PLEASE READ THE THREADS HEADER RE:J-BIRD AND THEN READ THIS.
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 52525 / September 29, 2005
ADMINISTRATIVE PROCEEDING
File No. 3-12059
In the Matter of
INTERNATIONAL BIOFUEL AND
BIOCHEMICAL CORPORATION
f/k/a J-BIRD MUSIC GROUP LTD.,
Respondent.
ORDER INSTITUTING ADMINISTRATIVE
AND CEASE-AND-DESIST PROCEEDINGS,
MAKING FINDINGS, IMPOSING A CEASEAND-
DESIST ORDER PURSUANT TO
SECTION 21C, AND REVOKING
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(j) OF THE
SECURITIES EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission (“Commission”) deems it necessary and
appropriate for the protection of investors that administrative proceedings and cease-and-desist
proceedings be, and hereby are, instituted pursuant to Sections 12(j) and 21C of the Securities
Exchange Act of 1934 (“Exchange Act”), against International Biofuel and Biochemical
Corporation f/k/a J-Bird Music Group Ltd. (“IBBC” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission’s jurisdiction over it and the subject matter of these
proceedings which are admitted, Respondent consents to the entry of this Order Instituting
Administrative and Cease-and-Desist Proceedings, Making Findings, Imposing a Cease-and-Desist
Order Pursuant to Section 21C, and Revoking Registration of Securities Pursuant to Section 12(j)
of the Securities Exchange Act of 1934 (“Order”), as set forth below.
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III.
On the basis of this Order and Respondent’s Offer, the Commission finds1 that:
Respondent
IBBC (CIK No. 1057550), formerly known as J-Bird Music Group, Inc., is based in
Pompano, Florida and is incorporated in Pennsylvania. The common stock of IBBC has been
registered under Section 12(g) of the Exchange Act since August 1998. The stock was de-listed
from the Over-The-Counter Bulletin Board service in the second quarter of 2003, and is now listed
for quotation in the “Pink Sheets” disseminated by Pink Sheets, LLC. (symbol “IBBO”).
Facts
A. IBBC has failed to file annual reports on Form 10-KSB for the fiscal years ended
December 31, 2003, and December 31, 2004.
B. IBBC has failed to file quarterly reports on Form 10-QSB for the quarters ended
September 30, 2003; March 31, 2004; June 30, 2004; September 30, 2004; and March 31, 2005.
C. IBBC has failed to file audited financial statements in its Annual Report on Form
10-KSB for the fiscal year ended December 31, 2002. IBBC’s auditor was unable to give an audit
opinion for the fiscal year ended December 31, 2002, because IBBC lacked adequate accounting
records for the auditor to perform an audit and IBBC did not have a system of internal controls that
were sufficient to provide reasonable assurances that transactions were recorded such that financial
statements could be prepared in accordance with generally accepted accounting principles.
D. IBBC filed two quarterly statements with the Commission, which were signed by
its former CEO, and one or more of which contained the following materially false and misleading
statements:
1. “IBBC is a registered biodiesel producer with the EPA.” (Forms 10-QSB
for the quarters ended March 31, 2003, and June 30, 2003) This statement was materially
false and misleading because Respondent, through its former CEO, knew, or was reckless
in not knowing, that IBBC sent a letter to the EPA requesting registration and that the EPA
did not approve such registration.
2. IBBC is working with DQ University to establish a laboratory and biofuel
plant. (Forms 10-QSB for the quarters ended March 31, 2003, and June 30, 2003) This
statement was materially false and misleading because Respondent, through its former
CEO, knew, or was reckless in not knowing, that IBBC was not in a position to work
with DQ University because IBBC did not own a biofuel processor. In addition,
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any
other person or entity in this or any other proceeding.
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Respondent, through its former CEO, knew, or was reckless in not knowing, that IBBC
had never had anything but preliminary discussions with DQ University.
3. The continuous flow technology IBBC licenses is protected by a patent.
(Form 10-QSB for the quarter ended March 31, 2003) This statement was materially
false and misleading because Respondent, through its former CEO, knew, or was reckless
in not knowing, that the technology was not patented because Respondent, through its
former CEO, knew that a patent application for the technology was pending, not that it
was approved.
4. “IBBC plans to have in production 12 plants, located throughout the U.S.,
each producing a minimum of 35 million gallons of biodiesel per year.” (Forms 10-QSB
for the quarters ended March 31, 2003, and June 30, 2003) This statement was materially
false and misleading because Respondent, through its former CEO, knew, or was reckless
in not knowing, that there was no reasonable basis for IBBC to make this statement.
