INTERACTIVE BRAND DEVELOPMENT INC. - 10KSB/A - 20060417 - OFFICER_TRANSACTIONS
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The amount due to stockholders at December 31, 2004 and December 31, 2003 was
$1,151,970 and $7,316. These amounts represented advances from shareholders and
corporate expenses paid personally by stockholders.
We were party to a lease agreement for our former executive offices with
Children's Academy of Pompano Beach, Inc., an entity controlled by the mother of
Gary Spaniak, our president. The lease agreement was through December 2007. On
December 20, 2004 we agreed to terminate the lease. The remaining obligations
under the lease on the date of termination were approximately $307,500.
Children's Academy of Pompano Beach, Inc. accepted 200,000 shares of our common
stock in consideration of forgiving all outstanding obligations under the lease
and release of any potential claims under the lease agreement. Gary Spaniak, Jr.
disclaims any beneficial ownership in the shares.
On July 14, 2004 we entered into a Settlement and Termination Agreement with Oak
Street Ventures, Inc. under which Oak Street Ventures received 4,000,000 shares
of our common stock in consideration of consulting services provided in
connection with our introduction to iBill and subsequent acquisition
negotiations with iBill. On August 26, 2004, we approved the issuance of 503,680
shares of common stock to Oak Street Ventures in consideration of additional
business consulting services provided to our company valued at $73,034. Gary
Spaniak, Sr. is a stockholder of Oak Street Ventures, Inc. He's the father of
Gary Spaniak, Jr. (an officer and director of our company). Gary Spaniak, Jr.
disclaims any beneficial interest in securities owned by his father.
On August 26, 2004, we also approved the issuance of 503,680 shares of common
stock to Corporation First, Inc. for certain business consulting services valued
at $73,034. Voting control of Corporation First is held by the mother of Gary
Spaniak, Jr. He disclaims any beneficial ownership in the shares.
25
On August 26, 2004 we entered into a business consulting services agreement with
Northbound, Inc. for services related to our insurance coverage. In
consideration of services provided under the agreement we issued Northbound
40,000 shares of our common stock. The services were valued at $5,800. The
principal of Northbound is the son of Gilbert Singerman, a director of our
company. Gilbert Singerman disclaims beneficial ownership of any securities held
by his son.
On October 1, 2004, we entered into a business consulting services agreement
with Gary Spaniak Sr., valued at $125,000 annually for a term of three years, in
addition to health insurance benefits. Mr. Spaniak is the father of the
president.
ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Settlement and Securities Purchase Agreement, dated as of
September 21, 2004 with PET Capital Partners LLC, Absolute
Return Europe Fund, Susan Devine, NAFT Ventures I LLC,
Marc H. Bell, Daniel Staton (collectively, the
"Bell/Staton Group"), Penthouse International, Inc., The
Molina Vector Investment, and Milberg Weiss Bershad &
Schulman LLP, as escrow agent(1).
2.2 Stockholders Agreement, dated October 19, 2004 among the
Bell/Staton Group and the Company(1).
2.3 August 22, 2004 Securities Purchase Agreement, as amended,
between the Company and Penthouse International, Inc(1).
3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Schedule 14A Proxy Statement
filed with SEC on November 1, 2004).
3.2 Amended and Restated By-Laws (incorporated by reference to
Form 10-KSB filed March 26, 2001).
3.3 Amendment to Bylaws (incorporated by reference to Schedule
14A Proxy Statement filed with SEC on November 1, 2004).
3.4 Certificate of Amendment of Certificate of Incorporation
(incorporated by reference to Schedule 14C Information
Statement filed with the SEC on March 10, 2005).
3.5 Designation of Series D Preferred Stock (incorporated by
reference to Form 8-K dated January 21, 2005).
3.6 Designation of Series E Preferred Stock(1).
3.7 Designation of Series F Preferred Stock(1).
3.8 Designation of Series G. Preferred Stock(1).
3.9 Designation of Series H Preferred Stock
3.10 Designation of .50 Warrants
8.1 Agreement and Plan of Merger (incorporated by reference to
Form 8-K filed November 19, 2002.)
10.1 Form of Subscription Agreement, dated as of September 20,
2004, between the Company and holders of 10% convertible
subordinated secured notes of the Company due 2009(1).
26
10.2 Form of 10% Note(1).
10.3 Form of Security Agreement between the Company and holders
of 10% Notes (1).
10.4 Form of Pledge Agreement among the Company, the holders of
10% Notes and holders of Series F preferred stock(1).
10.5 Form of Subscription Agreement, dated as of September 20,
2004, between the Company and Monarch Pointe Fund, Ltd.,
as holder of 35,000 shares of Series E convertible
preferred stock(1).
10.6 Form of Subscription Agreement, dated as of September 28,
2004, between the Company and Castlerigg Master
Investments Limited and Vestcap International Management
Limited, as holders of 34,500 shares of Series F
convertible senior secured preferred stock(1).
10.7 Form of Security Agreement between the Company and holders
of Series F Preferred Stock(1).
10.8 September 23, 2004 Stock Purchase Agreement among GMI
Investment Partners, Penthouse International, Inc. and the
Company(1).
10.9 Form of Registration Rights agreement between the Company
and holders of Preferred Stock and Notes(1).
10.10 iBill Securities Purchase Agreement dated July 22, 2004
(filed on Form 8-K Current Report dated July 30, 2004).
10.11 iBill Securities Closing Agreement dated January 21, 2005
(filed on Form 8-K Current Report dated January 21, 2005).
10.12 Employment Agreement dated October1, 2004 between the
Company and Steve Markley. (incorporated by reference to
Form 10-KSB filed on April 15, 2005)
10.13 Employment Agreement dated October 1, 2004 between the
Company and Gary Spaniak Jr. (incorporated by reference to
Form 10-KSB filed on April 15, 2005)
10.14 Consulting Agreement dated October 1, 2004 between the
Company and Bobby Story. (incorporated by reference to
Form 10-KSB filed on April 15, 2005)
10.15 Consulting Agreement dated October 1, 2004 between the
Company and Gary Spaniak Sr. (incorporated by reference to
Form 10-KSB filed on April 15, 2005)
10.16 Termination Agreement dated November 4, 2004 between the
Company and Foster Sports Inc. and Carl Foster.
(incorporated by reference to Form 10-KSB filed on April
15, 2005)
10.17 Management Agreement dated March 1, 2005 between the
Company and LTC Group, Inc., for the management of our
online auction business and website, iBidUSA.com.
(incorporated by reference to Form 10-KSB filed on April
15, 2005)
10.18 XTV Acquisition Agreement dated March 31, 2005.
14 Code of Ethics (incorporated by reference to Form 10-KSB
filed on March 29, 2004).
27
16.1 Letter from former Auditor (incorporated by reference to
Form 8-K/A filed January 21, 2003.)
31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act.
31.2 Certification of Principal Financial and Accounting
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act.
32.2 Certification of Chief Accounting Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act.
(1) Filed on Form 8-K Current Report dated October 19, 2004.
(b) Form 8-K
During the last quarter of the period covered by this annual report the
following reports on Form 8-K were filed by our company:
On October 26, 2004 a Form 8-K was filed to disclose events under items 1.01,
2.01, 2.03 and 3.02 of Form 8-K.
On December 12, 2004 a Form 8-K was filed to disclose events under items 1.02
and 9.01 of Form 8-K.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Year ended December 31, 2003
Audit Fees: The aggregate fees, including expenses, billed by the Company's
principal accountant in connection with the audit of our consolidated financial
statements for the most recent fiscal year and for the review of our financial
information included in our Annual Report on Form 10-KSB; and our quarterly
reports on Form 10-QSB during the fiscal year ending December 31, 2003 was
$30,000.
