Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
IBII > SEC Filings for IBII > Form 10-Q on 16-Nov-2012All Recent SEC Filings

Show all filings for ISLAND BREEZE INTERNATIONAL, INC.

Form 10-Q for ISLAND BREEZE INTERNATIONAL, INC.


16-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis summarizes the significant factors affecting (1) our consolidated results of operations for the three and nine months ended September 30, 2012, compared to the three and nine months ended September 30, 2011, and (2) our liquidity and capital resources. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes included in Item 1 of this Report.

Principal Office

Our administrative office is located at 211 Benigno Blvd, Suite #201, Bellmawr, New Jersey, 08031. Our telephone number is 856-931-1505.

Other information

IB International has 50,441,028 shares outstanding on September 30, 2012 and 45,423,082 shares issued and outstanding on December 31, 2011. 16,110,500 of such shares are designated as Class B common shares and the holder has the right to cast ten votes for each share held of record on all matters submitted to a vote of holders of common stock.

IB International is responsible for filing various forms with the United States Securities and Exchange Commission (the "SEC") such as Forms 10-K and Forms 10-Qs. The shareholders may read and copy any material filed by IB International with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC, 20549. The shareholders may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information which IB International has filed electronically with the SEC. This information is available by accessing the SEC website using the following address: http://www.sec.gov or via the IB International maintained website at the following address:
http://www.islandbreezeinternational.com.

DESCRIPTION OF THE PROPERTY

Plan of Operation

We have had no revenue and have no operations. Our efforts since our inception have been focused on developing and operating entertainment day cruises. We own one vessel, which we expect to substantially renovate and equip with gaming, restaurant and entertainment related equipment. We continue to evaluate available ports in the United States, including those located in the states of Florida, South Carolina, and Texas. We have also focused on international locations and we are evaluating port locations primarily in East Asia for the establishment of cruise operations, with a particular focus on home port locations in the Hong Kong Special Administrative Region of China. Through its recently formed services subsidiary, IBI Leisure, the Company intends to offer professional services to the maritime, gaming, and food and beverage industries.

We do not have the cash reserves required to complete the renovations of our vessel or to commence operations. We believe that we will need at least $15,000,000 of outside funding for us to launch our vessel and initiate our business. We may also decide to acquire another vessel from which we may establish our initial operations, which will require an undetermined amount of outside funding to acquire and initiate our entertainment cruise operations.

We currently expect to renovate the m/v Island Breeze (the "Island Breeze"), a 415 foot vessel currently located in Greece which we acquired on September 12, 2007. After renovations are complete, we expect the Island Breeze to have a passenger capacity of approximately 1,000 passengers. Further, we expect that after the completion of renovations, the Island Breeze will feature a full service a la carte and buffet restaurant, sport bar, a VIP lounge, showroom, and a full casino complete with slot machines and table games, although the final configuration may vary. Upon completion of renovations of the Island Breeze, we intend to place the Island Breeze in service and establish our planned entertainment cruise operation from a yet to be determined port location. If our initial operations are located in East Asia, we may decide to acquire another vessel from which we can commence our initial operations. It would be anticipated that such a vessel will have a sufficient number of cabins to accommodate passengers on overnight or multi-day cruises versus the shorter duration cruises that can be operated by the Island Breeze.

As of September 30, 2012, we had seven full-time employees and an additional one individual, who was an independent contractor, working for us either in his individual capacity or through a professional service company controlled by him. No employee is represented by a labor union. We anticipate employing additional personnel as needed for the casino gaming floor, food and beverage outlets, terminal services, and the operations of the vessel and the Company.

Investment Policies

IB International does not have an investment policy at this time other than to deposit any funds it has on hand into interest bearing accounts such as term deposits or invested in short term money instruments.


Table of Contents

Critical Accounting Policies

Our discussion and analysis of the Company's financial condition and results of operations, including the discussion on liquidity and capital resources, are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management reevaluates its estimates and judgments. The going concern basis of presentation assumes we will continue in operation throughout the next fiscal year and into the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. Certain conditions, discussed below, currently exist which raise doubt upon the validity of this assumption. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.