Respondent, through its former CEO, knew, or was reckless in not knowing, that no
company had ever produced this much biofuel in a year and that the technology IBBC
was using had not been proven to be able to produce that capacity.
5. “Net return to the company per gallon is estimated at 20 cents per gallon
produced.” (Forms 10-QSB for the quarters ended March 31, 2003, and June 30, 2003)
This statement was materially false and misleading because Respondent, through its
former CEO, knew, or was reckless in not knowing, there was no reasonable basis for
IBBC to represent that it could make such a return, particularly where its former CEO did
no due diligence to determine the rate of return for existing biofuel producers.
Additionally, Respondent, through its former CEO, was aware of undisclosed facts which
undermined the accuracy of the projected net return. Respondent, through its former
CEO, knew but did not disclose that the figure of 20 cents per gallon was dependent on
IBBC receiving tax credits from the federal government and IBBC had not been
approved to receive such tax credits.
E. IBBC filed registration statements with the Commission, which were signed by its
former CEO and contained the following materially false and misleading statements:
1. “IBBC is in the process of constructing a large scale biodiesel production
manufacturing plant in Connecticut.” (Business plan filed as an exhibit to Registration
Statement on Form S-8 filed on March 7, 2003) This statement was materially false and
misleading because Respondent, through its former CEO, knew, or was reckless in not
knowing, that IBBC was not actually constructing a plant and IBBC had no funding to buy
or construct any plant and had no site to build a plant in Connecticut.
2. “Each of the plants can have capabilities scaleable up to 20 million gallons
per year.” (Registration Statement on Form S-8 filed Feb. 14, 2003, and Registration
Statement on Form S-8 filed March 7, 2003) This statement was materially false and
misleading because Respondent, through its former CEO, knew, or was reckless in not
knowing, that there was no reasonable basis for IBBC to make this statement. Respondent,
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through its former CEO, knew, or was reckless in not knowing, that no company had ever
produced this much biofuel in a year and that the technology IBBC was using had not been
proven to be able to produce that capacity.
3. “The plant’s capacity is scaleable to 20,000,000 gallons the first year and
can be gradually increased to 240,000,000 gallons by 2008.” (Business plan filed as exhibit
to Registration Statement on Form S-8 filed on March 7, 2003) This statement was
materially false and misleading because Respondent, through its former CEO, knew, or
was reckless in not knowing, that there was no reasonable basis for IBBC to make this
statement. Respondent, through its former CEO, knew that no company had ever produced
this much biofuel in a year and that the technology IBBC was using had not been proven to
be able to produce that capacity.
4. IBBC made a false and misleading income statement projecting future
income, sales and profits with no reasonable basis. (Business plan filed as an Exhibit to
Registration Statement on Form S-8 filed on March 7, 2003) The income statement was
materially false and misleading because Respondent, through its former CEO, knew, or
was reckless in not knowing, that there was no reasonable basis for IBBC to make such
projections, particularly where these projections were based on IBBC’s statement of
production capability, which also had no reasonable basis. There was also no reasonable
basis for such projections because IBBC had no income or source of financing for a plant
and had not commenced construction on a plant.
F. As a result of the conduct described in paragraphs A through C, above, IBBC has
failed to comply with, and committed violations of, Section 13(a) of the Exchange Act, and Rules
13a-1 and 13a-13 thereunder while its common stock was registered with the Commission in that it
has not filed its annual reports on Form 10-KSB for the fiscal years ended December 31, 2003, and
December 31, 2004, and quarterly reports on Form 10-QSB for the quarters ended September 30,
2003; March 31, 2004; June 30, 2004; September 30, 2004; and March 31, 2005, and it failed to
file audited financial statements in its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2002. Section 13(a) of the Exchange Act, and Rules 13a-1 and 13a-13 thereunder,
require issuers of securities registered pursuant to Section 12 of the Exchange Act to file with the
Commission current information in periodic reports. Specifically, Rule 13a-1 requires issuers to
file annual reports and Rule 13a-13 requires issuers to file quarterly reports. In addition, Item
310(a) of Regulation S-B requires small business issuers to file audited financial statements with
annual reports.
G. As a result of the conduct described in paragraphs D and E, above, IBBC has failed
to comply with, and committed violations of, Section 10(b) of the Exchange Act, and Rule 10b-5
thereunder, by including materially false and misleading information in filings with the
Commission. Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, prohibit the making
of any untrue statement of material fact or the omission to state a material fact necessary in order to
make the statements made, in light of the circumstances under which they were made, not
misleading in connection with the purchase or sale of any security.
