Teranet, Income Fd Tr Unit - Recent Material Event
<![CDATA[TABLE OF CONTENTS
ITEMS PAGE
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PART I
Item 1. Description of Business 4
Item 2. Description of Property 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market For Common Equity and Related Stockholder Matters and 10
Small Business Issuer Purchases of Equity Securities
Item 6. Management's Discussion and Analysis or Plan of Operation 12
Item 7. Financial Statements 18
Item 8. Changes in and Disagreements with Accountants on 18
Accounting and Financial Disclosure
Item 8A. Controls and Procedures 18
Item 8B. Other Information 20
PART III
Item 9. Directors, Executive Officers, Promoters, Control Persons
and Corporate Governance; Compliance with Section 16(a) of
the Exchange Act 20
Item 10. Executive Compensation 23
Item 11. Security Ownership of Certain Beneficial Owners and 26
Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director
Item 12. Independence 27
Item 13. Exhibits 28
Item 14. Principal Accountant Fees and Services 30
2
CAUTIONARY STATEMENT
This Form 10-KSB contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Some of the statements
contained in this Form 10-KSB for International Building Technologies Group,
Inc. ("Company") discuss future expectations, contain projections of results of
operation or financial condition or state other "forward-looking" information.
These statements are subject to known and unknown risks, uncertainties, and
other factors that could cause the actual results to differ materially from
those contemplated by the statements. The forward-looking information is based
on various factors and is derived using numerous assumptions.
Management expresses its expectations, beliefs and projections in good
faith and believes the expectations reflected in these forward-looking
statements are based on reasonable assumptions; however, Management cannot
assure current stockholders or prospective stockholders that these expectations,
beliefs and projections will prove to be correct. Such forward-looking
statements reflect the current views of Management with respect to the Company
and anticipated future events.
Management cautions current stockholders and prospective stockholders that
such forward-looking statements, including, without limitation, those relating
to the Company's future business prospects, demand for its products, revenues,
capital needs, expenses, development and operation costs, wherever they occur in
this Form 10-KSB, as well as in the documents incorporated by reference herein,
are not guarantees of future performance or results, but are simply estimates
reflecting the best judgment of Management and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by such forward-looking statements.
Important factors that may cause actual results to differ from projections
include, for example:
* the success or failure of management's efforts to implement their
business strategy;
* the ability of the Company to raise sufficient capital to meet
operating requirements;
* the uncertainty of consumer demand for our products, services and
technologies;
* the ability of the Company to protect its intellectual property
rights;
* the ability of the Company to compete with major established
companies;
* the effect of changing economic conditions;
* the ability of the Company to attract and retain quality employees;
and
* other risks which may be described in future filings with the SEC.
Words such as "anticipates," "expects," "intends," "plans," "believes,"
"seeks," "estimates," and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict. Therefore, actual results and
outcomes may differ materially from what is expressed or forecasted in any such
forward-looking statements. Unless required by law, the Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
3
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
International Building Technologies Group, Inc. ("Company") was
incorporated as Ten Stix Inc. on January 10, 1996 under the laws of the State of
Colorado to engage in the design, development and marketing of unique card games
and other gaming products for the gaming industry. Ten Stix, Inc. changed its
domicile from Colorado to Nevada in 2004.
During 2004, the Company amended its Articles of Incorporation to change
its name to Motorsports Emporium, Inc. in order to bring the name of the Company
in line with its then new business focus, targeting motor sports enthusiasts.
During 2004, the Company divested itself of all interest in Ten Stix Inc. and
the gaming business.
As a result in the change in control and new business focus of the Company
occasioned by the events discussed below, the Company amended its Articles of
Incorporation to change its name to International Building Technologies Group,
Inc. in 2007.
CHANGE OF CONTROL
On March 14, 2007, Mr. Kenneth Yeung, Mr. David Keaveney and the Company
entered into a Stock Sale and Purchase Agreement, pursuant to which Mr. Yeung
acquired controlling interest in the Company as a result of his purchase of
200,000 shares of our Series C Preferred Stock from Mr. Keaveney, the then
President of the Company. The Series C Preferred Stock carries super voting
rights of 3,000 votes per share. As a result of this change of control, Mr.
Yeung was elected to the office of President of the Company on March 14, 2007.
Mr. Yeung was elected to the Board of Directors on April 13, 2007. On April 16,
2007, (i) Mr. Keaveney resigned from his positions of Chief Executive Officer,
Chief Financial Officer and Director of the Company; (ii) Ms. Rhonda Keaveney
resigned from her positions of Chief Operating Officer, Secretary and Director
of the Company Mr. Yeung then became the sole Director of the Company. On May
21, 2007, Mr. Peter Chin was elected to the positions of Corporate Secretary and
Director of the Company.
As a condition of Mr. Keaveney's sale of his Series C Preferred Stock to
Mr. Yeung, Mr. Yeung agreed to immediately pay off an aggregate of $200,627 of
the Company's liabilities, which debt reductions were intended to reduce a
substantial amount of the Company's outstanding liabilities, including $48,788
owed by the Company to Mr. Keaveney for accrued salary and $38,115 owed by the
Company to Rhonda Keaveney for accrued salary.
Although they were not parties to the Stock Sale and Purchase Agreement Mr.
Robert Brehm and his company, Intercontinental Assets Corporation ("IAC"),
approved the transaction. In order to accommodate the parties to the Stock Sale
and Purchase Agreement, Mr. Brehm and IAC entered into an amendment to the
Twelve Month Convertible Note ("Note") that had been previously issued to them
by the Company. The amendment provided for the deferral of payments under the
Note until June 2007, and extended the maturity of the note from August 10,
2007, to May 30, 2008.
BUSINESS TRANSFORMATION
The Company then divested its motor sports related assets and began to
focus on its current business related to building technologies, when on May 2,
2007, the Company entered into a Stock Sale and Purchase Agreement with Axia
Group, Inc. ("Axia") and International Building Technologies, Inc. ("IBT"),
pursuant to which the Company acquired 50,000,000 shares of IBT common stock (or
approximately 80% of IBT's issued and outstanding common stock) from Axia for
consideration consisting of a (i) $1,000,000 convertible note and (ii)
20,000,000 shares of the Company's common stock. On September 25, 2007, the
Company and Axia renegotiated the purchase price of the 80% equity stake in IBT
and made a downward adjustment of $1,000,000 to the purchase price and cancelled
the convertible note.
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As part of the original transaction with Axia, the Company and Axia entered
into an Exclusive License Agreement pursuant to which the Company granted Axia a
transferable, revocable right to use, market, sell and distribute certain
technology in the territory that includes the countries of Sri Lanka on an
exclusive basis and in Pakistan and India on a non-exclusive basis. The
Exclusive License Agreement had an original term of two years and may be renewed
for an additional two year term if certain performance conditions are met.
As a result of the transaction with Axia and IBT, the Company dedicated
itself to providing innovative solutions for the construction of homes,
buildings and communities around the world, offering a complete turn-key
approach to most projects from design and engineering to materials, training and
construction assistance. Acting through, IBT, a Nevada corporation, and its
wholly owned subsidiary International Building Technologies Co., Ltd. ("IBT Hong
Kong"), a Hong Kong corporation, we are transforming our business into a
worldwide manufacturer and developer of light panel technology to be used in
residential and commercial business, primarily in regions that are at risk of
earthquakes and hurricane-like winds.
IBT TECHNOLOGY
The Company is a developer and provider of a superior panel based building
technology which allows for the rapid, cost effective construction of
residential, commercial, and high-rise buildings utilizing materials that are
superior in strength and appearance, economical and eco-friendly. The Company
provides customers with architectural design, panel supply, installation
supervision, engineering, training, and technical support.
The components of our panels are simple, but effective:
* A light weight, high tensile treated galvanized steel wire cage;
* A core of expanded polystyrene;
* Connected and held in place by a logical series of treated galvanized
trusses;
* A coat of Portland cement, either gun or manually applied to bother
sides; and
* IBT panel technology complies with European and U.S. Standard
ICBO-ER-3509
Based on standard building codes prescribed by authorities worldwide, our
IBT technology will meet and exceed the minimum requirements. This includes load
tests of transverse, vertical compression and racking shear load and fire tests
including corner room burn and fire exposure under load.
SUPERIOR STRENGTH AND VALUE
* Earthquakes
* The IBT technology system is 30% more resistant when it comes to
seismic movement when compared to the traditional block system.
* Hurricanes
* The IBT technology has a structural capacity to withstand
hurricane-like winds up to 180 km per hour.
* Fires
* The IBT technology can undertake fire exposure for more than one
and a half hours.
* Insulation
* The expanded polystyrene used in the IBT technology system has an
acoustic insulation capacity that is 4 times higher than the
traditional block system and has thermal insulation that can
isolate heat 8 times more than construction using the traditional
block system.
* Environmental Safety
* Raw materials used in the manufacturing of expanded polystyrene
do not expel toxic fumes into the atmosphere.
5
ADVANTAGES
* Versatile Design and Use
* Complete architectural freedom and flexibility, sound barrier,
security and property walls exterior and interior wall systems,
roof systems, flat and pitched. This technology can be used for
multi-story buildings, walls and floors.
