ITEM 1. 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 of 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.
As previously reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2010, we amended our Articles of Incorporation by increasing the number of shares of our authorized capital from four billion shares to six billion shares. As a result of this amendment, we now have 5,950,000,000 shares of common stock authorized and 50,000,000 shares of preferred stock authorized.
BUSINESS TRANSFORMATION
The Company 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.
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 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.
THE COMPANY BUSINESS
The Company is in the business of manufacturing, marketing and providing equipment and materials to the building and construction industries. The Company is dedicated to providing unique and sustainable construction methods that can be used in developing and developed countries around the world.
The Company is a developer and provider of a superior panel based building technology. Our panel technology is superior to many traditional building methods, offers greater strength and resistance to winds and hurricanes, as well as providing a sustainable building solution that does not utilize timber, provides high insulation values and is resistant to bugs, mold and rot. See the discussion under "IBT Panel Technology," below.
Our panel technology 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.
Drawing on decades of experience in the construction industry in China and other countries in the Far East, the Company is seeking to develop new business in China, as well as establishing a manufacturing facility for our equipment and materials to customers throughout the world. We plan to manufacture equipment for our own projects, as well as exporting equipment and materials to customers throughout the world.
The Company has also been working with investors to establish a Company-operated panel production factory in China's Sichuan Province. This plan has been received with great interest by the Sichuan Construction Bureau, the government authority in governing major construction projects in rebuilding the earthquake region in Sichuan Province.
IBT PANEL TECHNOLOGY
As stated above, the Company is a developer and provider of a superior panel based building technology. Our panel technology is superior to many traditional building methods, offers greater strength and resistance to winds and hurricanes, as well as providing a sustainable building solution that does not utilize timber, provides high insulation values and is resistant to bugs, mold and rot.
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.
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 panel 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.
FHH SINO NEW ENERGIES CO., LTD.
As previously reported in our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 2, 2010, the Company signed a non-binding Letter of Intent on May 25, 2010, to merge with FHH Sino New Energies Co., Ltd., a Chinese company ("FHH Sino"), located in Weihai, Shandong Province of China. FHH Sino is a petroleum storage company that offers petroleum storage tanks and facilities for rental to the petroleum importers/exporters is Weihai, a coastal city in Shandong Province of Northern China.
According to a recent appraisal prepared by an accounting firm in accordance with China accounting standards, the Chinese company has net assets worth RMB 370 million (approximately US $54,000,000) and will generate annual revenues of RMB 100 million (approximately US $14, 000,000) after its completion of construction of Phase I and execution of rental contracts business in early 2011.
FHH Sino is currently in construction of its Phase I and has completed all the foundation and infrastructure for its 8 storage tanks. This infrastructure includes the supporting facilities and pipeline connecting to the harbor, which is just 600 meters away from the storage facilities.
FHH Sino provides petroleum storage tanks for rental to petroleum companies such as Sinochem and Sino-Petro, as well as being engaged in the business of local fuel oil distribution. FHH Sino has its Phase II planned and has received official approval from the Chinese authorities for additional storage tanks of 450,000 m3 and expects to commence construction of Phase II in late 2011.
The Company and FHH Sino are working together on the related merger agreements and auditors have been engaged to commence an audit of FHH Sino in preparation for the merger.
The Letter of Intent is subject to (i) the execution of a mutually acceptable definitive merger or exchange agreements: (ii) there being no material adverse change in the financial condition, business or prospects of the Company prior to closing; (iii) final investment committee approval; (iv) local government and regulatory approvals; (v) extension of existing employment contracts for the Company's management; and (vi) and a guarantee of buy-back or exchange of common stock for preferred stock (not to exceed U.S. $2,300,000) currently held my the Company's officers or investors.
Upon signing of the Letter of Intent, FHH Sino made a U.S. $230,000 good faith deposit with the Company.
Our President, Kenneth Yeung, has been working diligently on this transaction and we hope to close this transaction in the third quarter of this year. However, we can provide no assurance that this transaction will, in fact, come to fruition, as it is dependent upon a number of factors that may not occur or that we may not be able to control.
HOW TO CONTACT US
The Company's principal executive offices are located at 17800 Castleton Street, Suite 638, City of Industry, California 91748. Our telephone number is (626) 581-8500 and our facsimile number is (626) 626-7603.
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 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-K and quarterly reports on Form 10-Q 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 2008 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 Item 9A, below for a discussion our internal controls and procedures).
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.
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 30, 2011, we had one full time employee, Kenneth Yeung, who is our President and Chief Executive Officer. We believe that our relations with our employee are good. Our employee is not represented by a union or covered by a collective bargaining agreement.
REPORTS TO SECURITY HOLDERS
The public may view and obtain copies of the Company's reports, as filed with the Securities and Exchange Commission, at the SEC's Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the Public Reference Room is available by calling the SEC at 1-800-SEC-0330. Additionally, copies of the Company's reports are available and can be accessed and downloaded via the internet on the SEC's internet site at http://www.sec.gov.
ITEM 1A.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company and are not required to provide the information required by this item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2.
ITEM 2. PROPERTIES.
The Company does not own any real estate.
On February 20, 2009, the Company relocated its principal executive offices to 17800 Castleton Street, Suite 638, City of Industry, California 91748. The new offices are being leased under a verbal sublease from Allied Consultants, Inc., a company owned by Nelson Yeung, the brother of our President, Kenneth Yeung. Kenneth Yeung has no financial or other interest in Allied Consultants, Inc. The sublease rental is $3,250 per month, which covers access to and use of office furniture and equipment owned by Allied Consultants, Inc. The sublease is a month to month lease.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not the subject of any pending legal proceedings to the knowledge of management, nor is there any presently contemplated against the Company by any federal, state, or local government agency. Further, to the knowledge of management, no director or executive officer is a party to any action in which his interest is adverse to the Company.
ITEM 4.
ITEM 4. (REMOVED AND RESERVED).
Not applicable
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Until February 23, 2011, the Company's Common Stock was quoted on the Over-the-Counter Bulletin Board under the symbol "INBG.OB." For reasons unknown to us, on February 23, 2011, the major market maker for our Common Stock stopped quoting our Common Stock, and stopped quoting stocks of numerous other OTC Bulletin Board companies without even having the courtesy of advising all of these companies in advance. As a result of such market maker's actions, our Common Stock and the stocks of many other companies, were dropped from the OTC Bulletin Board quotation system. We are in the process of having a new market maker file a Form 211 on our behalf with FINRA so that our Common Stock will once again be quoted on the OTC Bulletin Board. 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. These quotations reflect inter-dealer prices without retail mark-up, markdown, or commissions, and may not reflect actual transactions.
Fiscal 2010 High Low ----------- ---- --- First Quarter (1) $.0001 $.0001 Second Quarter (1) $.0007 $.0001 Third Quarter (1) $.0005 $.0001 Fourth Quarter (1) $.0003 $.0001
Fiscal 2009 High Low ----------- ---- --- First Quarter (2) $0.0008 $0.0001 Second Quarter (1) $0.0004 $0.0001 Third Quarter (1) $0.0002 $0.0001 Fourth Quarter (1) $0.0002 $0.0001
---------- (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 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 28, 2011, there were approximately 359 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, six shareholders of record of the Company's Series D Preferred Stock, two shareholders of record of the Company's Series E Preferred Stock and one shareholder of record of the Company's Series F 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.
RECENT ISSUANCE OF UNREGISTERED SECURITIES
On January 10, 2011, the Company issued 50,000 shares of Series D Preferred Stock to Allied Consultants, Inc. 401 (k) Plan Trust for $1 per share with a total cash payment of $50,000.
During 2010, the Company issued the following common stock without registration under the Securities Act of 1933, as amended, that have not been previously included in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K:
Number of Aggregate Nature of Date of Issue Shares Issued Sales Price Transaction ------------- ------------- ----------- ----------- 10/26/2010 84,533,333 $12,680 Conversion of Series D Preferred Stock 11/17/2010 130,098,246 $18,538 Conversion of Debt 11/19/2010 2,320,966 $ 337 Conversion of Debt 11/19/2010 2,348,483 $ 326 Conversion of Debt 11/19/2010 7,687,719 $ 1,095 Conversion of Debt 11/23/2010 115,684,615 $15,000 Conversion of Series D Preferred Stock
The Company did not utilize or engage a principal underwriter in connection with any of the above securities transactions. The above securities were only offered and sold to "accredited investors" as that term is defined in Rule 501 of Regulation D, promulgated under the Securities Act of 1933, as amended. Management believes the above shares of common stock were issued pursuant to the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.
