stockholders' deficit (2,797,423) (2,377,071)
------------ ------------
Total liabilities and stockholders' deficit $ 3,446 $ 4,616
============ ============
See accompanying notes to condensed consolidated financial statements
4
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Cumulative Since
Reentering
Three Months Ended March 31, Development Stage
----------------------------- 4/01/2007 -
2011 2010 3/31/2011
----------- ----------- -----------
Revenues $ -- $ -- $ --
Cost of sales -- -- --
----------- ----------- -----------
Gross profit -- -- --
----------- ----------- -----------
Operating expenses:
General and administrative 274,357 118,570 2,526,307
Goodwill impairment -- -- 1,303,277
Depreciation and amortization -- -- 3,658
----------- ----------- -----------
Total operating expenses 274,357 118,570 3,833,242
----------- ----------- -----------
Operating loss (274,357) (118,570) (3,833,242)
----------- ----------- -----------
Other income (expense):
Interest income -- -- 374
Interest expense (18,147) (29,025) (2,603,772)
Loss on settlement -- -- (23,500)
Loss on investment -- -- (115,750)
Gain/(Loss) on extinguishment of debt -- -- 32,097
Gain on disposal of assets -- -- 2,565
Change in fair value of derivative liability (177,847) 736,994 (979,949)
Minority interest in net loss of subsidiary -- -- 15,000
Other income (expense) -- 45 3,855
----------- ----------- -----------
Total other income (expense) (195,994) 708,014 (3,669,080)
----------- ----------- -----------
Income / (Loss) from continuing operations $ (470,351) $ 589,444 $(7,502,322)
----------- ----------- -----------
See accompanying notes to condensed consolidated financial statements
5
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(CONTINUED)
Cumulative Since
Reentering
Three Months Ended March 31, Development Stage
---------------------------------- 4/01/2007 -
2011 2010 3/31/2011
-------------- -------------- --------------
Income / (Loss) from continuing operations $ (470,351) $ 589,444 $ (7,502,322)
-------------- -------------- --------------
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) (470,351) 589,444 (7,461,327)
Preferred dividend -- -- (89,154)
-------------- -------------- --------------
Net Income / (loss) attributable to
common shareholders (470,351) 589,444 (7,550,481)
Other comprehensive income
Foreign currency translation -- 11 (3,428)
-------------- -------------- --------------
Comprehensive income / (loss) $ (470,351) $ 589,455 $ (7,553,909)
============== ============== ==============
Net income / (loss) per common share -
basic and diluted
Continuing operations $ (0.00) $ 0.00
============== ==============
Discontinued operations $ -- $ --
============== ==============
Net Income (loss) per common share $ (0.00) $ 0.00
============== ==============
Weighted average common shares outstanding:
Basic 4,269,947,486 340,829,865
============== ==============
Diluted 5,950,000,000 5,950,000,000
============== ==============
See accompanying notes to condensed consolidated financial statements
6
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative Since
Reentering
Three Months Ended March 31, Development Stage
----------------------------- 4/01/2007 -
2011 2010 3/31/2011
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income /(loss) from continuing operations $ (470,351) $ 589,444 $ (7,550,480)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation -- -- 3,658
Impairment of goodwill -- -- 1,303,277
Amortization of debt discounts -- -- 128,933
Loss /(Gain) on extinguishment of debt -- -- (70,843)
Loss on Investments -- -- 115,750
Interest expense associated with beneficial
conversion feature -- 2,788 2,165,375
Change in fair value of derivative liability 177,847 (736,994) 979,949
Director stock based compensation -- -- 150,000
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)
Change in assets and liabilities:
Prepaid expenses and other assets -- -- 529
Accounts payable and accrued expenses 241,334 132,420 1,109,160
------------ ------------ ------------
Net cash used in continuing operations (51,170) (12,342) (1,274,238)
Net income (loss) from discontinued operations -- -- 40,995
Net cash provided by (used in) discontinued operations -- -- (83,796)
------------ ------------ ------------
Net cash used in operating activities (51,170) (12,342) (1,317,039)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on investment -- -- (80,750)
------------ ------------ ------------
Net cash used in continuing operations -- -- (80,750)
------------ ------------ ------------
Net cash provided by in investing activities $ -- $ -- $ (80,750)
------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements
7
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
Cumulative Since
Reentering
Three Months Ended March 31, Development Stage
----------------------------- 4/01/2007 -
2011 2010 3/31/2011
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party notes payable $ -- $ -- $ 80,000
Proceeds from notes payable -- -- 628,876
Proceeds from investor deposit, net -- -- 220,000
Repayments of notes payable -- -- (34,448)
Proceeds from issuance of preferred stock 50,000 -- 255,301
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 50,000 -- 1,340,774
----------- ----------- -----------
Effect of exchange rate changes on cash -- 11 (3,428)
----------- ----------- -----------
Cash
Increase (decrease) in cash (1,170) (12,331) (60,443)
CASH, beginning of period 1,605 12,514 60,878
