UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~June~~September 30, 2012

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________to _________.

Commission File Number: 000-53452

ISLAND BREEZE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-1742696
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

211 Benigno Blvd. Suite #201, Bellmawr, NJ	08031
(Address of principal executive offices)	(Zip Code)

(856) 931-1505

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of ~~August 6,~~November 15, 2012, the registrant had outstanding ~~31,906,024~~35,339,836 shares of Class A Common Stock and 16,110,500 shares of Class B Common Stock.

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~~ISLAND~~ISLAND BREEZE INTERNATIONAL, INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~JUNE~~SEPTEMBER 30, 2012

TABLE OF CONTENTS

		Page

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Operations	6
	Consolidated Statements of Changes in Stockholders' Equity	7
	Consolidated Statements of Cash Flow	8
	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2723
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3025
Item 4	Controls and Procedures	3026

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3127
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3127
Item 3.	Defaults Upon Senior Securities	3127
Item 4.	(Removed and Reserved)	3127
Item 5.	Other Information	3127
Item 6.	Exhibits and Reports on 8-K	3228

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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Information included in this Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Island Breeze International, Inc. (“We”, “Our” or the “Company”) to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations, are generally identifiable by use of words "may," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements are based on assumptions that, although we believe are reasonable, may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Explanatory Note.

As used in this report, unless the context otherwise requires, the words “we”, “our” and “us” and words of similar import refers to Island Breeze International, Inc. and its solely owned Cayman Island subsidiary Island Breeze International (“IBI”). Since virtually all of our assets and operations are conducted through IBI, the discussions of our business and the risks we face and our historic economic performance, which are subsequently presented in this Form 10-Q, relate primarily to IBI. Specific discussions or comments relating to Island Breeze International will reference “IBI,” and those relating to Goldpoint Resources, Inc. our predecessor company, will reference “Goldpoint”.

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Prelude

We were formerly an exploration stage company named Goldpoint Resources, Inc. (“Goldpoint”), which owned an option to acquire a mineral claim in Clark County, Nevada.

GoldPoint was incorporated on June 29, 2007, under the laws of the State of Nevada. Prior to June 12, 2009, GoldPoint did not make any significant purchases or sale of assets, nor was it involved in any mergers, acquisitions or consolidations. Prior to such date, Goldpoint was an exploration stage corporation. It intended to be in the business of mineral property exploration and had the right to conduct exploration activities on one property. Immediately prior to June 12, 2009, GoldPoint had one Officer and two Directors and no employees.

As of June 12, 2009, Olympian Cruises, LLC (“Olympian”), a Delaware limited liability company, acquired control of Goldpoint in a transaction we refer to herein as the “Share Exchange” or the “Reverse Acquisition”. As of such date, Goldpoint issued 30,000,000 shares of its common stock (or approximately 77.8 % of Goldpoint’s common stock outstanding on that date) to Olympian. In return for such issuances of shares, Goldpoint received all of the outstanding shares of capital stock of IBI, a privately held exempt Cayman Islands company. Thus, IBI became Goldpoint’s wholly-owned subsidiary and the business of the subsidiary became its only operations.

Under the agreement relating to the Share Exchange (the “Exchange Agreement”), Goldpoint was required to merge into a newly formed Delaware corporation, thereby becoming a Delaware corporation, change its name to Island Breeze International, Inc. and change its authorized capital stock to 100,000,000 shares of Class A Common Stock, par value $0.001 per share, 16,110,500 shares of Class B Common Stock, par value $0.001 per share and 1,000,000 shares of preferred stock, par value $0.001 per share.

It was originally contemplated that the Merger would occur prior to the consummation of the Share Exchange and that 13,889,500 shares of Class A Common Stock and 16,110,500 shares of Class B Common Stock would be issued to Olympian on consummation of the Share Exchange. However, in order to facilitate the closing of the Share Exchange, Goldpoint and Olympian agreed to effect the Merger after the consummation of the Share Exchange rather than beforehand. The Merger occurred on September 15, 2009 and after consummation of the Merger, Olympian exchanged 16,110,500 shares of Class A Common Stock for an identical number of shares of Class B Common Stock.

The Class A and Class B Common Stock are substantially identical except that holders of Class A Common Stock have the right to cast one vote for each share held of record and holders of Class B Common Stock have the right to cast ten votes for each share held of record on all matters submitted to a vote of holders of common stock. The Class A Common Stock and Class B Common Stock vote together as a single class on all matters on which stockholders may vote, including the election of directors, except when class voting is required by applicable law. As a result of the Merger, Goldpoint’s outstanding common stock automatically became Class A Common Stock on a 1 for 1 basis.

The Company’s activities since the closing of the Share Exchange have been focused on developing entertainment (including gaming) cruises to nowhere, the development of which is the historic business of IBI. As of ~~June~~September 30, 2012, the Company owned one vessel, which it expects to substantially renovate and equip with gaming, restaurant and entertainment related equipment. On May 7, 2010, the company sold the Casino Royale, which it had previously owned. The company is currently evaluating port locations in East Asia and the United States for the establishment of its initial cruise operations.

On August 14, 2009, IBI, the Company’s wholly-owned subsidiary, formed a new wholly-owned subsidiary named Island Breeze International Asia Limited, a Hong Kong corporation. IBI may utilize this corporation to operate certain entertainment cruises in Asia, if such cruises are launched. From inception through the date of this filing there has been no activity in this corporation.

(Since only our Class A Common Stock is registered under the securities laws or is publicly traded, all references in this Report to our common stock refers to our Class A Common Stock unless specifically noted otherwise.)

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PART I FINANCIAL INFORMATION

~~ITEM~~ ITEM 1. FINANCIAL STATEMENTS

~~ISLAND~~ISLAND BREEZE INTERNATIONAL,, INC.

(A Development Stage Enterprise)

Consolidated Balance Sheets

	June 30,			December 31,			September 30,			December 31,
	2012			2011			2012			2011
	(Unaudited)						(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	99,713		$	222,812		$	45,656		$	222,812
Other receivables		1,600			1,600			1,600			1,600
Prepaid expenses		4,896			8,939			4,624			8,939

Total current assets		106,209			233,351			51,880			233,351

Property and equipment, net		5,109			4,760			4,819			4,760
Gaming, entertainment equipment, and furniture not in use		676,061			687,093			676,061			687,093
Vessel under renovation - m/v Island Breeze (ex Atlantis)		11,904,634			10,696,257			12,141,697			10,696,257

Total assets	$	12,692,013		$	11,621,461		$	12,874,457		$	11,621,461

LIABILITIES, MEZZANINE AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	173,850		$	170,558		$	165,504		$	170,558
Accrued expenses		140,073			148,627			161,989			148,627
Line of credit		35,000			110,000			35,000			110,000
Accrued interest - related parties		23,014			18,150			19,386			18,150
Accrued interest		224,342			120,945			213,942			120,945
Derivative liability		-			21,486			-			21,486
Notes payable - related parties		105,000			105,000			65,000			105,000
Notes payable – others		2,021,657			601,417			2,474,493			601,417
Convertible notes payable - related parties		45,000			45,000			45,000			45,000
Convertible notes payable		1,260,800			1,146,631			1,170,800			1,146,631

Total current liabilities		4,028,736			2,487,814			4,351,114			2,487,814

Commitments and contingencies

Mezzanine equity
Class A common stock: $0.001 par value; authorized 100,000,000; 2,083,333 and 2,083,333 issued and outstanding at June 30, 2012 and December 31, 2011		208,333			208,333
Class A common stock: $0.001 par value; authorized 100,000,000; 2,083,333 and 2,083,333 issued and outstanding at September 30, 2012 and December 31, 2011								208,333			208,333

Stockholders' equity
Preferred stock, $0.001 par value, 1,000,000 authorized, none issued and outstanding at June 30, 2012 and December 31, 2011, respectively		-			-
Class A common stock: $0.001 par value; authorized 100,000,000; 28,981,024 and 27,229,249 issued and outstanding at June 30, 2012 and December 31, 2011, respectively		28,981			27,229
Class B common stock: $0.001 par value; 16,110,500 authorized, issued and outstanding at June 30, 2012 and December 31, 2011		16,111			16,111
Preferred stock, $0.001 par value, 1,000,000 authorized, none issued and outstanding at September 30, 2012 and December 31, 2011, respectively								-			-
Class A common stock: $0.001 par value; authorized 100,000,000; 32,247,195 and 27,229,249 issued and outstanding at September 30, 2012 and December 31, 2011, respectively								32,247			27,229
Class B common stock: $0.001 par value; 16,110,500 authorized, issued and outstanding at September 30, 2012 and December 31, 2011								16,111			16,111
Additional paid-in capital		19,974,016			19,678,629			20,255,076			19,678,629
Accumulated deficit during development stage		(11,564,164	)		(10,796,655	)		(11,988,424	)		(10,796,655	)

Total stockholders' equity		8,454,944			8,925,314			8,315,010			8,925,314

Total liabilities, mezzanine and stockholders’ equity	$	12,692,013		$	11,621,461		$	12,874,457		$	11,621,461

See Notes to Consolidated Financial Statements

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~~ISLAND~~ISLAND BREEZE INTERNATIONAL,, INC.

(A Development Stage Enterprise)

Consolidated Statements of Operations

(Unaudited)

													September 27, 2006
	Three Months Ended June 30,						Six Months Ended June 30,						(inception) to June 30,			Three Months Ended September 30,						Nine Months Ended September 30,						September 27, 2006 (inception) to September 30,
	2012			2011			2012			2011			2012			2012			2011			2012			2011			2012

Revenues	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-

Cost of Revenues		-			-			-			-			-			-			-			-			-			-

Gross Profit		-			-			-			-			-			-			-			-			-			-

General and administrative expenses		190,548			246,324			389,161			358,868			5,941,052			163,262			126,917			552,423			485,785			6,104,314

Operating loss		(190,548	)		(246,324	)		(389,161	)		(358,868	)		(5,941,052	)		(163,262	)		(126,917	)		(552,423	)		(485,785	)		(6,104,314	)

Nonoperating expense:
Impairment of vessel and equipment		-			-			-			-			(4,180,001	)		-			-			-			-			(4,180,001	)
Loss from revaluation of conversion option liability		-			-			3,075			(6,994	)		(46,404	)
Gain (Loss) from revaluation of conversion option liability																	-			18,892			3,075			11,898			(46,404	)
Loss from sale of equipment		(4,200	)		-			(4,200	)		-			(722,310	)		-			-			(4,200	)		-			(722,310	)
Gain from conversion of accounts payable																	37,409			-			37,409			-			37,409
Interest income		2			3			8			4			1,299			1			-			9			4			1,300
Interest expense		(204,737	)		(21,914	)		(377,231	)		(50,723	)		(675,696	)		(298,408	)		(36,983	)		(675,639	)		(87,706	)		(974,104	)

Loss before income tax expense		(399,483	)		(268,235	)		(767,509	)		(416,581	)		(11,564,164	)		(424,260	)		(145,008	)		(1,191,769	)		(561,589	)		(11,988,424	)

Income tax expense		-			-			-			-			-			-			-			-			-			-

Net Loss	$	(399,483	)	$	(268,235	)	$	(767,509	)	$	(416,581	)	$	(11,564,164	)	$	(424,260	)	$	(145,008	)	$	(1,191,769	)	$	(561,589	)	$	(11,988,424	)

Net loss per share, basic	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.01	)				$	(0.01	)	$	(0.00	)	$	(0.03	)	$	(0.01	)
Net loss per share, diluted	$	(0.01	)		(0.01	)		(0.02	)		(0.01	)				$	(0.01	)	$	(0.00	)	$	(0.03	)	$	(0.01	)

Weighted average number of shares of common stock outstanding, basic		43,995,558			42,604,564			43,800,639			42,798,038						48,950,038			43,085,782			46,973,630			42,889,179
Weighted average number of shares of common stock outstanding, diluted		43,995,558			42,604,564			43,800,639			42,798,038						48,950,038			43,085,782			46,973,630			42,889,179

See Notes to Consolidated Financial Statements

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~~ISLAND~~ISLAND BREEZE INTERNATIONAL,, INC.