* Spectacular Visual Appeal
* No evidence of prefabrication after application of concrete,
which can have a variety of finishes, smooth to heavily textured.
* Environment Friendly and Energy Saving
* No wood or timber products used, Thermal insulation allows for a
cooler internal environment. Air conditioning bills are
considerably lower.
* Cost Savings
* Significant decreases in on-site construction time and effective
use of labor due to simplicity of erection.
APPLICATIONS
* Residential Homes
* Schools
* High Rise Buildings
* Churches
* Condominiums
* Mining Shafts
* Hospitals
* Fences and Walls
* Vacation Lodges
* Medical Care Centers
* Community Buildings
We believe our panel based technology is one of the finest, strongest and
most cost effective building technologies available. Our panel based technology
is superior to other traditional building methods in terms of strength, time to
completion and resistance to the elements. Our IBT technology is also versatile
in its use and can be used to create unique architectural and design elements.
The results are buildings that look great and meet superior construction
standards.
Historically, IBT has completed projects in the United States, Central
America, the Caribbean, Asia, Europe and Africa.
OTHER PRODUCTS AND SERVICES OFFERED BY THE COMPANY
Currently, IBT provides Site Planning, Architectural and Engineering
Services, Contractor Services, Materials, Equipment, training and Supervision
and is engaged in projects in China utilizing our IBT technology.
ROSE BEST PROJECT
On July 8, 2007, IBT Hong Kong entered into an Asset Sale and Purchase
Agreement with Suining Yinfa Construction & Engineering Co., Ltd., a China
corporation ("Suining Yinfa"), pursuant to which IBT Hong Kong acquired a 51%
interest in the Rose Top Grade Project ("Rose Best Project") for U.S. $350,000
represented by a Convertible Promissory Note in the principal amount of U.S.
$350,000 issued by the Company in favor of Suining Yinfa.
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The U.S. $350,000 Convertible Promissory Note bears interest at the rate of
8% per annum and the principal amount plus accrued interest is due on or before
July 31, 2009. On December 12, 2007, this Note was converted into 350,000 shares
of the Company's Series E Preferred Stock.
The Rose Best Project (already underway) is located in the Sichuan Province
of China and consists of the construction of four upscale residential apartment
buildings with a total building area of approximately 537,000 square feet
(49,500 square meters). As of January 31, 2008, the project booked approximately
US $1.8 million in progress payments. The project is expected to book a total of
approximately US $6.7 million in revenues once it is completed. The Company has
a 51% interest in the income and loss of the joint venture. The Company is not
assured of any receipt of cash payments in the investment.
HOW TO CONTACT US
The Company's principal executive offices are located at 1151 Harbor Bay
Parkway, Suite 202, Alameda, California 94502. Our telephone number is (510)
814-3778 and its facsimile number is (510) 814-0366. We also have offices at
Suite 1001-1002, Far East Building, 1101 S. Pudong Blvd., Pudong District,
Shanghai, PRC 200120. Our Shanghai telephone number is (21) 5836-2932 and our
Shanghai facsimile number is (21) 5836-2933.
COMPETITIVE BUSINESS CONDITIONS
The Company competes with many companies in the global markets and many of
our competitors are large, well funded companies who have substantially larger
staffs and resources than we have at the present time. Unlike the many companies
that compete in the global market manufacturing building materials, we are
unique. Few companies manufacture our product or anything similar in nature. We
intend to compete based on our unique technology and business and government
contacts within China.
FOREIGN CURRENCY RISK
The Company has subsidiaries operating in the foreign arena and is exposed
to foreign currency fluctuations. Currently the Company's subsidiaries are
operating in China and Hong Kong. The Company's exposure to foreign currency
fluctuations in Hong Kong is limited as the Hong Kong Dollar is pegged against
the U.S. dollar. However, the Company's exposure to foreign currency
fluctuations in China is greater as the Chinese RMB has a floating exchange rate
based on market supply and demand with reference to a basket of currencies.
RAW MATERIALS AND SUPPLIES
China is the main supplier of the raw materials needed for our panels. The
Company has contact with and access to numerous suppliers of the raw materials
needed to manufacture its building panels and is not dependent on any one
supplier or limited group of suppliers.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
The Company believes that the diversity of the products and services it
offers helps alleviate the dependence on any one customer or limited group of
customers. The Company's offerings of services and products appeal to both the
retail and industrial customer base. Through the widespread use of the Company's
products and services, the Company will continue to increase its customer base.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS
The Company's common stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 ("1934 Act"). As a result of such registration,
the Company is subject to Regulation 14A of the "1934 Act," which regulates
proxy solicitations. Section 14(a) requires all companies with securities
registered pursuant to Section 12(g) thereof to comply with the rules and
regulations of the Commission regarding proxy solicitations, as outlined in
Regulation 14A. Matters submitted to stockholders of the Company at a special or
annual meeting thereof or pursuant to a written consent will require the Company
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to provide its stockholders with the information outlined in Schedules 14A or
14C of Regulation 14; preliminary copies of this information must be submitted
to the Commission at least 10 days prior to the date that definitive copies of
this information are forwarded to stockholders.
The Company is also required to file annual reports on Form 10-KSB and
quarterly reports on Form 10-QSB with the Commission on a regular basis, and
will be required to disclose certain events in a timely manner, (e.g. changes in
corporate control; acquisitions or dispositions of a significant amount of
assets other than in the ordinary course of business; and bankruptcy) in a
Current Report on Form 8-K.
WE WILL BE SUBJECT TO THE REQUIREMENTS OF SECTION 404 OF THE SARBANES-OXLEY
ACT. IF WE ARE UNABLE TO TIMELY COMPLY WITH SECTION 404 OR IF THE COSTS RELATED
TO COMPLIANCE ARE SIGNIFICANT, OUR PROFITABILITY, STOCK PRICE AND RESULTS OF
OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.
The Company is required to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act of 2002, which requires that we document and test our
internal controls and certify that we are responsible for maintaining an
adequate system of internal control procedures for the 2007 fiscal year. This
section also requires that our independent registered public accounting firm
opine on those internal controls and management's assessment of those controls.
We are currently evaluating our existing controls against the standards adopted
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
During the course of our ongoing evaluation and integration of the internal
controls of our business, we may identify areas requiring improvement, and we
may have to design enhanced processes and controls to address issues identified
through this review (see Section 8A).
Our subsidiaries currently operating in China also have to comply with the
provisions of Section 404 of the Sarbanes-Oxley Act of 2002. However, due to
time differences, cultural differences, and differences in common business
practices, documentation and testing of our internal controls overseas will be a
longer and more difficult process.
We believe that the out-of-pocket costs, the diversion of management's
attention from running the day-to-day operations and operational changes caused
by the need to comply with the requirement of Section 404 of the Sarbanes-Oxley
Act could be significant. If the time and costs associated with such compliance
exceed our current expectations, our results of operations and the future
fillings of our Company could be materially adversely affected.
Our subsidiaries currently operating in China are subject to inherent risks
associated with operations in a foreign arena. IBT and IBT Hong Kong are exposed
to risks of changes in governmental policies and building codes. There is no
guarantee of current Management's ability to be notified of changes in
governmental policies and building codes in a timely manner, which could
materially affect the Company.
Aside from required compliance with foreign governmental regulations and
rules, federal and state securities laws, regulations and rules, and federal,
state and local tax laws, regulations and rules, the Company is not aware of any
other governmental regulations now in existence or that may arise in the future
that would have an effect on the business of the Company.
DEPENDENCE ON KEY EMPLOYEES AND NEED FOR ADDITIONAL MANAGEMENT AND PERSONNEL
The Company is heavily dependent on the ability of our President, Kenneth
Yeung, who has contributed essential technical and management experience to our
business. The Company will be dependent upon Mr. Yeung to recruit good
management for the Company.
In the event of future growth in administration, marketing, manufacturing
and customer support functions, the Company may have to increase the depth and
experience of its management team by adding new members. The Company's success
will depend to a large degree upon the active participation of its key officers
and employees, as well as the continued service of its key management personnel
and its ability to identify, hire, and retain additional qualified personnel.
There can be no assurance that the Company will be able to recruit such
qualified personnel to enable it to conduct its proposed business successfully.
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INTELLECTUAL PROPERTY RIGHTS
The Company presently holds no intellectual property rights. The Company
intends to seek copyright and trademark protection of its trade names and
products. The Company's success and ability to compete are dependent to a degree
on the Company's name and product recognition. Accordingly, the Company will
primarily rely on copyright, trade secret and trademark law to protect its
product and brand names of products or under which the Company conducts its
business. Effective trademark protection may not be available for the Company's
trademarks.
The Company's competitors or others may adopt product or service names
similar to the Company's, thereby impeding the Company's ability to build brand
identity and possibly leading to customer confusion. The Company's inability to
adequately protect its product, brand, trade names and trademarks would have a
material adverse effect on the Company's business, financial condition and
operating results. Despite any precautions the Company takes, a third party may
be able to copy or otherwise obtain and use the Company's technology or other
proprietary information without authorization or to develop similar technology
independently.