ISSUER PURCHASES OF EQUITY SECURITIES
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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 our 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 are quoted on the OTC Bulletin Board under the symbol "INBG.OB."
Our principal executive offices are located at 17800 Castleton Street, Suite 638, City of Industry, CA 91748. Our telephone number is (626) 581-8500 and our facsimile number is (626) 626-7603. More information regarding our products and the Company is available on our website at www.ibtgi.com.
EXECUTIVE OVERVIEW
The Company is in the business of manufacturing, marketing and providing equipment and materials to the building and construction industries. The Company is dedicated to providing unique and sustainable construction methods that can be used in developing and developed countries around the world.
The Company is a developer and provider of a superior panel based building technology. Our panel technology is superior to many traditional building methods, offers greater strength and resistance to winds and hurricanes, as well as providing a sustainable building solution that does not utilize timber, provides high insulation values and is resistant to bugs, mold and rot.
Our panel technology 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.
Drawing on decades of experience in the construction industry in China and other countries in the Far East, the Company is seeking to develop new business in China, as well as establish a manufacturing facility for its equipment and materials. We plan to manufacture equipment for our own projects, as well as exporting equipment and materials to customers throughout the world.
The Company has also been working with investors to establish a Company operated panel production factory in China's Sichuan Province. This plan has been received with great interest by the Sichuan Construction Bureau, the government authority in governing major construction projects in rebuilding the earthquake region in Sichuan Province.
MATERIAL RECENT DEVELOPMENTS
RE-ENTERING DEVELOPMENT STAGE
On April 1, 2007, the Company re-entered the development stage. The Company has changed the focus of its business to building and constructing lightweight panels. The Company has devoted most of its efforts to establishing this new business, raising capital, establishing sources of supply, acquiring property, plant, equipment, and other operating assets.
RESULTS OF OPERATIONS - THE YEAR ENDED DECEMBER 31, 2010 COMPARED TO THE YEAR ENDED DECEMBER 31, 2009
Since discontinuing the prior business and re-entering the development stage as of April 1, 2007 the Company's results of operations has changed. There are no revenues during the current development stage as we are in the process of starting our manufacturing process.
For the year ended December 31, 2010, Operating Expenses for current operations totaled $503,480 is more than the year ended December 31, 2009's Operating Expenses of $480,513. The increase of $22,967 in Operating Expenses
between years ended 2010 and 2009 was mostly attributed to the increase in salary and travel expenses.
One of the significant changes in our results of operations is interest Expense which was $87,302 for the year ended December 31, 2010 and for the year ended December 31, 2009, Interest Expense was $1,402,005. The $1,314,703 drop in Interest Expense was due to the change in beneficial conversion feature of the notes. There is also a significant change in the fair value of derivative. As of December 31, 2010, change in fair value of derivative resulting in an increase from $32,133 to $1,303,727. This increase in the fair value of derivative is resulted from the liability of derivative that was less than that at December 31, 2009. The change in the fair value of derivative is resulted from the common stock equivalents of the Company on all convertible debentures and preferred stock exceeded the total common stock available for issuance by approximately by 26,373,626,374 shares. The Company's Chief Executive Officer, Kenneth Yeung, hold 3,000,000 shares of Series C Preferred Stock that are convertible into 26,373,626,374 common shares of the Company. Unless and until there is enough authorized common stock available to cover all common stock equivalents, Mr. Yeung will not convert any of his preferred shares. Furthermore, the stock is only convertible upon management's discretion. Management currently does not intend on converting such stock. Also, warrant options are not included in common stock equivalents since the exercise price of $0.25 for the warrant exceeds the fair value of common stock of $0.0004 per share on December 31, 2010. The remaining common stock equivalent of 2,030,886,444 shares has been accounted for as a derivative liability. The fair value of the derivative of $802,102 was determined by utilizing the Black-Scholes valuation model.
LIQUIDITY AND CAPITAL RESOURCES
Our future success and viability is primarily dependent upon our ability to increase operating cash flows and develop new business opportunities.
During the next 12 months, the Company's foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with reviewing or investigating any potential business ventures.
Additionally, we may experience a cash shortfall and be required to raise additional capital. In the year ended December 31, 2010 we relied on funds from the investor deposit and the issuance of preferred stock. Management may raise additional capital through future public or private offerings of our stock or through loans from private investors, although there can be no assurance that we will be able to obtain such financing. Our failure to do so could have a material and adverse affect upon us and our shareholders.
The Company has entered into negotiation with a private owned company in China for a possible merger and joint venture and will announce the terms and condition of such merger or joint venture if the transaction proceeds and when there is a signed LOI, MOU or a binding agreement.
The chart below summarizes our debt (see Note 4 - Notes Payable & Debt Discounts of the Consolidated Financial Statements - Notes Payable and Beneficial Conversions):
Terms Amount ----- ------ SHORT TERM NOTES PAYABLE TO SHAREHOLDERS: 12% Interest; principal of $6,597; convertible to common stock based on 75% of average price; due on 9/3/2009, net of unamortized discount related to the debt discount of $0 $ 6,597 12% Interest; principal of $293; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 293 12% Interest; principal of $11,000; convertible to common stock based on 75% of average price; due on 10/9/2009, net of unamortized discount related to the debt discount of $0 11,000
12% Interest; principal of $31,925; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 31,925 12% Interest; principal of $10,269; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 10,269 12% Interest; principal of $12,500; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 12,500 12% Interest; principal of $15,000; convertible to common stock based on 75% of average price; due on 8/1/2009, net of unamortized discount related to the debt discount of $0 15,000 12% Interest; principal of $17; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 17 12% Interest; principal of $5; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 5 12% Interest; principal of $231; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 231 12% Interest; principal of $9,458; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 9,458 12% Interest; principal of $37,133; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 37,133 12% Interest; principal of $5,000; convertible to common stock based on 75% of average price; due on 10/28/2009, net of unamortized discount related to the debt discount of $0 5,000 12% Interest; principal of $10,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $3,271 10,000 12% Interest; principal of $13,000; convertible to common stock based on 75% of average price; due on 8/1/2009, net of unamortized discount related to the debt discount of $0 13,000 12% Interest; principal of $7,209; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 7,209 12% Interest; principal of $23,847; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 23,847 12% Interest; principal of $20,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 20,000 12% Interest; principal of $25,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 25,000 12% Interest; principal of $70,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 70,000 12% Interest; principal of $36,867; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 36,867
12% Interest; principal of $73,975; convertible to common stock based on 75% of average price; due on 7/1/2009, net of unamortized discount related to the debt discount of $0 73,975 12% Interest; principal of $1,112; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 1,112 12% Interest; principal of $10,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 10,000 12% Interest; principal of $15,000; convertible to common stock based on 75% of average price; due on 10/29/2009, net of unamortized discount related to the debt discount of $0 15,000 12% Interest; principal of $50,240; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 50,242 -------- TOTAL SHORT TERM NOTES PAYABLE TO SHAREHOLDERS $495,679 ======== SHORT TERM NOTES PAYABLE: 12% Interest; principal of $50,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 50,000 12% Interest; principal of $50,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 50,000 12% Interest; principal of $15,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 15,000 12% Interest; principal of $10,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 10,000 12% Interest; principal of $20,500; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 20,500 -------- TOTAL SHORT TERM NOTES PAYABLE $145,500 ========
YEAR ENDED DECEMBER 31, 2010
As of December 31, 2010, the Company's current assets were $2,616 and its current liabilities were $2,381,687, resulting in a working capital deficit of $2,377,071. As of December 31, 2010, current assets were comprised of (i) $1,605 in cash; (ii) $1,011 in other current assets.
As of December 31, 2010, current liabilities were comprised of (i) $802,102 in derivative liability; (ii) $495,679 in notes payable to stockholders and $145,500 in notes payable; (ii) $356,024 in accounts payable and accrued expenses and $362,382 of other amounts due to shareholders.
As of December 31, 2010, the Company's total assets were $4,616 and its total liabilities were $2,381,687, with a net stockholder's deficit of $2,377,071.
For the year ended December 31, 2010, net cash flows used in operating activities were $289,041 compared to net cash flows used in operating activities of $192,918, before the net cash used in and provided by discontinued operations, for the year ended December 31, 2009. The increase of $96,123 during year ended December 31, 2010 were primarily due to the change in fair value of derivative liability and interest expense associated with beneficial conversion feature.
