UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2007
oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 333-122563
INTERNET ACQUISITION GROUP, INC.
(Exact name of small business issuer as specified in its charter)
| California | 20-0624181 |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
c/o American Union Securities
100 Wall Street 15th Floor New York, NY 10005
(Address of principal executive offices)
(Issuer’s telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of Common Stock, $0.001 par value, outstanding on February 19, 2008, was 100,000,000 shares.
PART 1 – FINANCIAL INFORMATION
| Item 1. Financial Statements | |
INTERNET ACQUISITION GROUP INC.
BALANCE SHEET
DECEMBER 31, 2007
(Unaudited)
ASSETS
| | | | |
| CURRENT ASSETS: | | | |
| Cash | | $ | 1,893 | |
| Inventories | | | 9,450 | |
| Purchase deposit | | | 35,026 | |
| TOTAL CURRENT ASSETS | | | 46,369 | |
| | | | | |
| Property and equipment, net of accumulated depreciation | | | 3,590,508 | |
| | | | | |
| TOTAL ASSETS | | $ | 3,636,877 | |
| | | | | |
| LIABILITIES AND SHAREHOLDERS’EQUITY | |
| | | | | |
| CURRENT LIABILITIES: | | | | |
| Accounts payable | | $ | 467,684 | |
| Notes payable –bank | | | 1,891,980 | |
| Due toaffiliated company | | | 53,128 | |
| Due to shareholder | | | 305,083 | |
| Accrued expenses | | | 322,481 | |
| TOTAL CURRENT LIABILITIES | | | 3,040,356 | |
| | | | | |
| SHAREHOLDERS’EQUITY: | | | | |
Common stock, $0.001 par value, 100,000,000 shares authorized | | | | |
100,000,000shares issued and outstanding 6,896,363,000 shares to be issuedupon authorization | | | 6,996,363 | |
| Accumulated deficit | | | (6,579,818 | ) |
| Accumulated other comprehensive income | | | 179,976 | |
| TOTAL SHAREHOLDERS’EQUITY | | | 596,521 | |
| | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS’EQUITY | | $ | 3,636,877 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See notes to financial statements
INTERNET ACQUISITION GROUP, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
| | THREE MONTHS ENDED DECEMBER 31, 2007 | |
| | 2007 | | 2006 |
| SALES | $ - | | $ - |
| | | | |
| | | | |
| COST OF SALES | - | | - |
| | | | |
| | | | |
| GROSS PROFIT | - | | - |
| | | | |
| | | | |
| | | | |
| COSTS AND EXPENSES: | | | |
| General and administrative expenses | 144,927 | | 128,561 |
| Interest expense | 30,879 | | 41,018 |
| | | | |
| TOTAL COSTS AND EXPENSES | 175,806 | | 169,579 |
| | | | |
| | | | |
| NET LOSS | $ (175,806) | | $ (169,579) |
| | | | |
| | | | |
| | | | |
| Basic and diluted earnings per common share | * | | $ - |
| | | | |
| Weighted average number of shares outstanding | 100,000,000 | | N/A |
| | | | |
| | | | |
| * Less than $0.01 per share | | | |
See notes to financial statements
INTERNET ACQUISITION GROUP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
| | THREE MONTHS ENDED DECEMEMBER 31, 2007 | |
| | 2007 2006 |
| OPERATING ACTIVITIES: | | | |
| Net loss | $ (175,806) | | $ (169,579) |
| Adjustments to reconcile net loss | | | |
| to net cash used in operating activities: | | | |
| Depreciation | 124,355 | | 115,109 |
| Changes in operating assets and liabilities: | | | |
| Inventories | (172) | | - |
| Other current assets | (752) | | - |
| Accounts payable | (4,230) | | (14,086) |
| Accrued expenses | 31,026 | | 37,880 |
| NET CASH USED IN OPERATING ACTIVITIES | (25,579) | | (30,676) |
| | | | |
| | | | |
| FINANCING ACTIVITIES: | | | |
| Due from shareholder | - | | (640) |
| Due from affiliated company | 28,689 | | 32,354 |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 28,689 | | 31,714 |
| | | | |
| EFFECT OF EXCHANGE RATE ON CASH | (3,055) | | (1,027) |
| | | | |
| INCREASE IN CASH | 55 | | 11 |
| | | | |
| CASH – BEGINNING OF PERIOD | 1,838 | | 922 |
| | | | |
| CASH – END OF PERIOD | $ 1,893 | | $ 933 |
| | | | |
| Supplemental disclosures of cash flow information: | | | |
| Cash paid during the period for: | | | |
| Interest | $ - | | $ 6,852 |
| | | | |
| | | | |
See notes to financial statements
INTERNET ACQUISITION GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
(UNAUDITED)
1 BUSINESS DESCRIPTION AND ACQUISITION
Internet Acquisition Group, Inc. (“IAG”) was incorporated in the State of California in January of 2004. The original concept of the company was to acquire existing Internet based businesses and achieve economies of scale and develop cross-marketing opportunities between these businesses.