Policing unauthorized use of the Company's products are made especially
difficult by the global nature of the Internet and the difficulty in controlling
the ultimate destination or security of products or other data. The laws of
other countries may afford the Company little or no effective protection for the
Company's intellectual property.
EMPLOYEES
As of March 26, 2008, the Company had one employee. No union or any other
form of collective bargaining unit represents any employee.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not own any real estate. The Company's subsidiary, IBT,
executed a sublease for the premises located at 1151 Harbor Bay Parkway, Suite
202, Alameda, California (approximately 1,400 square feet of space), dated May
1, 2007, and an amendment to the sublease dated October 29, 2007, for a 17 month
term expiring September 30, 2008. The rent paid under the sublease was $2,000
for May 2007, $2,500 for the months of June through October 2007, and $3,000 per
month for November 2007 and for each month of the remaining term of the
sublease.
The Company's subsidiary, IBT Hong Kong. executed a lease on approximately
974 square feet of space for its offices at 1101 S. Pudong Boulevard, Suite
1001-1002, Pudong District, Shanghai, PRC. Initially, the lease was for a one
year term from February 15, 2007 to February 14, 2008. The lease has been
extended until February 14, 2009. The monthly rental on this lease was
approximately U.S. $1,500 (RMB11,000) during its first year. The monthly rental
under the extended lease is approximately U.S. $1,818 (RMB13,000) per month.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not currently involved in any legal matters. However, in
2006, X-Clearing Corporation obtained a judgment against the Company as
described below. The Company is not aware of any pending or threatened claims or
assessments, which may have a material adverse impact on the Company's financial
position or results of operations.
CASE NUMBER 05CV5129 X-CLEARING CORPORATION V. MOTORSPORTS EMPORIUM, INC.
During the third quarter of 2005, the Company was made a defendant in
the matter of X-Clearing Corporation, FKA Global Stock Transfer and Global
Securities Transfer v. Ten Stix, Inc., NKA MotorSports Emporium, Inc., filed on
July 1, 2005, in the District Court for the City and County of Denver Colorado,
case number 05CV5129. The plaintiff alleged breach of contract, collection of
debts owed and bad faith pertaining to activities of prior management and sought
damages in excess of $35,000. In July 2006, a judgment was entered in favor of
X-Clearing Corporation against MotorSports Emporium for the principal amount of
$16,856.28 plus prejudgment interest of $3,639.78, in addition to costs and
reasonable attorney fees. On November 27, 2006, the judgment was domesticated in
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Arizona (CV2006-018060 and CV2006-018061) for the amount of $20,496.06, costs of
$912 and attorney fees of $19,231. The judgment will accrue interest at the rate
of 8% per annum until paid.
On April 16, 2007, the Company paid X-Clearing $32,000 in cash and
approximately $958 also in cash to Ikon for costs of copying or printing
transfer agent records. Such amounts were accrued during the previous year. This
legal matter has been paid in full and this case is closed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of our shareholders during the fourth
quarter of the year ended December 31, 2007.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES.
As of the date of this Annual Report, the Company's Common Stock is quoted
on the Over-the-Counter Bulletin Board under the symbol "INBG.OB." The market
for the Company's Common Stock is limited, volatile and sporadic and the price
of the Company's Common Stock could be subject to wide fluctuations in response
to quarterly variations in operating results, news announcements, trading
volume, sales of Common Stock by officers, directors and principal shareholders
of the Company, general market trends, changes in the supply and demand for the
Company's shares, and other factors. The following table sets forth the high and
low sales prices for each quarter relating to the Company's Common Stock for the
last two fiscal years, and has been retroactively adjusted to account for the 1
for 225 reverse stock split that occurred on October 31, 2006. These quotations
reflect inter-dealer prices without retail mark-up, markdown, or commissions,
and may not reflect actual transactions.
FISCAL 2007 High Low
----------- ---- ---
First Quarter (2) $ 0.11 $0.026
Second Quarter (1) $ 0.098 $0.0382
Third Quarter (1) $ 0.07 $0.011
Fourth Quarter (1) $ 0.013 $0.002
FISCAL 2006 High Low
----------- ---- ---
First Quarter (1) $1.58 $0.90
Second Quarter (1) $0.90 $0.45
Third Quarter (1) $0.45 $0.23
Fourth Quarter (1) $0.20 $0.05
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(1) This represents the closing bid information for the stock on the OTC
Bulletin Board. The bid and ask quotations represent prices between dealers
and do not include retail markup, markdown or commission. They do not
represent actual transactions and have not been adjusted for stock
dividends or splits.
(2) This represents the closing price for the stock on the OTC Bulletin Board.
All of the above information was listed as reported by the National
Association of Securities Dealers Composite feed or other qualified inter-dealer
quotation medium.
Our common stock is considered a "penny stock." The application of the
"penny stock" rules to our common stock could limit the trading and liquidity of
the common stock, adversely affect the market price of our common stock and
increase your transaction costs to sell those shares. The Commission has adopted
regulations which generally define a "penny stock" to be any equity security
that has a market price (as defined) of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions.
Shareholders should be aware that, according to SEC Release No. 34-29093
dated April 17, 1991, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include (1) control of the
market for the security by one or a few broker-dealers that are often related to
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the promoter or issuer; (2) manipulation of prices through prearranged matching
of purchases and sales and false and misleading press releases; (3) boiler room
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask differential and markups by selling broker dealers; and (5) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
occurrence of these patterns or practices could increase the volatility of our
share price.
Our management is aware of the abuses that have occurred historically in
the penny stock market.
HOLDERS
As of March 26, 2008, there were approximately 295 shareholders of record
of the Company's Common Stock, 96 shareholders of record of the Company's Series
A Preferred Stock, one shareholder of record of the Company's Series C Preferred
Stock, one shareholder of record of the Company's Series D Preferred Stock and
four shareholder of record of the Company's Series E Preferred Stock.
DIVIDENDS
The Company has not declared any cash dividends with respect to its common
stock or preferred stock during the last two fiscal years and does not intend to
declare dividends in the foreseeable future. There are no material restrictions
limiting or that are likely to limit the Company's ability to pay dividends on
its outstanding securities.
For information regarding the Company's Equity Compensation Plans, see Part
III, Item 11.
RECENT ISSUANCE OF UNREGISTERED SECURITIES
Since December 31, 2006, the Company has issued the following securities
without registration under the Securities Act of 1933:
<TABLE>
<CAPTION>
Number of Aggregate
Date of Issue Shares Issued Sales Price Nature of Transaction
------------- ------------- ----------- ---------------------
<S> <C> <C> <C>
2/9/2007 166,667 $ 5,000 In exchange for debt cancellation
3/1/2007 384,615 $ 10,000 In exchange for debt cancellation
3/9/2007 403,225 $ 10,000 In exchange for debt cancellation
4/16/2007 551,334 $ 17,521 In exchange for debt cancellation
5/4/2007 270,000 $ 10,854 In exchange for debt cancellation
5/10/2007 271,867 $ 11,114 In exchange for debt cancellation
5/17/2007 20,000,000 $1,300,000 Asset Purchase--IBT
6/4/2007 220,000 $ 11,000 In exchange for debt cancellation
6/15/2007 1,219,904 $ 41,042 In exchange for debt cancellation
8/13/2007 142,858 $ 2,085 Private Offering
9/4/2007 257,142 $ 3,754 Private offering
9/12/2007 450,824 $ 8,791 In exchange for debt cancellation
10/5/2007 1,105,796 $ 8,791 In exchange for debt cancellation
11/5/2007 2,577,180 $ 8,599 In exchange for debt cancellation
11/28/2007 4,000,000 $ 5,768 In exchange for debt cancellation
12/3/2007 2,350,000 $ 3,386 In exchange for debt cancellation
12/17/2007 4,725,216 $ 7,070 In exchange for debt cancellation
12/12/2007 350,000 (1) $ 350,000 Conversion of Note issued in connection
with the Suining Project
12/12/2007 50,000 (2) $ 50,000 Director's Compensation
</TABLE>
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(1) The Company issued 350,000 shares of Series E Preferred Stock.
(2) The Company issued 50,000 shares of Series D Preferred Stock.
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.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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. See also the
disclosures under "Cautionary Statement" following the Table of Contents in this
Annual Report.
GENERAL
Prior to December 1, 2004 the Company was known as Ten Stix, Inc. and
changed its name to MotorSports Emporium, Inc. on December 1, 2004 under the
laws of the State of Nevada to engage in the motor sports industry targeting
enthusiasts participating in die cast collecting, automobile restoration,
purchase of high-performance accessories, motor sports related collectibles,
driver's apparel, race venues and product licensing. On July 12, 2007, the
Company reported in a Definitive Schedule 14C that the Company was going to
change its name to International Building Technologies Group, Inc. to better
reflect its change of business from motor sports related to building and
construction of lightweight panels. On July 17, 2007 the Company amended its
articles of incorporation to change its name to International Building
Technologies Group, Inc. effective on August 6, 2007. According to Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises," the Company has reentered the development stage. The Company
devotes most of its efforts to establishing a new business, raising capital,
establishing sources of supply, acquiring property, plant, equipment, and other
operating assets. The Company's shares of common stock trade on the OTC Bulletin
Board under the symbol "INBG.OB".