Results of Operations

We are a development stage company. Since inception, our efforts have been principally devoted to the acquisition and renovation of two vessels. From inception, September 27, 2006, to September 30, 2012, we have sustained accumulated losses of $11,988,424. Included in the loss were general and administrative expenses, impairment expense of one of our previous owned vessels, loss from the sale of some of our equipment, a charge taken from the revaluation of a conversion option liability of a convertible note as discussed in Note 7(q), as well as professional fees not associated with the purchase and renovation of our vessels.

General and administrative expenses amounted to $163,262 for the three months ended September 30, 2012, compared to $126,917 for the three months ended September 30, 2011, an increase of $36,345. The increase in expenses is predominately due to the increase in costs associated with travel, professional service, employee salaries and employee benefits.

General and administrative expenses amounted to $552,423 for the nine months ended September 30, 2012, compared to $485,785 for the nine months ended September 30, 2011, an increase of $66,638. The increase in expenses is predominately due to the increase costs associated with travel, professional services, employee salaries and employee benefits.

Nonoperating expenses (excluding interest income) amounted to $260,999 for the three months ended September 30, 2012, compared to $18,091 for the three months ended September 30, 2011, an increase in the amount of $242,908. The increase is primarily due to interest accrued on convertible and promissory notes payable during the three months ended September 30, 2012.

Nonoperating expenses (excluding interest income) amounted to $639,355 for the nine months ended September 30, 2012, compared to $75,808 for the nine months ended September 30, 2011, an increase in the amount of $563,547. The increase is primarily due to interest accrued on convertible and promissory notes payable during the nine months ended September 30, 2012.

Balance Sheet Discussion

As of September 30, 2012 and December 31, 2011

As of September 30, 2012, our total assets were $12,874,457, total liabilities were $4,351,114 and shareholders' equity was $8,315,010 compared to $11,621,461, $2,487,814 and $8,925,314, respectively, as of December 31, 2011. Current assets at September 30, 2012 were $51,880 consisting of cash and cash equivalents of $45,656, other receivable of $1,600 and prepaid expenses of $4,624 compared to $222,812, $1,600 and $8,939, respectively, at December 31, 2011. Included in total assets as of September 30, 2012 are property, and equipment, net of depreciation, of $4,819 and other assets of $12,817,758 consisting of the cost of vessel we have acquired and costs related to renovations of the vessel as well as gaming/entertainment equipment not in use, compared to $4,760 and $11,383,350, respectively, for the period ended December 31, 2011 with respect to these items.

As of September 30, 2012, our total liabilities and our current liabilities were $4,351,114, consisting of officer loans and notes payables and other loans in the amount of $2,539,493, accounts payable of $165,504, convertible notes payable of $1,215,800, accrued interest of $233,328, derivative liability of $0, accrued expenses of $161,989, and other short term liabilities of $35,000, compared to total and current liabilities of $2,487,814, consisting of officer loans and notes payables and other loans in the amount of $706,417, accounts payable of $170,558, convertible notes payable of $1,191,631, accrued interest of $139,095, derivative liability of $21,486, and accrued expenses of $148,627, and other short term liabilities of $110,000, respectively for the period ended December 31, 2011. The increase in our liabilities for the nine months ended September 30, 2012 compared to December 31, 2011 primarily resulted from an increase in our convertible notes and other loans payable.

The net cash used in our operating activities in the nine month period ended September 30, 2012 was $411,346, an increase of 174,093 from that used in the nine month period ended September 30, 2011, which net increase was affected primarily by an increase in our net loss for the period.

Net cash used in investment activities in the nine month period ended September 30, 2012 was $1,439,491, an increase of $1,163,016 from that used in the nine month period ended September 30, 2011, which net increase was affected primarily by purchase of equipment and services related to the renovation of the mv Island Breeze.

Net cash provided by financing activities in the nine month period ended September 30, 2012 was $1,673,681, compared to $496,000 from the nine month period ended September 30, 2012, consisting of proceeds from issuance of notes payable.

Cash and cash equivalents for the nine months ended September 30, 2012, decreased by $177,156, as compared to December 31, 2011.