Audit Related Fees: The aggregate fees, including expenses, billed by the
Company's principal accountant for services reasonably related to the audit for
the year ended December 31, 2003 were none.
All Other Fees: The aggregate fees, including expenses, billed for all other
services rendered to the Company by its principal accountant during year 2003
was none.
28
Year ended December 31, 2004
Audit Fees: The aggregate fees, including expenses, billed by the Company's
principal accountant in connection with the audit of our consolidated financial
statements for the fiscal year ended December 31, 2004 and for the review of our
financial information included in our Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2003; and our quarterly reports on Form 10-QSB
during the fiscal year ending December 31, 2004 was $15,000.
Audit Related Fees: The aggregate fees, including expenses, billed by the
Company's principal accountant for services reasonably related to the audit for
the year ended December 31, 2004 were $44,000.
All Other Fees: The aggregate fees, including expenses, billed for all other
services rendered to the Company by its principal accountant during year 2004
was none.
The Board of Directors has considered whether the provisions of the services
covered above under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" is compatible with maintaining the
auditor's independence.
29
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERACTIVE BRAND DEVELOPMENT, INC.
By /s/ Steven Markley
---------------------
Chief Executive Officer
and Principal Financial Officer
Date: April 17, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934,
This report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Steve Markley Chief Executive Officer, April 17, 2006
----------------------- Secretary/Treasurer, Principal
Steve Markley Financial Officer, Director
/s/ Gary Spaniak Jr. President, Director April 17, 2006
-----------------------
Gary Spaniak Jr.
/s/ Steve Robinson Director April 17, 2006
-----------------------
Steve Robinson
/s/ Gilbert Singerman Director April 17, 2006
-----------------------
Gilbert Singerman
Director
Robert Dolin
30
FINANCIAL STATEMENTS
INTERACTIVE BRAND DEVELOPMENT, INC.
Table of Contents
Report of Independent Certified Public Accountants................. F-2
Consolidated Balance Sheet as of December 31, 2004................. F-3
Consolidated Statements of Operations
for the years ended December 31, 2004 and 2003..................... F-4
Consolidated Statements of Changes in Shareholders' Equity
for the year ended December 31, 2004 and 2003...................... F-5
Consolidated Statements of Cash Flows
for the year ended December 31, 2004 and 2003...................... F-6
Notes to Consolidated Financial Statements......................... F-7 - F-24
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the board of directors and shareholders of
Interactive Brand Development, Inc.
We have audited the accompanying consolidated balance sheet of Interactive Brand
Development, Inc. as of December 31, 2004 and the related consolidated
statements of operations, changes in shareholders' deficiency and cash flows for
the years ended December 31, 2004 and 2003. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provided a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Interactive Brand Development,
Inc. as of December 31, 2004, and the results of its operations and its cash
flows for the year then ended December 31, 2004 and 2003 in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1 to
the financial statements, the Company has incurred recurring operating losses
and has a working capital deficit at December 31, 2004. The Company is working
on various alternatives to improve the Company's financial resources which are
also described in Note 1. Absent the successful completion of one of these
alternatives, the Company's operating results will increasingly become
uncertain. These conditions raise substantial doubt about the Company's ability
to continue as a going concern; however, the financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
Jewett, Schwartz, & Associates
Hollywood, Florida
April 11, 2005
F-2
INTERACTIVE BRAND DEVELOPMENT
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
2004
------------
(AS RESTATED)
ASSETS
Current assets:
Cash and cash equivalents $ --
Accounts receivable 452
------------
Total current assets 452
Property, plant and equipment, net of accumulated depreciation of $56,116 26,593
Investment in cel art 6,848,950
Investment in Penthouse Media Group, Inc. 22,214,945
Prepaid acquisition costs 4,000
Patents 12,500
------------
Total assets $ 29,107,440
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 148,706
Notes payable - related party 1,048,248
Due to affiliate 593,525
Accrued payroll and related liabilities 432,400
------------
Total current liabilities 2,222,879
Long-term debt, net of current portion 9,784,457
Convertible features of financial instruments 5,775,141
Other liabilities 475,000
------------
Total liabilities 18,257,477
Commitments and contingencies:
Shareholders' equity:
Preferred C, $0.001 par value, 45,000 shares authorized, 10,000 shares issued and 10
outstanding
Preferred G, $0.001 par value, 45,000 shares authorized, 45,000 shares issued and 45
outstanding
Common stock, $0.001 par value, 30,000,000 shares authorized: 28,312,569 shares issued and
outstanding 28,312
Additional paid-in capital - stock 14,282,947
Additional paid-in capital - warrants 915,402
Accumulated deficit (4,376,753)
------------
Total shareholders' equity 10,849,963
------------
Total liabilities and shareholders' equity $ 29,107,440
============
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
INTERACTIVE BRAND DEVELOPMENT
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
2004 2003
------------ ------------
Revenues:
Cel Art Sales $ -- $ 52,250
Other -- (5,883)
------------ ------------
Total Revenue -- 46,367
Operating expenses:
Cost of sales -- 22,500
Selling, general and administrative 1,153,610 161,464
Depreciation and amortization 16,172 16,196
------------ ------------
Total operating expenses 1,169,782 177,660
------------ ------------
Operating loss (1,169,782) (131,293)
Other income (expense):
Loss on disposal of fixed assets (42,860) --
Interest expense (92,893) (361)
------------ ------------
Total other expense (135,753) (361)
------------ ------------
Net operating loss (1,305,535) (131,654)
Income taxes -- --
------------ ------------
Net loss from continuing operations (1,305,535) (131,654)
------------ ------------
Discontinued operations, net of income tax
Loss on disposal of discontinued operations, (657,885) --
Loss from operations for discontinued Foster Sports & Ibid Auction (1,494,958) (333,114)
------------ ------------
Loss from discontinued operations (2,152,843) (333,114)
------------ ------------
Net loss (3,458,378) (464,768)
Dividends on preferred stock (6,000) (8,000)
------------ ------------
Net loss applicable to common stock $ (3,464,378) $ (472,768)
============ ============
Basic and diluted earnings (loss) per common share:
Continuing operations (0.07) (0.01)
Discontinued operations (0.12) (0.02)
------------ ------------
Total $ (0.19) $ (0.03)
============ ============
Weighted average number shares outstanding - basic and diluted 18,023,018 15,192,425
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
INTERACTIVE BRAND DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
(AS RESTATED) Preferred Stock
-----------------------------------------------------------------
Series B Series C Series G
------------------- ------------------ ------------------
Shares Amoun Share Amount Shares Amount
------- ------- ------- ------- ------- -------
BALANCE DECEMBER 31, 2002 1,000 $ 100 10,000 $ 1,000 -- $ --
Reclassification of preferred stock to
paid-in-capital -- (99) -- (990) -- --
Net loss -- -- -- -- -- --
------- ------- ------- ------- ------- -------
BALANCE DECEMBER 31, 2003 -- -- 10,000 10 -- --
Purchase of Foster Sports, Inc. -- -- -- -- -- --
Stock issued for services -- -- -- -- -- --
Stock issued for mergers and acquisition
(M&A) work -- -- -- -- -- --
Stock issued for cel art @ $0.45 -- -- -- -- -- --
Conversion of Series B into Common Stock
(1,000) (1) -- -- -- --
Record purchase of Penthouse Media Group
(PMG), net of acquisition costs -- -- -- -- 45,000 45
Foster Sports, Inc. adjustment -- -- -- -- -- --
Net loss -- -- -- -- -- --
------- ------- ------- ------- ------- -------
BALANCE DECEMBER 31, 2004 -- $ -- 10,000 $ 10 45,000 $ 45
======= ======= ======= ======= ======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
INTERACTIVE BRAND DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
(AS RESTATED) Additional