Our principal executive offices are located at 1151 Harbor Bay Parkway,
Suite 202, Alameda, CA 94502. Our telephone number is (510) 814-3778 and
facsimile number is (510) 814-0366. More information regarding our products and
the Company is available on our website at www.ibtgi.com.
EXECUTIVE OVERVIEW
In 2004, we entered the motor sports industry selling die cast model cars.
In 2005 we created several divisions to sell race worn memorabilia (helmets,
gloves and racing suits), automotive related art and high performance brake
fluid. Additionally, in 2006 we created a car wash product named after a
well-known racing legend. Up until the end of our first quarter in 2007 we
continued to focus our efforts on our high performance brake fluid and specialty
car care product lines, however due to a change in control and certain events,
we changed our business operations to better reflect management's experience and
our expertise in the light weight panel industry where we can better concentrate
on global construction and engineering projects. At the end of the first quarter
of 2007 we divested ourselves from the motor sports business and transitioned
into the business of lightweight panel construction through our subsidiary IBT
and its wholly owned subsidiary IBT Hong Kong.
12
The Company is a developer and provider of a superior panel based building
technology which allows for the rapid, cost effective construction of
residential, commercial, and high-rise buildings utilizing materials that are
superior in strength and appearance, economical and eco-friendly. The Company
provides customers with architectural design, panel supply, supervision of
installation, engineering, training, and technical support.
We currently have signed Memorandums of Understanding and are negotiating
contracts for various projects throughout China. Our endeavors include an entire
new town, luxury condominiums, resorts, social interest homes, and standard
industrial buildings. We strive to establish fully operational panel facilities
throughout China, where they are building more square feet of new housing,
commercial, and industrial buildings than any other country.
In July 2007, IBT Hong Kong, entered into an asset and purchase agreement
with China based Suining Yinfa Construction & Engineering Co, Ltd. for 51%
interest in a Chinese building project named Rose Top Grade (Rose Best) Project.
The Rose Top Grade (Rose Best) Project, already underway, is located in the
Sichuan Province of China and consists of four upscale residential apartment
buildings with a total building area of approximately 49,500 square meters
(537,000 square feet). As of January 31, 2008, the project booked approximately
US $1.8 million in progress payments. The project is expected to book a total of
approximately US $6.7 million in revenues once it is completed. The Company has
a 51% interest in the income and loss of the joint venture. The Company is not
assured of any receipt of cash payments in the investment. We purchased 51% of
the Rose Top Grade (Rose Best) Project from Suining Yinfa for a convertible
promissory note of $350,000 USD, which was converted to 350,000 shares of the
Company's Series D preferred stock on December 12, 2007.
In December 2007, the Company signed a Memorandum of Understanding to
acquire a machinery manufacturing company in Wuhan, Hubei Province of China.
Hubei InteWufeng Machinery Co., Ltd. states their company currently has assets
worth RMB 28.5 million (approximately US $4.0 million) and generated revenues of
RMB 30 million (approximately US $4.2 million) in the year of 2007. The Hubei
InteWufeng Machinery Co., Ltd. currently offers several lines of equipment, but
its machining capabilities can be retooled to manufacture the panel production
manufacturing systems that the Company will utilize in several planned projects
in China and other countries.
We have been incurring selling, general and administrative expenses
primarily to develop our existing businesses, improve our current infrastructure
to address anticipated growth and identify and evaluate complementary business
development opportunities and marketing. The development of these businesses has
led to recent operating losses and cash outflows. However, we believe the
Company is strategically positioning itself with contracts and business ventures
that can significantly contribute to the continuous development of its panel
business and the Company's bottom line.
MATERIAL RECENT DEVELOPMENTS
RE-ENTERING DEVELOPMENT STAGE
On April 1, 2007, the Company re-entered the development stage. The Company
has changed from the motor sports business to the business of building and
construction of lightweight panels. The Company has devoted most of its efforts
to establishing a new business, raising capital, establishing sources of supply,
acquiring property, plant, equipment, and other operating assets.
CHANGE OF CORPORATE NAME
On May 21, 2007, the Board of Directors and the majority of the
shareholders of the Company passed a resolution to amend the Company's articles
of incorporation to change its name to International Building Technologies
Group, Inc. Such amendment became effective on August 6, 2007.
13
CHANGE IN CONTROL
On September 13, 2006, we issued 200,000 shares of Series C Preferred Stock
to David W. Keaveney, our then President and CEO, in exchange for the
cancellation of $10,000 in accrued, but unpaid, compensation due to Mr.
Keaveney. On March 14, 2007, Mr. Keaveney sold his Series C Preferred Stock to
Mr. Kenneth Yeung. Since the Series C Preferred Stock carries super-voting
rights of 3,000 votes per share, Mr. Yeung is entitled to 600 million votes on
matters submitted to our shareholders for vote. As a result of Mr. Yeung's
voting power, he effectively controls the Company and is considered a "control
person" under applicable SEC regulations.
On April 13, 2007, the Company elected Mr. Kenneth Yeung to the Board of
Directors who is also the President and major shareholder of the Company.
Effective on April 16, 2007, David W. Keaveney resigned from his positions
as Chief Executive Officer, Chief Financial Officer and Director of the Company.
Effective on April 16, 2007, Rhonda Keaveney resigned from her positions as
Chief Operating Officer, Secretary and Director of the Company.
On April 16, 2007 Mr. Kenneth Yeung was elected as the interim Principal
Executive and Financial Officer of the company.
On May 30, 2007, the Company elected Mr. Peter Chin to the Board of
Directors and to the office of Corporate Secretary.
REVERSE STOCK SPLIT
Effective October 31, 2006, the Company effected a reverse split of our
common stock on a ratio of 1 share for every 225 shares of common stock, without
decreasing the number of authorized shares of common stock and without changing
the par value of the common stock.
RETIREMENT OF SERIES B PREFERRED STOCK IN EXCHANGE FOR NOTE PAYABLE
On August 21, 2006, the outstanding Series B Preferred Stock, consisting of
shares held by Mr. David Keaveney, a former director and a shareholder were
retired in exchange for cash compensation of $1 each to Mr. David Keaveney and a
former director and a convertible note payable in the principal amount of
$250,000 to a shareholder. The Company has determined that this transaction
meets the definition of an extinguishment based on the guidance contained in the
Emerging Issues Task Force No. 96-19: "Debtor's Accounting for a Modification or
Exchange of Debt Instruments" ("EITF 96-19"), and, therefore, the Company has
recognized a loss on extinguishment of debt of $116,405 related to this
transaction.
DISCONTINUED OPERATIONS
At the end of the first quarter of 2007 the Company discontinued all
operations related to the motor sports business due to increased manufacturer's
prices, slowing retail sales, increased competition from online auction sites
and the consolidation of the die cast industry. This includes operations by its
wholly owned subsidiaries Scottsdale Diecast, Inc. ("SDI") and Quadriga
Motorsports, Inc. ("Quadriga"). The Company has since shifted focus to
developing and manufacturing lightweight panel technology. The Company has
subsequently disposed of all assets related to the motor sports business in the
first quarter of 2007. No income tax expense has been recorded related to the
discontinued operations given the Company's net operating loss carry forwards
and related valuation allowances. All activity during the current year related
to the motor sports business has been reclassified to present the operations as
discontinued operations. Prior year financial statements for 2006 have also been
reclassified to present the operations of the motor sports business as
discontinued operations.
14
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED
DECEMBER 31, 2006
The results of operations in the prior year are not indicative of the
performance in neither the current period nor future periods. This is due to the
change in business from an exclusive die cast merchandising business to
developing and manufacturing lightweight panel technology. The discontinued
operations of all activities related to the motor sports business in the first
quarter of 2007 and all of 2006 is reflected as Discontinued Operations on the
Statement of Operations.
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. In 2006 the revenues were $57,853.
For the year ended December 31, 2007, Operating Expenses for current
operations totaled $670,111 and operating expenses for Discontinued Operations
totaled $181,780. Combined, Operating Expenses of $851,891 for the year ended
December 31, 2007 is less than year ended December 31, 2006's Operating Expenses
of $1,129,544. The decrease of $277,653 in Operating Expenses between years
ended 2007 and 2006 is mostly attributed to the shift in business focus and the
discontinuation of the prior business.
The most significant change in our results of operations is Interest
Expense. As of December 31, 2007, Interest Expense for current operations
totaled $309,585 and Interest Expense for Discontinued Operations totaled
$12,642. Combined, Interest Expense of $322,227 for the year ended December 31,
2007 is greater than the year ended December 31, 2006's Interest Expense of
$28,489. The increase of $293,738 in Interest Expense is largely due to
issuances of new debt with non-cash interest expenses such as accretion of
warrants and accretion on debt discounts (See Note 6 - Notes Payable & Debt
Discounts). These non-cash expenses make up the majority of the difference
between current year and prior year interest expense.