For the year ended December 31, 2010 and December 31, 2009, net cash flows used in investing activities were $0 and $80,750 respectively.
For the year ended December 31, 2010, net cash flows provided by financing activities was $281,000 compared to net cash flows provided by financing activities of $123,501 for the year ended December 31, 2009. Cash inflow for in 2010 consisted of the investor deposit of $220,000 and sale of preferred stock while cash inflows in 2009 consisted of the sale of preferred stock.
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classifications of liabilities that might be necessary should we be unable to continue our operations.
As of the date of this Annual Report, the Company has generated no revenues from operations since it entered the development stage on April 1, 2007. Therefore, the Company's auditors have expressed substantial doubt about the Company's ability to continue as a going concern. Management believes that it can maintain its status as a going concern based on its ability to raise funds pursuant to future public and private offerings and to obtain advances and minimize operating expenses by not duplicating or incurring needless expenses.
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 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.
FUTURE COMMITMENTS
As of the date of this Annual Report, the Company does not have any material commitments nor does management anticipate any further material commitments within the next twelve months.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements and supplementary data may be found beginning at page.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
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, 2010, that our disclosure controls and procedures have been improved and were effective as of December 31, 2010.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
1. pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the framework set forth in the report entitled Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.
IDENTIFIED MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. Management identified the following internal control deficiency which we had assessed as a material weakness as of Dec. 31, 2009 and 2008 during its assessment of our internal control over financial reporting as follows:
1. We did not have adequate segregation of duties over certain areas of our financial reporting process.
The internal control deficiency identified above will only be completely corrected if the company expands and has the capacity to adequately segregate the duties to mitigate risk in financial reporting. Expansion will depend mostly on the ability of management to begin operations and generate enough income to warrant growth in personnel.
We did not have effective comprehensive entity-level internal controls specific to the structure of our board of directors and organization of critical committees. Due to our expected expansion, as disclosed in this Form 10-K, without correcting this significant deficiency and ensuring that our board of directors has the proper oversight and committees are properly established, the control environment in subsequent years may not be effective.
We had engaged a regionally-recognized independent consulting firm assisted management with its assessment of the effectiveness of our internal control over financial reporting, including scope determination, planning, staffing, documentation, testing, remediation and retesting and overall program management of the assessment project. In conclusion, our Chief Executive Officer and Chief Financial Officer surmised that the Company has improved the effective internal control over financial reporting as of December 31, 2009.
MANAGEMENT'S REMEDIATION INITIATIVES
We are in the further process of evaluating our material and significant deficiencies. We have already begun to remediate many of the deficiencies. However, others will require additional people, including adding to our board of directors, which will take longer to remediate.
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
1. Identify and retain one or two new directors for our board of directors including a member who is appropriately credentialed as a financial expert with a goal of having sufficient independent board of directors oversight;
2. Ensure all entity level controls are applied at all levels of the organization and are scalable for acquisition or merge targets;
3. Establish comprehensive formal general accounting policies and procedures and require directors or employees to sign off such policies and procedures as documentation of their understanding of and compliance with company policies;
4. Make all directors or employees subject to our Code of Ethics (including those employees in acquisition targets) and require all employees and directors to sign our Code of Ethics on an annual basis and retain the related documentation; and,
5. Implement better segregation of duties given the size of our company.
We believe that the above five initiatives have been at least partially, if not fully, implemented by the December 31, 2010.
CONCLUSION
The above identified improvement, material weaknesses and deficiency did not result in material audit adjustments to our 2009 financial statements. However, it is reasonably possible that, if not re-mediated, one or more of the identified material weaknesses noted above could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period.
In light of the identified material weaknesses, management, performed (1) significant additional substantive review of those areas described above, and (2) performed additional analyses, including but not limited to a detailed balance sheet and statement of operations analytical review that compared changes from the prior period's financial statements and analyzed all significant differences. These procedures were completed so management could gain assurance that the financial statements and schedules included in this Form 10-K fairly present in all material respects the Company's financial position, results of operations and cash flows for the periods presented.
The changes noted above, are the only changes during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our executive officers are elected by the board of directors and serve at the discretion of the board, subject to employment and/or consulting agreements described in Item 11, below. All of the current directors serve until the next annual shareholders' meeting or until their successors have been duly elected and qualified. The following table sets forth certain information regarding our current directors and executive officers:
IDENTITY OF DIRECTORS AND EXECUTIVE OFFICERS AS OF MARCH 28, 2011
---------- * 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.
DIRECTORS
We believe that our board of directors should be composed of individuals with sophistication and experience in many substantive areas that impact our business. We believe that experience, qualifications or skills in the following areas are important: (i) organizational leadership and vision; (ii) strategic, financial and operational planning; (iii) corporate restructuring and performance enhancement; (iv) corporate finance; and (v) experience as a board member of other corporations. These areas are in addition to the personal qualifications described in this section. We believe that our current board members possess the professional and personal qualifications necessary for board service. The principal occupation and business experience, for at least the past five years, of our current directors are as follows:
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 also serves as Chief Executive Officer and Director of Disability Access Corporation. Disability Access Corporation's wholly-owned subsidiary, Disability Access Consultants, Inc., creates a system to facilitate and expedite the processes related to inspections based on the regulatory standards for the American with Disabilities Act. 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. Currently, Peter Chin, our Secretary and Director, also serves as Chief Executive Officer and Director of Disability Access Corporation ("DBYC.PK").
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.
COMPENSATION OF DIRECTORS
During 2010, we issued 50,000 shares of Series D Preferred Stock to Director Peter Chin as compensation. During 2009, we issued 50,000 shares of Series D Preferred to Director Peter Chin as compensation. During 2008, we did not compensate our Directors for serving on our Board of Directors.
There are no arrangements or understandings between any of the directors or executive officers, or any other person or person pursuant to which they were selected as directors and/or officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past ten 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, 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
Our board of directors acts as our audit committee. No member of our board of directors is an "audit committee financial expert," as that term is defined in Item 401(e) of Regulation S-K promulgated under the Securities Act of 1933, as amended. Our board of directors concluded that the benefits of retaining an individual who qualifies as an "audit committee financial expert" would be outweighed by the costs of retaining such a person.
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 our 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, 2010, all the officers, directors and more than 10% beneficial owners have complied with the above described filing requirements.
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: 17800 Castleton Street, Suite 638, City of Industry, California 91748. A copy of the Code of Ethics was attached as Exhibit 14 to the Company's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the aggregate compensation paid by the Company to the above named executive officers and directors of the Company for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
---------- (1) During the fiscal year ended December 31, 2010, Mr. Kenneth Yeung received a cash salary of $40,000, with an additional $200,000 in salary accrued by the Company, and a car allowance of $6,676 (pursuant to his employment agreement with the Company) (2) During the fiscal year ended December 31, 2009, Mr. Kenneth Yeung received cash salary of $100,000 and a car allowance of $6,584 (pursuant to his employment agreement with the Company). (3) During the fiscal year ended December 31, 2008, Mr. Kenneth Yeung received cash salary of $100,000 and a car allowance of $3,096 (pursuant to his employment agreement with the Company). (4) During 2010, 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 2010. The shares ere valued at $1.00 per share for an aggregate consideration of $50,000. (5) During 2009, 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 2008 and 2009. The shares ere valued at $1.00 per share for an aggregate consideration of $50,000.
EMPLOYMENT CONTRACTS
On February 1, 2010, the Company entered into a three year Employment Agreement with Mr. Yeung to become effective on May 1, 2010, that provides for the following base compensation to Mr. Yeung:
May-December 2010 $20,000 per month January-December 2011 $22,500 per month January-December 2012 $25,000 per month January-April 2013 $27,500 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; * Participation in group life, hospitalization or disability insurance programs, health programs, pension plan similar benefit plan or other "fringe benefits" of the Company; and * An annual incentive bonus in an amount not less than 1.8% of the total collected sales amount from operations of the Company, payable within 30 days after the end of each fiscal year during the term of his new Employment Agreement; and * Other incentive bonus in an amount deemed appropriate by the Compensation Committee of the Company (when constituted), subject to review every six months.
DIRECTOR COMPENSATION
We do not have formal compensation plan for our directors. During 2010 and 2009, we compensated Director Peter Chin with shares of our Series D Preferred Stock as described in the above table.
COMPENSATION DISCUSSION AND ANALYSIS
We have prepared the following Compensation Discussion and Analysis to provide you with information that we believe is necessary to understand our executive compensation policies and decisions as they relate to the compensation of our named executive officers.