Common Stock Paid-in-Capital
---------------------------- ---------------------------- Retained
Shares Amount Stock Warrants Earnings Total
------------ ------------ ------------ ------------ ------------ ------------
BALANCE DECEMBER 31, 2002 15,192,425 $ 15,192 $ 6,088,038 $ -- $ (453,607) $ 5,650,723
Reclassification of preferred
stock to paid-in-capital -- -- 1,089 -- -- --
Net loss -- -- -- -- (464,768) (464,768)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE DECEMBER 31, 2003 15,192,425 15,192 6,089,127 -- (918,375) 5,185,955
Purchase of Foster Sports, Inc. 480,000 480 3,095,520 -- -- 3,096,000
Stock issued for services 2,162,124 2,162 272,168 -- -- 274,330
Stock issued for mergers and
acquisition (M&A) work 4,000,000 4,000 -- -- -- 4,000
Stock issued for cel art @ $0.45 6,700,000 6,700 3,008,300 -- -- 3,015,000
Conversion of Series B into
Common Stock 198,020 198 (197) -- -- --
Record purchase PMG, net of
acquisition costs -- -- 4,526,609 915,402 -- 5,442,056
Foster Sports, Inc. adjustment . (420,000) (420) (2,708,580) -- -- (2,709,000)
Net loss -- -- -- -- (3,458,378) (3,458,378)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE DECEMBER 31, 2004 28,312,569 $ 28,312 $ 14,282,947 $ 915,402 $ (4,376,753) $ 10,849,963
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
INTERACTIVE BRAND DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
------------ ------------
(As restated)
Operating activities
Net loss $ (3,458,378) $ (464,768)
Loss from discontinued operations 2,152,843 --
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 16,172 16,196
Net impairment loss from discontinued operations 468,410 --
Stock issued for services and settlements 278,330 --
Changes in operating assets and liabilities:
Accounts receivable and processor reserves 22,772 137,779
Other assets -- 22,500
Accounts payable and accrued expenses 566,093 184,236
------------ ------------
Cash provided by (used in) continuing operations 46,242 (104,057)
Cash used in discontinued operations (2,152,843) --
------------ ------------
Cash used in operating activities (2,106,601) (104,057)
Investing activities
Acquisition of PMG (16,475,000) --
Prepaid acquisition costs (4,000) --
Prepaid acquisition costs -- (887)
------------ ------------
Cash used in investing activities (16,479,000) (887)
Financing activities
Proceeds from notes payable 750,000 --
Payments on notes payable (275,000) --
Proceeds from loans from related parties 1,048,248 --
Proceeds from convertible notes 9,525,000 20,000
Proceeds from sale of stock 6,950,000 183,632
Proceeds from shareholders advances 586,209 (82,799)
Repayments on notes payable - related party -- (120,833)
Principal payment of notes payable -- (15,956)
------------ ------------
Cash provided by (used in) financing activities 18,584,457 (15,956)
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,144) (120,900)
Cash and cash equivalents at beginning of period 1,144 122,014
------------ ------------
Cash and cash equivalents at end of period $ -- $ 1,144
============ ============
Non-cash operating, investing and financing activities:
Preferred stock issued for the following:
Stock issued for services $ 278,330 $ --
============ ============
Stock issued for cel art $ 3,015,000 $ --
============ ============
Stock issued for the acquisition of PMG $ 5,739,944 $ 3,096,000
============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-6
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 1: ORGANIZATION AND CAPITALIZATION
Interactive Brand Development, Inc. ("IBD", the "Company" or the "Corporation"),
a Delaware corporation, is authorized under its Articles of Incorporation to
issue and have outstanding at any one time 30,000,000 shares of common stock par
value $.001 per share. As a subsequent event to fiscal year 2004, a majority of
the Company's shareholders by written consent dated January 31, 2005 voted to
increase the number of authorized shares to 400,000,000 shares of common stock,
par value $.001 per share, effective March 31, 2005.
Historically, the Company's operations have consisted of an online auction
website and investments in an animation library. In April 2004, the Company
acquired Foster Sports, Inc., a company that primarily broadcasts a sports talk
show on two radio stations in South and Central Florida. During the fourth
quarter of 2004 the Company revised its business plan to focus on its new
strategy of building a presence as a marketing and media holding company in the
adult entertainment industry. Accordingly, the Company discontinued operations
of both IBID Auction and Foster Sports, Inc. during the fourth quarter of 2004.
On October 19, 2004, the Company finalized the acquisition of a 34.7% non-voting
equity interest in Penthouse Media Group, Inc. ("PMG"), an established global
adult media, entertainment, and licensing company.
Investment in PMG
On November 29, 2004, the Company changed its name to Interactive Brand
Development, Inc. from Care Concepts I, Inc. to better define its emerging role
as a media holding company after consummating a transaction on October 19, 2004,
to acquire a minority equity non-voting interest in the post-bankruptcy,
reorganized Penthouse Media Group, Inc. (formerly known as General Media, Inc.).
Such amount of equity held is 34.7%. Penthouse Media Group emerged from
bankruptcy reorganization on October 5, 2004. In order to finance the purchase
price for this equity investment in the reorganized Penthouse Media Group, IBD
sold $9.525 million principal amount of its 10% Promissory Notes, due September
15, 2009, 35,000 shares of its Series E convertible preferred stock, 34,500
shares of its Series F convertible redeemable senior secured preferred stock and
45,000 shares of its Series G convertible preferred stock to 22 investors for
$16.475 million of gross proceeds. Currently, such convertible securities,
together with 3-year warrants to purchase up to 4,216,280 additional shares of
the Company's common stock at $3.00 per share, may be converted or exercised for
up to 72,216,280 shares of IBD common stock.
The Company reports its investment in PMG under the cost method of accounting.
Accordingly, the investment in PMG is reflected on the consolidated balance
sheet at its initial cost, and the Company will recognize income only to the
extent it receives cash distributions. Temporary unrealized changes in the value
of the individual investments would be reported as other comprehensive income or
loss, and other-than-temporary unrealized decreases in value would be expensed
as incurred. The Company performs an annual impairment, unless circumstances or
events arise that would indicate the investment might be impaired. Based on the
2004 annual impairment test, the Company determined that no impairment charge
was needed for the PMG investment.
F-7
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 1: ORGANIZATION AND CAPITALIZATION - (CONTINUED)
Subsequent Acquisitions
Effective January 21, 2005, IBD completed the acquisition of all of the equity
interests in iBill Corporation, which owns 100% of the membership interests in
Media Billing Company, LLC, which owns 100% of the membership interests in
Internet Billing Company LLC , from PHSL.
In connection with the acquisition of iBill in January 2005, IBD issued to PHSL
330,000 shares of its Series D Preferred Stock, which PHSL is entitled to
convert into the number of shares of IBD common stock as shall represent 49.9%
of the fully-diluted shares of the Company's common stock on the date of
conversion. If PHSL had converted on the date of issuance, 100,733,244 shares of
IBD common stock would have been issued.
In March 2005, IBD completed the purchase of a minority interest in Interactive
Television Network Inc. The investment represented a 25% equity ownership of
ITVN, in exchange for 4,000 shares of Convertible Preferred Stock Series H and
$1,700,000 in cash. On June 30, 2005, Interactive Television Networks, Inc.
merged with Radium Ventures, a public company RDIU. Pursuant to the merger
agreement, IBD is receiving 5,529,222 restricted common shares of Radium.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RESTATEMENT OF FINANCIAL STATEMENTS
During 2005, the Company engaged an independent third party firm to review its
current valuation of the convertible notes and Series D, E, F, G and H Preferred
Stocks issued in connection with the acquisition of iBill and the investments
in PMG and ITW. Based on the results of the valuation project, the Company has
restated its 2004 consolidated financial statements to revise the initial
estimated value proscribed to the 10% convertible notes and Series E, F and G
Preferred Stocks. These changes affect the balance sheet, statement of
shareholders' equity and the statement of cash flows.