In 2007, the company had a loss of $70,843 associated with the settlement
and amendment of various debts. This includes a gain of $10,354 associated with
the settlement of debt related to the new business operations. This $10,354 was
the accrued interest portion of a $350,000 note that was paid in full with
preferred E shares and the interest portion waived by the lender. A loss
totaling $81,197 is recognized due to the substantial difference between the
amended notes and the original notes per Emerging Issues Task Force No. 96-19,
"Debtor's Accounting for a Modification or Exchange of Debt Instruments" ("EITF
96-19"). EITF 96-19 requires the Company to recognize a gain or loss associated
with a change that is considered substantially different between the present
values of the original note and the amended note (See Note 6 - Notes Payable &
Debt Discounts). This $70,843 loss on extinguishment of debt is presented on the
Consolidated Statement of Operations under Other Income (Expense).
In 2007, the company had a total gain and loss of $70,728 on disposal
related to discontinued operations. The gain includes the settlement of various
debts and accrued expenses, which reduced the total $180,222 amount due to
$109,491. The difference of $70,731 in gains includes $7,538 associated with the
settlement of outstanding litigation; $958 for copy services related to transfer
agent records; $12,598 related to settlement of legal fees associated with the
outstanding litigation; $37,500 of accrued salary related to the discontinued
operations which was waived by Mr. Keaveney at the end of 2007 and reflected as
a gain as discussed in Note 7 - Related Party Transactions; and $13,095 related
to the settlement of various consultant fees and accrued expenses. The $3 loss
was eliminated from the accounts and the resulting loss and was charged to
disposal of assets under Discontinued Operations of the accompanying Condensed
Consolidated Statement of Operations.
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. As
discussed in Note 7 - Related Party Transactions to the Consolidated Financial
Statements, Mr. Keaveney sold his Series C Preferred Stock to Mr. Kenneth Yeung.
As a result of Mr. Yeung's voting power, he effectively controls the Company and
is considered a "control person" under applicable SEC regulations. Mr. Yeung
agreed to immediately pay off an aggregate of $202,470 of the Company's
liabilities, which debt reductions were intended to reduce outstanding
liabilities, including $48,788 owed by the Company to Keaveney for accrued
salary and $38,115 owed by the Company to Rhonda Keaveney, the Company's former
Chief Operating Officer. The cash to pay the liabilities was received by the
Company in March 2007. All related liabilities were paid in the second quarter
15
of 2007 with the exception of the balance of $37,500 in accrued salary that is
due and owed to David Keaveney. This balance of $37,500 of accrued salary
related to the Discontinued Operations was waived by Mr. Keaveney as of December
31, 2007 and reflected as a gain in Discontinued Operations on the Consolidated
Statement of Operations. See Note 9 - Discontinued Operations.
During the next 12 months, our foreseeable cash requirements will relate to
continuing to develop the operations of our wholly owned subsidiaries and
business divisions, maintaining our 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 venture.
Because we have not identified any such venture as of the date of this Report,
it is impossible to predict the costs. Additionally, we may experience a cash
shortfall and be required to raise additional capital. Up until December 31,
2006, we have relied upon internally generated funds. In the year ended December
31, 2007 we relied on funds from the sale of shares of stock and loans from our
shareholders and private investors to finance our operations and growth.
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 Chart below summarizes our debt (see Note 6 - Notes Payable & Debt
Discounts of the Consolidated Financial Statements - Notes Payable and
Beneficial Conversions):
Terms Amount
----- ------
SHORT TERM NOTES PAYABLE TO SHAREHOLDERS:
- 10% Interest; principal of $156,926; monthly payments
of $4,396; convertible to common stock based on 75% of
average price; due on 5/30/2008, net of unamortized
discounted related to the debt discount of $54,041 $102,885
- 5% Interest; principal of $70,839; monthly payments of
$4,387; convertible to common stock based on 70% of
average price; due on 7/1/2009, net of unamortized
discount related to the debt discount of $43,438 27,401
- 5% Interest; principal of $12,003; monthly payments of
$1,283; convertible to common stock based on 70% of
average price; due on 7/1/2009, net of unamortized
discount related to the debt discount of $7,036 4,967
--------
TOTAL SHORT TERM NOTES PAYABLE TO SHAREHOLDERS $135,253
--------
LONG TERM NOTES PAYABLE TO SHAREHOLDERS:
- 5% Interest; principal of $25,943; monthly payments of
$4,387; convertible to common stock based on 70% of
average price; due on 7/1/2009, net of unamortized
discount related to the debt discount of $15,908 - $ 10,035
- 5% Interest; principal of $7,586; monthly payments of
$1,283; convertible to common stock based on 70% of
average price; due on 7/1/2009, net of unamortized
discount related to the debt discount of $4,447 3,139
- 10% Interest; principal of $30,629; convertible to
common stock based on 60% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $20,900 9,729
- 10% Interest; principal of $50,240; convertible to
common stock based on 60% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $50,040 200
--------
TOTAL LONG TERM NOTES PAYABLE TO SHAREHOLDERS $ 23,103
--------
LONG TERM NOTES PAYABLE:
- 10% Interest; principal of $50,000; convertible to
common stock based on 60% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $14,046 35,954
- 10% Interest; principal of $130,735; convertible to
common stock based on 50% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $95,712 35,023
- 10% Interest; principal of $32,017; convertible to
common stock based on 50% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $23,440 8,577
- 10% Interest; principal of $104,054; convertible to
common stock based on 50% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $80,824 23,230
- 10% Interest; principal of $10,642; convertible to
common stock based on 50% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $10,642 0
- 10% Interest; principal of $37,133; convertible to
common stock based on 60% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $25,080 12,053
16
- 10% Interest; principal of $61,870; convertible to
common stock based on 50% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $60,919 951
- 10% Interest; principal of $50,603; convertible to
common stock based on 60% of average price; due on
12/31/2009, net of unamortized discount related to the
debt discount of $50,557 46
--------
TOTAL LONG TERM NOTES PAYABLE $115,834
========
YEAR ENDED DECEMBER 31, 2007
As of December 31, 2007, the Company's current assets were $384,735 and its
current liabilities were $253,504, resulting in a working capital surplus of
$131,231. As of December 31, 2007, current assets were comprised of (i) $32,970
in cash; (ii) $350,000 deposit on the Suining Rose Top Project and (iii) $1,765
in other current assets.
As of December 31, 2007, current liabilities were comprised of (i) $102,885
in notes payable to stockholders; (ii) $40,825 in accounts payable and accrued
expenses and $77,426 of other amounts due to shareholders.
As of December 31, 2007, the Company's total assets were $1,696,158 and its
total liabilities were $392,441, with a net stockholder's equity of $1,303,717.
For the year ended December 31, 2007, net cash flows used in operating
activities were ($330,609) compared to net cash flows used in operating
activities of ($435,211) for the year ended December 31, 2006. The decrease of
$104,602 during the twelve-month period ended December 31, 2007 was primarily
due an increasing usage of non-cash stock based compensation for consulting and
related services as well as the liquidation of the Company's inventory of
die-cast collectibles and high performance brake fluid.
For the year ended December 31, 2007, net cash flows provided by investing
activities was $15,000 compared to net cash used by investing activities of
$1,171 during the year ended December 31, 2006. Cash outflows in 2007 were
related to the sale of the website of the discontinued operations in the motor
sports business.
For the twelve-month period ended December 31, 2007, net cash flows
provided by financing activities was $552,420 compared to net cash flows
provided by financing activities of $417,280 for the twelve-month period ended
December 31, 2006. Cash flows in 2007 consisted primarily of proceeds from the
issuance of common stock and the exercise of stock options partially offset by
principal repayments on notes payable. During 2006, the Company utilized a
portion of its financing cash inflows (consisting of proceeds from the issuance
of common stock and the exercise of stock options) to repay certain notes
payable, with the remainder used for operating and investing activities.
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.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, the Company does not have any
off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Company's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors. The
term "off-balance sheet arrangement" generally means any transaction, agreement
or other contractual arrangement to which an entity unconsolidated with the
Company is a party, under which the Company has (i) any obligation arising under
a guarantee, contract, derivative instrument or variable interest; or (ii) a
17
retained or contingent interest in assets transferred to such entity or similar
arrangement that serves as credit, liquidity or market risk support for such
assets.
ITEM 7. FINANCIAL STATEMENTS.
The Financial Statements of International Building Technologies Group, Inc.
are listed on the Index to Financial Statements as set forth on page F-2.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 8A. 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, 2007 that our disclosure controls
and procedures were not effective at the reasonable assurance level due to the
material weaknesses in our internal controls over financial reporting discussed
immediately below.
(b) 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.
18
Management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2007. 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 deficiencies which we have
assessed as material weaknesses during its assessment of our internal control
over financial reporting as of December 31, 2007:
1. We did not have formal policies governing certain accounting
transactions and financial reporting processes finalized as of
December 31, 2007;
2. We did not have adequate segregation of duties that were mitigated
over certain areas of our financial reporting process due to the size
of company that we were at December 31, 2007.