We have only two members on our board of directors and do not currently have a compensation committee. However, we intend to expand our board of directors in the near future by appointing or electing at least two new directors who will be deemed to be independent directors. The presence of independent directors on our board of directors will allow us to form and constitute a compensation committee of our board of directors.
The primary objectives of the compensation committee with respect to executive compensation will be to (i) attract and retain the best possible executive talent available to us; (ii) motivate our executive officers to enhance our growth and profitability and increase shareholder value; and (iii) reward superior performance and contributions to the achievement of corporate objectives.
The focus of our executive pay strategy will be to tie short-term and long-term cash and equity incentives to the achievement of measurable corporate and individual performance objectives or benchmarks and to align executive compensation with the creation and enhancement of shareholder value. In order to achieve these objectives, our compensation committee will be tasked with developing and maintaining a transparent compensation plan that will tie a substantial portion of our executives' overall compensation to our sales, operational efficiencies and profitability.
Our board of directors has not set any performance objectives or benchmarks for 2010, as it intends for those objectives and benchmarks to be determined by the compensation committee once it is constituted and then approved by the board. However, we anticipate that compensation benefits will include competitive salaries, bonuses (cash and equity based), health insurance and stock option plans.
Our compensation committee will meet at least quarterly to assess the cost and effectiveness of each executive benefit and the performance of our executive officers in light of our revenues, expenses and profits.
OTHER CONTRACTS
None.
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 2010 or 2009.
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 2010 or 2009.
LONG-TERM INCENTIVE PLAN AWARDS
There were no long-term incentive plan awards made in the last two fiscal years.
REPRICING OPTIONS
During the fiscal year ended December 31, 2010, the Company did not reprice any stock options.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
To our knowledge, the following table sets forth, as of March 28, 2011, information regarding the ownership of our common stock by:
* Persons who own more than 5% of our common stock * each of our directors and each of our executive officers; and * all directors and executive officers as a group.
(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 28, 2011, 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.
---------- 1. The Series C Preferred Stock has voting rights of 3,000 votes per share, so that Mr. Yeung has the right to vote 9,000,000,000 of the 13,269,947,486 votes that may be cast by 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 28, 2011, 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.
(c) Securities Authorized for Issuance under Equity Compensation Plans: None.
There are no arrangements or understandings among the entities and individuals referenced above or their respective associates concerning election of directors or other any other matters which may require shareholder approval.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
During 2010, the Company had no formal or standard compensation arrangement with members of its Board of Directors. During 2010, 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. As discussed under Item 2, above, on February 20, 2009, the Company entered into a sublease agreement with Allied Consultants, Inc., a company owned by Nelson Yeung, the brother of our President, Kenneth Yeung. Our board of directors believes the sublease is on terms fair and favorable to the Company.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has renewed the engagement of HJ & Associates, LLC to serve as the independent accounting firm responsible for auditing our financial statements for the fiscal year ended December 31, 2010.
(1) Audit Fees. During the fiscal year ended December 31, 2010, 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-Q and for services provided in connection with the statutory and regulatory filings or engagements for 2010, was $28,500. During the fiscal year ended December 31, 2009, 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-Q and for services provided in connection with the statutory and regulatory filings or engagements for 2009, was $42,100.
(2) Audit-Related Fees. During fiscal years ended December 31, 2010 and 2009, 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 years ended December 31, 2010 and 2009, our Auditors billed us $3,000 and $4,300, for tax services, respectively.
(4) All Other Fees. None.
(5) Audit Committee's Pre-Approval Policies and Procedures.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before Principal Accountants are engaged by us to render any auditing or permitted non-audit related service, the engagement be:
* approved by our audit committee (which consists of our entire board of directors); or * entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors' responsibilities to management.
The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
The board of directors has considered the nature and amount of fees billed by our principal accountants and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our principal accountants' independence.
During the 2010 and 2009 fiscal years, the Company used the following pre-approval procedures related to the selection of our independent auditors and the services they provide: unanimous consent of all directors via a board resolution.
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) (1) Financial Statements
Financial statements for International Building Technologies Group, Inc. listed in the Index to Financial Statements and Supplementary Data on page are filed as part of this Annual Report.
(a) (2) Financial Statement Schedule
Financial Statement Schedule for International Building Technologies Group, Inc. listed in the Index to financial Statements and Supplementary Data on page are filed as part of this Annual Report.
(a) (3) See the "Index to Exhibits" set forth below.
(b) See Exhibit Index below for exhibits required by Item 601 of Regulation S-K
EXHIBIT INDEX
List of Exhibits attached or incorporated by reference pursuant to Item 601 of Regulation S-K
Exhibit Description ------- ----------- 2(i)* Agreement and Plan of Merger (Appendix D of the Company's Definitive Proxy Statement on Form DEF 14A filed with the Commission on June 25, 2004).
3(i)(1)* Restated Articles of Incorporation filed with the Secretary of State of Colorado on August 10, 2004 (Appendix A of the Company's Definitive Proxy Statement on Form DEF 14A filed with the Commission on June 25, 2004).
3(i)(2)* Articles of Incorporation of Ten Stix, Inc. filed with the Secretary of State of Nevada on May 28, 2004(Appendix F of the Company's Definitive Proxy Statement on Form DEF 14A filed with the Commission on June 25, 2004).
3(i)(3)* Certificate of Amendment to Articles of Incorporation of Ten Stix, Inc. filed with the Secretary of State of Nevada on December 1, 2004 (Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on December 6, 2004).
3(i)(4)* Certificate of Amendment to the Articles of Incorporation of the Company filed with the Secretary of State of Nevada on October 12, 2006(Exhibit 3(1) to the Company's Quarterly report on Form 10-QSB filed with the Commission on November 14, 2006).
3(i)(5)* Certificate of Amendment to the Articles of Incorporation of the Company filed with the Secretary of State of Nevada on July 17, 2007(Exhibit 3 (i)(5) to the Company's form 10-KSB Annual Report for the Fiscal Year Ended December 31, 2007, filed with the Commission on April 3, 2008).
3(i)(6)* Certificate of Amendment to the Articles of Incorporation of the Company filed with the Secretary of State of Nevada on May 22, 2008, changing par value of common stock to $.00001 (Exhibit 3.1 to the Company's Quarterly Report for the Period Ended June 30, 2008, filed with the Commission on August 13, 2008).
3(i)(7)* Certificate of Amendment to Articles of Incorporation to change the total authorized shares and conversion terms of the Company's Series E Preferred Stock filed with the Secretary of State of Nevada on July 28, 2008(Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the Period Ended June 30, 2008, filed with the Commission on August 13, 2008).
3(i)(8)* Certificate of Amendment to Articles of Incorporation to change the total authorized capital stock of the Company filed with the Secretary of State of Nevada on August 11, 2008(Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the Period Ended June 30, 2008, filed with the Commission on August 13, 2008).
3(i)(9)* Certificate of Amendment to Articles of Incorporation to change the total authorized capital stock of the Company, filed with the Secretary of State of Nevada on October 13, 2009 (Exhibit 3(i)(9) to the Company's Quarterly Report on Form 10-Q for the Period Ended September 30, 2009, filed with the Commission on November 16, 2009).
3(i)(10)* Certificate of Amendment to Articles of Incorporation to change the total authorized capital stock of the Company, filed with the Secretary of State of Nevada and effective October 25, 2010 (Exhibit 3(i)(10) to the Company's Current Report on Form 8-K filed with the Commission on October 26, 2010).
3(ii)* By-laws of the Company (Exhibit 3. II to the Company's Registration Statement on Form 10-SB filed with the Commission on February 8, 2001).
4(i)* Certificate of Designation of Series A Preferred Stock of Ten Stix, Inc. (Appendix G of the Company's Definitive Proxy Statement on Form DEF 14A filed with the Commission on June 25, 2004).
4(ii)* Certificate of Designation of Series C Preferred Stock of the Company (Exhibit 99.1 to the Company's Current report on Form 8-K filed with the Commission on September 14, 2006).
4(iii)* Certificate of Amendment to Certificate of Designation of Series B Preferred Stock of the Company filed with the Secretary of State of Nevada on May 30, 2007(Exhibit 4(iii) to the Company's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007, filed with the Commission on April 3, 2008).
4(iv)* Certificate of Amendment to Certificate of Designation of Series C Preferred Stock of Company filed with the Secretary of State of Nevada on May 30, 2007(Exhibit 4(iv) to the Company's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007, filed with the Commission on April 3, 2008).