----------- ----------- -----------
CASH, end of period $ 435 $ 183 $ 435
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Tax paid $ -- $ -- $ 4,800
=========== =========== ===========
Cash paid for interest $ 235 $ 235 $ 1,736
=========== =========== ===========
Non-cash discontinued operation activities:
Employee stock based compensation $ -- $ -- $ 30,698
Issuance of common stock for debt $ -- $ -- $ 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 $ -- $ 12,320 $ 243,490
Issuance of common stock for payment of debt $ -- $ 13,080 $ 947,506
Issuance of common stock for settlement $ -- $ -- $ 13,500
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 Condensed Financial Statements
March 31, 2011
NOTE 1: ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
International Building Technologies Group, Inc. (OTCBB: INBG) (the "Company")
has four total subsidiaries, one active subsidiary and three 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.
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 diligent, 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.
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 consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the consolidated financial statements
includes normal recurring adjustments and reflects all adjustments, which, in
the opinion of management, are necessary for a fair presentation of such
financial statements.
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.
9
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
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 March
31, 2011 and 2010.
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
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.
10
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
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 quarter-end exchange rates. Income
and expense items are translated at weighted-average rates of exchange
prevailing during the quarter. 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 quarter-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
quarter.
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 quarters ended March 31, 2011 and 2010
(denoted in Hong Kong dollars per one U.S. dollar):
2011 2010
---- ----
Current exchange rate at March 31, HKD 7.78836 7.76406
Weighted average exchange rate 7.78670 7.76270
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.
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 resulted in net income for the quarter ended March
31, 2010, common stock equivalents were included from diluted net income per
share. However, as the Company incurred net loss for the quarter ended March 31,
2011, common stock equivalents were excluded from diluted net loss per share as
their effect would be anti-dilutive.
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 quarters ended March 31, 2011 and 2010, 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.
11
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2010, the FASB issued guidance to remove the requirement for an
entity that files financial statements with the SEC to disclose a date through
which subsequent events have been evaluated. The adoption of this guidance
during our current fiscal quarter did not have any impact on our Consolidated
Financial Statements.
NOTE 2: MATERIAL EVENTS
NEW BUSINESS VENTURE
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 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
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 March 31, 2011, the Company has incurred net
loss 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 accumulated deficit of
$7,550,481 as of March 31, 2011. The Company has a working capital deficit of
$2,799,423 for the quarter then ended. 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.
12
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
In the past year, the Company funded operations through investor's deposit. For
the coming quarter, 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 March 31, 2011. The Company is technically in default on its promissory notes
to the persons or entities detailed hereafter, 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 2011 since they were default as of
December 31, 2009.
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 $293; 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 $0 293
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 $17; 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 17
12% Interest; principal of $5; 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 5
12% Interest; principal of $231; 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 $0 231
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
13
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
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 $73,977; 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 73,977
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 50,240
--------
TOTAL SHORT TERM NOTES PAYABLE TO SHAREHOLDERS $495,680
========
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
14
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
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 January 10, 2011, the Company issued 50,000 shares of Series D Preferred
Stock in exchange for $50,000 cash.
COMMON STOCK
On October 1, 2010, the Company has increased its authorized shares of Common
Stock to 5,950,000,000 shares.