(A Development Stage Enterprise)

Consolidated Statements of Changes in Stockholders' Equity

														Accumulated																			Accumulated
														Deficit																			Deficit
	Common Stock										Additional			During						Common Stock										Additional			During
	Shares					Amount					Paid-In			Development						Shares					Amount					Paid-In			Development
	Class A			Class B		Class A			Class B		Capital			Stage			Total			Class A			Class B		Class A			Class B		Capital			Stage			Total
September 27, 2006 (Inception)		13,889,500			16,110,500	$	13,889		$	16,111	$	(30,000	)	$	-		$	-			13,889,500			16,110,500	$	13,889		$	16,111	$	(30,000	)	$	-		$	-
Additional cash contributions to equity		-			-		-			-		5,003,926			-			5,003,926			-			-		-			-		5,003,926			-			5,003,926
Net loss		-			-		-			-		-			(172,009	)		(172,009	)		-			-		-			-		-			(172,009	)		(172,009	)
Balance, December 31, 2006		13,889,500			16,110,500		13,889			16,111		4,973,926			(172,009	)		4,831,917			13,889,500			16,110,500		13,889			16,111		4,973,926			(172,009	)		4,831,917
Additional cash contributions to equity		-			-		-			-		4,970,795			-			4,970,795			-			-		-			-		4,970,795			-			4,970,795
Net loss		-			-		-			-		-			(616,907	)		(616,907	)		-			-		-			-		-			(616,907	)		(616,907	)
Balance, December 31, 2007		13,889,500			16,110,500		13,889			16,111		9,944,721			(788,916	)		9,185,805			13,889,500			16,110,500		13,889			16,111		9,944,721			(788,916	)		9,185,805
Additional cash contributions to equity		-			-		-			-		1,032,676			-			1,032,676			-			-		-			-		1,032,676			-			1,032,676
Net loss		-			-		-			-		-			(618,411	)		(618,411	)		-			-		-			-		-			(618,411	)		(618,411	)
Balance, December 31, 2008		13,889,500			16,110,500		13,889			16,111		10,977,397			(1,407,327	)		9,600,070			13,889,500			16,110,500		13,889			16,111		10,977,397			(1,407,327	)		9,600,070

Stock issued in recapitalization pursuant to reverse merger		3,500,000			-		3,500			-		(3,500	)		-			-			3,500,000			-		3,500			-		(3,500	)		-			-
Convertible note issued for cancelled officer shares		(2,000,000	)		-		(2,000	)		-		(168,000	)		-			(170,000	)		(2,000,000	)		-		(2,000	)		-		(168,000	)		-			(170,000	)
Shares issued for convertible notes payable at $1.00 per share in June, 2009		5,566,795			-		5,567			-		5,561,228			-			5,566,795			5,566,795			-		5,567			-		5,561,228			-			5,566,795
Shares issued for convertible notes payable at $0.50 per share in June, 2009		300,049			-		300			-		149,725			-			150,025			300,049			-		300			-		149,725			-			150,025
Shares issued for services at $0.70 per shares in June, 2009		500,000			-		500			-		349,500			-			350,000			500,000			-		500			-		349,500			-			350,000
Shares issued for services at $0.20 per share in June, 2009		25,000			-		25			-		4,975			-			5,000			25,000			-		25			-		4,975			-			5,000
Shares sold for cash at $0.50 per share in June, 2009		20,000			-		20			-		9,980			-			10,000			20,000			-		20			-		9,980			-			10,000
Shares issued for services at $0.50 per share in July, 2009		270,000			-		270			-		134,730			-			135,000			270,000			-		270			-		134,730			-			135,000
Shares sold for cash at $0.50 per share in July, 2009		420,000			-		420			-		209,580			-			210,000			420,000			-		420			-		209,580			-			210,000
Shares sold for cash at $0.50 per share in August, 2009		280,000			-		280			-		139,720			-			140,000			280,000			-		280			-		139,720			-			140,000
Shares sold for cash at $0.50 per share in September, 2009		175,000			-		175			-		87,325			-			87,500			175,000			-		175			-		87,325			-			87,500
Shares issued for convertible notes payable at $0.28 per share in September, 2009		600,000			-		600			-		169,400			-			170,000			600,000			-		600			-		169,400			-			170,000
Shares issued for services at $0.50 per share in September, 2009		25,000			-		25			-		12,475			-			12,500			25,000			-		25			-		12,475			-			12,500
Shares sold for cash at $0.25 per share in October, 2009		80,000			-		80			-		19,920			-			20,000			80,000			-		80			-		19,920			-			20,000
Shares sold for cash at $0.50 per share in October, 2009		20,000			-		20			-		9,980			-			10,000			20,000			-		20			-		9,980			-			10,000
Shares issued for services at $0.50 per share in November, 2009		642,500			-		643.00			-		320,607			-			321,250			642,500			-		643.00			-		320,607			-			321,250
Shares issued for services at $0.50 per share in December, 2009		10,000			-		10			-		4,990			-			5,000			10,000			-		10			-		4,990			-			5,000
Additional cash contributions to capital		-			-		-			-		590,262			-			590,262			-			-		-			-		590,262			-			590,262
Net loss for the year ended December 31, 2009		-			-		-			-		-			(1,623,928	)		(1,623,928	)		-			-		-			-		-			(1,623,928	)		(1,623,928	)
Balance, December 31, 2009		24,323,844			16,110,500		24,324			16,111		18,580,294			(3,031,255	)		15,589,474			24,323,844			16,110,500		24,324			16,111		18,580,294			(3,031,255	)		15,589,474

Shares issued for services at $0.50 per share in January, 2010		210,000			-		210			-		104,790			-			105,000			210,000			-		210			-		104,790			-			105,000
Shares issued for services at $0.50 per share in February, 2010		235,000			-		235			-		117,265			-			117,500			235,000			-		235			-		117,265			-			117,500
Shares sold for cash at $0.50 per share in February, 2010		202,000			-		202			-		100,798			-			101,000			202,000			-		202			-		100,798			-			101,000
Shares issued for services at $0.50 per share in March, 2010		175,000			-		175			-		87,325			-			87,500			175,000			-		175			-		87,325			-			87,500
Shares sold for cash at $0.50 per share in March, 2010		129,000			-		129			-		64,371			-			64,500			129,000			-		129			-		64,371			-			64,500
Shares issued for services at $0.50 per share in April, 2010		32,000			-		32			-		15,968			-			16,000			32,000			-		32			-		15,968			-			16,000
Shares sold for cash at $0.50 per share in April, 2010		172,000			-		172			-		85,828			-			86,000			172,000			-		172			-		85,828			-			86,000
Shares issued for services at $0.50 per share in June, 2010		150,000			-		150			-		74,850			-			75,000			150,000			-		150			-		74,850			-			75,000
Shares issued for services at $0.51 per share in July, 2010		50,000			-		50			-		25,450			-			25,500			50,000			-		50			-		25,450			-			25,500
Shares issued at $0.49 per share as origination fee for note payable in September, 2010		8,000			-		8			-		3,912			-			3,920			8,000			-		8			-		3,912			-			3,920
Shares issued at $0.2412 per share for conversion of note payable in October, 2010		41,459			-		41			-		9,959			-			10,000			41,459			-		41			-		9,959			-			10,000
Shares issued at $0.1876 per share for conversion of note payable in October, 2010		53,305			-		53			-		9,947			-			10,000			53,305			-		53			-		9,947			-			10,000
Shares issued at $0.1675 per share for conversion of note payable in November, 2010		59,701			-		60			-		9,940			-			10,000			59,701			-		60			-		9,940			-			10,000
Shares issued at $0.1414 per share for conversion of note payable in November, 2010		70,721			-		71			-		9,929			-			10,000			70,721			-		71			-		9,929			-			10,000
Shares issued at $0.1675 per share for conversion of note payable in December, 2010		89,552			-		90			-		14,910			-			15,000			89,552			-		90			-		14,910			-			15,000
Conversion option liability charged to APIC at time of conversion		-			-		-			-		32,028			-			32,028			-			-		-			-		32,028			-			32,028
Shares issued at $0.64 per share as loan origination fees in October, 2010		5,000			-		5			-		3,200			-			3,205			5,000			-		5			-		3,200			-			3,205
Shares issued at $0.28 per share as loan origination fees in November, 2010		3,000			-		3			-		837			-			840			3,000			-		3			-		837			-			840
Shares issued at $0.30 per share as loan origination fees in November, 2010		15,000			-		15			-		4,485			-			4,500			15,000			-		15			-		4,485			-			4,500
Shares issued at $0.33 per share as loan origination fees in November, 2010		15,000			-		15			-		4,935			-			4,950			15,000			-		15			-		4,935			-			4,950
Shares issued at $0.24 per share as loan origination fees in December, 2010		2,500			-		2			-		598			-			600			2,500			-		2			-		598			-			600
Shares sold for cash at $0.50 per share in November, 2010		200,000			-		200			-		99,800			-			100,000			200,000			-		200			-		99,800			-			100,000
Net loss for the year ended December 31, 2010		-			-		-			-		-			(6,629,661	)		(6,629,661	)		-			-		-			-		-			(6,629,661	)		(6,629,661	)
Balance, December 31, 2010		26,242,082			16,110,500		26,242			16,111		19,461,419			(9,660,916	)		9,842,856			26,242,082			16,110,500		26,242			16,111		19,461,419			(9,660,916	)		9,842,856

Shares issued at $0.1407 per share for conversion of note payable in January 2011		71,073			-		71			-		9,929			-			10,000			71,073			-		71			-		9,929			-			10,000
Shares issued at $0.1273 per share for conversion of note payable in January 2011		94,266			-		94			-		11,906			-			12,000			94,266			-		94			-		11,906			-			12,000
Shares issued at $0.1117 per share for conversion of note payable in January 2011		102,060			-		102			-		12,131			-			12,233			102,060			-		102			-		12,131			-			12,233
Shares issued at$0.18 per share for conversion of note payable in February 2011		28,246			-		28			-		5,022			-			5,050			28,246			-		28			-		5,022			-			5,050
Shares issued at $0.15 per share for conversion of note payable in March 2011		75,400			-		75			-		11,235			-			11,310			75,400			-		75			-		11,235			-			11,310
Derivative liability charged to APIC at time of conversion		-			-		-			-		18,202			-			18,202			-			-		-			-		18,202			-			18,202
Shares issued at $0.25 per share as loan origination fees in March 2011		38,000			-		38			-		9,462			-			9,500			38,000			-		38			-		9,462			-			9,500
Shares issued at $0.18 per share as loan origination fees in March 2011		22,500			-		23			-		4,027			-			4,050			22,500			-		23			-		4,027			-			4,050
Shares issued for services at $0.25 per share in March 2011		163,500			-		164			-		40,711			-			40,875			163,500			-		164			-		40,711			-			40,875
Shares issued under SIP at $0.25 per share in March 2011		60,000			-		60			-		14,940			-			15,000			60,000			-		60			-		14,940			-			15,000
Shares issued for services at $0.25 per share in March 2011		20,000			-		20			-		4,980			-			5,000			20,000			-		20			-		4,980			-			5,000
Common stock issued at $0.15 per share for June 2011 loan origination fees		3,500			-		4			-		521			-			525			3,500			-		4			-		521			-			525
Common stock issued at $0.19 per share for September 2011 loan origination fees		54,655			-		54			-		10,330			-			10,384			54,655			-		54			-		10,330			-			10,384
Shares issued at $0.13 per share pursuant to note conversion in December 2011		59,701			-		60			-		7,940			-			8,000			59,701			-		60			-		7,940			-			8,000
Shares issued at $0.10 per share pursuant to note conversion in December 2011		143,266			-		143			-		14,857			-			15,000			143,266			-		143			-		14,857			-			15,000
Shares issued at $0.18 per share as loan origination fee in December 2011		51,000			-		51			-		9,129			-			9,180			51,000			-		51			-		9,129			-			9,180
Reclassify Conversion Option to Liability for portion converted		-			-		-			-		31,888			-			31,888			-			-		-			-		31,888			-			31,888
Net loss for the year ended December 31, 2011		-			-		-			-		-			(1,135,739	)		(1,135,739	)		-			-		-			-		-			(1,135,739	)		(1,135,739	)
Balance December 31, 2011		27,229,249			16,110,500		27,229			16,111		19,678,629			(10,796,655	)		8,925,314			27,229,249			16,110,500		27,229			16,111		19,678,629			(10,796,655	)		8,925,314