4(v)* Certificate of Amendment to Certificate of Designation of Series D Preferred Stock of the Company filed with the Secretary of State of Nevada on December 10, 2007(Exhibit 4(v) to the Company's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007, filed with the Commission on April 3, 2008).
4(vi)* Certificate of Designation of Series E Preferred Stock of the Company filed with the Secretary of State of Nevada on December 10, 2007(Exhibit 4(vi) to the Company's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007, filed with the Commission on April 3, 2008).
4(vii)* Certificate of Designation of Series F Preferred Stock of the Company filed with the Secretary of State of Nevada on April 23, 2008 (Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the Period Ended June 30, 2008, filed with the Commission on August 13, 2008).
4(viii)* Amendment to Certificate of Designation After Issuance of Class or Series to change the total authorized shares and conversion terms of the Company's Series E Preferred Stock filed with the Secretary of State of Nevada on August 28, 2008(Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q for the Period Ended June 30, 2008, filed with the Commission on August 13, 2008).
10.1* Stock Sale and Purchase Agreement dated March 14, 2007, by, between David Keaveney, Kenneth Yeung and the Company(Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on March 27, 2007).
10.2* Asset Sale and Purchase Agreement dated July 8, 2007, by and between International Building Technologies Co., Ltd. and Suining Yinfa Construction & Engineering Co., Ltd.(Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on July 23, 2007).
10.3* Amendment to Asset Sale and Purchase Agreement by and between the Company and Suining Yinfa Construction and Engineering, Ltd., executed on December 5, 2007(Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the Commission on April 29, 2008).
10.4* Rescission to the Asset Sale and Purchase Agreement by and between the Company and Suining Yinfa Construction and Engineering, Ltd., executed on April 23, 2008(Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Commission on April 29, 2008).
10.5* Twelve Month Convertible Note Amendment dated March 14, 2007(Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on March 27, 2007).
10.6* Employment Agreement between the Company and Kenneth Yeung dated May 21, 2007, effective May 1, 2007(Exhibit 10.8 to the Company's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007, filed with the Commission on April 3, 2008).
10.7* Employment Agreement between the Company and Kenneth Yeung dated February 1, 2010, effective May 1, 2010.
10.8* Stock Sale and Purchase Agreement by and between the Company and Wuhan Intepower Co., Ltd., executed on April 17, 2008(Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Commission on April 21, 2008).
10.9* Compensation Agreement between the Company and Peter Chin dated September 30, 2009.
14* Code of Ethics (Exhibit 14 to the Company's Annual Report on Form 10-KSB for the Fiscal Year Ended December 31, 2007, filed with the Commission on April 3, 2008).
21** Subsidiaries of the Company
31.1** Certification 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 906 Certification of Principal Financial Officer
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 30, 2011 /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 30, 2011 /s/ Kenneth Yeung ----------------------------------------- By: Kenneth Yeung Its: President, Chief Executive Officer, and Director (Principal Executive Officer) Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
Dated: March 30, 2011 /s/ Peter Chin ----------------------------------------- By: Peter Chin Its: Corporate Secretary and Director
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders International Building Technologies Group, Inc.
We have audited the accompanying consolidated balance sheets of International Building Technologies Group, Inc. and subsidiaries (A Development Stage Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the years then ended and since re-entering the development stage on April 1, 2007 through December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of International Building Technologies Group, Inc. and subsidiaries as of December 31, 2010 and 2009, 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, 2010 in conformity with U.S. generally accepted accounting principles.
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, LLPu ----------------------------------------------- HJ Associates & Consultants, LLP Salt Lake City, Utah March 30, 2011
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS
December 31, December 31, 2010 2009 ------- ------- ASSETS
Cash $ 1,605 $12,514 Other current assets 1,011 1,011 ------- ------- Total current assets 2,616 13,525 ------- -------
Other assets 2,000 2,000 ------- -------
Total assets $ 4,616 $15,525 ======= =======
See accompanying notes to consolidated financial statements
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS (CONTINUED)
See accompanying notes to consolidated financial statements
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes to consolidated financial statements
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
See accompanying notes to consolidated financial statements
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
See accompanying footnotes to the consolidated financial statements
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes to consolidated financial statements
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
See accompanying notes to consolidated financial statements
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
Note 1: Organization, Basis of Presentation and Significant Accounting Policies
Organization
International Building Technologies Group, Inc. (OTCBB: INBG) (the "Company") has four total subsidiaries, one active subsidiary and three dormant subsidiaries.
Active Subsidiaries:
* International Building Technologies Co., Ltd. ("IBT Hong Kong") - a Hong Kong Corporation with equity interest of 100%
Dormant Subsidiaries:
* Scottsdale Diecast, Inc. - a Nevada Corporation with equity interest of 100% * Quadriga Motorsports, Inc. - a Nevada Corporation with equity interest of 100% * International Building Technologies, Inc. ("IBT") - a Nevada Corporation with equity interest of 80%
Currently the Company or its subsidiary is focusing its attention on several viable businesses that could be well suited to possibly merge into the company. The Company has signed a letter of intent (LOI) with a Chinese company and entered into the process of merge. The Company believes it is in a position of strength and is going to explore every opportunity to bring value assets, revenue and profit back to its stockholders and investors.
The Company has engaged a Chinese law firm to conduct the due diligent, as well an audit firm to conduct the audit as required for the merge. Result and progress of such Due Diligent and audit will be announced once they are completed.
The Company had offices in Alameda, CA, and Shanghai, China in 2007. In December, 2008, the Company closed the office in Shanghai, China. In January, 2009, the Company closed the office in Alameda, CA and moved to City of Industry, CA.
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in the consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
Reclassification
Certain reclassifications, which have no effect on net income (loss), have been made in the prior period financial statements to conform to the current presentation.
Intangible Assets
The license agreement was abandoned in accordance with FASB Accounting Codification Standards 360-10-20 (previous guidance Statement of Accounting No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets") and consequently the remaining value of the asset was fully amortized as of December 31, 2010 and 2009.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets in accordance with FASB Accounting Codification Standards 360-10-20 by measuring the carrying amounts of assets against the estimated undiscounted future cash flows associated with them. At the time the carrying value of such assets exceeds the fair value of such assets, impairment is recognized.
Incomes Taxes
The Company accounts for income taxes under the liability method of accounting for income taxes in accordance with the provisions of FASB Accounting Codification Standards 740 - "Income Taxes" (previous guidance Statements of Financial Accounting Standards No. 109, "Accounting for Income Taxes," ("FAS 109") and related interpretations and guidance including FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109" ("FIN 48")). Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
Translation of Non-U.S. Currency Amounts
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at weighted-average rates of exchange prevailing during the year. Translation adjustments are recorded in Other Comprehensive Income not affecting retained earnings within Stockholders' equity.
Inventories, plant, rental machines and other property-net, and other non-monetary assets and liabilities of non-U.S. subsidiaries and branches that operate in U.S. dollars, or whose economic environment is highly inflationary, are translated at approximate exchange rates prevailing when the company acquired the assets or liabilities. All other assets and liabilities are translated at year-end exchange rates. Cost of sales and depreciation are translated at historical exchange rates. All other income and expense items are translated at the weighted-average rates of exchange prevailing during the year.
Current and historical exchange rates are not indicative of what future exchange rates will be and should not be construed as such.
Relevant exchange rates used in the preparation of the financial statements of the subsidiary are as follows for years ended December 31, 2010 and 2009 (denoted in Hong Kong dollars per one U.S. dollar):
2010 2009 ------- ------- Current exchange rate at December 31, HKD 7.78320 7.75510 Weighted average exchange rate 7.76952 7.75218
Fair Value of Financial Instruments
The carrying amounts of cash, accounts payable, and accrued expenses approximate fair value because of the short maturity of these items.
Loss per Common Share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. As the Company resulted in net income for the year ended December 31, 2010, common stock equivalents were included from diluted net income per share. However, as the Company incurred net loss for the year ended December 31, 2009, common stock equivalents were excluded from diluted net loss per share as their effect would be anti-dilutive.
Stock-Based Compensation
FASB Accounting Codification Standards (ACS) Topic 825, "Compensation - Stock Compensation" (previous guidance Statement of Accounting Standards SFAS No. 123R, "Share-Based Payment") requires all share-based payments to employees, including grants of employee stock options to be recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). During years ended December 31, 2010 and 2009, the Company did not recognize any of compensation expense associated with stock-based compensation. Under FASB ACS Topic 825, the expense recognition for variable awards is the same under the intrinsic value and the fair value methods.