After the acquisition referred to in Note 2 the Company’s business is principally that of its wholly-owned subsidiary, Renyuan Bio-Chemicy (“Renyuan”). Renyuan is a high-technology biochemical enterprise located in the Jizhou City High and New Tech Industrial Zone of Hebei Province near Beijing, China. Renyuan’s business is the research, production and management of chemicals, bio-pharma and pharmaceutical intermediates; however Renyuan’s ability to produce any products or conduct any research is dependent upon its ability to raise additional funds.
2 ACQUISITION
On September 27, 2007, the Company consummated the Reverse Acquisition in which China Renyuan International, Inc. a Delaware corporation (“CRI”) became the Company’s wholly-owned subsidiary. The agreement provides for former CRI shareholders to receive 6,926,399,370 shares of common stock (the “Purchase Price Shares”), which will constitute up to 99% of the issued and outstanding stock. As the Company is currently authorized by its Articles of Incorporation to issue 100,000,000 shares of common stock, and prior to the Reverse Acquisition, the Company had only 30,036,370 authorized by unissued shares of common stock available for issuance, the Exchange Agreement provided for the former CRI shareholders to receive 30,036,370 shares of the 6,926,399,370 shares (the “Initial Purchase Price Shares”) immediately, with the remaining 6,896,363,000 shares (the “Remaining Purchase Price Shares”) to be issued as soon as the Company has sufficient authorized common stock to effect such issuance.
The above acquisition has been accounted for as a reverse merger, since the former shareholder of CRI effectively control the Company and the only operations of the Company are solely those of CRI.
3 GOING CONCERN
The financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. The Company’s ability to continue as a going concern is dependent on, among other things, its ability to achieve profitable operations, to maintain its existing financing and to obtain additional financing to meet its obligations and to pay its liabilities when they come due. The Company is currently pursuing new debt and equity financing in conjunction with proposed future acquisitions and operations.
At the present time, the Company does not have sufficient working capital to meet its needs. The Company intends to raise additional funds through the issuance of equity or convertible debt securities. There can be no assurance that additional financing will be available on terms favorable to the Company, or at all. The inability to raise the additional funds could cause the Company to cease all operations.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
INTERNET ACQUISITION GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
(UNAUDITED)
4 SIGNIFICANT ACCOUNTING POLICIES
Accounting methods
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a fiscal year ending on September 30th.
Uses of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted accounting principles 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 net revenue and expenses during each reporting period. Actual results could differ from those estimates.
Inventories
Inventories, consisting of supplies, are valued at the lower of cost as determined by the first-in, first-out method or market.
Property and equipment
Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight line method for financial reporting purposes, whereas accelerated methods are used for tax purposes.
| Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized. |
| Impairment of long-lived assets |
The Company accounts for the impairment of long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
Deferred income taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (ASFAS 109") which requires that deferred tax assets and liabilities be recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, SFAS 109 requires recognition of future tax benefits, such as carryforwards, to the extent that realization of such benefits is more likely than not and that a valuation allowance be provided when it is more likely than not that some portion of the deferred tax asset will not be realized.
INTERNET ACQUISITION GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
(UNAUDITED)
Currency translation
Since the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (RMB). Revenue and expense accounts are translated at the average rates during the period, and balance sheet items are translated at year-end rates. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of stockholders’ equity. Gains and losses from foreign currency transactions are recognized in current operations.
5 DUE TO AFFILIATED COMPANY
Amounts due to affiliated company are non-interest bearing and due on demand.
A summary of property and equipment and the estimated lives used in the computation of depreciation and amortization as of December 31, 2007 is as follows:
| | Amount | | Life |
| Machinery and equipment | $3,039,578 | | 7 years |
| Building and building improvements | 2,025,734 | | 39.5 years |
| Automobile | 5,335 | | 3 years |
| Land | 295,746 | | 50 years |
| | 5,366,393 | | |
| Accumulated depreciation and amortization | 1,775,885 | | |
| | $3,590,508 | | |
7 NOTES PAYABLE – BANK
Notes payable – bank consist of the following:
| | Notes payable – bank bearing interest at 5.58% and due March 21, 2008 | | $1,508,100 |
| | | | |
| | Note payable – bank bearing interest at 10.8225% and due April 29, 2008 | | 383,880 |
| | | | |
| | | | $1,891,980 |
The above notes are collateralized by substantially all assets of the Company.
8 DUE TO SHAREHOLDER
Amounts due to shareholder are non-interest bearing and due on demand.
INTERNET ACQUISITION GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
(UNAUDITED)
9 EARNINGS PER SHARE
Outstanding shares prior to September 27, 2007, the date of the merger, are undeterminable. The total shares issued are therefore used as the average shares outstanding.