NOTE 6: DERIVATIVE LIABILITY
As of March 31, 2011, 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 75,928,995,057 shares. The Company's
Chief Executive Officer, Kenneth Yeung, hold 3,000,000 shares of Series C
Preferred Stock that are convertible into 65,934,065,934 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 $0.0001 per
share on March 31, 2011. The remaining common stock equivalent of 9,994,929,123
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 465.42%, a contractual life of approximately a year, a zero
dividend rate, 0.27% risk free interest rate, exercise price of $0.00009622 and
the fair value of common stock of $0.0001 per share as of March 31, 2011, the
Company determined the allocated fair value of the derivative liability. The
Company reflected a loss of $177,847 in the quarter ended March 31, 2011 to
adjust the derivative liability to $979,949 as of the quarter-end, representing
the initial fair value of excess common stock equivalents exceeding the total
common stock available for issuance.
We adopted ASC Topic 820 (originally issued as SFAS 157, "Fair Value
Measurements") as of January 1, 2008 for financial instruments measured at fair
value on a recurring basis. ASC Topic 820 defines fair value, establishes a
framework for measuring fair value in accordance with accounting principles
generally accepted in the United States and expands disclosures about fair value
measurements.
15
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. ASC Topic 820 establishes a three-tier
fair value hierarchy which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurements) and the
lowest priority to unobservable inputs (level 3 measurements). These tiers
include:
Level 1, defined as observable inputs such as quoted prices for identical
instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are
either directly or indirectly observable such as quoted prices for similar
instruments in active markets or quoted prices for identical or similar
instruments in markets that are not active; and
Level 3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own assumptions, such as
valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
Quoted
Prices in
Active Significant
Market for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
Total (Level 1) (Level 2) (Level 3)
-------- -------- -------- --------
Liabilities
Derivative liability $979,949 $ -- $ -- $979,949
-------- -------- -------- --------
Total liabilities measured
at fair value $979,949 $ -- $ -- $979,949
======== ======== ======== ========
The table below presents our liabilities measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) at March 31, 2011. We
classify financial instruments in Level 3 of the fair value hierarchy when there
is reliance on at least one significant unobservable input to the valuation
model.
Three months ended
March 31, 2011
--------------
Opening balance on January 1, 2011 $802,102
Change in fair value of derivative liabilities 177,847
--------
Closing balance on March 31, 2011 $979,949
========
Total loss included in the statement of operations
for the change in fair value of derivative liability $177,847
========
16
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Condensed Financial Statements
March 31, 2011
NOTE 7: SUBSEQUENT EVENTS
STOCK ISSUANCES
The Company issued the following Stock in subsequent of the quarter ended March
31, 2011 and prior to the filing of financial statements.
* On November 15, 2010, the Company has retained Mr. Cheng Kim Man Edwin
as its consultant for services to be provided for six months. The
compensation shall be shares of Preferred Stock Series E equivalent to
US$35,000 distributable at the end of six months on May 15, 2011.
* On November 15, 2010, the Company has retained Mr. Jack Sze as its
consultant for services to be provided for six months. The
compensation shall be shares of Preferred Stock Series E equivalent to
US$50,000 distributable at the end of six months on May 15, 2011.
* On November 15, 2010, the Company has retained Mr. Tang Chong Yin as
its consultant for services to be provided for six months. The
compensation shall be shares of Preferred Stock Series E equivalent to
US$80,000 distributable at the end of six months on May 15, 2011.
* On November 15, 2010, the Company has retained Mr. Barry Grama as its
consultant for services to be provided for six months. The
compensation shall be shares of Preferred Stock Series E equivalent to
US$80,000 distributable at the end of six months on May 15, 2011.
Management has reviewed material subsequent events in accordance with FASB ASC
855 "Subsequent Events". No additional disclosures are required.
17
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 - THE QUARTER ENDED MARCH 31, 2011 COMPARED TO THE QUARTER
ENDED MARCH 31, 2010
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 March 31, 2011, Operating Expenses for current
operations totaled $274,357 is more than the quarter ended March 31, 2010's
Operating Expenses of $118,570. The increase of $155,787 in Operating Expenses
between quarters ended 2011 and 2010 was mostly attributed to the increase in
consulting fees.