Our capital expenditure plan for 2012 is estimated to approximate $27,000,000 to facilitate our renovation plan, purchase of gaming equipment, hiring of additional personnel, terminal improvements, marketing, working capital reserves, and general corporate purposes. We require additional financing to continue. The Company expects financing will be supplied by additional capital contributions from the Company's shareholders, long-term debt, the sale of securities or a combination thereof. There can be no assurance that financing from such sources or from any sources will be available to us.


Table of Contents

We have funded our activities to date through capital contributions from our shareholders, short term loans, convertible notes and issuance of our common stock. As of September 30, 2012, we had shareholders' equity of $8,315,010, but little cash on hand.

Liquidity and Capital Resources

During the three months period ended September 30, 2012, the Company borrowed an aggregate of $304,745 on a promissory note referenced in Note 7(ap).

During the three months period ended September 30, 2012, the Company sold an aggregate of 1,540,001 Class A common shares, based upon fair market value for the period, for a total of $166,000.

During the nine months period ended September 30, 2012, the Company issued an aggregate of 1,690,170 Class A common shares in lieu of an aggregate of $149,685 in principal and accrued interest to the holders of the notes referenced in Notes 7(d), 7(w), 7(x), 7(y), 7(z) and 7(aa).

On November 9, 2012, our senior secured promissory note, referenced in Note 7(ap) of the Company Financial Statements included in this Report on 10-Q (the "Senior Note"), matured pursuant to its terms and as a result is due in full. As of that date, the Company has been in default of if its obligations to satisfy the Senior Note. The amount due at maturity was $2,754,398, inclusive of the principal amount outstanding and the interest accrued under the Senior Note through the maturity date. The Company does not have the cash recourses available to make the payments required under the Senior Note. We are in discussions with the lender to extend the maturity date, but cannot be assured we will reach an agreement with the lender. If the maturity date of the Senior Note is not extended, the lender, at its option, may exercise various rights provided to it in the case of an Event of Default under the Senior Note, including, the right to foreclosure on the Company's vessel, the mv Island Breeze, which is the Company's only significant asset, and in such case the Company will likely not be able to continue as a going concern.

The Company believes all of the issuances of securities referred to in this Note were exempt from registration under the Securities Act of 1933 pursuant to
Section 4(2) thereof and other available exemptions.

As of September 30, 2012, the Company's aggregate obligation, to include principal and accrued interest, under promissory notes due on or before September 30, 2013 is $4,107,799. Of this amount, $1,440,680 is evidenced by promissory notes which are convertible into shares of our Class A Common Stock at the option of the holder. $3,970,011 of our obligations under outstanding promissory notes will become due on or before December 31, 2012.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company incurred net losses of $1,191,769 and $561,589 for the nine months ended September 30, 2012 and 2011, respectively and $11,988,424 from inception (September 27, 2006) through September 30, 2012. In addition, the Company's current liabilities exceed its current assets by $4,299,234 as of September 30, 2012. These factors among others, including the Company's current cash position, which was $45,656 as of September 30, 2012, indicate that the Company may be unable to continue as a going concern for a reasonable period of time absent the infusion of substantial additional capital.

If adequate funds are raised upon a debt or equity financing transaction and operations results improve significantly, management believes that the Company can meets its ongoing obligations and continue to operate. However, no assurance can be given that management's actions will result in the resolution of its liquidity problems or its eventual emergence as a profitable company.

The Company's forward looking plan to continue as a going concern is primarily based upon raising additional capital in the form of debt or equity to enable us to initiate and sustain operations as an entertainment cruise business. We have had and will continue to have discussions with third parties to accomplish this goal which may result in our issuing equity securities, borrowing funds and issuing debt securities, restructuring existing debt, entering into joint ventures with third parties, selling assets, including gaming and other equipment we own or our vessel the mv Island Breeze, or any combination or the foregoing. Also, we have and will continue to implement plans to reduce our expenses consistent with our underlying business plan. There can be no assurance that our efforts in this regard will ultimately be successful.

The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Impact of Inflation

Since we have had no operations to date, inflation has not affected the results of our operations, but may affect the costs we will incur to complete the renovation of our vessels. Do not expect such consequences to be significant given the current economic client.

  Add IBII to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for IBII - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.