The effect of the restatements on the December 31, 2004 consolidated balance
sheet is as follows:
Previously
Account Name dr.(cr.) Reported Adjustments As Restated
--------------------------------------------- ------------ ------------ ------------
Investment in PMG $ 43,220,940 $(21,005,995) $ 22,214,945
Long-term debt $ (9,525,000) $ (259,457) $ (9,784,457)
Convertible features of financial instruments
$ -- $ (5,775,141) $ (5,775,141)
Series E preferred stock $ (35) $ 35 $ --
Series F preferred stock $ (35) $ 35 $ --
Additional paid-in-capital - stock $(42,238,872) $ 27,955,925 $(14,282,947)
Additional paid-in-capital - warrants $ -- $ (915,402) $ (915,402)
o Investment in PMG. The decrease in the investment in PMG of $21,005,995
was due to the result of the valuation project the Company performed in
the fourth quarter of 2005.
o Long-term debt. The increase in long-term debt of $259,457 was due to
the Company reclassifying the value of the Series E and F preferred
stock from equity to liabilities, net of the amounts allocated to the
derivative financial instruments and the warrants attached thereto. In
addition, a portion of the previously recorded value of the 10% notes
representing the embedded conversion feature was reclassified out of
debt to be included in the derivative financial instruments and the
value attributable to the warrants attached to the 10% notes was
reclassified to equity.
The conversion of the Series F preferred stock is at the option of the
holder, not the Company, and is redeemable at the holder's request in
cash. The Series E preferred stock is convertible into an indeterminate
number of shares of the Company's common stock based on the price of
the stock near the conversion date. The Series G preferred stock is not
considered a derivative financial instrument as it is convertible into
a specific, determinable number of common shares.
o Derivative financial instruments - Conversion features of 10% notes,
Series E preferred stock and Series F preferred stock. The increases in
the derivative financial instruments are the initial valuation of the
embedded derivatives included in these instruments. The increase of
$5,775,141 was related to the value proscribed to the 10% notes, Series
E preferred stock and Series F preferred stock of $1,831,862,
$1,898,559 and $2,044,720, respectively. The derivatives will be
remeasured at each reporting date and the differential between the
recorded amount and the remeasured amount will be recorded in
operations in the period of change.
o Series E preferred stock and Series F preferred stock. The decreases in
the Series E preferred stock of $35 and in the Series F preferred stock
of $35 is the result of the Company reclassifying these items from
equity to liabilities. The liquidation value of the preferred stock is
$100 per share. There were 35,000 Series E issued and 34,500 Series F
issued ($3,500,000 and $3,450,000, respectively). The offsetting
increase is to long-term debt, net of the embedded derivatives.
o Additional paid-in-capital - stock. The decrease in additional
paid-in-capital - stock of $27,955,925 is the result of the decrease in
the values of the preferred stocks issued in connection with the
investment in PMG of $21,005,995, the decrease associated with the
portion of the Series E that was reclassified from APIC to derivatives
and debt ($3,499,965), the decrease associated with the portion of the
Series F reclassification from APIC to derivatives and debt
($3,449,965).
o Additional paid-in-capital - warrants. The increase in additional
paid-in-capital - warrants of $915,402 is the result of the value
assigned to the warrants for the 10% convertible notes, Series E
preferred stock and Series F preferred stock of $711,890, $159,102 and
$44,410, respectively. The fair value of the warrants will be reviewed
each quarter.
PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material inter-company accounts
and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Although these estimates are based on management's knowledge of current events
and actions it may undertake in the future, they may ultimately differ from
actual results.
F-8
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable.
CASH AND CASH EQUIVALENTS
The Company maintains deposit balances at financial institutions that,
from time to time, may exceed federally insured limits. At December 31,
2004, the Company had no deposits in excess of federally insured
limits. The Company maintains its cash with high quality financial
institutions, which the Company believes limits these risks.
MARKETABLE SECURITIES
The Company accounts for investments under the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Investment
securities are classified into one of three categories:
held-to-maturity, available-for-sale, or trading. Securities are
considered held-to-maturity when the Company has the positive intent
and ability to hold the securities to maturity. These securities are
recorded as either short-term investments or long-term marketable
securities on the balance sheet depending upon their original
contractual maturity dates. Held-to-maturity securities are stated at
amortized cost, including adjustments for amortization of premiums and
accretion of discounts. Securities are considered trading when bought
principally for the purpose of selling in the near term. Trading
securities are recorded as short-term investments and are carried at
market value.
Unrealized holding gains and losses on trading securities are included
in operating income. Securities not classified as held-to-maturity or
as trading are considered available-for-sale. Available-for-sale
securities are recorded as either short-term investments or long-term
marketable securities and are carried at market value with unrealized
gains and losses included in other comprehensive income in
stockholders' equity.
ACCOUNTS RECEIVABLE
Accounts receivable arise from credit card payments for auctions.
Concentrations of credit risk related to credit card payments are
limited to the processors who remit the cash to the Company along with
the Company's allocable share of fees. The Company believes these
processors are financially stable and no significant credit risk exists
with respect to accounts receivable arising from credit card payments.
No allowance was considered necessary at December 31, 2004.
F-9
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
FURNITURE AND FIXTURES
Furniture and fixtures is stated at cost, net of accumulated depreciation and
amortization. Depreciation and amortization of furniture and fixtures is
computed using the straight-line method based on the estimated useful lives of
the related assets. Leasehold improvements are amortized over their estimated
useful lives, or the term of the lease, whichever is shorter. Maintenance and
repair costs are expensed as incurred.
IMPAIRMENT OF LONG LIVED ASSETS
The Company follows Statement of Financial Accounting Standards No. 121
(Statement 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The carrying value of long-lived assets
(tangible, identifiable intangible, and goodwill) is reviewed if the facts and
circumstances suggest that they may be impaired. For purposes of this review,
assets are grouped at the lowest levels for which there are identifiable cash
flows. If this review indicates that an asset's carrying value will not be
recoverable, as determined based on future expected, undiscounted cash flows,
the carrying value is reduced to fair market value. At December 31, 2004, the
Company's management believes there is no impairment of its long-lived assets.
There can be no assurance, however, that market conditions will not change or
demand for the Company's products and services will continue, which could result
in impairment of long-lived assets in the future.
INTANGIBLE ASSETS
The Company accounts for intangible assets in accordance with SFAS 142.
Generally, intangible assets with indefinite lives, and goodwill, are no longer
amortized; they are carried at lower of cost or market and subject to annual
impairment evaluation, or interim impairment evaluation if an interim triggering
event occurs, using a new fair market value method. Intangible assets with
finite lives are amortized over those lives, with no stipulated maximum, and an
impairment test is performed only when a triggering event occurs. Such assets
are amortized on a straight-line basis over the estimated useful life of the
asset. Intangible assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. If
the fair value is less than the carrying amount of the asset, an impairment loss
is then recognized.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks.