Recent Accounting Pronouncements
In February 2010, the FASB issued guidance to remove the requirement for an entity that files financial statements with the SEC to disclose a date through which subsequent events have been evaluated. The adoption of this guidance during our current fiscal quarter did not have any impact on our Consolidated Financial Statements.
On July 1, 2009, Financial Accounting Standards Board ("FASB") Accounting Standards Codification(TM) ("ASC") became the sole source of authoritative Generally Accepted Accounting Principles ("GAAP") literature recognized by the Financial Accounting Standards Board for financial statements issued for interim and annual periods ending after September 15, 2009. Rules and interpretive releases of the Security Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Except for applicable SEC rules and regulations and a limited number of grandfathered standards, all other sources of GAAP for nongovernmental entities were superseded by the issuance of ASC. ASC did not change GAAP, but rather combined the sources of GAAP and the framework for selecting among those sources into a single source. Accordingly, the adoption of ASC had no impact on the financial results of the Company.
In June 2009, the FASB issued FAS 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles," which now resided with ASC 105, "Generally Accepted Accounting Principles." ASC 105 will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.The Company expects the adoption of ASC 105 to have an impact on the Company's results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 167, "Amendments to FASB Interpretation No. 46(R)," which now resides with ASC 810, "Consolidation." ASC 810 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in ASC 860, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provided timely and useful information about an enterprise's involvement in a variable interest entity. This statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company expects the adoption of ASC 810 to have an impact on the Company's results of operations, financial condition or cash flows.
In June 2009, the FASB issued FAS 140/166, "Accounting for Transfers of Financial Assets," an amendment of FAS 140, which now resides with ASC 860, "Transfers and Servicing." ASC 860 is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets: the effects of a transfer on its financial position, financial performance , and cash flows: and a transferor's continuing involvement, if any, in transferred financial assets. This statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009. The Company expects the adoption of ASC 860 to have an impact on the Company's results of operations, financial condition or cash flows.
In May 2009, the FASB issued FAS 165, "Subsequent Events," which now resides with ASC 855, "Subsequent Events." This pronouncement establishes standards for accounting for and disclosing subsequent events (events which occur after the
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
balance sheet date but before financial statements are issued or are available to be issued). ASC 855 requires and entity to disclose the date subsequent events were evaluated and whether that evaluation took place on the date financial statements were issued or were available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption of ASC 855 did not have a material impact on the Company's financial condition or results of operation.
Note 2: Material Events
Amendment of the conversion rates of the convertible promissory notes
On February 27, 2009, the Company amended the conversion feature of certain promissory notes. The original conversion features are summarized in Note 4. The amended conversion feature states that at any time, the Payee may convert all or part of the remaining principal balance and accrued interest into shares of the Company's Common Stock based on 75% of the average of the twenty closing prices in the past 20 trading days immediately preceding such conversion so long as such conversions shall not exceed 4.99% of the then outstanding common stock of the Company.
Amendment of the conversion rates of the convertible promissory notes
On July 10, 2009, the Company made the decision to rescind the Stock Sale and Purchase Agreement that signed with Wuhan Interpower Co. Ltd on April 17, 2008. The Company believes that the decision was made for the best interest of the company and the investors. The Company has requested that Wuhan Interpower Co., Ltd. immediately refund the US$161,500. According to the correspondence being exchanged recently, as of July 31, 2009, Wuhan Interpower Co., Ltd. has neither agreed to fully refund of US$161,500 nor refused to do so, despite our several requests in writings. The Company is going to seek legal assistance in China to recover the said amount plus interest.
In November, 2009, Wuhan Interpower Co., Ltd agreed to pay 50%, $80,750, of the investment deposit back to the Company. In considering the cost involved in lawsuit or arbitration in China, the Company has accepted this settlement. Accordingly, the loss on investment increased by $80,750 in the current year and the investment deposit decreased to $80,750. The return of the deposit was received in December, 2009.
Amendment on the article of incorporation to increase the authorized shares
The Company had authorized capital stock of 2,000,000,000 shares, including 1,950,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock. On August 10, 2009, our Board of Directors and the shareholders holding a majority of the voting rights in the Company approved an amendment to the Articles of Incorporation to increase the number of outstanding shares of our capital stock to 4,000,000,000 including 3,950,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock. New business venture
On May 25, 2010, the Company signed a non-binding Letter of Intent to merge with FHH Sino New Energies CO., Ltd., a Chinese company ("FHH Sino") located in Weihai, Shandong Province of China. FHH Sino is a petroleum storage company that offers petroleum storage tanks and facilities for rental to the petroleum importers/exporters in Weihai, a coastal city in Shandong Province of Northern China. Upon signing the Letter of Intent on May 27, 2010 (effective date), FHH Sino made a U.S. $230,000 deposit with the Company.
The Company intends to merge with FHH Sino by exchanging the Company's common stock with FHH Sino's holding or subsidiary company. This merger will give the
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
Company the opportunity to switch its nature of business into the energy sector, the ability to generate revenue and profit once the FHH Sino commences its operation in early 2011, thus benefits our shareholders in the near future.
Note 3: Going Concern
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow from operations to meet its obligations on a timely basis and/or obtain financing as may be required. As of December 31, 2010, the Company has incurred net income from operations prior to reentering the development stage and has a stockholders' deficit of $5,534,336. Since the inception of reentering the development stage on April 1, 2007, the Company has a stockholders' deficit of $7,080,130 as of December 31, 2010. The Company has a working capital deficit of $2,377,071 as of December 31, 2010. These factors raise substantial doubt about the Company's ability to continue as a going concern.
During the next 12 months, the Company's foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with reviewing or investigating any potential business ventures. The Company may experience a cash shortfall and be required to raise additional capital. Historically, it has relied upon internally generated funds and funds from the sale of shares of stock and loans from its shareholders and private investors to finance its operations and growth. Management may raise additional capital through future public or private offerings of the Company's stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company's failure to do so could have a material and adverse affect upon it and its shareholders.
The Company has entered into negotiation with a private owned company in China for a possible merger and joint venture and will announce the terms and condition of such merger or joint venture if the transaction proceeds and when there is a signed LOI, MOU or a binding agreement.
In the past year, the Company funded operations through investor's deposit. For the coming year, the Company plans to continue to fund the Company through debt and securities sales and issuances, focus on a possible joint venture or merger until the company generates revenues through the operations of such merged company or joint venture as stated above.
Note 4: Notes Payable & Debt Discounts
The chart below summarizes the Notes Payable & Debt Discounts of the Company as of December 31, 2010. The Company is technically in default on its promissory notes to the persons or entities detailed hereafter, most of which notes matured on December 31, 2009. The Company is currently working with the note holders to restructure the terms of such notes and extend the maturity dates. The interest rate for these loans will be at 12% in 2010 since they were default at the year end.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
Terms Amount ----- ------ SHORT TERM NOTES PAYABLE TO SHAREHOLDERS: 12% Interest; principal of $6,597; convertible to common stock based on 75% of average price; due on 9/3/2009, net of unamortized discount related to the debt discount of $0 $ 6,597 12% Interest; principal of $293; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 293 12% Interest; principal of $11,000; convertible to common stock based on 75% of average price; due on 10/9/2009, net of unamortized discount related to the debt discount of $0 11,000 12% Interest; principal of $31,925; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 31,925 12% Interest; principal of $10,269; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 10,269 12% Interest; principal of $12,500; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 12,500 12% Interest; principal of $15,000; convertible to common stock based on 75% of average price; due on 8/1/2009, net of unamortized discount related to the debt discount of $0 15,000 12% Interest; principal of $17; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 17 12% Interest; principal of $5; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 5 12% Interest; principal of $231; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 231 12% Interest; principal of $9,458; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 9,458 12% Interest; principal of $37,133; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 37,133 12% Interest; principal of $5,000; convertible to common stock based on 75% of average price; due on 10/28/2009, net of unamortized discount related to the debt discount of $0 5,000 12% Interest; principal of $10,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $3,271 10,000 12% Interest; principal of $13,000; convertible to common stock based on 75% of average price; due on 8/1/2009, net of unamortized discount related to the debt discount of $0 13,000 12% Interest; principal of $7,209; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 7,209 12% Interest; principal of $23,847; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 23,847
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
12% Interest; principal of $20,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 20,000 12% Interest; principal of $25,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 25,000 12% Interest; principal of $70,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 70,000 12% Interest; principal of $36,867; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 36,867 12% Interest; principal of $73,975; convertible to common stock based on 75% of average price; due on 7/1/2009, net of unamortized discount related to the debt discount of $0 73,975 12% Interest; principal of $1,112; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discounted related to the debt discount of $0 1,112 12% Interest; principal of $10,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 10,000 12% Interest; principal of $15,000; convertible to common stock based on 75% of average price; due on 10/29/2009, net of unamortized discount related to the debt discount of $0 15,000 12% Interest; principal of $50,240; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 50,242 -------- TOTAL SHORT TERM NOTES PAYABLE TO SHAREHOLDERS $495,679 ======== SHORT TERM NOTES PAYABLE: 12% Interest; principal of $50,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 50,000 12% Interest; principal of $50,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 50,000 12% Interest; principal of $15,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 15,000 12% Interest; principal of $10,000; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 10,000 12% Interest; principal of $20,500; convertible to common stock based on 75% of average price; due on 12/31/2009, net of unamortized discount related to the debt discount of $0 20,500 -------- TOTAL SHORT TERM NOTES PAYABLE $145,500 ========
Note 5: Related Party Transactions
Accrued Expenses
During the year ended December 31, 2010 and December 31, 2009, the accrued wage and reimbursement to the officer related to traveling overseas was $6,022 and $41,124 respectively. The payable to the related party was $352,382 and $207,321 at December 31, 2010 and December 31, 2009, respectively.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
During the year ended December 31, 2010, the officer advanced $22,500 to the Company for working capital. At December 31, 2010, there is $15,297 due from this officer. This non-interest bearing advance is due on demand. The payroll to the officer was $240,000 for the year ended December 31, 2010. The accrued payroll was $347,085 at December 31, 2010.