Although we are not required to disclosure significant deficiencies, we
have chosen to disclose those significant deficiencies, which if not corrected
in the next year may become material weaknesses.
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-KSB,
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.
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 did not maintain effective internal
control over financial reporting as of December 31, 2007.
MANAGEMENT'S REMEDIATION INITIATIVES
We are in the 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 a new director 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 targets;
3. Establish comprehensive formal general accounting policies and
procedures and require employees to sign off such policies and
procedures as documentation of their understanding of and compliance
with company policies;
19
4. Make all 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 anticipate that the above five initiatives will be at least partially,
if not fully, implemented by June 30, 2008. Additionally, we plan to test our
updated controls and remediate our deficiencies by December 31, 2008.
CONCLUSION
The above identified material weaknesses and significant deficiency did not
result in material audit adjustments to our 2007 financial statements. However,
it is reasonably possible that, if not remediated, 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-KSB fairly present in all material respects the Company's financial position,
results of operations and cash flows for the periods presented.
(c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
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.
ITEM 8B. OTHER INFORMATION.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF
THE EXCHANGE ACT
IDENTITY OF DIRECTORS AND EXECUTIVE OFFICERS AS OF MARCH 26, 2008
<TABLE>
<CAPTION>
Name Director Since Age Position
---- -------------- --- --------
<S> <C> <C> <C>
Kenneth Yeung* April 13, 2007 52 President, Chief Executive Officer, Chief
Financial Officer, Treasurer and Director
Peter Chin** May 21, 2007 60 Secretary and Director
</TABLE>
----------
* On March 14, 2007, Mr. Yeung was elected to the office of President of the
Company. On April 16, 2007, Mr. Yeung was elected to the additional offices
of Chief Financial Officer and Treasurer.
** On May 21, 2007, Mr. Chin was elected to the office of Corporate Secretary.
*** All Company officers serve at the pleasure of the Board of Directors. All
current members of the Board of Directors will serve as such until the next
annual meeting of stockholders or until their successors are duly elected.
20
KENNETH YEUNG. Mr. Yeung is currently the Chief Executive Officer of ia&d
Consultants, Inc., a Los Angeles based consulting firm engaged in planning,
architectural design, engineering and business consulting. As the CEO of ia&d
consultants, Inc., Mr. Yeung leads that company by developing business and
providing services such as planning, architectural design and engineering to its
clients worldwide and particularly in China. His company has completed numerous
projects including commercial and residential developments, hotels and resorts,
schools and recreational facility development. Currently, Mr. Yeung's company
has offices in three major cities in China. Mr. Yeung received a Bachelor of
Arts and Sciences from the University of Hawaii. From the mid-1990s, Mr. Yeung
has held senior executive positions with companies engaged in civil engineering,
building material manufacturing, planning, architecture and design.
PETER CHIN. Mr. Chin was born in Shanghai, China and raised in Hong Kong.
Mr. Chin studied abroad in both Sydney, Australia and the United States. Mr.
Chin has over 20 years of experience in the financial markets, focusing on
corporate finance, while advising companies in China and the United States. Mr.
Chin served on the board of directors of Golden Arrow Group of Companies, USA, a
hotel and land management company in China. Additionally, Mr. Chin served as
Chief Executive Officer and Chairman of PTS, Inc. and as Chief Executive Officer
of Disability Access Corporation. Mr. Chin consults with various publicly traded
and private held companies on executive and financial decisions.
DIRECTORSHIPS
No Director of the Company or person nominated or chosen to become a
Director holds any other directorship in any company with a class of securities
registered pursuant to Section 12 of the 1934 Act or subject to the requirements
of Section 15(d) of such Act or any other company registered as an investment
company under the Investment Company Act of 1940.
SIGNIFICANT EMPLOYEES
No other significant employees exist.
FAMILY RELATIONSHIPS
There are no family relationships between any officer, director or person
who will be nominated to serve on our Board of Directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, no present director, executive officer or
person nominated to become a director or an executive officer of the Company:
1. had a petition under the federal bankruptcy laws or any state
insolvency law filed by or against, or a receiver, fiscal agent or
similar officer appointed by a court for the business or property of
such person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation
or business association of which he was an executive officer at or
within two years before the time of such filing;
2. was convicted in a criminal proceeding or subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
3. was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or
otherwise limiting his involvement in any of the following activities:
(i) Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
21
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such
activity;
(ii) Engaging in any type of business practice; or
(iii)Engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation
of federal or state securities laws or federal commodities laws;
or
4. was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of an federal or state authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph
(3) (i), above, or to be associated with persons engaged in any such
activity; or
5. was found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and for which the judgment has not been reversed,
suspended or vacated.
AUDIT COMMITTEE FINANCIAL EXPERT AND IDENTIFICATION OF AUDIT COMMITTEE
The Company has no separately designated standing audit committee or other
committee performing similar functions. The Board of Directors acts as the audit
committee. None of the directors qualifies as an Audit Committee Financial
Expert.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of beneficial ownership on Form
3, changes in beneficial ownership on Form 4 and an annual statement of
beneficial ownership on Form 5, with the SEC. Such executive officers, directors
and greater than ten percent shareholders are required by SEC rules to furnish
the Company with copies of all such forms that they have filed.
Based on its review of the copies of such forms filed with the SEC
electronically, received by the Company and representations from certain
reporting persons, the Company believes that during the fiscal year ended
December 31, 2007, all the officers, directors and more than 10% beneficial
owners have complied with the above described filing requirements, except for
Mr. Peter Chin, who inadvertently did not file a Form 3 in June 2007, following
his election as a Director and Corporate Secretary . However, Mr. Chin filed his
Form 3 on February 15, 2008. Mr. Chin also filed his Form 5 on February 15, 2008
(one day late). Management believes that Mr. Chin's late filings of his Forms 3
and 5 were inadvertent.
CODE OF ETHICS
The Company has adopted a Code of Ethics applicable to its employees and
officers, including its principal executive officer, principal financial
officer, principal accounting officer or controller and any other persons
performing similar functions. The Code of Ethics will be provided free of charge
by the Company to interested parties upon request. Requests should be made in
writing and directed to the Company at the following address: 1151 Harbor Bay
Parkway, Suite 202, Alameda, California 94502. A copy of the Code of Ethics is
also attached as Exhibit 14 to this filing.
22
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the aggregate compensation paid by the
Company to the above named executive officers of the Company for services
rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth 2007 $100,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 3,096(1) $103,096
Yeung, 2006 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
President 2005 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
and CEO
Peter Chin, 2007 $ 0 $ 0 $50,000(2) $ 0 $ 0 $ 0 $ 0 $ 50,000
Director 2006 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
2005 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
David 2007 $ 46,500 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 46,500
Keaveney, 2006 $186,000(4) $ 0 $ 0 $ 0 $ 0 $ 0 $55,565(2) $241,565
Former CEO(3) 2005 $114,000 $11,000(6) $ 0 $ 0 $ 0 $ 0 $52,801(7) $177,801
Rhonda 2007 $ 15,000(8) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 15,000
Keaveney, 2006 $ 60,000(5) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 60,000
Former COO(3) 2005 $ 40,000 $11,000(6) $ 0 $ 0 $ 0 $ 0 $ 0 $ 51,000
</TABLE>
----------
(1) During the fiscal year ended December 31, 2007, Mr. Kenneth Yeung received
cash salary of $100,000 and a car allowance of $3,096 (pursuant to his
employment agreement with the Company).
(2) On December 12, 2007, the Company issued 50,000 shares of Series D
Preferred Stock to Mr. Peter Chin as compensation for serving as Corporate
Secretary and Director of the Company during 2007.
(3) Mr. David Keaveney & Mrs. Ronda Keaveney served as the Company's Chief
Executive Officer and Chief Operating Officer, respectively, from January
1, 2007 until their resignations on April 16, 2007.
(4) On September 25, 2004 Mr. David Keaveney was elected to the Board of
Directors and to the offices of President, Chief Executive Officer and
Chief Financial Officer of the Company. During the fiscal year ended
December 31, 2006 Mr. David Keaveney received a cash salary of $116,230.82
and received 200,000 shares of the Company's Series C Preferred Stock in
lieu of $10,000 in accrued, but unpaid salary. Included in this total is
$59,769.18 of accrued, but unpaid salary due to Mr. David Keaveney as of
December 31, 2006.
(5) During the fiscal year ended December 31, 2006, Mr. David Keaveney received
(pursuant to his employment agreement with the Company) an automobile
allowance of $21,225.78, $24,000 for renting a home office to the Company,
$9,913.85 in medical reimbursements and a $425.28 life insurance premium.
Mrs. Rhonda Keaveney, as the wife of Mr. David Keaveney, was an obvious
beneficiary of the automobile allowance, home office rent and medical
expenses attributed to Mr. David Keaveney and as described in this
footnote.
23
(6) On September 7, 2005, the Company issued 1,000,000 shares of restricted
common stock to each of the three members of the Board of Directors,
including Mr. David Keaveney and Mrs. Rhonda Keaveney. These shares were
valued at $.011 per share.