Shares issued pursuant to note conversion at conversion price of $0.11 per share in January 2012		139,925			-		140			-		14,860			-			15,000			139,925			-		140			-		14,860			-			15,000
Shares issued pursuant to note conversion at conversion price of $0.10 per share in January 2012		142,421			-		142			-		14,016			-			14,158			142,421			-		142			-		14,016			-			14,158
Shares issued for services at $0.20 per share in March 2012		204,000			-		204			-		40,596			-			40,800			204,000			-		204			-		40,596			-			40,800
Shares issued under SIP at $0.14 in March 2012		25,000			-		25			-		3,475			-			3,500			25,000			-		25			-		3,475			-			3,500
Reclassify Conversion Option to Liability for portion converted												18,411						18,411			-			-		-			-		18,411			-			18,411
Net loss for three months ended March 31, 2012		-			-		-			-		-			(368,026	)		(368,026	)		-			-		-			-		-			(368,026	)		(368,026	)
Shares sold for cash at $0.15 per share April 2012		20,000			-		20			-		2,980			-			3,000			20,000			-		20			-		2,980			-			3,000
Shares sold for cash at $0.15 per share in June 2012		833,334			-		833			-		124,167			-			125,000			833,334			-		833			-		124,167			-			125,000

Shares issued at $0.195 per share as loan origination fee in June 2012		6,000			-		6			-		1,164			-			1,170			6,000			-		6			-		1,164			-			1,170
Shares issued at $0.19 per share as loan origination fee in June 2012		2,000			-		2			-		378			-			380			2,000			-		2			-		378			-			380
Shares issued at $0.18 per share as loan origination fee in June 2012		5,000			-		5			-		895			-			900			5,000			-		5			-		895			-			900

Shares issued at $0.20 per share in lieu of cash for accounts payable in June 2012		374,095			-		375			-		74,445			-			74,820			374,095			-		375			-		74,445			-			74,820

Net loss for the three months ending June 30, 2012		-			-		-			-		-			(399,483	)		(399,483	)		-			-		-			-		-			(399,483	)		(399,483	)
Balance June 30, 2012 (Unaudited)		28,981,024			16,110,500		28,981			16,111		19,974,016			(11,564,164	)		8,454,944

Shares sold for cash at $0.10 per share in July 2012																					50,000			-		50			-		4,950			-			5,000
Shares sold for cash at $0.15 per share in July 2012																					106,667			-		107			-		15,893			-			16,000
Shares sold for cash at $0.10 per share in August 2012																					1,000,000			-		1,000			-		99,000			-			100,000
Shares sold for cash at $0.15 per share in August 2012																					133,334			-		133			-		19,867			-			20,000
Shares sold for cash at $0.10 per share in September 2012																					250,000			-		250			-		24,750			-			25,000

Shares issued at $0.10 per share as loan origination fee in August 2012																					1,000			-		1			-		99			-			100

Shares issued at $0.07 per share pursuant to note conversion in July 2012																					650,000			-		650			-		45,018			-			45,668
Shares issued at $0.10 per share pursuant to note conversion in August 2012																					749,570			-		750			-		74,207			-			74,957
Shares issued at $0.10 per share pursuant to note conversion in September 2012																					290,600			-		291			-		28,769			-			29,060

Shares issued under Stock Incentive Plan at $0.17 per share in July 2012																					35,000			-		35			-		5,915			-			5,950

Conversion of account payables to Class A common shares																					-			-		-			-		(37,409	)					(37,409	)

Net loss for the three months ending September 30, 2012																					-			-		-			-		-			(424,260	)		(424,260	)
Balance September 30, 2012 (Unaudited)																					32,247,195			16,110,500		32,247			16,111		20,255,076			(11,988,424	)		8,315,010

See Notes to Consolidated Financial Statements

Table of Contents

~~ISLAND~~ISLAND BREEZE INTERNATIONAL,, INC.

(A Development Stage Enterprise)

Consolidated Statements of Cash Flows

(Unaudited)

	For the six months Ended						September 27, 2006 (inception) to			For the nine months Ended						September 27, 2006 (inception) to
	June 30,						June 30,			September 30,						September 30,
	2012			2011			2012			2012			2011			2012
Cash Flows From Operating Activities
Net loss	$	(767,509	)	$	(416,581	)	$	(11,564,164	)	$	(1,191,769	)	$	(561,589	)	$	(11,988,424	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		534			1,678			15,863			824			2,353			16,153
Amortization of discount on notes payable		180,887			448			233,042			356,404			2,079			408,559
Impairment of tangible asset		-			-			4,180,001			-			-			4,180,001
Loss on sale of equipment		4,200			-			722,310			4,200			-			722,310
Revaluation of derivative liability		(3,075	)		6,994			46,404			(3,075	)		(11,899	)		46,404
Gain from conversion of accounts payable											(37,409	)		-			(37,409	)
Stock issued for services		119,120			60,875			1,435,245			125,070			60,875			1,441,195
Stock issued for loan origination fee		2,450			14,075			54,104			2,550			24,459			54,204
Stock issued for interest		-			-			25			-			-			25
Changes in operating assets and liabilities
Prepaid expenses		4,043			(1,137	)		(4,896	)		4,315			(15,669	)		(4,624	)
Other receivable		-			191,090			189,490			-			191,090			189,490
Accounts payable		3,292			(5,681	)		173,851			(5,054	)		21,958			165,505
Accrued interest - related parties		4,864			1,378			16,925			6,904			3,835			18,965
Accrued interest		108,871			41,273			262,353			312,332			66,757			465,814
Accrued expenses		(8,554	)		(21,596	)		167,859			13,362			(21,502	)		189,775

Net cash used in operating activities		(350,877	)		(127,184	)		(4,071,588	)		(411,346	)		(237,253	)		(4,132,057	)

Cash Flows From Investing Activities
Purchase of property and equipment		(883	)		-			(20,980	)		(883	)		-			(20,980	)
Proceeds from sale of assets		6,832			250			1,179,082			6,832			250			1,179,082
Purchase of assets - Island Breeze and m/v Casino Royale		(1,208,379	)		(180,595	)		(18,655,369	)		(1,445,440	)		(276,725	)		(18,892,430	)

Net cash used in investing activities		(1,202,430	)		(180,345	)		(17,497,267	)		(1,439,491	)		(276,475	)		(17,734,328	)

Cash Flows From Financing Activities
Proceeds from line of credit		-			90,000			145,000			-			145,000			145,000
Proceeds from issuance of convertible notes		119,000			265,000			6,985,362			119,000			385,000			6,985,362
Proceeds from issuance of notes payable – other		1,260,841						2,450,075			1,538,158			-			2,727,392
Payments on notes payable – other		(2,633	)		(45,000	)		(200,112	)		(192,477	)		(53,000	)		(389,956	)
Principal payments on convertible notes		-			(6,000	)		(6,000	)
Payments on convertible notes											(5,000	)		(6,000	)		(11,000	)
Proceeds from issuance of common stock for cash		128,000			-			937,000			294,000			-			1,103,000
Proceeds from notes payable – related parties		-			45,000			45,000			-			45,000			45,000
Payments of notes payable - related parties		-			(20,000	)		(175,416	)		-			(20,000	)		(175,416	)
Principal payments on line of credit		(75,000	)		-			(110,000	)		(80,000	)		-			(115,000	)
Capital contribution		-			-			11,597,659			-			-			11,597,659

Net cash provided by financing activities		1,430,208			329,000			21,668,568			1,673,681			496,000			21,912,041

Net increase (decrease) in cash		(123,099	)		21,471			99,713			(177,156	)		(17,728	)		45,656

Cash and cash equivalents, beginning of the year	$	222,812		$	49,635		$	-		$	222,812		$	49,635		$	-

Cash and cash equivalents, end of the period	$	99,713		$	71,106		$	99,713		$	45,656		$	31,907		$	45,656

Cash paid during the period for:

Interest	$	85,244		$	7,624		$	117,147		$	202,477		$	15,035		$	234,380

Taxes	$	-		$	-		$	-		$	-		$	-		$	-

Supplemental Information and Non-monetary Transactions:

Issuance of stock for convertible debt and accrued interest	$	29,158		$	50,223		$	6,096,051		$	178,843		$	50,223		$	6,245,736
Issuance of stock for services	$	119,120		$	60,875		$	1,745,245		$	125,070		$	60,875		$	1,751,195
Issuance of stock for loan origination fee	$	2,450		$	14,075		$	54,104		$	2,550		$	24,459		$	54,204
Capitalized accrued interest	$	-		$	-		$	597,699		$	-		$	-		$	597,699
Issuance of convertible debt for stock	$	-		$	-		$	170,000		$	-		$	-		$	170,000
Issuance of Mezzanine equity with Put option	$	-		$	-		$	208,333		$	-		$	-		$	208,333

See Notes to Consolidated Financial Statements

Table of Contents

~~ISLAND~~ISLAND BREEZE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND NATURE OF BUSINESS

Basis of Presentation

Island Breeze International, Inc. (“IB International” or the “Company”) a development-stage enterprise under the provisions of ASC 915, “Development Stage Enterprises”, is the holding company of Island Breeze International (“IBI”). IBI’s core business is focused on developing and operating gaming day cruises to nowhere. The mission of IBI is to develop the next generation entertainment product for the discerning population, who demand excellence and an alternative closer to home.

On June 12, 2009 IB International’s predecessor, Goldpoint Resources, Inc. (“Goldpoint”), acquired all of the issued and outstanding capital stock of IBI, a privately held exempt Cayman Islands company, which before closing was a wholly-owned subsidiary of Olympian Cruises, LLC (“Olympian”), a Delaware Limited Liability Company.

As of June 12, 2009, Olympian acquired control of Goldpoint in a transaction we referred to herein as the Share Exchange. As of such date, Goldpoint issued 30,000,000 shares of its common stock (or approximately 77.8 % of Goldpoint’s common stock outstanding on the date hereof) to Olympian. In return for such issuances of shares, Goldpoint received all of the outstanding shares of capital stock of IBI thus, IBI became Goldpoint’s wholly-owned subsidiary and the business of the subsidiary constitutes our only operations.

Since this transaction resulted in existing shareholders of IBI acquiring control of Goldpoint, for financial reporting purposes, the business combination has been accounted for as an additional capitalization of Goldpoint (a reverse acquisition with IBI as the accounting acquirer). As the operations of IBI are the only continuing operations of the Company, in accounting for the transaction, IBI is deemed to be the purchaser for financial reporting purposes. Accordingly, its net assets were included in the consolidated balance sheet at their historical value.

Under the agreement relating to the Share Exchange (the “Exchange Agreement”), we were required to merge into a newly formed Delaware corporation (the “Merger”), thereby became a Delaware corporation, change our name to Island Breeze International, Inc. and change our authorized capital stock to 100,000,000 shares of Class A Common Stock, par value $0.001 per share, 16,110,500 shares of Class B Common Stock, par value $0.001 per share and 1,000,000 shares of preferred stock, par value $0.001 per share.

As a result of the Merger, Goldpoint, our predecessor Nevada Corporation, no longer exists, our name has changed to Island Breeze International, Inc. and each outstanding share of Goldpoint’s common stock, $0.001 par value, has been automatically converted into one share of Class A Common Stock of IB International. Each outstanding stock certificate representing Goldpoint common stock is deemed, without any action by the shareholder to represent the same number of shares of Class A Common Stock of IB International. Stockholders do not need to exchange their stock certificates as a result of the Merger.

Also, as contemplated in the Exchange Agreement, Olympian exchanged 16,110,500 shares of Class A Common Stock for and identical number of Class B Common Stock. The Class A and Class B Common Stock are substantially identical except that holders of Class A Common Stock will have the right to cast one vote for each share held of record and holders of Class B Common Stock have the right to cast ten votes for each share held of record on all matters submitted to a vote of holders of common stock. The Class A Common Stock and Class B Common Stock vote together as a single class on all matters on which stockholders may vote, including the election of directors, except when class voting is required by applicable law.