Stock Issuance
During the year ended December 31, 2009, the Company issued 50,000 shares of preferred stock series D at $1 per share to the director for the director service fee. See Note 6 - Stockholders' Equity.
During the year ended December 31, 2009, an officer purchased 1,000,000 shares of preferred stock series C at $0.001 per share. See Note 6 - Stockholders' Equity.
During the year ended December 31, 2010, the Company issued 50,000 shares of preferred stock series D at $1 per share to the director for the director service fee. See Note 6 - Stockholders' Equity.
During the year ended December 31, 2010, an officer purchased 1,000,000 shares of preferred stock series C at $0.001 per share. See Note 6 - Stockholders' Equity.
Note 6: Stockholders' Equity
PREFERRED STOCK
Amendments to Series D, E, and F Preferred Stock
On April 20, 2009, amendments were made to the market price for series D, E and F preferred stock. The market price shall be computed as the arithmetic average of the 20 closing prices for such security during the last 20 consecutive trading days immediately preceding such date of determination. All such determinations to be appropriately adjusted for any stock dividend, stock split or other similar transaction during such period.
On April 20, 2009, the Company issued 50,000 shares of Series D Preferred Stock at $50,000 in exchange for cash.
On August 6, 2009, the Company issued 50,000 shares of Series D Preferred Stock at $50,000 in exchange for cash.
On September 21, 2009, the Company issued 22,500 shares of Series D Preferred Stock at $22,500 in exchange for cash.
On September 30, 2009, the Company issued 50,000 shares of Series D Preferred Stock at $50,000 for the director service fee.
On January 13, 2010, First Apex Management Limited converted 12,320 shares of Preferred D Stock into 88,000,000 shares of Common Stock at a $0.00014 conversion price on November 2, 2009.
On April 23, 2010, CEPA Group Pacific Holdings Ltd. converted 12,320 shares of Preferred D Stock into 88,000,000 shares of Common Stock at a $0.00014 conversion price as of April 15, 2010.
On June 7, 2010, Jade C. Uno converted 20,000 shares of Preferred D Stock into 105,263,157 shares of Common Stock at a $0.00019 conversion price based upon the 20-day trading average of the Company.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
On July 28, 2010, First Apex Management Ltd. exchanged 22,500 shares of Preferred D Stock valued at $1.00 per share into 90,000,000 shares of Common Stock at a $0.00025 conversion price.
On July 28, 2010, CEPA Group Pacific Holdings Ltd. exchanged 12,680 shares of Preferred D Stock valued at $1.00 per share into 50,720,000 shares of Common Stock at a $0.00025 conversion price.
On August 13, 2010, First Apex Management Ltd. purchased 20,000 shares of Preferred D Stock valued at $1.00 per share for a total consideration of $20,000.
On August 13, 2010, CEPA Group Pacific Holdings Ltd. purchased 20,000 shares of Preferred D Stock valued at $1.00 per share for a total consideration of $20,000.
On August 13, 2010, Ms. Chen Yunxia purchased 20,000 shares of Preferred D Stock valued at $1.00 per share for a total consideration of $20,000.
On August 31, 2010, Jade C. Uno exchanged 15,000 shares of Preferred D Stock valued at $1.00 per share into 65,217,391 shares of Common Stock at a $0.00023 conversion price.
On October 5, 2010, Kenneth Yeung purchased 1,000,000 shares of Preferred C Stock at $0.001 per share.
On October 26, 2010, First Apex Management Ltd. exchanged 12,680 shares of Preferred D Stock valued at $1.00 per share into 84,533,333 shares of Common Stock at a $0.00015 conversion price.
On November 15, 2010, the Company issued 50,000 shares of Series D Preferred Stock at $50,000 to Peter Chin as director service fee for services rendered from September 30, 2009 through September 30, 2010.
On November 23, 2010, Peter Chin exchanged 15,000 shares of Preferred D Stock valued at $1.00 per share into 115,384,615 shares of Common Stock at a $0.00013 conversion price.
COMMON STOCK
During the year ended December 31, 2010, the Company issued a total of 1,962,770,393 shares of common stock valued at $198,116 for repayment of debt and $122,500 for conversion from Preferred D Stock detailed in the following chart:
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
On August 10, 2009, the Company's Board of Directors and shareholders holding a majority of voting rights approved an amendment to the Articles of Incorporation to increase the number of outstanding shares of the capital stock to 4,000,000,000 including 3,950,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock.
On October 1, 2010, the Company has increased its authorized shares of Common Stock to 5,950,000,000 shares.
Note 7: Income Taxes
The Company and its subsidiaries file income tax returns in the U.S. Federal Jurisdiction, and various states and foreign jurisdictions. No provision for Hong Kong Profits Tax has been made for the periods presented as the Company and its subsidiaries operating in Hong Kong have no assessable profits during the years being reported.
The Company believes sufficient uncertainty exists regarding the realization of net operating loss carry-forwards and other timing differences for the periods presented. Accordingly, a valuation allowance has been provided for the entire amount related thereto. The valuation allowance increased by approximately $129,450 and $156,644 during the years ended December 31, 2010 and 2009, respectively.
The income tax provision differs from the amount of income tax determined by applying the U.S. Federal and State income tax rates of 39% to pretax income for the years ended December 31, 2010 and 2009 due to the following:
Year Ended December 31, ------------------------------- 2010 2009 ---------- ---------- Book income $ 285,060 $ (753,293) Change in derivative liability (508,454) (12,532) Stock for services/option expense 19,500 19,500 Related party accrual expenses 73,214 77,512 Amortization of beneficial conversion feature 1,087 511,980 Other 189 (189) Valuation Allowance 129,450 156,644 ---------- ---------- Total Income tax provision $ -- $ -- ========== ==========
At December 31, 2010, the Company had net operating loss carry-forwards of approximately $3,900,000 that may be offset against future taxable income from the year 2010 through 2030. No tax benefit has been reported in the December 31,
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
2010 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.
Net deferred tax assets consist of the following components as of December 31, 2010 and 2009:
Year Ended December 31, ----------------------------------- 2010 2009 ------------ ------------ Deferred tax assets: NOL carryover $ 1,463,000 $ 1,378,500 Accrued expenses - related party 180,336 107,122 Deferred tax liabilities Depreciation ------------ ------------ Valuation Allowance (1,643,336) (1,485,622) ------------ ------------ Total Income tax provision $ -- $ -- ============ ============
The Company files income tax returns in the United States federal jurisdiction and certain states in the United States and certain foreign jurisdictions. With a few exceptions, the company is no longer subject to U. S. federal, state, or non-U.S. Income tax examination by tax authorities on tax returns filed before January 31, 2006. The Company recently filed an extension for the U. S. Federal return for the year ended December 31, 2010. The company has filed its 2009 U.S. Federal return. These U. S. federal returns are considered open tax years as of the date of these consolidated financial statements. No tax returns are currently under examination by any tax authorities.
Note 8: Acquisitions and Investments
Acquisition of Wuhan Wufeng Machinery Manufacturing Company, Ltd.