(7) During the fiscal year ended December 31, 2005, Mr. David Keaveney received
(pursuant to his employment agreement with the Company) an automobile
allowance of $17,310, $24,000 for renting a home office to the Company,
$11,431 in medical expense reimbursements and $60 for a life insurance
premium.
(8) On October 13, 2004, Mrs. Rhonda Keaveney, wife of Mr. David Keaveney, was
elected to the Board of Directors and to the office of Secretary of the
Company. In March 2005, Mrs. Rhonda Keaveney was elected to the office of
Chief Operating Officer of the Company. During the fiscal year ended
December 31, 2006, Mrs. Rhonda Keaveney received a cash salary of $36,923.
Additionally, in 2006, Mrs. Rhonda Keaveney received $15,000 of the $35,000
of accrued salary from 2005. Included in this total is $44,227 of accrued,
but unpaid as of December 31, 2006.
EMPLOYMENT CONTRACTS
On May 21, 2007, the Company entered into a three year Employment Agreement
with Kenneth Yeung, its President and Chief Executive Officer. The Employment
Agreement was effective as of May 1, 2007, and expires on April 30, 2010, unless
earlier terminated as provided in the Employment Agreement. The Employment
Agreement provides for the following base compensation of Mr. Yeung:
May-December 2007 $12,500 per month
January-December 2008 $15,000 per month
January-December 2009 $17,500 per month
January-April 2010 $20,000 per month
In addition to the above base compensation, Mr. Yeung is entitled to the
following compensation benefits:
* Participation in the Company's Stock Option Plan;
* An undesignated monthly automobile allowance ; and,
* Participation in group life, hospitalization or disability insurance
programs, health programs, pension plan similar benefit plan or other
"fringe benefits" of the Company.
The Company also granted Mr. Yeung the following additional rights with
respect to his 200,000 shares of Series C Preferred Stock:
1. Eligibility for conversion to Company common stock on April 30, 2009,
unless Mandatory Conversion is required for any reason as set forth
herein below.
2. Upon written request from the Company, each share of Series C
Preferred Stock will convert to $5.00 worth of the Company common
stock on a mandatory basis, which will be determined by taking the
average closing bid price ("ACBP") for the common stock for the 20
days prior to conversion. For example, if the ACBP is $0.10, Mr. Yeung
will receive 50 shares of common stock for each share of Series C
Preferred Stock. If the ACBP is $1.00, Mr. Yeung will receive five
share of common stock for each share of Series C Preferred Stock.
OTHER CONTRACTS
None.
24
STOCK OPTIONS AND WARRANTS
In March 2007, the Company's 2007 Employee and Consultant Stock Incentive
Plan was adopted and approved by the Board of Directors. The Plan authorized
1,000,000 shares of common stock of the Company to be granted to employees,
officers, consultants and directors of the Company. The Company filed a Form S-8
on March 20, 2007, related to this Plan. All 1,000,000 shares covered by the
Plan have been issued and there are no options outstanding under the Plan.
In June 2007, the Company's 2007 Consultants Retainer Stock Plan was
adopted and approved by the Board of Directors. The Plan authorized 2,900,000
shares of common stock of the Company to be granted to employees, officers,
consultants and directors of the Company. The Company filed a Form S-8 on June
1, 2007, related to this Plan. All 2,900,000 shares covered by the Plan have
been issued and there are no options outstanding under the Plan.
In September 2007, the Company's 2007 Consultants Retainer Stock Plan No. 2
was adopted and approved by the Board of Directors. The Plan authorized
9,000,000 shares of common stock of the Company to be granted to employees,
officers, consultants and directors of the Company. The Company filed a Form S-8
on September 27, 2007, related to this Plan. All 9,000,000 shares covered by the
Plan have been issued and there are no options outstanding under the Plan.
In December 2007, the Company's 2007 Consultants Retainer Stock Plan No. 3
was adopted and approved by the Board of Directors. The Plan authorized
15,000,000 shares of common stock of the Company to be granted to employees,
officers, consultants and directors of the Company. The Company filed a Form S-8
on December 13, 2007, related to this Plan. There are currently 2,274,693 shares
covered by the Plan that have not been issued and there are no options
outstanding under the Plan.
OPTION/SAR GRANTS TABLE
There were no stock options/SARS granted under the Company's stock option
plans to executive officers and directors during fiscal 2007 or 2006.
AGGREGATE OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
There were no exercises of stock options/SAR by executive officers during
fiscal 2007 or 2006.
LONG-TERM INCENTIVE PLAN AWARDS
There were no long-term incentive plan awards made in the last two fiscal
years.
COMPENSATION OF DIRECTORS
During 2007, the Company had no formal or standard compensation
arrangement with members of its Board of Directors. However, Director Peter Chin
received 50,000 shares of Series D Preferred Stock as compensation for serving
as Corporate Secretary and Director.
REPRICING OPTIONS
During the fiscal year ended December 31, 2007, the Company did not reprice
any stock options.
25
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company has three (3) classes of voting securities outstanding (Common
Stock, Series A Preferred Stock and Series C Preferred Stock). The following
table sets forth security ownership information as of the close of business on
March 26, 2008, for any person or group, known by the Company to own more than
five percent (5%) of the Company's common stock and Series C Preferred Stock. No
table is included for the Company's Series A Preferred Stock due to the fact
that only 96 shares of same are outstanding and such shares represent a DE
minimus number of votes that could be cast on any matter presented for a vote of
stockholders.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Title Of Beneficial Percent of
of Beneficial Owner Class Owner Class
------------------- ----- ----- -----
<S> <C> <C> <C>
Kenneth Yeung Series C Preferred 200,000 100%(1)
1151 Harbor Bay Parkway, Ste 202
Alameda, CA 94502
</TABLE>
----------
1. The Series C Preferred Stock has voting rights of 3,000 votes per share, so
that Mr. Yeung has the right to vote 600,000,000 of the 713,030,374 votes
available to Mr. Yeung and the holders of our common stock, thereby giving
Mr. Yeung controlling voting rights in the Company.
(b) SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth security ownership information as of the
close of business on March 26, 2008, of all directors and all executive officers
listed in the "Summary Compensation Table" set forth herein, and all directors
and executive officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Title Of Beneficial Percent of
of Beneficial Owner Class Owner Class
------------------- ----- ----- -----
<S> <C> <C> <C>
Kenneth Yeung
1151 Harbor Bay Parkway, Suite 202 Series C Preferred Stock 200,000 100.00%
Alameda, CA 94502 Common Stock 0 0%
Peter Chin
1151 Harbor Bay Parkway, Suite 202 Series C Preferred Stock 50,000 100.00%
Alameda, CA 94502 Common Stock 0 0%
Officers and Directors as a Group (1 Preferred Stock C 200,000 100.00%
Officers and Directors as a Group (1 Preferred Stock D 50,000 100.00%
person) Common Stock 0 0%
</TABLE>
(c) CHANGES IN CONTROL
Since December 31, 2006, the Company has experienced one change in control
of its voting securities:
1. As discussed under "Material Recent Development," above, on March 14,
2007, Mr. Keaveney sold his 200,000 shares of Series C Preferred to
Kenneth Yeung for a purchase price of $10,000 (the exact price
previously exchanged by Mr. Keaveney when he acquired such shares by
canceling $10,000 of accrued, but unpaid, compensation due to Mr.
Keaveney from the Company). As a result of Mr. Yeung's acquisition of
26
the Series C Preferred Stock from Mr. Keaveney, Mr. Yeung is
considered a "control person" of the Company under applicable SEC
regulations. Moreover, Mr. Yeung was elected to the office of
President of the Company on March 14, 2007. In addition, David W.
Keaveney resigned from his current offices as Chief Executive Officer,
Chief Financial Officer and Director of the Company. Rhonda Keaveney
also resigned from her offices as Chief Operating Officer, Secretary
and Director of the Company.
(d) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
<TABLE>
<CAPTION>
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
warrants, and rights warrants and rights reflected in column (a))
-------------------- ------------------- ------------------------
<S> <C> <C> <C>
Equity compensation plans
approved by security holders 0 n/a 0
Equity compensation plans not
approved by security holders 0 n/a 2,274,693
Total 0 n/a 2,274,693
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
During 2007, the Company had no formal or standard compensation arrangement
with members of its Board of Directors.
During 2007 and as of the date of this annual report, the Company's two
directors, Kenneth Yeung and Peter Chin, were and are not independent directors.
27
ITEM 13. EXHIBITS.
List of Exhibits attached or incorporated by reference pursuant to Item 601
of Regulation S-B
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.
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.
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.
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.
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.
28
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* Stock Sale and Purchase Agreement dated May 2, 2007, by, between and
among Axia Group, Inc, International Building Technologies, Inc. and
the Company (Exhibit 10.1 to the Company's Current Report on Form
8-K filed with the Commission on May 9, 2007).
10.3* Convertible Note dated May 2, 2007, issued by the Company to Axia
Group, Inc. (Exhibit 10.2 to the Company's Current report on form
8-K filed with the Commission on May 9, 2007).