~~Table of Contents~~

The difference in voting rights described above increases the voting power of the Class B Common stockholders and, accordingly, has an anti-takeover effect. The existence of the Class B Common Stock may make the Company a less attractive target for a hostile takeover bid or render more difficult or discourage a merger proposal, an unfriendly tender offer, a proxy contest, or the removal of incumbent management, even if such transactions were favored by the stockholders of the Company other than the Class B Common stockholders. Thus, the stockholders may be deprived of an opportunity to sell their shares at a premium over prevailing market prices, in the event of a hostile takeover bid. Those seeking to acquire the Company through a business combination will be compelled to consult first with the Class B Common stockholders in order to negotiate the terms of such business combination. Any such proposed business combination will have to be approved by our Board of Directors, which may be under the control of the Class B Common stockholders, and if stockholder approval is required the approval of the Class B Common stockholders will be necessary before any such business combination can be consummated.

On September 15, 2009, the Company adopted its 2009 Stock Incentive Plan (the “Plan”). We adopted the 2009 Plan to provide a means by which employees, directors, and consultants of the Company and those of our subsidiaries and other designated affiliates, which we refer to together as our affiliates, may be granted awards of our Class A Common Stock, be given the opportunity to purchase our Class A Common Stock and be granted other benefits including those measured by increases in the value of our Class A Common Stock, to assist in retaining the services of such persons, to secure and retain the services of persons capable of filling such positions and to provide incentive for such persons to exert maximum efforts for our success and the success of our affiliates.

Table of Contents

The total number of shares of our Class A Common Stock that may be subject to awards under the 2009 Plan is equal to 5,000,000 shares. Therefore, 5,000,000 shares of Class A Common Stock are available for awards under the 2009 Plan. During the fiscal year ended December 31, 2010 the Company awarded 235,000 shares of Class A Common Stock under the Plan. During the fiscal year ended December 31, 2011, the Company awarded 60,000 shares of Class A Common Stock under the Plan. During the ~~six~~nine months ended ~~June~~September 30, 2012, the Company awarded ~~25,000~~60,000 shares of Class A Common Stock under the Plan. As of ~~June~~September 30, 2012, ~~4,680,000~~4,645,000 shares are available for issuance under the Plan.

Nature of Business

Effective on the closing of the Share Exchange mentioned above, we abandoned all activities related to our mining business and our activities are conducted exclusively through IBI.

IBI was incorporated under the laws of the Cayman Islands as an exempt company on September 27, 2006. We have had no revenue and have no operations. Our initial efforts since our inception have been focused on developing and operating entertainment day ~~cruises.~~cruises and now includes offering professional maritime services to third-parties. 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.

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. We believe that after it is renovated the Island Breeze would be better suited for our East Asian and U.S. operations, than a second vessel which we previously owned and sold on May 7, 2010, the m/v Casino Royal (the “Casino Royale”), since the Island Breeze has an enclosed entertainment area and the gaming area is concentrated on one level. We also believe that based on our current renovation plans, the Island Breeze would require less capital investment and take less time to renovate than the Casino Royale. 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.

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NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements have been prepared by the Company, in accordance with generally accepted accounting principles pursuant to Regulation S-X of the Securities and Exchange Commission. Accordingly, these interim financial statements should be read in conjunction with the Company’s financial statements and related notes as contained in Form 10-K for the year ended December 31, 2011. In the opinion of management, the interim consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of the operations for the ~~six~~nine months ended ~~June~~September 30, 2012 are not necessarily indicative of the results of operations to be expected for the full year.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of IB International and its subsidiaries. All significant intercompany balances 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.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash equivalents include highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations. We had no cash equivalents at ~~June~~September 30, 2012.

Prepaid Expenses

Prepaid expenses are primarily comprised of advance payments made to vendors for equipment and services. The Company records prepaid expenses at the expected recovery amount.

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Property and Equipment

Property and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property, plant and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purpose as follows:

	Years
Vessel		30
Vessel improvement		3-28
Machinery and equipment		10
Computer hardware and software		3-5

We capitalize costs that are directly related to the purchase and renovation of the vessel. We capitalize interest as part of vessel acquisition costs and other capital projects during the renovation period. Upon placing the vessel into service, the vessel will be depreciated over its useful life and the costs of repairs and maintenance, including minor improvement costs, will be charged to expenses as incurred. Further, upon placing a vessel into service, specifically identified or estimated cost and accumulated depreciation of previously capitalized vessel components will be written off upon replacement.

Dry-dock costs primarily represent planned major maintenance activities that are incurred when a vessel is taken out of service for scheduled maintenance. These costs will be expensed as incurred.

~~Table of Contents~~

Long-lived Assets

Long-lived assets primarily include property and equipment and intangible assets with finite lives. Long-lived assets are reviewed on a regular basis for the existence of facts and circumstances that may suggest that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated undiscounted future cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management, and different judgments could yield different results.

From inception to ~~June~~September 30, 2012 the Company recognized an aggregate of $4,180,001 in impairment expense associated with the sale of a vessel on May 7, 2010.

Advertising Expense

The Company expenses advertising costs as incurred. The Company incurred no advertising expense for the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2011 respectively.

Income Taxes

The Company accounts for income taxes under ASC 740 "Income Taxes". Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

Comprehensive Income

Comprehensive income includes net income and also considers the effect of other changes to stockholders’ equity that are not required to be recorded in determining net income, but are rather reported as a separate component of stockholders’ equity. During the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2011 there were no sources of other comprehensive income.

Fair Value of Financial Instruments

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at ~~June~~September 30, 2012 and December 31, 2011.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

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The following table presents liabilities that are recognized at fair value at ~~June~~September 30, 2012:

Description

Level 1

Level 2

Level 3

Total

Derivative liability

—

The following table presents liabilities that are recognized at fair value at December 31, 2011:

Description		Level 1				Level 2				Level 3				Total
Derivative liability			—				—				21,486				21,486

Earnings Per Share Information

FASB ASC 260, “Earnings Per Share” provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. During the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, common stock equivalents were not included in the calculation of the diluted weighted average number of common shares outstanding because they would be anti-dilutive, thereby decreasing the net loss per common share.

At ~~June~~September 30, 2012, the following convertible securities were not included in the fully-diluted loss per share because the result would have been anti-dilutive: debt convertible and accrued interest into ~~1,173,476~~1,190,160 shares at $0.50 per share, debt convertible and accrued interest into ~~251,156~~256,697 shares at $0.25 per share, debt convertible and accrued interest into ~~3,734,485~~541,450 shares at $0.20 per share, debt convertible and accrued interest into 550,524 shares at $0.15 per share and debt convertible and accrued interest into ~~532,376~~112,538 shares at ~~$0.15~~$0.10 per share.

Share Based Compensation

ASC 718 "Compensation - Stock Compensation" prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to Non-Employees" and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

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 is in a development stage and incurred losses from operations of ~~$399,483~~$424,260 and ~~$268,235~~$145,008 for the three months ended ~~June~~September 30, 2012 and 2011, respectively, ~~$767,509~~$1,191,769 and ~~$416,581~~$561,589 for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively, and ~~$11,564,164~~$11,988,424 from inception (September 27, 2006) through ~~June~~September 30, 2012. In addition, the Company’s current liabilities exceed its current assets by ~~$3,922,527,~~$4,299,234, as of ~~June~~September 30, 2012. These factors, including the Company’s current cash position, which was ~~$99,713~~$45,656 as of ~~June~~September 30, 2012, may 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.

~~Table of Contents~~

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 m/v 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.

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Recent Accounting Pronouncements

Recently Issued Standards

In the ~~six~~nine months ended ~~June~~September 30, 2012, the Financial Accounting Standards Board (“FASB”) issued ~~no new~~ Accounting Standard ~~Updates.~~Updates ASU 2012-01 thru ASU 2012-04, which are not expected to have a material impact on the consolidated financial statements upon adoption.

NOTE 3 – PROPERTY AND EQUIPMENT, NET

Property and equipment as of ~~June~~September 30, 2012 and December 31, 2011 were as follows:

	June 30,		December 31,		September 30,		December 31,
	2012		2011		2012		2011
	(Unaudited)				(Unaudited)
Furniture and fixtures	$	3,844	$	3,844	$	3,844	$	3,844
Office equipment		13,555		12,672		13,555		12,672
Computer software		3,573		3,573		3,573		3,573
		20,972		20,089		20,972		20,089

Less accumulated depreciation		15,863		15,329		16,153		15,329

Property and equipment, net	$	5,109	$	4,760	$	4,819	$	4,760

Depreciation expense was ~~$289~~$290 and ~~$823~~$675 for the three months ended ~~June~~September 30, 2012 and 2011, respectively, ~~$534~~$824 and ~~$1,678~~$2,353 for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively, and ~~$15,863~~$16,153 since inception.

NOTE 4 – GAMING, ENTERTAINMENT EQUIPMENT, AND FURNITURE NOT IN USE

Gaming, entertainment, and furniture consist of assets previously located on board the Company’s vessel the Casino Royale, which was sold on May 7, 2010. The book value of these items, based upon the purchase invoices of the original owner, was initially determined to be $2,000,000. During the year ended December 31, 2010, the Company sold certain of these assets with an aggregate book value of $1,312,657 for $476,000. The Company also recorded a revaluation loss of $118,457, and a loss on the sale of assets of $718,200. During the year ended December 31, 2011, the Company sold certain assets for $250. During the ~~six~~nine months ended ~~June~~September 30, 2012, the Company sold certain assets for $6,832 and recorded a loss on the sale in the amount of $4,200. At ~~June~~September 30, ~~2011,~~2012, assets with an estimated market value of $676,061, based upon management’s impairment test, remain on the Company’s balance sheet.

NOTE 5 – VESSEL UNDER RENOVATION – M/V ISLAND BREEZE (EX ATLANTIS)

On September 12, 2007, the Company completed the purchase of the passenger ship m/v Atlantis, and subsequently renamed it the m/v Island Breeze. The total costs related to the purchase of the vessel were $8,039,645. As of ~~June~~September 30, 2012, the Company has paid an additional ~~$3,864,989~~$4,102,052 in renovation costs for a total cost of ~~$11,904,634.~~$12,141,697.

~~Table of Contents~~

The m/v Island Breeze is currently moored in Elefsina Bay, near Piraeus, Greece. We estimate that the full scale renovation of the Island Breeze will cost approximately an additional $7,000,000 and will take approximately four months from the commencement of full scale renovations, which will occur after the required financing is secured. Additionally, we anticipate that we will incur an additional $3,200,000 of costs related to the purchase and installation of gaming equipment, IT equipment, and other furniture, fixtures & equipment. However, we believe that such costs can be reduced if we were to utilize, in part or in whole, the gaming equipment, IT equipment, and other furniture and fixtures which had been onboard the Casino Royale, which the book value of our remaining equipment on ~~June~~September 30, 2012 was 676,061. Further, we will continue to incur additional carrying costs related to the Island Breeze while we seek to secure the financing necessary to renovate and refit the vessel. We may modify the scope of the renovations if we are unable to secure the financing we require to complete the contemplated renovations.

NOTE 6 – DERIVATIVE LIABILITY

In June 2008, the FASB issued new accounting guidance, which requires entities to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock by assessing the instrument’s contingent exercise provisions and settlement provisions. Instruments not indexed to their own stock fail to meet the scope exception of ASC 815 “Derivative and Hedging” and should be classified as a liability and marked-to-market. The statement is effective for fiscal years beginning after December 15, 2008 and is to be applied to outstanding instruments upon adoption with the cumulative effect of the change in accounting principle recognized as an adjustment to the opening balance of retained earnings.

ASC 815-40 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity’s own stock. As disclosed in Note 7(q), on June 13, 2011, the Company entered into a convertible note which contains a variable conversion price. In accordance with ASC 815-40, this conversion option is classified as a derivative liability and was valued at $44,782. This amount was credited to conversion option liability when the note was issued. During the year ended December 31, 2011, portions of the convertible note were converted; these portions were revalued at the time of exercise at an aggregate amount of $31,888, and this amount was reclassified from liability to additional paid-in capital. The remaining conversion note was revalued at December 31, 2011, and the amount of $20,490 was charged to operations as loss on revaluation. The estimated values of the conversion options were determined using the Black-Scholes pricing model and the following assumptions: Stock price at revalue date of $0.1750; Exercise price at revalue date of $0.1068; Expected volatility of 142% - 188%; Expected life (years) of .76 to .18; risk free interest rate of 0.11% to 0.10%; and dividend rate of 0. During the three months ended March 31, 2012, the remaining principal and accrued interest of the convertible note were converted into 282,346 shares of Class A common stock, and the entire discount of $21,486 was amortized. At ~~June~~September 30, 2012, the amount of unamortized discount was $0.