On April 16, 2008, the Company entered into a definitive agreement to acquire a 92% interest in Wuhan Wufeng Machinery Manufacturing Company, Ltd. ("Machinery Co.") from Wuhan Intepower Company, Ltd., a China Corporation ("Seller") pursuant to a Stock Sale and Purchase Agreement. After transferring a 4% interest to certain management personnel of the Machinery Co. at the close of the transaction, the Company would have owned a net interest of 88% of the equity securities of the Machinery Company. The closing of this acquisition was to occur as soon as the audit of the books and accounts of the Machinery Co. was completed to the satisfaction of the Company and requisite governmental approvals are obtained. On June 24, 2008, the Company received requisite governmental approvals to proceed with this transaction and during the third quarter, the Company engaged PCAOB approved SEC auditors Albert Wong & Company to perform the audit of the Machinery Company. As of December 31, 2008, the Company had paid the 10% cash down payment on the acquisition. The convertible notes for the balance of the acquisition was to be finalized pending the completion of the audit.
The Machinery Co. offered several lines of machineries and equipments which can be retooled to manufacture the panel production machineries that the Company would endeavor to sell and utilize in several planned projects in China and other countries. The Machinery Co. currently has state of the art tools, experienced engineers, capability to design new lines of equipment, as well as strong customer service and after-sales support.
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
The purchase consideration to be paid by the Company to the Seller was to have been approximately U.S. $1,500,000, consisting of cash for 10% of the purchase consideration, and three (3) Convertible Promissory Notes representing the balance of the purchase consideration. At the Seller's option the notes were to be convertible into shares of the Company's common stock at a value equivalent to the notes.
However, on July 10, 2009, the Company made the decision to rescind the Stock Sale and Purchase Agreement. The Company believes that the decision was made in the best interest of the Company and the investors. The Company requested that Wuhan Interpower Co., Ltd. immediately refund the US$161,500 advanced by the Company to Wuhan Interpower Co., Ltd.
In November, 2009, Wuhan Interpower Co., Ltd agreed to pay 50%, $80,750, of the investment deposit back to the Company. In considering the cost involved in lawsuit or arbitration in China, the Company decided to accept this settlement. Accordingly, the loss on investment increased by $80,750 in the current period and the investment deposit decreased to $80,750. Wuhan Interpower Co., Ltd paid the Company back the deposit of $80,750 in December 2009.
Merger with FHH Sino New Energies Co., Ltd.
On May 25, 2010, the Company signed a non-binding Letter of Intent to merge with FHH Sino New Energies CO., Ltd., a Chinese company ("FHH Sino") located in Weihai, Shandong Province of China. FHH Sino is a petroleum storage company that offers petroleum storage tanks and facilities for rental to the petroleum importers/exporters in Weihai, a coastal city in Shandong Province of Northern China. Upon signing the Letter of Intent on May 27, 2010 (effective date), FHH Sino made a U.S. $230,000 deposit with the Company.
The Company intends to merge with FHH Sino by exchanging the Company's common stock with FHH Sino's holding or subsidiary company. This merger will give the Company the opportunity to switch its nature of business into the energy sector, the ability to generate revenue and profit once the FHH Sino commences its operation in early 2011, thus benefits our shareholders in the near future.
Note 9: Derivative Liability
As of December 31, 2010, the common stock equivalents of the Company on all convertible debentures and preferred stock exceeded the total common stock available for issuance by approximately by 28,404,512,818 shares. The Company's Chief Executive Officer, Kenneth Yeung, hold 3,000,000 shares of Series C Preferred Stock that are convertible into 26,373,626,374 common shares of the Company.
Unless and until there is enough authorized common stock available to cover all common stock equivalents, Mr. Yeung will not convert any of his preferred shares. Furthermore, the stock is only convertible upon management's discretion. Management currently does not intend on converting such stock. Also, warrant options are not included in common stock equivalents since the exercise price of $0.25 for the warrant is more than the fair value of common stock of $0.0004 per share on December 31, 2010. The remaining common stock equivalent of 2,030,886,444 shares has been accounted for as a derivative liability. Accordingly, the excess common stock equivalents exceeding the total common stock available for issue is marked to market through earnings at the end of each reporting period. Utilizing the Black-Scholes valuation model and the following assumptions: estimated volatility of 479.95%, a contractual life of approximately a year, a zero dividend rate, 0.29% risk free interest rate, exercise price of $0.00023957 and the fair value of common stock of $0.0004 per share as of December 31, 2010, the Company determined the allocated fair value
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
of the derivative liability. The Company reflected an income of $1,303,727 in the year ended December 31, 2010 to adjust the derivative liability to $802,102 as of December 31, 2010, representing the initial fair value of excess common stock equivalents exceeding the total common stock available for issuance.
Year ended Year ended December 31, December 31, 2010 2009 ------------ ------------ Opening balance at January 1, 2010 and $ 2,105,829 $ 2,137,962 January 1, 2009 Change in fair value of derivative liabilities (1,303,727) (32,133) ------------ ------------ Closing balance at September 30, 2010 $ 802,102 $ 2,105,829 ============ ============
Total gain included in the statement of operations for the change in fair value of derivative liability $ 802,102 $ 32,133 ============ ============
Note 10: Commitments and Contingencies
Litigation
As of December 31, 2010 there was no threatened or pending litigation against the Company.
Note 11: Stock Options and Warrants
Warrants
The Company issued warrants in connection with the promissory notes signed during the year ended December 31, 2007. Each warrant gives the holder the right to subscribe to and purchase from the Company one share of the Company's common stock, par value of $0.001, exercisable at $0.25 per share any time after date of issuance and is set to expire five years after date of issuance. There were no warrants granted during years ended December 31, 2010 and 2009.
The fair value of each warrant award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on volatilities from the Company's traded common stock. The expected term of the warrants granted is estimated at the contractual term as noted in the individual option agreements and represents the period of time that the warrants granted are expected to be outstanding. The risk-free rate for the periods within the contractual life of the option is based on the U.S. Treasury bond rate in effect at the time of grant for bonds with maturity dates at the estimated term of the options.
Year Ended December 31, 2010 -----------------
Expected volatility 479.975% Weighted-average volatility 30.16% Expected dividends $ --- Expected term (in years) 5 Risk-free rate 0.21% - 0.49%
INTERNATIONAL BUILDING TECHNOLOGIES GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Notes to the Condensed Financial Statements December 31, 2010
The following table summarizes the warrants the Company issued as of the years ended December 31, 2010 and 2009:
Weighted- Weighted- Average Average Remaining Aggregate Warrant Exercise Contractual Intrinsic Warrants Shares Price Term Value -------- ------ ----- ---- ----- Outstanding at December 31, 2009 2,104,000 $0.25 5 $128,931 Exercisable at December 31, 2009 2,104,000 $0.25 5 $128,931 Outstanding at December 31, 2010 2,104,000 $0.25 5 $128,931 Exercisable at December 31, 2010 2,104,000 $0.25 5 $128,931
Note 12: Subsequent events
Stock Issuances
The Company issued the following stock subsequent to December 31, 2010 and prior to the filing of financial statements for the year ended December 31, 2010:
* On January 10, 2011, 50,000 shares of Preferred Series D Stock were issued to Allied Consultants, Inc. 401(K) Plan Trust for $1 per share with a total cash payment of $50,000.
Consulting Agreements
Duing the fourth quarter of 2010, the Company entered into the following consulting agreements:
* On November 15, 2010, the Company has retained Mr. Cheng Kim Man Edwin as its consultant for services to be provided for six months. The compensation shall be shares of Preferred Stock Series E equivalent to US$35,000 distributable at the end of six months on May 15, 2011.
* On November 15, 2010, the Company has retained Mr. Jack Sze as its consultant for services to be provided for six months. The compensation shall be shares of Preferred Stock Series E equivalent to US$50,000 distributable at the end of six months on May 15, 2011.
* On November 15, 2010, the Company has retained Mr. Tang Chong Yin as its consultant for services to be provided for six months. The compensation shall be shares of Preferred Stock Series E equivalent to US$80,000 distributable at the end of six months on May 15, 2011.
* On November 15, 2010, the Company has retained Mr. Barry Grama as its consultant for services to be provided for six months. The compensation shall be shares of Preferred Stock Series E equivalent to US$80,000 distributable at the end of six months on May 15, 2011.
Management has reviewed material subsequent events in accordance with FASB ASC 855 "Subsequent Events". No additional disclosures are required.