The Company reviews the terms of convertible debt and equity instruments that we
issue to determine whether there are embedded derivative instruments, including
the embedded conversion option, that are required to be bifurcated and accounted
for separately as a derivative financial instrument. When the risks and rewards
of any embedded derivative instrument are not "clearly and closely" related to
the risks and rewards of the host instrument, the embedded derivative instrument
is generally required to be bifurcated and accounted for separately. If the
convertible instrument is debt, or has debt-like characteristics, the risks and
rewards associated with the embedded conversion option are not "clearly and
closely" related to that debt host instrument. The conversion option has the
risks and rewards associated with an equity instrument, not a debt instrument,
because its value is related to the value of our common stock. Nonetheless, if
the host instrument is considered to be "conventional convertible debt" (or
"conventional convertible preferred stock"), bifurcation of the embedded
conversion option is generally not required. However, if the instrument is not
considered to be conventional convertible debt (or conventional convertible
preferred stock), bifurcation of the embedded conversion option may be required
in certain circumstances. Generally, where the ability to physical or net-share
settle the conversion option is deemed to be not within the control of the
Company, the embedded conversion option is required to be bifurcated and
accounted for as a derivative financial instrument liability.
In connection with the sale of convertible debt and equity instruments, the
Company may also issue freestanding options or warrants. Additionally, the
Company may issue options or warrants to non-employees in connection with
consulting or other services they provide. Although the terms of the options and
warrants may not provide for net-cash settlement, in certain circumstances,
physical or net-share settlement may be deemed to not be within the control of
the Company and, accordingly, the Company may be required to account for these
freestanding options and warrants as derivative financial instrument
liabilities, rather than as equity.
Derivative financial instruments are required to be initially measured at their
fair value. For derivative financial instruments that shall be accounted for as
liabilities, the derivative instrument is initially recorded at its fair value
and is then re-valued at each reporting date, with changes in the fair value
reported as charges or credits to income.
In circumstances where the embedded conversion option in a convertible
instrument may be required to be bifurcated and there are also other embedded
derivative instruments in the convertible instrument that are required to be
bifurcated, the bifurcated derivative instruments are accounted for as a single,
compound derivative instrument.
If the embedded derivative instrument is to be bifurcated and accounted for as a
liability, the total proceeds received will be first allocated to the fair value
of the bifurcated derivative instrument. If freestanding options or warrants
were also issued and are to be accounted for as derivative instrument
liabilities (rather than as equity), the proceeds are next allocated to the fair
value of those instruments. The remaining proceeds, if any, are then allocated
to the convertible instrument itself, usually resulting in that instrument being
recorded at a discount from its face amount. In circumstances where a
freestanding derivative instrument is to be accounted for as an equity
instrument, the proceeds are allocated between the convertible instrument and
the derivative equity instrument, based on their relative fair values.
F-10
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
REVENUE RECOGNITION
Prior to the Company's discontinuation of operations of IBID Auction and Foster
Sports, Inc. during the fourth quarter of 2004, the Company recognized revenues
from internet auction sales, charity auction sales where the Company acted as an
agent and recognized a processing fee associated with the charity auction sales,
barter transactions, and cel art sales.
o Internet auction sales were recognized upon at the time the auction was
completed. The Company did not generally grant return privileges to
customers. The Company retained all of the proceeds of the auction.
o Charity auction processing fees were recognized net. Under the guidance
provided by the Securities Exchange Commission Staff Accounting
Bulletin ("SAB") No. 104, "Revenue Recognition" and the Emerging Issues
Task Force ("EITF") Abstract No. 99-19 "Reporting Revenue Gross as a
Principal versus Net as an Agent" ("EITF 99-19"), the Company was, in
substance, acting as an agent for the charities and therefore
recognized as revenue only the net fees realized on the transactions.
The Company recognized revenues on a per-transaction basis when the
auction was completed and collection from the customer was probable.
o The Company accounted for revenue on barter transactions in accordance
with the Emerging Issues Task Force ("EITF") Issue No. 99-17,
"Accounting for Advertising Barter Transactions," which provides
standards for determining the amount of revenue which may be recognized
in barter transactions involving the exchange of advertising services.
Advertising barter revenue is recognized only if the fair value of the
advertising given is determinable based upon past transactions
involving similar advertising exchanged for cash. A past cash
transaction can only support the recognition of revenue on advertising
barter transactions up to the dollar amount of the specific cash
transaction and that cash transaction can only be used once to value
barter advertising. If the fair value of the advertising surrendered in
the barter transaction is not determinable, the barter transaction is
recorded based on the carrying amount of the advertising surrendered,
which is zero.
ADVERTISING COSTS
Advertising costs are charged to expense as incurred. Advertising expense was
approximately $31,410 and $86,000 for the years ended December 31, 2004 and
2003, respectively.
F-11
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Pursuant to SFAS No. 109, income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. 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. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, accounts receivable and prepaid expenses, as well as
accounts payable, accrued expenses and short-term deferred revenue, as reflected
in the consolidated financial statements, approximate fair value because of the
short-term maturity of these instruments.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
BASIC AND DILUTED NET LOSS PER SHARE
The Company computes basic and diluted earnings per share in accordance with
SFAS No. 128, "Earnings per Share." Basic EPS excludes the dilutive effects of
options, warrants and other convertible securities. Diluted EPS reflects the
potential dilution of securities that could share in the earnings of the
Company. All convertible debt and equities were excluded from the computations
of diluted net loss per common share for the year ended December 31, 2004, as
their effect is anti-dilutive
ISSUANCE COSTS
Issuance costs include amounts paid and the estimated value of warrants or
options issued to placement agents or financial consultants to obtain equity
financing. The Company allocates issuance costs for equity financing on the
relative fair value of the individual elements at the time of issuance. Equity
issuance costs are deducted from the proceeds of the related equity securities.
F-12
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
SEGEMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. The Company operates in one segment for management reporting
purposes.
RECLASSIFICATIONS
Certain amounts in prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current year
financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
Other-Than-Temporary Impairment of Investments
In March 2004, the EITF of the FASB reached a consensus on Issue No. 03-01, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments" ("EITF 03-01"). EITF 03-01 addresses the meaning of
other-than-temporary impairment and its application to debt and equity
securities within the scope of SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115") and equity securities that are not
subject to the scope of SFAS 115 and not accounted for under the equity method
of accounting. As of December 31, 2004, the Company determined that EITF 03-01
had no impact on its consolidated financial statements.
Contingently Convertible Instruments
In September 2004, the EITF reached a consensus on Issue No. 04-08, "The Effect
of Contingently Convertible Instruments on Diluted Earnings Per Share" ("EITF
04-08"), which is effective for reporting periods ending after December 15,
2004. EITF 04-08 requires companies to include shares issuable under convertible
instruments in diluted earnings per share computations (if dilutive) regardless
of whether the market price trigger (or other contingent feature) has been met.
In addition, prior period earnings per share amounts presented for comparative
purposes must be restated. EITF 04-08 did not impact earnings per share in 2004.
F-13
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS - (CONTINUED)
Share-Based Payment
In December 2004, the FASB issued a revision of SFAS 123 ("SFAS 123(R)") that
will require compensation costs related to share-based payment transactions to
be recognized in the statement of operations. With limited exceptions, the
amount of compensation cost will be measured based on the grant-date fair value
of the equity or liability instruments issued. In addition, liability awards
will be re-measured each reporting period. Compensation cost will be recognized
over the period that an employee provides service in exchange for the award.
SFAS 123(R) replaces SFAS 123 and is effective as of the first interim period
beginning after June 15, 2005. Based on the number of shares and awards
outstanding as of December 31, 2004 (and without giving effect to any awards
which may be granted in 2005), we expect that the adoption of SFAS 123(R) will
have no material impact to the financial statements.
In November 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 151, "Inventory Costs."
The new statement amends Accounting Research Bulletin ("APB") No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material. This statement
requires that those items be recognized as current-period charges and requires
that allocation of fixed production overheads to the cost of conversion be based
on the normal capacity of the production facilities. This statement is effective
for fiscal years beginning after June 15, 2005. The Company does not expect
adoption of this statement to have a material impact on its financial condition
or results of operations.