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Based upon ASC 840-15-25 the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible securities. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date. Accordingly, sufficient shares are deemed available to satisfy the potential conversion of the conventional convertible notes issued and these previously issued conventional convertible notes are not classified as derivatives.

NOTE 7 – NOTES AND LOANS PAYABLE

Notes and loans payable consist of the following at ~~June~~September 30, 2012 and December 31, 2011:

	June 30,		December 31,		September 30,		December 31,
	2012		2011		2012		2011
Notes payable - related parties, (a)(d)	$	105,000	$	105,000	$	65,000	$	105,000
Notes payable – others, (c)(ap)		2,021,657		601,417		2,474,493		601,417
Convertible notes payable – related parties, (v)		45,000		45,000		45,000		45,000
Convertible notes payable, net, (e) through (at) except (v)		1,260,800		1,146,631
Convertible notes payable, net, (e) through (av) except (v)						1,170,800		1,146,631
Line of Credit, (xx)		35,000		110,000		35,000		110,000
	$	3,467,457	$	2,008,048	$	3,790,293	$	2,008,048

(a)

On December 1, 2008 and December 5, 2008 the Company borrowed an aggregated sum of $90,000 from officers and directors of the Company. The Company issued Promissory Notes with a term of one year at an interest rate of five percent that accrues to term. The Notes were subsequently reissued under the original terms of the Notes for a period of one year from the respective original term dates. During the year ended December 31, 2010, the Company made principal payments in the amount of $5,000 on this note. On December 16, 2011, the Note holders signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. During the year ended December 31, 2011, the Company made principal payments of $20,000 and accrued interest payments of $2,135 on these Notes. On ~~June~~September 30, 2012, the aggregate principal balance of the Notes was $65,000 and accrued interest was ~~$12,142.~~$12,961.

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(b)

Deleted.

(c)

On June 18, 2009, the Company borrowed $250,000 and issued a Promissory Note evidencing this loan. This loan, plus interest at the rate of 12% per annum and is payable 90 days from the date of issue. We also issued 25,000 shares of Class A common stock in connection with this loan. On September 17, 2009 the Company issued the Promissory Note under the original terms, for $227,479, which included the original principle amount less a $30,000 principal pay down plus accrued interest. The Promissory Note is payable 90 days from date of issue. We also issued 25,000 shares of Class A common stock in connection with the extension of this loan. On December 17, 2009 the Company reissued the Promissory Note under the original terms, for $200,788, which included the original principle amount less a $30,000 principal pay down plus accrued interest. The Promissory Note is payable 104 days from date of issue. We also issued 5,000 shares of Class A common stock in connection with the extension of this loan. During the period from January 1, 2010 to March 31, 2010, the Company made aggregate payments of principal in the amount of $40,000. On April 1, 2010, the Company reissued the Promissory Note under the original terms, for $167,335, which included accrued interest. The Promissory Note was payable six months from date of issue. During the period from March 31, 2010 to June 30, 2010, the Company made aggregate payments of principal in the amount of $36,000. On October 1, 2010, the Company reissued the Promissory Note under the original terms, for $91,335. The Promissory Note is payable six months from the date of issue. During the period from July 1, 2010 to September 30, 2010, the Company made aggregate payments of principal in the amount of $30,000. During the period from September 30, 2010 to December 31, 2010, the Company made aggregate principal payments in the amount of $40,000 and interest payments in the amount of $7,852. Subsequent to the due date, the lender verbally agreed to extend the Note on a month-to-month basis until paid in full. During the period from January 1, 2011 to December 31, 2011, the Company made aggregate principal payments in the amount of $61,335 and accrued interest payments of ~~$2,665,~~$2,665. On January 4, 2012, the Company made a final accrued interest payment of $2,633, which satisfied the Company’s obligations under this Note.

(d)

On October 9, 2009, the Company borrowed $49,000 and issued a Promissory Note to Olympian Cruises, LLC, our majority shareholder. Olympian owns 13,889,500 shares of Class A Common Stock and 16,110,500 shares of Class B Common Stock, which were issued to Olympian during the Share Exchange with Island Breeze International, Inc. on June 12, 2009. The managing members of Olympian include three officers of Island Breeze International, Inc. The Promissory Note provides for interest at the rate of 5% per annum and is payable along with principal, one year from the date of issue. On January 13, 2010, the Company made a principal payment in the amount of $500. On June 3, 2010, the Company made a principal payment in the amount of $500. On August 30, 2010, the Company made a principal payment in the amount of $8,000. On October 9, 2010, the Company reissued the Promissory Note under the original terms for $40,000. On December 16, 2011, the Note holder signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June 30,~~July 16, 2012, the ~~note~~holder of the Note converted the principal balance ~~was~~of $40,000 and accrued interest onof $5,668 into 650,000 shares of Class A common shares at $0.07 per share, which satisfied the ~~note was $5,580.~~Company’s obligations under this Note.

(e)

On November 6, 2009, the Company borrowed $300,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum and is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 120,000 shares of Class A common stock in connection with this loan. On November 17, 2010, a new Convertible Promissory Note was issued in the amount of $330,904 which included accrued interest of $30,904. As additional consideration for the lender agreeing to this transaction, the Company issued 15,000 restricted shares of its Class A common stock to the note holder. This note was due in one payment on February 29, 2011. On March 1, 2011, the note holder extended the loan under the current terms until June 1, 2011. As Additional consideration for the extension, the Company issued 10,000 restricted shares of its Class A common stock to the note holder. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the note balance was $330,904 and accrued interest on the note was ~~$53,579.~~

$61,921.

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(f)

On November 17, 2009, the Company borrowed $72,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum and is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 22,500 shares of Class A common stock in connection with this loan. On November 23, 2010, the Company issued a new Convertible Promissory Note in the principal amount of $72,000 to replace the expiring note. The new note bears interest at the rate of 12% per annum, and is payable in one installment on February 23, 2011. During the three months ended December 31, 2010, the Company paid accrued interest in the amount of $7,318. The Company also issued 15,000 shares of Class A common stock in connection with the new note. On March 4, 2011, the Company issued a new Convertible Promissory Note in the principal amount of $72,000 to replace the expiring Note. The new Note bears interest at the rate of 15% per annum, a conversion price of $0.15 per share based upon the fair market value during the period, and is payable in one installment on May 31, 2011. On March 8, 2011, the Company paid accrued interest in the amount of $2,369. The Company also issued 30,000 shares of Class A common stock in connection with the new Note. On August 14, 2011, the Company executed an extension on the Note thru September 30, 2011. The Company paid accrued interest thru the period ended June 30, 2011, in the amount of $3,515 and also issued 35,000 shares of Class A common stock in connection with the extension. On December 1, 2011, the Company executed an extension on the Note thru June 30, 2012. The Company paid accrued interest in the amount of $2,973 and also issued 35,000 shares of Class A common stock in connection with the extension. Subsequent to the maturity date, the Company is in discussions with the Lender to extend the Note. On ~~June~~September 30, 2012, the note balance was $72,000 and accrued interest was ~~$7,856.~~$10,579.

(g)

On December 18, 2009, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum and is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. On March 31, 2011, the holder of the Note converted the principal balance of $10,000 and accrued interest of $1,310 into 75,400 shares of Class A common shares which satisfied the Company’s obligations under this Note.Deleted.

(h)

On December 31, 2009, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum and is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 2,000 shares of Class A common stock in connection with this loan. On February 11, 2011, the Company reissued the Note with a maturity date of September 30, 2011 and a conversion price of $0.25 per share, based upon the fair market value during the period. As additional consideration of the lender agreeing to this transaction, the Company issued 1,000 restricted shares of its Class A common stock to the Note holder. On December 16, 2011, the Note holder signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. The Company issued 1,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the Note balance due on this note was $10,000 and accrued interest was ~~$2,499.~~$2,750.

(i)

On December 31, 2009, the Company borrowed $15,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum and is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 3,000 shares of Class A common stock in connection with this loan. On December 16, 2011, the Note holder signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. The Company issued 1,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the Note balance was $15,000 and accrued interest was ~~$3,748.~~$4,126.

(j)

On February 1, 2010, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or for all like this before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. On February 16, 2011, the holder converted $4,000 of principal and $1,084 of accrued interest due on the Note into 28,246 shares of Class A common stock. We paid the lender $6,000 of remaining principal due to satisfy the Company’s obligations under the Note.Deleted.

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(k)

On February 14, 2010, the Company borrowed $20,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 4,000 shares of Class A common stock in connection with this loan. On February 11, 2011, the Company reissued the Note with a maturity date of September 30, 2011 and a conversion price of $0.25 per share, based upon the fair market value during the period. As additional consideration of the lender agreeing to this transaction, the Company issued 2,000 restricted shares of its Class A common stock to the Note holder. On July 28, 2011, the Lender cancelled this Note and rolled the principal in the amount of $20,000 and accrued interest in the amount of $2,953 into a new note as referenced in Note 7(ag) of this report.

(l)

On February 13, 2010, the Company borrowed $30,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 6,000 shares of Class A common stock in connection with this loan. On December 16, 2011, the Note holder signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. During June 2012, the Company issued 1,000 shares of Class A common stock in connection with this extension. On ~~June~~September 7, 2012, the Company paid $5,000 of accrued interest on the Note. On September 30, 2012, the note balance was $30,000 and accrued interest on the note was ~~$7,144.~~$2,900.

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(m)

On February 16, 2010, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. On December 1, 2011, the Note holder signed an extension agreement that extends the maturity date until March 31, 2012. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. The Company issued 1,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the note balance was $10,000 and accrued interest on the note was ~~$2,367.~~$2,618.

(n)

On February 19, 2010, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. On December 1, 2011, the Note holder signed an extension agreement that extends the maturity date until February 28, 2012. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. The Company issued 2,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the note balance was $10,000 and accrued interest on the note was ~~$2,364.~~$2,615.

(o)

On February 19, 2010, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. On October 18, 2011, the Company reissued the Note in the amount of $11,663 which included $10,000 principal and $1,663 of accrued interest thru date of reissue. The maturity date of the reissued Note is April 30, 2012. The Company issued 1,000 shares of Class A common stock in connection with this Note. On May 18, 2012, the lender rolled the Company reissued the Note in the amount of $12,346, as referenced in Note 7(au) of this report, which included $11,663 of principal and $683 of accrued interest thru date of reissue.

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(p)

On February 19, 2010, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. On December 16, 2011, the Note holder signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. The Company agreed to issue 1,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the note balance was $10,000 and accrued interest on the note was ~~$2,371.~~$2,622.