There is a significant change in the fair value of derivative. As of March
31, 2011, change in fair value of derivative resulted in an decrease of
$177,847. This increase in the fair value of derivative is resulted from the
liability of derivative that was less than that on March 31, 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 65,934,065,934 shares.
The Company's Chief Executive Officer, Kenneth Yeung, hold 3,000,000 shares of
Series C Preferred Stock that are convertible into 65,934,065,934 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 $0.0001 per share on March 31, 2011. The remaining common stock
equivalent of 9,994,929,123 shares has been accounted for as a derivative
liability. The fair value of the derivative of $979,949 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.
18
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 quarter ended March 31, 2011 we relied on funds from
the investor deposit and the issuance of preferred stock. 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 $293; 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 $0 293
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 $17; 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 17
12% Interest; principal of $5; 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 5
12% Interest; principal of $231; 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 $0 231
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
19
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 $73,977; 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 73,977
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 50,240
--------
TOTAL SHORT TERM NOTES PAYABLE TO SHAREHOLDERS $495,680
========
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
========
20
QUARTER ENDED MARCH 31, 2011
As of March 31, 2011, the Company's current assets were $3,446 and its
current liabilities were $2,800,869, resulting in a working capital deficit of
$2,797,423. As of March 31, 2011, current assets were comprised of (i) $435 in
cash; (ii) $1,011 in other current assets.
As of March 31, 2011, current liabilities were comprised of (i) $979,949 in
derivative liability; (ii) $495,679 in notes payable to stockholders and
$145,500 in notes payable; (ii) $359,860 in accounts payable and accrued
expenses and $419,755 of other amounts due to shareholders.
For the quarter ended March 31, 2011, net cash flows used in operating
activities were $51,170 compared to net cash flows used in operating activities
of $12,342, before the net cash used in and provided by discontinued operations,
for the quarter ended March 31, 2010. The decrease of $38,828 during the quarter
ended March 31, 2011 were primarily due to the change in fair value of
derivative liability and interest expense associated with beneficial conversion
feature.
For quarters ended March 31, 2011 and 2010, net cash flows used in
investing activities were both at $0.
For the quarter ended March 31, 2011, net cash flows provided by financing
activities was $50,000 compared to net cash flows provided by financing
activities of $0 for the quarter ended March 31, 2010. Cash inflow for in 2011
consisted of the sale of preferred stock while for the same period in 2010 there
was not any activity.
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.
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
21
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, 2010, and again
as of March 31, 2011, 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.
Management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2010, and again at March 31, 2011. 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.
22
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 March 31, 2011, December 31, 2010 and 2009
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.
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, 2010, and again as
of March 31, 2011.
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.
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.
23
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
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 March 31, 2011, 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 December 31, 2010, the Company has issued the following securities
without registration under the Securities Act of 1933:
PREFERRED STOCK:
Series D Preferred Stock Issued:
Number of Aggregate Nature of
Date of Issue Shares Issued Sales Price Transaction
------------- ------------- ----------- -----------
1/10/2011 50,000 $50,000.00 Cash Purchase
24
Management believes the above shares of Series D Preferred Stock were
issued pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended. No broker or underwriter was involved in any
of the above transactions.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. (REMOVED AND RESERVED).
ITEM 5. OTHER INFORMATION.
None.
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).
25
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).
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 (Exhibit 3(i)(9) to
the Company's Quarterly Report on Form 10-Q for the Period Ended
September 30, 2009, filed with the Commission on November 16, 2009).
3(i)(10)* 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 and effective October 25, 2010 (Exhibit
3(i)(10) to the Company's Current Report on Form 8-K filed with the
Commission on October 26, 2010).
3(ii)* By-laws of the Company (Exhibit 3. II to the Company's Registration
Statement on Form 10-SB 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).
26
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).
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.
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.
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).
21** Subsidiaries of the Company
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: May 16, 2011 /s/ Kenneth Yeung
-----------------------------------------------
Kenneth Yeung
President, Chief Executive Officer and
Chief Financial Officer (Principal
Accounting, Executive and Financial Officer)
2