In December 2004, the FASB issued SFAS No. 123 (revised 2004) (SFAS 123(R)"),
"Share-Based Payment." This statement replaces SFAS No. 123 "Accounting for
Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees." SFAS 123(R) will require the fair value of all stock
option awards issued to employees to be recorded as an expense over the related
vesting period. The statement also requires the recognition of compensation
expense for the fair value of any unvested stock option awards outstanding at
the date of adoption. The adoption of SFAS 123(R) will impact the Company by
requiring it to use the fair-value based method of accounting for future and
unvested employee stock transactions rather than the intrinsic method the
Company currently uses. The Company will adopt this SFAS as of January 1, 2006.
The Company does not expect the adoption of this SFAS 123(R) to have a material
impact its financial statements.
F-14
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 3: FURNITURE AND FIXTURES
ESTIMATED USEFUL
LIVES AT DECEMBER
(YEARS) 31, 2004
---------------- -----------
Office furniture and equipment 5-7 $82,709
--- -------
Less accumulated depreciation & amortization (56,116)
-------
Total $26,593
=======
Depreciation and amortization expense for the years ended December 31, 2004 and
2003 was $206,137 and $197,909, of which $189,165 and $181,713 pertained to
assets utilized in the discontinued operations.
NOTE 4: INVESTMENT IN CEL ART
Cel Art:
The Company acquired a portion of it's the cel art from an unrelated third
party. The Company issued series "C" preferred stock for the inventory, which as
a subsequent event to fiscal year 2004 was converted in January 2005 into
1,000,000 shares of the Company's common stock.
On October 27, 2004, the Company approved the issuance of 3,000,000 shares of
common stock to acquire an additional 26,261 pieces of animation cel art and
related intellectual property, valued at $1,350,000 from an unrelated third
party. In December 2004, the Company purchased an additional 33,739 pieces of
cel art valued at $1,665,000 in consideration of 3,700,000 shares of common
stock from a related party. The Company adopted FASB 123 "Accounting for Stock
Based Compensation" in accounting for these transactions. Paragraph 8 states
that when goods or services are received for the issuance of equity instruments
they should be accounted for based on the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable. Management felt the fair value of the inventory was more
reliably measurable.
These cel art pieces are used in a program established by the Company with local
and national charities to increase its databases of potential bidders and buyers
on their auction website. The investment in cel art at December 31, 2004 was
$6,848,950.
The Company has no immediate plans to sell the cel art, however it is available
to be sold at the prevailing market, if needed. Temporary unrealized changes in
value would be reported as other comprehensive income or loss, and other than
temporary unrealized decreases in value would be expensed as incurred.
Management performs an annual impairment, unless circumstances or events arise
that would indicate the cel art might be impaired. Management does not believe a
provision for loss or write-down of the cel art value is necessary, based on the
results of the analysis performed by an independent appraiser contracted by the
Company. The consultant reviewed a variety of factors, including recent sales in
the marketplace.
F-15
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 4: INVESTMENT IN CEL ART - (CONTINUED)
The cost of insuring these cels was not financially feasible. The Company has
created a secure designated area in Deerfield Beach to store the inventory. The
Company has taken many measures to fireproof this area. A monitored fire and
security system and surveillance cameras have been installed.
During 2004 the Company revised its business plan to be in line with the
Company's focus on building a presence as a media holding company in the adult
entertainment industry. Accordingly, the Company decided to discontinue its
operations related to auction sales and on March 1, 2005 entered into a
licensing agreement with LTC Group, Inc., whereby LTC will pay the Company a
license fee for the right to use the auction software developed and patented by
the Company. Such licensing fee is equal to 20 percent of the gross auction
profits.
In keeping with the Company's amended business strategy, the Company divested
its ownership interest in Foster Sports, Inc. in November 2004 and discontinued
its pursuit of business combinations with entities engaged in radio media.
Upon further review, the Company determined that Foster had not fully met the
contingent consideration requirements specified in the Company's stock purchase
agreement. According to the stock purchase agreement, Foster would receive a
total of 480,000 shares of the Company's common stock if Foster met certain
revenue requirements. Based on the Company's review, it was determined that
Foster met revenue requirements sufficient to earn only 60,000 shares of IBD
common stock. Accordingly, the Company issued 60,000 shares of its common stock
to Foster.
F-16
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
As a result of divesting its ownership interest in Foster Sports and online
auction sales, the Company recognized a loss from disposition of $657,885. Such
loss is reported on the consolidated condensed statements of operations as part
of the "Loss from disposal of discontinued operations."
2004
-----------
Current assets $ 528,788
Property and equipment (Foster), net 62,276
Auction software, net 1,112,988
Goodwill 387,000
Other assets 208,004
-----------
2,299,056
Current liabilities (444,650)
Long term liabilities (1,196,521)
-----------
(1,641,171)
Net assets of discontinued operations $ 657,885
===========
Operating results for discontinued operations were as follows:
2004 2003
----------- -----------
Revenue $ 793,160 $ 307,010
----------- -----------
Operating expenses -- 458,411
Depreciation and amortization 189,165 181,713
----------- -----------
Loss before income tax benefit (1,494,958) (333,144)
----------- -----------
Income tax benefit 598,000 133,250
----------- -----------
Net loss $ (896,858) $ (199,864)
=========== ===========
F-17
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 6: INCOME TAXES
The Company accounts for income taxes using the asset and liability method
prescribed by Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under the asset and liability method, deferred income taxes
are recognized for the tax consequences of temporary differences by applying the
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and tax bases of the existing assets
and liabilities. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is provided to the extent any deferred tax asset may not be realized.
As of December 31, 2004, a valuation allowance for the full amount of the net
deferred tax asset resulting from the tax net operating losses and other items
was utilized because of uncertainty regarding its realization.
In accordance with Internal Revenue code section 382, a change in ownership of
greater than 50% of a corporation within a three-year period will place an
annual limitation on the corporation's ability to utilize its existing tax
benefit carryforwards. Under such circumstances, the potential benefits from
utilization of the tax loss carryforwards as of that date may be substantially
limited or reduced on an annual basis. At December 31, 2004, the Company was
unable to determine its net operating loss carryforwards for Federal income tax
purposes due to the recent capital transaction which has materially changed the
ownership of the Company.
The net income tax provision for the years ended December 31, 2004 and 2003 was
zero. However, because the presentations of the accompanying statements of
operations include the results of operations from both continuing operations and
discontinued operations, the Company is required to present an allocation of an
income tax provision between such elements. The following is a reconciliation of
the income tax provision as allocated to the various elements of the
accompanying statements of operations:
2004 2003
--------- ---------
Income Tax Benefit (Expense)
Continuing Operations
Current $ -- $ --
Deferred (861,150) (133,250)
Discontinued Operations:
Loss from discontinued operations 598,000 133,250
Loss from disposition 263,150 --
--------- ---------
861,150 --
Net Income Tax Provision $ -- $ --
========= =========
F-18
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 7: CONVERTIBLE NOTES PAYABLE AND PREFERRED STOCK
The Company issued an aggregate of $9,525,000 of 10% Convertible Notes ("10 %
Notes") to 18 investors (the "Note Holder"), none of whom were previously
affiliated with the Company. The note holders also received warrants to purchase
3,175,000 additional shares of common stock at an exercise price of $3.00 per
share. Interest is payable semi-annually on June 30th and December 31st, at the
rate of 10% per annum, payable at the option of the Company of either 100% in
cash, 50% in cash and the balance in common stock. The notes are convertible, at
the option of the holder, into common stock at the lesser of $3.00 ("Floor
Price") or 50% of the average of the closing bid price in the over the counter
market during the five business days ending on the day before the holder gives
notice of conversion. In the event the Note Conversion Price is less than the
Floor Price, the holders are entitled to receive additional shares of common
stock equal to an adjusted floor price of $0.50. The notes are secured by (i) a
lien on the assets of Internet Billing Company LLC ("iBill") subordinated to the
lien granted to holders of the Series F Preferred Stock, and (ii) the pledge by
the Company of a portion (pro rated with the Series F Senior Preferred Stock) of
its 34.7% equity interest in PMG. The 10% Notes convert to a maximum of
19,050,000 shares of common stock plus any unpaid interest or accrued stock.