(q)

On April 16, 2010, we entered into a Securities Purchase Agreement (“SPA”) with an investor and pursuant thereto issued an 8% convertible promissory note in the amount of $85,000 that is convertible into shares of Class A Common Stock. The loan is due in full along with accrued interest on December 1, 2010. The Investor has the right to convert all or any part of the outstanding and unpaid principal amount, as well as the interest accrued on this note into fully paid and non-assessable shares of Common Stock. The conversion price is sixty-seven percent of the average of the three lowest bid prices on the over-the-counter bulletin board during the 10-day period prior to the conversion. During the period commencing on the execution of the note and ending 180 days thereafter, subject to certain limitations, provided the Investor has not sent us a notice of conversion, we have the right to redeem the note for an amount equal to 150 percent of the outstanding principal amount of the note plus the interest accrued and unpaid thereon, plus certain other adjustments. Because the conversion price is based upon the price of the Company stock and is a variable price, this conversion feature is considered a derivative liability pursuant to ASC 815-40 (note 6). The conversion feature was valued via the Black-Scholes valuation method at $9,343 at the time the note was issued. This amount is considered a discount to the note, and is being amortized to interest expense over the life of the note. During the year ended December 31, 2010, the entire discount of $9,343 was amortized, and at December 31, 2010 the amount of unamortized discount was $0. During the three months ended December 31, 2010, principal in the amount of $55,000 was converted into 314,738 shares of the Company’s Class A Common stock. At December 31, 2010, principal of $30,000 and accrued interest of $4,233 were due on the note. During the period January 1, 2011 to March 31, 2011, the remaining principal in the amount of $30,000 and accrued interest in the amount of $4,233 was converted into 267,399 Class A common shares which satisfied the Company’s obligations under this Note. On June 13, 2011 we entered into a SPA with an investor and issued an 8% convertible promissory note, under identical terms as denoted above, in the amount of $50,000 that is convertible into shares of Class A Common Stock. The loan is due in full along with accrued interest on March 5, 2012. The beneficial derivative liability was valued via the Black-Scholes valuation method at $44,782 at the time the note was issued. During the year ended December 31, 2011, $23,296 of the discount was amortized, and at December 31, 2011 the amount of unamortized discount was $21,486. During December 2011, the holder of the note converted $23,000 of the principal due on the note into 202,967 shares of Class A common stock. On December 31, 2011, the Note balance was $27,000 and accrued interest on the Note was $2,158. During January 2012, the holder of our $50,000 convertible promissory note converted $27,000 of the principal due on the note and accrued interest of $2,158 into 282,346 shares of Class A common stock. The Company has satisfied its obligations under this Note.

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(r)

On June 15, 2010, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. On December 16, 2011, the Note holder signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. The Company issued 1,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the note balance was $10,000 and accrued interest on the note was ~~$2,044.~~$2,295.

(s)

On September 29, 2010, the Company borrowed $80,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 8,000 shares of Class A common stock in connection with this loan. On December 31, 2011, the note balance was $80,000 and accrued interest on the note was $11,069. On January 13, 2012, the Lender agreed to extend the note, at an interest rate of 15% annum, until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; (ii) the note holder rolls this note into a new Convertible Note with a principal amount of $91,069, which includes principal of $80,000 and accrued interest thru December 31, 2011 of $11,069, and a conversion rate of $0.20 per share; or (iii) the note holder delivers to the Company a written notice to convert or request for payment. The Company issued 10,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the note balance was $80,000 and accrued interest on the note was ~~$17,053.~~

$20,078.

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(t)

On November 10, 2010, the Company borrowed $25,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 12% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 3,000 shares of Class A common stock in connection with this loan. On August 8, 2011, the Lender agreed to extend the maturity date of the Note until August 8, 2012 with a new interest rate of 15% per annum and a conversion price of $0.20 per share, based upon the fair market value during the period. The Lender added an additional $75,000 of principal to the Note and agreed to roll accrued interest of $2,150 into the Note as principal. The Company also issued 10,215 shares of Class A common stock in connection with the extension of this Note. On June 20, 2012, the lender extended the maturity date of the Note thru June 20, 2013. The Company also issued 2,000 shares of Class A common stock in connection with the extension of this Note. On ~~June~~September 30, 2012, the note balance was $102,150 and accrued interest on the note was ~~$13,414.~~$17,276.

(u)

On December 29, 2010, the Company borrowed $25,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.50 per share, based upon the fair market value during the period. The Company also issued 2,500 shares of Class A common stock in connection with this loan. On July 28, 2011, the Lender cancelled this Note and rolled the principal in the amount of $25,000 and accrued interest in the amount of $1,447 into a new note as referenced in Note 7(ag) of this report.

(v)

On February 9, 2011, the Company borrowed $20,000 from an Officer of the Company and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the lender may elect to convert the principal amount of this Note into Class A Common shares at a conversion price of $0.25 per share, based upon the fair market value during the period. On June 30, 2011, the Company borrowed $25,000 from an Officer of the Company and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable sixty days from the date of issue. On or before the maturity date, upon written notice to the Company, the lender may elect to convert the principal amount of this Note into Class A Common shares at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also committed to issue 2,500 shares of Class A common stock in connection with this loan. On December 16, 2011, the Note holders signed an extension agreement that extends the maturity dates until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the aggregated Notes balance was $45,000 and accrued interest on the Notes was ~~$5,290.~~$6,424.

(w)

On February 15, 2011, the Company borrowed $50,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 2,500 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender ~~are~~were in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. ~~On June 30,~~During August 2012, the ~~Note balance was~~holder of our $50,000 convertible promissory note agreed to amend the conversion price to $0.10 per share and converted $50,000 of the principal due on the note and accrued interest ~~on the Note was $6,864.~~of $7,659 into 576,590 shares of Class A common stock. The Company has satisfied its obligations under this Note.

(x)

On February 15, 2011, the Company borrowed $5,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 250 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender ~~are~~were in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. ~~On June 30,~~During August 2012, the ~~Note balance was~~holder of our $5,000 convertible promissory note agreed to amend the conversion price to $0.10 per share and converted $5,000 of the principal due on the note and accrued interest ~~on the Note was $686.~~of $766 into 57,660 shares of Class A common stock. The Company has satisfied its obligations under this Note.

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(y)

of $766 into 57,660 shares of Class A common stock. The Company has satisfied its obligations under this Note.

(z)

(aa)

On February 15, 2011, the Company borrowed $25,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 1,250 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender ~~are~~were in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. ~~On June 30,~~During September 2012, the ~~Note balance was~~holder of our $25,000 convertible promissory note agreed to amend the conversion price to $0.10 per share and converted $25,000 of the principal due on the note and accrued interest ~~on the Note was $3,431.~~of $4,060 into 290,600 shares of Class A common stock. The Company has satisfied its obligations under this Note.

(ab)

On February 25, 2011, the Company borrowed $25,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 2,500 shares of Class A common stock in connection with this loan. On February 15, 2012, the Note holder signed an extension agreement that extends the maturity date until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. The Company issued 1,000 shares of Class A common stock in connection with this extension. On ~~June~~September 30, 2012, the Note balance was $25,000 and accrued interest on the Note was ~~$3,363.~~$3,992.

(ac)

On March 25, 2011, the Company borrowed $20,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the Note balance was $20,000 and accrued interest on the Note was ~~$2,537.~~$3,042.

(ad)

On March 28, 2011, the Company borrowed $50,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 2,500 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the Note balance was $50,000 and accrued interest on the Note was ~~$6,301.~~$7,562.

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(ae)

On March 29, 2011, the Company borrowed $20,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the Note balance was $20,000 and accrued interest on the Note was ~~$2,515.~~$3,020.

(af)

On June 30, 2011, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 1,000 shares of Class A common stock in connection with this loan. ~~Subsequent~~On August 3, 2012, the Note holder signed an extension agreement that amends the conversion price to $0.10 per share and extends the maturity date ~~the~~until November 2, 2012. The Company ~~and lender are~~issued 1,000 shares of Class A common stock in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment.connection with this extension. On ~~June~~September 30, 2012, the Note balance was $10,000 and accrued interest on the Note was ~~$1,003.~~$1,254.

(ag)

On July 28, 2011, the Lender cancelled the Notes referenced in Note 7(k) and Note 7(u) of this report and rolled the aggregated principal in the amount of $45,000, aggregated accrued interest in the amount of $4,400, and new cash in the amount of $25,000 into a new Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 15% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 7,440 shares of Class A common stock in connection with this loan. The Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the Note balance was $74,400 and accrued interest on the Note was ~~$10,365.~~$13,177.

(ah)

On August 18, 2011, the Company borrowed $5,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 500 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the Note balance was $5,000 and accrued interest on the Note was ~~$436.~~$562.

(ai)

On September 20, 2011, the Company borrowed $15,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 1,500 shares of Class A common stock in connection with this loan. Subsequent to the maturity date, the Company and lender are in discussions to extend the note under the current terms until the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On ~~June~~September 30, 2012, the Note balance was $15,000 and accrued interest on the Note was ~~$1,167.~~$1,545.

(aj)

On November 29, 2011, the Company borrowed $5,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June 30,~~September30, 2012, the Note balance was $5,000 and accrued interest on the Note was ~~$293.~~$420.

(ak)

On November 29, 2011, the Company borrowed $5,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $5,000 and accrued interest on the Note was ~~$293.~~$420.

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(al)

On November 29, 2011, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, which based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $10,000 and accrued interest on the Note was ~~$586.~~

$838.

(am)

On November 29, 2011, the Company borrowed $10,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $10,000 and accrued interest on the Note was ~~$586.~~$838.

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(an)

On November 29, 2011, the Company borrowed $5,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $5,000 and accrued interest on the Note was ~~$293.~~$420.

(ao)

On November 29, 2011, the Company borrowed $5,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $5,000 and accrued interest on the Note was ~~$293.~~$420.

(ap)

On November 9, 2011, we and our wholly owned Cayman Island subsidiary, Island Breeze International (“International”), entered into a securities purchase agreement (the “SPA”) with an investor (the “Investor”) as evidenced in our Form 8K filed on November 14, 2011. Pursuant to the SPA, we and International issued to Investor a promissory note (the “Note”) in the principal amount of $2,750,000 which, if fully funded, will represent $2,500,000 in cash and a non refundable 9% original issue discount (“OID”) of $250,000. Pursuant to this financing, we can request advances be made to us by the Investor from time to time. The initial advance at closing was $724,580.38 (inclusive of the OID). Subsequent advances will be used primarily to pay for refurbishment of Island Breeze. The Note is due and payable on November 9, 2012 and is secured by a mortgage on Island Breeze, a vessel owned by International. In connection with this loan, we issued to Investor 2,083,333 shares of our common stock (the “Shares”). We have the right to purchase, for $0.001 per share, a percentage of these Shares determined by the percentage of the Note which is not funded by advances (the “Repurchase Right”). Under the terms of the SPA, Investor has the right, commencing on the 22nd month anniversary of the closing (subject to acceleration in certain circumstances), to cause us and International to purchase the shares for cash at a purchase price per share of $0.10, subject to certain adjustments (the “Put”). The mortgage will be released upon our satisfaction of the Note and until such time will secure our obligations under the Note, the Put, and other obligations set forth in the documents executed with respect to the transaction. At ~~June~~September 30, 2012 and December 31, 2011, the Shares are presented as mezzanine equity. Since inception of Note, thru ~~June~~September 30, 2012, the Company has received an aggregate of ~~$2,253,927~~$2,558,672 advanced against the Note (inclusive of the OID). Since inception of the Note thru ~~June~~September 30, 2012, the Company has paid ~~$77,611~~$189,844 of interest on the Note. On ~~June~~September 30, 2012, the Company has the right to repurchase ~~375,813~~144,945 Shares at a repurchase price of ~~$376.~~$145. Additionally, the Investor may Put to the Company ~~1,707,520~~1,938,388 Shares at an aggregate Put price of ~~$170,752.~~$193,839. On ~~June~~September 30, 2012, the Note balance was ~~$2,253,927~~$2,558,672 and accrued interest on the Note was ~~$58,251.~~$30,486.

(aq)

On December 28, 2011, the Company borrowed $100,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company also issued 10,000 shares of Class A common stock in connection with this loan. On ~~June~~September 30, 2012, the Note balance was $100,000 and accrued interest on the Note was ~~$5,068.~~$7,589.

(ar)

On February 6, 2012, the Company borrowed $35,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $35,000 and accrued interest on the Note was ~~$1,390.~~$2,272.

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(as)

On February 7, 2012, the Company borrowed $20,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $20,000 and accrued interest on the Note was ~~$795.~~$1,299.

(at)

On March 27, 2012, the Company borrowed $14,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $14,000 and accrued interest on the Note was ~~$683.~~$1,036.

(au)

On May 18, 2012, the lender referenced in Note 7(o), rolled an aggregate of $12,346, which included $11,663 of principal and $683 of accrued interest thru date of reissue. The Company issued a Convertible Promissory Note evidencing this loan. The Company issued 2,000 shares of Class A common stock in connection with this Note. This loan, plus interest at the rate of 10% per annum, is payable upon the earlier of (i) the Company pays in full the Convertible Note to include principal and accrued interest; or (ii) the note holder delivers to the Company a written notice to convert or request for payment. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.25 per share, based upon the fair market value during the period. On ~~June~~September 30, 2012, the Note balance was $12,346 and accrued interest on the Note was ~~$142.~~$453.