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H. As a result of the conduct described in paragraph D above, IBBC has failed to
comply with, and committed violations of, Section 13(a) of the Exchange Act, and Rule 13a-13
thereunder, by including materially false and misleading information in periodic reports. Section
13(a) of the Exchange Act, and Rule 13a-13 thereunder, require issuers of securities registered
pursuant to Section 12 of the Exchange Act to file with the Commission accurate information in
periodic reports. See SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978), cert.
denied, 440 U.S. 913 (1979).
I. As a result of the conduct described in paragraph C above, IBBC has failed to
comply with, and committed violations of, Section 13(b)(2)(A) of the Exchange Act by failing to
make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly
reflected the transactions and dispositions of its assets for the fiscal year ended December 31, 2002.
J. As a result of the conduct described in paragraph C above, IBBC has failed to
comply with, and committed violations of, Section 13(b)(2)(B) of the Exchange Act by failing to
devise and maintain a system of internal accounting controls sufficient to provide reasonable
assurances that transactions were recorded such that financial statements could be prepared in
accordance with generally accepted accounting principles for the fiscal year ended December 31,
2002.
Undertakings
Respondent agrees that it will cooperate fully with the Commission in any and all related
investigations, litigations, or other proceedings commenced by the Commission or to which the
Commission is a party, by undertaking to do the following:
(a) Produce, without service of a notice or subpoena, any and all non-privileged
documents and other information reasonably requested by the Commission’s
staff;
(b) Use its best efforts to encourage its employees, officers, directors and agents to
be interviewed by the Commission’s staff at such times and places as the staff
may reasonably request;
(c) Use its best efforts to encourage its employees, officers, directors and agents to
appear and testify without service of a notice or subpoena in such investigations,
depositions, hearings or trials as may be reasonably requested by the
Commission’s staff;
(d) Agree that any notice or subpoena issued to Respondent in connection with any
and all related investigations, litigations, or other proceedings may be served by
regular mail or facsimile transmission on its President or other officer;
(e) Waive the territorial limits on service contained in Rule 45 of the Federal Rules
of Civil Procedure and any applicable local rules, with respect to such notices
and subpoenas provided that the party requesting the testimony reimburses
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Respondent’s travel, lodging, and subsistence expenses at the then-prevailing
United States Government per diem rates; and
(f) Consent to personal jurisdiction over Respondent in any United States District
Court for purposes of enforcing such subpoena.
In determining to accept the offer of IBBC, the Commission considered the undertakings
set forth above.
IV.
Section 12(j) of the Exchange Act provides as follows:
The Commission is authorized, by order, as it deems necessary or
appropriate for the protection of investors to deny, to suspend the
effective date of, to suspend for a period not exceeding twelve
months, or to revoke the registration of a security, if the
Commission finds, on the record after notice and opportunity for
hearing, that the issuer of such security has failed to comply with
any provision of this title or the rules and regulations thereunder.
No member of a national securities exchange, broker, or dealer shall
make use of the mails or any means or instrumentality of interstate
commerce to effect any transaction in, or to induce the purchase or
sale of, any security the registration of which has been and is
suspended or revoked pursuant to the preceding sentence.
Section 21C(a) of the Exchange Act provides as follows:
If the Commission finds, after notice and opportunity for hearing,
that any person is violating, has violated, or is about to violate any
provision of this title, or any rule or regulation thereunder, the
Commission may publish its findings and enter an order requiring
such person, and any other person that is, was, or would be a cause
of the violation, due to an act or omission the person knew or should
have known would contribute to such violation, to cease and desist
from committing or causing such violation, and any future violation
of the same provision, rule, or regulation.
In view of the foregoing, the Commission finds that it is necessary and appropriate for the
protection of investors, to impose the sanctions agreed to in Respondent’s Offer.
Accordingly, pursuant to Section 12(j) of the Exchange Act, it is hereby ORDERED that
registration of each class of Respondent’s securities registered pursuant to Section 12 of the
Exchange Act be, and hereby is, revoked. IT IS FURTHER ORDERED, pursuant to Section 21C
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of the Exchange Act, that Respondent cease and desist from committing or causing any violations
and any future violations, of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange
Act and Exchange Act Rules 10b-5, 13a-1, and 13a-13. IT IS FURTHER ORDERED that
Respondent shall comply with the undertakings enumerated in Section III above.
By the Commission.
Jonathan G. Katz
Secretary |