The Company raised $3.5 million from the sale of 35,000 shares of its Series E
6% Convertible Preferred Stock ("Series E") to Monarch Pointe Fund LP
("Monarch"). The Series E stock holders were also issued warrants to purchase
approximately 430,000 shares of common stock at an exercise price equal of $3.00
per share. The Series E shares rank senior to the Company's common shares,
Series C Preferred Stock and Series G Preferred Stock; and are entitled to 6%
dividends when and as declared by the Board of Directors. Series E are
convertible, at the option of the holder, into common stock at the lesser of
$3.00 ("Floor Price") or 50% of the average of the closing bid price in the over
the counter market during the five business days ending on the day before the
holder gives notice of conversion. In the event the Series E Conversion Price is
less than the Floor Price, the holders are entitled to receive additional shares
of common stock equal to an adjusted floor price of $0.50. Series E convert to a
maximum of 7,000,000 shares of common stock.
F-19
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 7: CONVERTIBLE NOTES PAYABLE AND PREFERRED STOCK - (CONTINUED)
The Company raised $3.45 million from the sale of 34,500 shares of its Series F
10% Convertible Preferred Stock ("Series F") to Castlerigg Master Investments
Limited ("Castlerigg"). The Series F stock holders were also issued warrants to
purchase approximately 610,776 shares of common stock at an exercise price equal
of $3.00 per share. The Series F shares rank senior to the Company's common
shares, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series G Preferred Stock; and are entitled to 10% dividends payable
semi-annually on June 30th and December 31st, payable at the option of the
Company of either 100% in cash, 50% in cash and the balance in common stock.
Series F are convertible, at the option of the holder, into common stock at the
lesser of $3.00 ("Floor Price") or 50% of the average of the closing bid price
in the over the counter market during the five business days ending on the day
before the holder gives notice of conversion. In the event the Series F
Conversion Price is less than the Floor Price, the holders are entitled to
receive additional shares of common stock equal to an adjusted floor price of
$0.50. Series F are secured by (i) a lien on the assets of Internet Billing
Company LLC ("iBill") subordinated only to a first priority lien that may be
granted to one or more senior lender providing up to $10.0 million of working
capital financing to iBill and (ii) the pledge by the Company of a portion (pro
rated with the 10% Notes) of its 34.7% equity interest in PMG. Series F convert
to a maximum of 6,900,000 shares of common stock plus any unpaid interest
accrued in stock.
The Company issued Series G Convertible Preferred Stock ("Series G") in
connection with its acquisition of PMG. Series G is junior on liquidation and
sale of control of the Company to the Series E and Series F; does not pay any
dividend and is not secured by any assets or securities; and is not subject to
mandatory redemption. Series G shall convert upon the earlier to occur of
December 31, 2004 or the Company obtaining stockholder approval, and the
aggregate number of shares of Company common stock as shall equal 68.0 million
shares of common stock, less a maximum of 27,458,333 Conversion Shares issuable
at the adjusted Floor conversion price of $0.50 applicable to 10% Notes, Series
E, and Series F Securities.
This conversion provision represents a beneficial conversion feature, the value
of which is calculated by subtracting the conversion price of $0.50 from the
market price of the common stock on the date the preferred shares were issued.
The Series E and Series F preferred stocks have been classified as long-term
debt net of the amounts allocated to the derivative financial instruments and
the warrants attached thereto. The Series E preferred stock is convertible into
an indeterminate number of shares of the Company's common stock based on the
price of the stock near the conversion date. The conversion of the Series F
preferred stock is at the option of the holder, not the Company, and is
redeemable at the holder's request in cash. The Series G preferred stock is not
considered a derivative financial instrument as it is convertible into a
specific, determinable number of common shares. Due to embedded conversion
features, the Company has bifurcated $1,831,862, $1,898,559 and $2,044,720 of
the 10% notes, Series E preferred stock and Series F preferred stock,
respectively, and any changes in the fair value will be charged or credited to
income on a quarterly basis.
As of December 31, 2004, long-term debt is comprised of the following:
10% Convertible Notes $ 9,525,000
Series E preferred stock 3,500,000
Series F preferred stock 3,450,000
------------
Total long-term debt 16,475,000
Less: unamortized discount (6,690,543)
------------
Total long-term debt, net of current portion and unamortized discount $ 9,783,399
============
The unamortized discount of $6,690,543 is comprised of the following and will be
amortized over the following periods:
10% Convertible Notes (5 years) $ 2,543,752
Series E preferred stock (3 years) 2,057,661
Series F preferred stock (5 years) 2,089,130
------------
Unamortized discount $ 6,690,543
============
As of December 31, 2004, convertible features of financial instruments is
comprised of the following:
10% Convertible Notes $ 1,831,862
Series E preferred stock 1,898,559
Series F preferred stock 2,044,720
------------
Convertible features of financial instruments $ 5,775,141
============
On November 26, 2002 the Company was authorized by the Board of Directors to
issue three series of preferred stock. Series A Convertible Preferred Stock,
100,000 shares authorized, was converted in 2003. Series B Convertible Preferred
Stock, 10,000 shares authorized, was converted in accordance with the Series
preferences in 2004 for 198,020 shares of Common Stock
Subsequent to December 31, 2004, Series C Convertible Preferred Stock was
converted in accordance with its preferences in January 2005 for 1,00,000 shares
of Common Stock.
F-20
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 8: WARRANTS
The Company had no outstanding warrants to purchase common stock at the
beginning of year 2004. In October, 2004 4,215,776 additional warrants were
issued at $3.00 in conjunction with the Company's efforts to raise capital for
its investment in Penthouse Media Group. The Company accounts for these
transactions under the provisions of SFAS No.123 "Accounting for Stock Based
Compensation," and APB No.25 "Accounting for Stock Issued to Employees."
The company is relying on both APB 14, "Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants" and EITF 00-19, "Accounting for Derivative
Financial Instruments Accounting for Derivative Financial Instruments Indexed to
or Potentially Settled in Indexed to or Potentially Settled in a Company's Own
Stock" for treatment of the convertible stock. They require the company to
expense the "Beneficial Conversion Feature" in the current year. This means the
difference between the fair value of the common stock and the conversion price
will be amortized over the term of the note (years). Should the lender(s)
convert some or all of their notes prior to the term expiring or at a different
price; the accrued amounts will be adjusted accordingly.
The fair value of each warrant that was granted in conjunction with the
financial instruments were estimated using the Black-Scholes option pricing
model. The fair values calculated were as follows:
10% Convertible Notes $ 711,890
Series E preferred stock 159,102
Series F preferred stock 44,410
----------
Warrants $ 915,402
==========
NOTE 9: RELATED PARTY TRANSACTIONS
The amount due to stockholders at December 31, 2004 and December 31, 2003 was
$1,048,248 and $7,316. These amounts represented advances from shareholders and
corporate expenses paid personally by stockholders.