(av)

On June 22, 2012, the Company borrowed $50,000 and issued a Convertible Promissory Note evidencing this loan. This loan, plus interest at the rate of 10% per annum, is payable twelve months from the date of issue. On or before the maturity date, upon written notice to the Company, the Lender may elect to convert the principal amount of this Note into shares of Class A common stock at a conversion price of $0.20 per share, based upon the fair market value during the period. The Company issued 5,000 shares of Class A common stock in connection with this Note. On ~~June~~September 30, 2012, the Note balance was $50,000 and accrued interest on the Note was ~~$123.~~$1,383.

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(xx)

During the year ended December 31, 2011, we borrowed an aggregate of $145,000 against an established line of credit. This loan, plus interest accrued at the rate of 18% annum, is payable at the discretion of the Company during the term of the credit line, but shall be paid in full no later than June 1, 2012. Subsequent to the maturity date, the Company is in discussions with the lender to convert the remaining principal into Class A common stock of the Company. During the ~~three~~nine months ended ~~June~~September 30, 2012, we made payments of ~~$10,000~~$75,000 principal and ~~$1,313~~$5,000 accrued interest on this loan. On ~~June~~September 30, 2012, the principal balance due on this line of credit was $35,000 and accrued interest was ~~$1,061.~~$2,132.

With respect to Notes past maturity, our inability to reach an agreement with the holder of the Notes, with respect to an extension or modification of the Notes, may at the option of the holder, result in an event of default under Notes which are not so extended or modified. None of the note holders have notified the Company of default.

NOTE 8 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has authorized 1,000,000 shares of blank check preferred stock at a par value $0.001 per share. Our charter documents provide authorization to our Board of Directors to issue "blank check" preferred stock, with designations, rights and preferences as they may determine. Accordingly, our Board of Directors may, without stockholder approval, issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. These types of provisions may discourage, delay or prevent a change in our control and are traditional antitakeover measures. These provisions make it difficult for a majority stockholder to gain control of the Board of Directors and of our company. These provisions may be beneficial to our management and our Board of Directors in a hostile tender offer and may have an adverse impact on shareholders who may want to participate in such a tender offer, or who may want to replace some or all of the members of our Board of Directors. To date, the Company has issued no preferred stock.

Common Stock

The Company’s capitalization authorized is 100,000,000 Class A common shares and 16,110,500 Class B common shares each class with a par value of $0.001 per share. As of ~~June~~September 30, 2012, the Company had ~~28,981,030~~32,247,195 Class A common shares, 2,083,333 Class A common shares presented as mezzanine equity and 16,110,500 Class B common shares issued and outstanding. A full description of our common stock is provided in the prelude to this Form 10-Q.

During ~~April~~July 2012, we issued ~~20,000 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.15 per share, based upon fair market value for the period.~~

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~~During June 2012, we issued 833,334~~106,667 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.15 per share, based upon fair market value for the period.

During ~~June~~July 2012, we issued 50,000 Class A common shares in connection with the sale of our common stock, at an ~~aggregate~~agreed price of ~~6,000~~$0.10 per share, based upon fair market value for the period.

During July 2012, we issued 35,000 Class A common shares under the Company’s 2009 Stock Incentive Plan, at a price of $0.17 per share, based upon fair market value for the period.

During July 2012, we issued 650,000 Class A common shares in connection with the conversion of the principal and accrued interest of a related party note, as referenced in Note 7(d), at an agreed price of $0.07 per share, which was below fair market value at the time of conversion.

During August 2012, we issued 1,000,000 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.10 per share, based upon fair market value for the period.

During August 2012, we issued 133,334 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.15 per share, based upon fair market value for the period.

During August 2012, we issued 1,000 Class A common shares in connection with the extension of Convertible Notes referenced in Note ~~7(i), 7(l), 7(p), 7(ab), and 7(au),~~7(af) at a price of ~~$0.195~~$0.10 per share, based upon fair market value for the period.

During ~~June~~August 2012, we issued ~~2,000~~an aggregate of 749,570 Class A common shares in connection with the ~~extension~~conversion of a Convertible ~~Note~~Notes referenced in Note ~~7(t)~~7(w), 7(x), 7(y), 7(z), at a price of ~~$0.19~~$0.10 per share, based upon fair market value for the period.

During ~~June~~August 2012, we issued ~~5,000~~290,600 Class A common shares in connection with the conversion of a Convertible Note referenced in Note ~~7(av)~~7(aa), at a price of ~~$0.18~~$0.10 per share, based upon fair market value for the period.

During ~~June~~September 2012, we issued ~~an aggregate of 374,095~~250,000 Class A common shares ~~valued~~in connection with the sale of our common stock, at ~~$0.20~~an agreed price of $0.10 per share, ~~which was an agreed~~based upon ~~price at~~fair market value for the ~~time of issuance to certain vendors, in lieu of cash for balance due for services rendered.~~period.

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.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Leasing Arrangements

On March 31, 2010 the Company entered into a Lease Agreement with The Children’s Choice of New Jersey, Inc. to lease the premises located at 211 Benigno Blvd, Ste #211, Bellmawr, New Jersey. The lease term commenced on April 1, 2010, and continues for thirteen months at a base lease rate of $1,209 per month. At the end of the initial term, the company has the option to extend the terms of the lease for two additional twelve months periods at the base lease rate plus a maximum three percent increase. On May 1, 2011, the lease was automatically extended thru April 30, 2013 at the base rate of $1,209 per month. The Company paid ~~$7,254~~$10,881 in base lease during the ~~six~~nine months ended ~~June~~September 30, 2012.

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On December 1, 2009 the Company entered into an agreement to lease office space in Taipei, Taiwan with a term expiring on November 30, 2012. During the lease term the Company shall pay a base lease rate of $198 (NT6000) per month for any period in which the Company occupies the premises. The Company does not have a provision to renew the lease at the end of the initial lease term.

Future minimum rental payments under this operating lease are as follows:

Six months ending December 31,	2012	$	8,244
Three months ending December 31,				2012	$	4,023
Year ending December 31,	2013		4,836	2013		4,836
		$	13,080		$	8,859

Rent expense for leased facilities were $3,627 and $3,627 for the three months ended ~~March 31,~~September 30, 2012 and 2011, respectively, and ~~$7,254~~$10,881 and ~~$12,254~~$15,881 for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively.

Contingencies

On or about March 28, 2012, an individual commenced an action against the Company and two of its executive officers in the state of South Carolina (Case No. 2012-CP-10-2139 (Court Of Common Pleas Ninth Judicial Circuit, County of Charleston, State of South Carolina)). In the complaint, the Plaintiff demands actual, consequential and punitive damages in an unspecified amount in connection with consulting services allegedly performed in connection with certain financings. On or about September 24, 2012, the Plaintiff’s Counsel withdrew as counsel in this case. The Court ordered the counsel for the Plaintiff shall be relieved and the Plaintiff shall have 30 days to obtain new counsel or proceed pro se in the case. The Company intends to assert an aggressive defense in this proceeding.

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NOTE 10 – RELATED PARTY TRANSACTIONS

During the period of January 1, 2012 to ~~June~~September 30, 2012, with the exception of the transactions described in Note 7(a), Note 7(d) and Note 7(v) of this report, the Company did not engage in the any related party transactions.

NOTE 11 – SUBSEQUENT EVENTS

The Company evaluated its ~~June~~September 30, 2012 Quarterly Report on Form 10-Q for subsequent events through the filing date of this report. The Company is not aware of any subsequent events that would require recognition or disclosure in the consolidated financial statements, except for the ones disclosed below.

On ~~July 2,~~October 1, 2012, the Company formed a new wholly-owned subsidiary named IBI Leisure Group, LLC (“IBI Leisure”), a New Jersey LLC. IBI Leisure is the professional services division of IB International.

On October 5, 2012, we issued ~~35,000 Class A common shares valued at $0.17 per share, based upon fair market value for the period, under the Company’s 2009 Stock Incentive Program.~~

On July 12, 2012, we sold an aggregate of 106,667 Class A Common shares valued at $0.15 per share, based upon fair market value for the period, via the Company’s Securities Purchase Agreement, in the amount of $16,000.

~~On July 16, 2012, we issued 650,000~~158,308 Class A common shares valued at $0.07 per share, based upon ~~an agreed price per share, to retire a promissory note~~fair market value for the period, as payment in ~~the amount~~lieu of ~~$45,480, to include principal and~~cash for $11,082 of accrued interest aspayable through this date on our loan referenced in Note ~~7(d)~~7(f). ~~Fair market value~~Concurrent with the issue of shares, the ~~shares on~~Note holder signed an extension agreement that extends the maturity date ~~of transaction was $0.12 per share.~~until April 30, 2013.

On ~~July 23,~~October 10, 2012, we sold ~~an aggregate of 50,000~~200,000 Class A ~~Common~~common shares valued at $0.10 per share, based upon fair market value for the period, via the Company’s Securities Purchase Agreement, in the amount of ~~$5,000.~~$20,000.

~~Subsequent to~~

On November 12, 2012, the ~~balance sheet date, the Company made an aggregate~~holder of ~~$36,341 in accrued interest payments, to~~ our ~~secured lender,~~Convertible Note referenced in Note ~~7(ap).~~7(af), signed an extension agreement that amends the conversion price to $0.10 per share and extends the maturity date until February 2, 2013. The Company issued 1,000 shares of Class A common stock in connection with this extension.

Subsequent to the balance sheet date, the Company received an aggregate of ~~$134,736~~$154,269.21 in gross proceeds against our secured loan referenced in Note 7(ap).

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.

On November 15, 2012, Olympian Cruises, LLC ("Olympian"), our largest stockholder, transferred 11,540,500 shares of our Class A common stock to certain of its members in redemption of their membership interests in Olympian. We are advised that this transaction was effected by Olympian to satisfy requests and desires of the transferees to hold their interests in the shares of the Company's Class A common stock directly rather than indirectly through their ownership of membership interests in Olympian. Subsequent to the transfers, Olympian owned 2,349,000 shares of the Companies Class A common stock and 16,110,500 shares of the Company's Class B common.

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~~ITEM~~ 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 ~~six~~nine months ended ~~June~~September 30, 2012, compared to the three and ~~six~~nine months ended ~~June~~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 ~~47,174,860~~50,441,028 shares outstanding on ~~June~~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 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 ~~June~~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.

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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.

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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 ~~June~~September 30, 2012, we have sustained accumulated losses of ~~$11,564,164.~~$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 ~~$190,548~~$163,262 for the three months ended ~~June~~September 30, 2012, compared to ~~$246,324~~$126,917 for the three months ended ~~June~~September 30, 2011, ~~a decrease~~an increase of ~~$55,776.~~$36,345. The ~~decrease~~increase in expenses is predominately due to the ~~decrease~~increase in costs associated with ~~consulting services~~travel, professional service, employee salaries and ~~the costs associated with travel.~~employee benefits.

General and administrative expenses amounted to ~~$389,161~~$552,423 for the ~~six~~nine months ended ~~June~~September 30, 2012, compared to ~~$358,868~~$485,785 for the ~~six~~nine months ended ~~June~~September 30, 2011, an increase of ~~$30,293.~~$66,638. The increase in expenses is predominately due to the increase costs associated with ~~acquiring capital, as disclosed in Note 7.~~travel, professional services, employee salaries and employee benefits.

Nonoperating expenses (excluding interest income) amounted to ~~$208,937~~$260,999 for the three months ended ~~June~~September 30, 2012, compared to ~~$21,914~~$18,091 for the three months ended ~~June~~September 30, 2011, an increase in the amount of ~~$187,023.~~$242,908. The increase is primarily due to interest accrued on convertible and promissory notes payable during the three months ended ~~June~~September 30, 2012.

Nonoperating expenses (excluding interest income) amounted to ~~$378,356~~$639,355 for the ~~six~~nine months ended ~~June~~September 30, 2012, compared to ~~$57,717~~$75,808 for the ~~six~~nine months ended ~~June~~September 30, 2011, an increase in the amount of ~~$320,639.~~$563,547. The increase is primarily due to interest accrued on convertible and promissory notes payable during the ~~six~~nine months ended ~~June~~September 30, 2012.