10.4* Exclusive License Agreement dated May 2, 2007, by and between Axia
Group, Inc. and the Company (Exhibit 10.3 to the Company's Current
Report on Form 8-K filed with the Commission on May 9, 2007).
10.5* 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).
10.6* Amendment dated September 25, 2007, to the Stock Sale and Purchase
Agreement by and between Axia Group, Inc. and the Company (Exhibit
10.1 to the Company's Current Report on Form 8-K filed with the
Commission on September 28, 2007).
10.7* 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).
10.8** Employment Agreement between the Company and Kenneth Yeung dated May
21, 2007, effective May 1, 2007.
10.9* The Company's 2007 Employee and Consultant Stock Incentive Plan
(Exhibit 4.1 to Registration Statement on Form S-8 filed with the
Commission on March 20, 2007).
10.10* The Company's 2007 Consultants Retainer Stock Plan (Exhibit 4.1 to
Registration Statement on Form S-8 filed with the Commission on June
1, 2007).
10.11* The Company's 2007 Consultants Retainer Stock Plan No. 2 (Exhibit
4.1 to Registration Statement on Form S-8 filed with the Commission
on September 27, 2007).
10.12* The Company's 2007 Consultants Retainer Stock Plan No. 3 (Exhibit
4.1 to Registration Statement on Form S-8 filed with the Commission
on December 13, 2007).
14** Code of Ethics
21** Subsidiaries of the Company
31.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C.
Section 1350
31.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C.
Section 1350
32.1** 906 Certification of Principal Executive Officer
32.2** 906 Certification of Principal Financial Officer
----------
* Exhibits incorporated herein by reference. File No. 0-32323.
** Filed herewith
29
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent accountants during the fiscal years ending
December 31, 2007 and 2006 were HJ & Associates, LLC
1. Audit Fees. During the fiscal years ended December 31, 2007 and 2006,
the aggregate fees billed by the Company's auditors, for services
rendered for the audit of our annual financial statements and the
review of the financial statements included in our quarterly reports
on Form 10-QSB and for services provided in connection with the
statutory and regulatory filings or engagements for those fiscal
years, were $70,434 and $24,000, respectively.
2. Audit-Related Fees. During fiscal years ended December 31, 2007 and
2006 our auditors did not receive any fees for any audit-related
services other than as set forth in paragraph (1) above.
3. Tax Fees. During the fiscal years ended December 31, 2007 and 2006,
the aggregate fees billed by the Company's auditors for tax related
services amounted to $817 and $2,120 respectively.
4. All Other Fees. None.
5. Audit Committee's Pre-Approval Policies and Procedures. The Company
had no audit committee during the fiscal years ended December 31, 2007
and 2006; hence, there were no pre-approval policies or procedures in
effect during such fiscal years.
30
SIGNATURES
In accordance with 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.
Dated: March 31, 2008 /s/ Kenneth Yeung
------------------------------------------
By: Kenneth Yeung
Its: President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Dated: March 31, 2008 /s/ Kenneth Yeung
------------------------------------------
By: Kenneth Yeung,
Its: President, Chief Executive Officer, Chief
Financial Officer, Treasurer and Director
(Principal Executive Officer, Principal
Financial Officer and Principal Accounting
Officer)
Dated: March 31, 2008 /s/ Peter Chin
------------------------------------------
By: Peter Chin
Its: Secretary and Director
31
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
FORMERLY MOTORSPORTS EMPORIUM, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2007 AND 2006
CONTENTS
Report of Independent Registered Public Accounting Firm.................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit).................. F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to the Consolidated Financial Statements............................. F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
International Building Technologies Group, Inc.
and Subsidiaries
(A Development Stage Company)
Alameda, California
We have audited the accompanying consolidated balance sheets of International
Building Technologies Group, Inc. and Subsidiaries (A Development Stage
Company), as of December 31, 2007 and 2006, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 2007 and 2006 and since re-entering the development
stage on April 1, 2007 through December 31, 2007. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
International Building Technologies Group, Inc. and Subsidiaries (A Development
Stage Company) as of December 31, 2007 and 2006, and the results of their
operations and their cash flows for the years then ended and since re-entering
the development stage on April 1, 2007 through December 31, 2007, in conformity
with U.S. generally accepted accounting principles.
We were not engaged to examine management's assertion about the effectiveness of
International Building Technologies Group, Inc. and Subsidiaries' (A Development
Stage Company) internal control over financial reporting as of December 31, 2007
and accordingly, we do not express an opinion thereon.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered recurring losses and
has experienced negative cash flows from operations, which raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to those matters are also described in Note 3 to the
consolidated financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ HJ Associates & Consultants, LLP
------------------------------------------
HJ Associates & Consultants, LLP
Salt Lake City, Utah
March 29, 2008
F-2
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(FORMERLY MOTORSPORTS EMPORIUM, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
2007 2006
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 32,970 $ 7,200
Deposit on Suining Rosetop Project 350,000 --
Other current assets 1,765 --
----------- -----------
Total current assets 384,735 7,200
----------- -----------
Fixed assets, net of depreciation 2,766 --
Other assets 5,380 --
Assets held for sale -- 42,106
Goodwill 1,303,277 --
----------- -----------
Total assets $ 1,696,158 $ 49,306
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accounts payable and accrued expenses $ 40,825 $ --
Accrued expenses - related parties 77,426 114,000
Notes payable to shareholders, net 135,253 245,000
----------- -----------
Total current liabilities 253,504 359,000
----------- -----------
Liabilities held for sale -- 273,454
Long term notes payable, net 115,834 --
Long term notes payable to shareholders, net 23,103 121,920
----------- -----------
Total long term liabilities 138,937 395,374
----------- -----------
Total liabilities 392,441 754,374
----------- -----------
COMMITMENT & CONTINGENCY -- --
MINORITY INTEREST -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred A stock, $250 par value, 10,000 shares authorized;
96 shares issued and outstanding 24,000 24,000
Preferred C stock, no par value, 1,000,000 shares authorized;
200,000 shares issued and outstanding 10,000 10,000
Preferred D stock, $.01 par value, 10,000,000 shares authorized;
50,000 shares issued and outstanding 500 --
Preferred E stock, $.01 par value, 10,000,000 shares authorized;
350,000 shares issued and outstanding 3,500 --
Common stock; $.001 par value, 500,000,000 shares authorized;
68,198,914 and 2,979,355 issued and outstanding 68,199 2,979
Additional paid-in capital 7,773,064 4,623,949
Stock subscription receivable -- (1,305)
Accumulated deficit - Prior to reentering development stage (5,534,336) (5,364,691)
Accumulated deficit - From inception of reentering development
stage on 4/1/2007 (1,041,137) --
Other comprehensive income (73) --
----------- -----------
Total stockholders' equity (deficit) 1,303,717 (705,068)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 1,696,158 $ 49,306
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC.
(FORMERLY MOTORSPORTS EMPORIUM, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative Since
Year Ended December 31, Reentering
----------------------------------- Deveplopment Stage
2007 2006 4/1/2007 - 12/31/2007
------------ ------------ ---------------------
<S> <C> <C> <C>
Retail sales $ -- $ -- $ --
Cost of sales -- -- --
------------ ------------ ------------
Gross profit -- -- --
------------ ------------ ------------
Operating expenses:
Selling, general and administrative 666,607 -- 666,607
Depreciation and amortization 3,504 -- 3,504
------------ ------------ ------------
Total operating expenses 670,111 -- 670,111
------------ ------------ ------------
Operating loss (670,111) -- (670,111)
------------ ------------ ------------
Other income (expense):
Interest income 357 -- 357
Interest expense (309,585) -- (390,783)
Rapid Funding settlement expense -- -- --
Gain on reversal of contingency accrual -- -- --
Loss on extinguishment of debt (70,843) -- 10,354
Loss on Disposal of Assets -- -- --
Minority interest in net loss of subsidiary 15,000 -- 15,000
Other income (expense) 3,050 -- 3,051
------------ ------------ ------------
Total other income (expense) (362,021) -- (362,021)
------------ ------------ ------------
Loss from continuing operations (1,032,132) -- (1,032,132)
------------ ------------ ------------
Discontinued operations:
Income (loss) from operations of discontinued business (199,378) (1,223,863) (20,063)
Income (loss) on disposal of assets 70,728 34,152 61,058
------------ ------------ ------------
Income (loss) on discontinued operations (128,650) (1,189,711) 40,995
------------ ------------ ------------
Net loss (1,160,782) (1,189,711) (991,137)
Preferred dividend (50,000) -- (50,000)
------------ ------------ ------------
Net loss attributable to common share (1,210,782) (1,189,711) (1,041,137)
------------ ------------ ------------
Other comprehensive income
Foreign Currency Translation (73) -- (73)
------------ ------------ ------------
Comprehensive loss $ (1,210,855) $ (1,189,711) $ (1,041,210)
============ ============ ============
Net loss per common share - basic and diluted
Continuing operations $ (0.04) $ 0.00
============ ============
Discontinued operations $ (0.01) $ (0.65)
============ ============
Net loss per common sha]]> |