The Company was a party to a lease agreement for its former executive offices
with Children's Academy of Pompano Beach, Inc., an entity controlled by a family
member of the Company's president. The lease agreement was through December
2007. On December 20, 2004 the Company agreed to terminate the lease. The
remaining obligations under the lease on the date of termination were
approximately $307,500. Children's Academy of Pompano Beach, Inc. accepted
200,000 shares of IBD common stock, valued at the date of issuance at
approximately $80,000, in consideration of forgiving all outstanding obligations
under the lease and release of any potential claims under the lease agreement.
The Company's president disclaims any beneficial ownership in the shares.
F-21
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 9: RELATED PARTY TRANSACTIONS - (CONTINUED)
On July 14, 2004 the Company entered into a Settlement and Termination Agreement
with Oak Street Ventures, Inc. under which Oak Street Ventures received
4,000,000 shares of IBD common stock in consideration of consulting services
provided in connection with the Company's introduction to iBill and subsequent
acquisition negotiations with iBill. The 4,000,000 shares are subject to a
one-year lock up agreement. On October 5, 2004, the Company approved the
issuance of 503,680 shares of common stock to Oak Street Ventures, issued on
December 3, 2004, in consideration of additional business consulting services
provided. A principal of Oak Street Ventures, Inc. is a family member of an
officer and director of the Company.
On October 5, 2004, the Company also approved the issuance of 503,680 shares of
common stock to Corporation First, Inc., issued on December 3, 2004, for certain
business consulting services. Voting control of Corporation First is held by a
family member of the Company's president. The Company's president disclaims any
beneficial ownership in the shares.
On October 5, 2004 the Company entered into a business consulting services
agreement with Northbound, Inc., issued December 3, 2004, for services related
to insurance coverage. In consideration of services provided under the agreement
the Company issued Northbound 40,000 shares of its common stock. The principal
of Northbound is a family member of a director of the Company. The director
disclaims beneficial ownership of any securities held by the family member.
On October 27, 2004, the Company approved the issuance of 3,000,000 shares of
common stock to American Collectors' Exchange, Inc. pursuant to an agreement to
acquire 26,261 pieces of cel art valued at $1,350,000. American Collectors'
Exchange, Inc. is owned by a family member of an officer and director of the
Company.
In December 2004, the Company purchased an additional 33,739 pieces of cel art
valued at $1,665,000 in consideration of 3,700,000 shares of common stock from a
company which is owned by family member of an officer and director of the
Company.
F-22
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 10: PREFERRED STOCK DIVIDENDS
Series B Convertible Preferred stock was converted on November 16, 2004, for
which the Holder received 198,020 shares of IBD common stock, which included
payment of accrued dividends. Dividends that were cumulative from date of
issuance and were declared upon the conversion of series B shares in 2004.
Series F Preferred stock has accrued dividends paid one half in cash and one
half in common stock. The Company paid $77,778 in cash for dividends on Series F
in 2004 and 25,926 shares of its common stock, valued at $.50 per share, in
dividends in 2004. In computing net income applicable to common stock, the
Company has incorporated the preferred stock dividend expense in fiscal year
2003 of $8,000 and $6,000 for fiscal year 2004.
NOTE 11: SUBSEQUENT EVENTS
Effective January 21, 2005, IBD completed the acquisition of 100% of the equity
interests in iBill Corporation, Inc., which owns all of the membership interest
in Media Billing Company, LLC, which owns 100% of the membership interests in
Internet Billing Company LLC , from PHSL.
In connection with the acquisition of iBill in January 2005, IBD issued to PHSL
330,000 shares of its Series D Preferred Stock, which PHSL is entitled to
convert into the number of shares of IBD common stock as shall represent 49.9%
of the fully-diluted shares of the Company's common stock on the date of
conversion. If PHSL had converted on the date of issuance, 100,733,244 shares of
IBD common stock would have been issued. The transaction will be recorded as a
reverse acquisition.
F-23
INTERACTIVE BRAND DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 11: SUBSEQUENT EVENTS - (CONTINUED)
The following condensed financial statements shows the fair value of the assets
acquired and the liabilities assumed as of the date of the acquisition. The pro
forma information is based on the assumption that the acquisition took place on
January 1, 2004:
Pro Forma Condensed Balance Sheet
(UNAUDITED)
INTERACTIVE INTERNET PRO
BRAND BILLING FORMA
DEVELOPMENT, INC. COMPANY, LLC COMBINED
CONDENSED CONDENSED
------------ ------------
Current Assets $ 453 $ 22,354,428 $ 22,354,881
------------ ------------ ------------
Total Assets $ 50,113,435 $ 71,100,616 $121,214,051
Current liabilities $ 2,222,879 $ 48,906,283 $ 51,129,162
Total liabilities $ 12,222,879 $ 51,684,992 $ 63,907,871
Equity $ 37,890,556 $ 19,415,624 $ 57,306,180
Total liabilities and Equity $ 50,113,435 $ 71,100,616 $121,214,051
On December 31, 2004, iBill obtained a line of credit for $2,000,000 from
International Investment Group ("IIG"), a non-affiliated lender, to improve its
liquidity. The line of credit has matured and is currently payable in full. The
parties are negotiating the terms of an agreement to provide for an extension of
the credit facilitate. There can be no assurance that terms are reached and, if
they are not, there could be serious negative consequences to iBill since the
loan is secured by the assets of iBill.
Subsequent to fiscal year-end 2004, on March 31, 2005, the Company acquired
approximately 25% of XTV, Inc., ("XTV") from XTV Investments LLC. XTV is a
development stage interactive video-on-demand company that intends to broadcast
video content to standard television sets using the Internet (video over IP; or
IPTV). The Company purchased 6,250 of the 25,000 common shares outstanding in
XTV. A portion of the shares (2,083) are subject to an escrow agreement in which
the Company must sign up at least 10,000 subscribers to the service to
facilitate the release of 1,042 shares from escrow, and an additional 10,000
subscribers to facilitate the release of the balance of the escrowed shares on
or before October 31, 2006. Shares remaining in escrow at that date will be
returned to XTV for cancellation. As consideration for the acquisition, the
Company paid $1,700,000 in cash and issued 4,000 shares of a newly created
preferred stock, Series H, which converts to 40,000,000 shares of IBD common
stock upon a 10-day post-closing document exchange. Warrants that convert into
40 million shares at $0.50 of IBD common stock were also issued in conjunction
with this transaction, the terms of which are detailed below.
F-24
EXHIBIT 31.1
I, Steve Markley, certify that:
1. I have reviewed this annual report on Form 10-KSB of Interactive Brand
Development, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditor and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 17, 2006
/s/ Steve Markley
-----------------------
Steve Markley
Chief Executive Officer
EXHIBIT 31.2
I, Steve Markley, certify that:
1. I have reviewed this annual report on Form 10-KSB of Interactive Brand
Development, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditor and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 17, 2006
/s/Steve Markley
---------------------------
Steve Markley
Principal Financial Officer
EXHIBIT 32.1
Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley act of 2001.
In connection with the Annual Report of Interactive Brand Development, Inc. (the
"Company") on Form 10-KSB for the year ended December 31, 2004, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Steve Markley, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2001, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: April 17, 2006
/s/ Steve Markley
--------------------------------------
Steve Markley, Chief Executive Officer
Dated: April 17, 2006
/s/ Gary Spaniak, Jr.
----------------------------
Gary Spaniak, Jr., President
EXHIBIT 32.2
Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley act of 2001.
In connection with the Annual Report of Interactive Brand Development, Inc. (the
"Company") on Form 10-KSB for the year ended December 31, 2004, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Steve Markley, Principal Financial Officer of the Company, certify, pursuant to
18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2001, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: April 17, 2006
/s/ Steve Markley
------------------------------------------
Steve Markley, Principal Financial Officer
Dated: April 17, 2006
/s/ Gary Spaniak, Jr.
----------------------------
Gary Spaniak, Jr., President
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