Balance Sheet Discussion

As of ~~June~~September 30, 2012 and December 31, 2011

As of ~~June~~September 30, 2012, our total assets were ~~$12,692,013,~~$12,874,457, total liabilities were ~~$4,028,736~~$4,351,114 and shareholders’ equity was ~~$8,454,944~~$8,315,010 compared to $11,621,461, $2,487,814 and $8,925,314, respectively, as of December 31, 2011. Current assets at ~~June~~September 30, 2012 were ~~$106,209~~$51,880 consisting of cash and cash equivalents of ~~$99,713,~~$45,656, other receivable of $1,600 and prepaid expenses of ~~$4,896~~$4,624 compared to $222,812, $1,600 and $8,939, respectively, at December 31, 2011. Included in total assets as of ~~June~~September 30, 2012 are property, and equipment, net of depreciation, of ~~$5,109~~$4,819 and other assets of ~~$12,580,695~~$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 ~~June~~September 30, 2012, our total liabilities and our current liabilities were ~~$4,028,736~~$4,351,114, consisting of officer loans and notes payables and other loans in the amount of ~~$2,171,657,~~$2,539,493, accounts payable of ~~$173,850,~~$165,504, convertible notes payable of ~~$1,260,800,~~$1,215,800, accrued interest of ~~$247,356,~~$233,328, derivative liability of $0, accrued expenses of ~~$140,073,~~$161,989, and other short term liabilities of $35,000, compared to total and current liabilities of $2,487,814, consisting of officer ~~loan~~loans and notes payables and other loans in the amount of ~~$751,417,~~$706,417, accounts payable of $170,558, convertible notes payable of ~~$1,146,631,~~$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.

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The increase in our liabilities for the ~~six~~nine months ended ~~June~~September 30, 2012 compared to December 31, 2011 primarily resulted from an increase in our convertible notes ~~payable~~ and other ~~loans.~~loans payable.

The net cash used in our operating activities in the ~~six~~nine month period ended ~~June~~September 30, 2012 was ~~$350,877,~~$411,346, an increase of ~~$223,693~~174,093 from that used in the ~~six~~nine month period ended ~~June~~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 ~~six~~nine month period ended ~~June~~September 30, 2012 was ~~$1,202,430,~~$1,439,491, an increase of ~~$1,022,085~~$1,163,016 from that used in the ~~six~~nine month period ended ~~June~~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 ~~six~~nine month period ended ~~June~~September 30, 2012 was ~~$1,403,208,~~$1,673,681, compared to ~~$329,000~~$496,000 from the ~~six~~nine month period ended ~~June~~September 30, 2012, consisting of proceeds from issuance of notes ~~payable..~~payable.

Cash and cash equivalents for the ~~six~~nine months ended ~~June~~September 30, 2012, decreased by ~~$123,099,~~$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.

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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 ~~June~~September 30, 2012, we had shareholders’ equity of ~~$8,454,944,~~$8,315,010, but little cash on hand.

Liquidity and Capital Resources

During the three months period ended ~~June~~September 30, 2012, the Company borrowed an aggregate of ~~$436,709~~$304,745 on a promissory note referenced in ~~Notes~~Note 7(ap).

During the three months period ended ~~June~~September 30, 2012, the Company sold an aggregate of ~~853,340~~1,540,001 Class A common shares, based upon fair market value for the period, for a total of ~~$128,000.~~$166,000.

During the ~~three~~nine months period ended ~~June~~September 30, 2012, the Company issued an aggregate of ~~374,095~~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 ~~paid for services rendered,~~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 ~~amount~~case of ~~$74,820.~~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.

As of ~~June~~September 30, 2012, the Company’s aggregate obligation, to include principal and accrued interest, under promissory notes due on or before ~~June~~September 30, 2013 is ~~$3,947,077.~~$4,107,799. Of this amount, ~~$1,476,115~~$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. ~~$3,733,423~~$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 ~~$767,509~~$1,191,769 and ~~$416,581~~$561,589 for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively and ~~$11,564,164~~$11,988,424 from inception (September 27, 2006) through ~~June~~September 30, 2012. In addition, the Company’s current liabilities exceed its current assets by ~~$3,922,527~~$4,299,234 as of ~~June~~September 30, 2012. These factors among others, including the Company’s current cash position, which was ~~$99,713~~$45,656 as of ~~June~~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.

~~Table of Contents~~

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.

~~ITEM~~ ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold instruments that are sensitive to changes in interest rates, foreign currency exchange rates or commodity prices. Therefore, we believe that we are not materially exposed to market risks resulting from fluctuations from such rates or prices. Currency and exchange rate fluctuations may negatively impact our financial results. We expect to pay for the renovations of one of our vessels (the Island Breeze) in Euros and will therefore be adversely affected if the value of the U.S. dollar declines against the Euro. Furthermore, currency fluctuations will directly affect our operational results if we operate in foreign countries.

~~ITEM~~ Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.

Our Chief Executive Officer, and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, 2012 as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~June~~September 30, 2012, our Chief Executive Officer, and our Chief Financial Officer, concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be declared by us in reports that we file with or submit to the SEC is (1) recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended ~~June~~September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting and therefore no corrective actions were taken.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

~~ITEM~~ ITEM 1. LEGAL PROCEEDINGS

~~ITEM~~ ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company’s capitalization authorized is 100,000,000 Class A common shares and 16,110,500 Class B common shares each class with a par value of $0.001 per share. As of ~~June~~September 30, 2012 the Company had ~~31,064,357~~32,247,195 Class A common shares and 16,110,500 Class B common shares issued and outstanding. A full description of our common stock is provided in the prelude to this Form 10-Q.

During ~~April~~July 2012, we issued ~~20,000~~106,667 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.15 per share, based upon fair market value for the period.

During ~~June~~July 2012, we issued ~~833,340~~50,000 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.10 per share, based upon fair market value for the period.

During July 2012, we issued 35,000 Class A common shares under the Company’s 2009 Stock Incentive Plan, at a price of $0.17 per share, based upon fair market value for the period.

During August 2012, we issued 1,000,000 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.10 per share, based upon fair market value for the period.

During August 2012, we issued 133,334 Class A common shares in connection with the sale of our common stock, at an agreed price of $0.15 per share, based upon fair market value for the period.

During ~~June~~August 2012, we issued ~~an aggregate of 6,000~~1,000 Class A common shares in connection with the extension of Convertible Notes referenced in Note ~~7(i), 7(l), 7(p), 7(ab), and 7(au),~~7(af) at a price of ~~$0.195~~$0.10 per share, based upon fair market value for the period.

~~ITEM~~ ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None~~

~~ITEM~~ ~~4. (REMOVED AND RESERVED)~~

~~ITEM~~ ~~5. OTHER INFORMATION~~

On ~~August 8, 2011, we entered into a Funding Commitment~~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 ~~“Agreement”~~“Senior Note”), matured pursuant to its terms and as ~~evidenced~~a result is due in ~~Exhibit 10.3~~full. As of ~~our Form 10-Q filed on August 11, 2011,~~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 ~~amount~~case of ~~$12,500,000 in Structured Notes (the “Notes”)~~an Event of Default under the Senior Note, including, the right to ~~be issued by a yet to be formed subsidiary of the Company. The Notes, if placed, will be secured by a first position lien~~foreclosure on the Company’s vessel, the mv Island ~~Breeze. The funding date of~~Breeze, which is the ~~Notes was expected~~Company’s only significant asset, and in such case the Company will likely not be able to ~~be ninety (90) days from commencement. On June 15, 2012, we terminated the Agreement based upon the underwriter’s inability to finalize~~continue as a ~~closing date for funding.~~going concern.

On June 22, 2012, we retained a New York-based investment banking firm to act as its sole financial advisor, sole placement agent or lead arranger in connection with a private placement of up to US $20 million of debt or equity securities of its Cayman Island subsidiary, Island Breeze International. The proceeds of this offering will be used for the repayment of existing debt, the continued renovation of the subsidiary's vessel, the m/v Island Breeze, the acquisition of equipment, working capital, and other costs related to the establishment of cruise operations from a port located in Florida. This placement is a best effort undertaking and there can be no assurance it will be successfully completed.ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

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~~ITEM~~ ITEM 6. EXHIBITS AND REPORTS ON 8-K

Exhibit Index

Exhibit No		Description
2.1***		Agreement and Plan of Share Exchange, dated as of June 12, 2009, among Goldpoint Resources, Inc. and Olympian Cruises, LLC.
3.1**		Articles of Incorporation of Goldpoint Resources, Inc.
3.2**		By-Laws Incorporation of Goldpoint Resources, Inc.
3.3*****		Amended and Restated Certificate of Incorporation of Island Breeze International, Inc.
3.4*****		By-Laws of Island Breeze International, Inc.
4.1***		Form of Convertible Promissory Note in the principal amount of $500,000 issued by Island Breeze International to Catino, SA dated May 23, 2008.
4.2***		Form of Convertible Promissory Note in the principal amount of $4,000,000 issued by Island Breeze International to Catino, SA dated May 23, 2008.
4.3***		Form of Convertible Promissory Note in the principal amount of $500,000 issued by Island Breeze International to Catino, SA dated September 3, 2008.
4.4***		Form of Convertible Promissory Notes issued to investors, in the aggregate principal amount of $150,000, in June 2009.
4.5***		Form of Convertible Promissory Note issued to Patrick Orr in the amount of $600,000, dated June 12, 2009.
4.6****		Drawdown Equity Financing Agreement between Island Breeze International, Inc. and Auctus Private Equity Fund, LLC dated January 25, 2010.
4.7****		Registration Rights Agreement Between Island Breeze International, Inc. and Auctus Private Equity Fund, LLC dated January 25, 2010.
4.8*****		Island Breeze International 2009 Stock Incentive Plan.
4.9******		Form of Joint Venture Agreement between an investor, Island Breeze International, Inc. and Island Breeze International dated, April 16, 2010.
4.10******		Form of Securities Purchase Agreement, between Island Breeze International and an investor dated, April 16, 2010.
4.11******		Form of Securities Purchase Agreement, between Island Breeze International and an investor dated, April 16, 2010, with respect to the Convertible Promissory Note in the amount of $85,000 issued by the Company on April 16, 2010.
4.12******		Form of Convertible Promissory Note issued to an investor, in the principal amount of $85,000 dated, April 16, 2010.
4.13*******		Form of Amendment of the Joint Venture Agreement between an investor, Island Breeze International, Inc. and Island Breeze International and the Securities Purchase Agreement, between Island Breeze International and an investor, each dated, April 16, 2010.
10.1***		Mortgage issued as of May, 2008 by Island Breeze International, as Mortgagor, to Catino, S.A., as Mortgagee.
10.2******		Memorandum of Understanding between Island Breeze International and Amandla Icon Shipping Corporation Pte Ltd dated April 17, 2009.
10.3********		Form of Funding Commitment dated, August 3, 2011.
14*****		Code of Ethics.
21.1*****		Subsidiaries
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14a under the Securities Exchange Act of 1934.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14a under the Securities Exchange Act of 1934.
32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

Numbers with (*) are filed herewith. Numbers with (**) have been incorporated by reference from our Form SB-2, filed on December 13, 2007. Numbers with (***) have been incorporated by reference from our Current Report on Form 8-K, filed on June 18, 2009. Numbers with (****) have been incorporated by reference from our Current Report on Form 8-K, filed on January 27, 2010. Numbers with (*****) have been incorporated by reference from our Annual Report on Form 10-K, filed on April 14, 2010. Numbers with (******) have been incorporated by reference from our Current Report on Form 8-K, filed on April 22, 2010. Numbers with (*******) have been incorporated by reference from our Current Report on Form 8-K, filed on November 12, 2010. Numbers with (********) have been incorporated by reference from our Quarterly Report on Form 10-Q, filed on August 18, 2011.

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~~SIGNATURE~~SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	ISLAND BREEZE INTERNATIONAL, INC.

Dated: ~~August 10,~~November 15, 2012	By:	/s/ Bradley T. Prader
		Bradley T. Prader
		President and Chief Executive Officer

	By:	/s/ Steven G. Weismann
		Steven G. Weismann
		Chief Financial Officer

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