Vulnerability due to Operations in PRC
The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.
Substantially all of the Company’s businesses are transacted in RMB, which is not freely convertible. The People’s Bank of China or other banks are authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.
Since the Company has its primary operations in the PRC, the majority of its revenues will be settled in RMB, not U.S. Dollars. Due to certain restrictions on currency exchanges that exist in the PRC, the Company’s ability to use revenue generated in RMB to pay any dividend payments to its shareholders may be limited.
Concentration of Credit Risk
Cash is currently the only financial instrument that potentially subjects the Company to significant concentration of credit risk is primarily cash. The Company maintains its cash with various banks and trust companies located in China which are not insured or otherwise protected. Should any of these institutions holding the Company’s cash become insolvent, or if the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution.
Environmental issues
The Company conducts business in an industry that is subject to a broad array of environmental laws and regulations. The production of the products the Company intends to produce will create pollutants. The Company will incur significant costs if additional government regulations are introduced to protect the environment.
Item 2. Management’s Discussion and Analysis
The following presentation of Management's Discussion and Analysis has been prepared by internal management and should be read in conjunction with the financial statements and notes thereto included in this Form 10-QSB. Except for the historical information contained herein, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties, such as statements of our business plans, objectives, expectations and intentions as of the date of this filing. The cautionary statements about reliance on forward-looking statements made earlier in this document should be given serious consideration with respect to all forward-looking statements wherever they appear in this report, notwithstanding that the "safe harbor" protections available to some publicly reporting companies under applicable federal securities law do not apply to us as an issuer of penny stocks. Our actual results could differ materially from those discussed here.
The following discussion relates solely to the operations of our operating subsidiary, Renyuan Bio-Chemicy, and not to CRI or our former discontinued businesses of developing Internet based businesses and providing professional purchasing management.
RESULTS OF OPERATIONS
Quarter Ended December 30, 2007 compared to Quarter Ended December 30, 2006
Our level of operations were minimal during our quarter ended December 31, 2007. During the quarter, we had revenues of nil compared to the quarter ended December 31, 2006 when our revenues were also nil. The primary reason for the lack of revenue was the lack of operating capital to manufacture our products.
Our selling, general and administrative expenses nonetheless has increased from $169,579 in the quarter ended December 31, 2006 to $175,806 in the quarter ended December 31, 2007. The primary reason for the increase was due to the increase in general and administrative expenses.
We expect that in the next two years our selling, general and administrative expense will remain at its fiscal 2007 level or higher, as we will incur the expenses attributable to being a U.S. public company and as we continue to expand the focus of our business operations, necessitating a staff of skilled administrators.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended December 31, 2007, the operations of Renyuan Bio-Chemicy Co. used $25,579 in cash, primarily due to $175,806 in net loss as compared to a total of 30,676 cash used in fiscal year 2006.
We do not have adequate resources to fund our operations for the foreseeable future and we will need to raise funds going forward in order to fund our operations. Even as the government relaxes their directives on the products we used to sell, without sufficient working capital, we will not be able to resume production. Since Renyuan Bio-Chemicy was organized in February 2001, its operations have been funded primarily by capital contributions from Mr. Chaozhong Ren, who is our Vice President and who will be our majority shareholder following the issuance of the Remaining Purchase Price Shares its President and majority shareholder.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
We do not own the type of market risk sensitive instruments described in Regulation S-K Section 305
ITEMS 4 AND 4T. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (one person, our President), as appropriate, to allow timely decisions regarding required disclosures.
As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of that date.
There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| | | | | |
| PART II |
| | | | | |
| OTHER INFORMATION |
| | | | | |
| Item 1 | | Legal Proceedings | |
| | | None | |
| Item 1A | | | |
| | | | Risk Factors: Reference is made to our Current Report on Form 10-KSB, dated February 14, 2008 | |
| | | | | |
| Item 2 | | Unregistered Sale of Equity Securities and Use of Proceeds |
| | | | | |
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| Item 3 | | Defaults Upon Senior Securities |
| | | | | |
| | | | None | |
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| Item 4 | | Submission of Matters to a Vote of Shareholders |
| | | | | |
| | | | None | |
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| Item 5 | | Other Information |
| | | | | |
| | | | None | |
| | | | | |
| Item 6 | | Exhibits |
| | | | | |
| Exhibit Number | | Description |
| | | |
| | 31.1 | | Section 302 Certification Of Chief Executive Officer And Chief Financial Officer |
| | | | |
| | 32.1 | | Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 – Chief Executive Officer And Chief Financial Officer |
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERNET ACQUISITION GROUP, INC.
By: /s/ Qingfu Ren
| | Qingfu Ren, Chief Executive Officer |
Date: February 19, 2008
