10-Q 1 form10q.htm IB3 NETWORKS 10-Q 9-30-2009 form10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

x
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September  30, 2009

o
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period __________ to __________

Commission File Number: 000-52374

IB3 Networks, Inc.
(Exact name of small business issuer as specified in its charter)

Nevada
61-1433933
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)

10 South High Street, Canal Winchester, Ohio, 43110
(Address of principal executive offices)

(614) 833-9713 x235
(Issuer’s telephone number)


________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)


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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

o Large accelerated filer Accelerated filer
o Non-accelerated filer
x Smaller reporting company
  

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date 25,728,209 common shares as of October 5, 2009.
 
 
TABLE OF CONTENTS

 
 
PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:



These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended September 30, 2009 are not necessarily indicative of the results that can be expected for the full year.

 
IB3 NETWORKS, INC.
(FKA LANGUAGE ACCESS NETWORK, INC.)
Consolidated Balance Sheets

   
September 30,
2009
    
December 31,
2008
  
   
(Unaudited)
    
(Audited)
  
Assets
            
Current Assets
            
Cash and equivalents
   $ 1,674     $ 13,000  
Accounts receivable, net
     32,164       39,410  
Inventory
     3,974       8,673  
Other current assets
     14,117       3,193  
Total Current Assets
     51,929       64,276  
Furniture and Equipment, net
     28,008       36,474  
Other Assets
                
Goodwill
     269,725       269,725  
Total Other Assets
     269,725       269,725  
Total Assets
   $ 349,662     $ 370,475  
Liabilities and Stockholders' Equity (Deficit)
                
Current Liabilities
                
Accounts payable and accrued expenses
   $ 955,694     $ 1,010,477  
Bank overdraft
     2,032       -  
Payable-related party
     388,652       40,741  
Notes payable-short term
     33,854       58,211  
Client deposits
     10,026       33,521  
Total Current Liabilities
     1,390,258       1,142,950  
Long Term Liabilities
                
Convertible notes payable, net of discount of $37,500
     755,466       100,000  
Total Liabilities
     2,145,724       1,242,950  
Stockholders' Equity (Deficit)
                
Common stock: $0.001 par value; 100,000,000 shares authorized, 25,897,103 and 24,436,491 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively
     25,897       24,436  
Additional paid-in capital
     14,793,370       14,034,678  
Accumulated deficit
     (16,615,329 )     (14,931,589 )
Total Stockholders' Equity (Deficit)
     (1,796,062 )     (872,475 )
Total Liabilities and Stockholders' Equity (Deficit)
   $ 349,662     $ 370,475  

The accompanying notes are an integral part of these financial statements.

 
IB3 NETWORKS, INC.
(FKA LANGUAGE ACCESS NETWORK, INC.)
Consolidated Statements of Operations
(Unaudited)

   
For the Three
Months Ended
September 30,
2009
    
For the Three
Months Ended
September 30,
2008
    
For the Nine
Months Ended
September 30,
2009
    
For the Nine
Months Ended
September 30,
2008
  
                         
Net Revenue
   $ 168,715     $ 321,871     $ 730,922     $ 986,990  
Cost of Goods Sold
     112,036       181,071       418,849       609,414  
Gross profit
     56,679       140,800       312,073       377,576  
Operating Expenses
                                
Depreciation and amortization
     4,325       5,250       14,390       16,112  
Selling, general and administrative
     189,974       95,835       1,286,658       453,250  
Total operating expenses
     194,299       101,085       1,301,048       469,362  
Operating Loss
     (137,620 )     39,715       (988,975 )     (91,786 )
Other Income and Expenses
                                
Interest expense
     (40,767 )     (22,341 )     (68,382 )     (246,338 )
Other income (expense)
     -       -       3,891       (52 )
Total other income and expenses
     (40,767 )     (22,341 )     (64,491 )     (246,390 )
Net loss before income taxes
     (178,387 )     17,374       (1,053,466 )     (338,176 )
Income tax expense
     -       -       -       -  
Discontinued Operations
     -       -       (630,274 )     599,571  
Net Income (Loss)
   $ (178,387 )   $ 17,374     $ (1,683,740 )   $ 261,395  
Basic Earnings (Loss) Per Share
                                
Continuing operations
   $ (0.01 )   $ 0.00     $ (0.04 )   $ (0.05 )
Discontinued operations
   $ -     $ -     $ (0.03 )   $ 0.10  
    $ (0.01 )   $ 0.00     $ (0.07 )   $ 0.04  
Weighted Average
                                
Common Shares Outstanding
     25,917,103       12,345,655       25,129,519       6,239,377  

The accompanying notes are an integral part of these financial statements.

 
IB3 NETWORKS, INC.
(FKA LANGUAGE ACCESS NETWORK, INC.)
Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)

   
Common Stock
    
Additional
    
Accumulated
    
Total
Stockholders'
  
   
Shares
    
Amount
    
Paid-in Capital
    
Deficit
    
Deficit
  
                               
Balance, December 31, 2007
     105,537     $ 105     $ 12,739,114     $ (14,972,886 )   $ (2,233,667 )
                                         
Notes converted to common stock at $1.45 per share
     55,125       55       79,945       -       80,000  
                                         
Notes converted to common stock at $0.80 per share
     333,280       333       268,417       -       268,750  
                                         
Beneficial conversion feature
     -       -       3,540       -       3,540  
                                         
Shares issued for cash at $0.001 per share
     5,300,000       5,300       -       -       5,300  
                                         
Notes converted to common stock at $0.05 per share
     18,642,549       18,643       943,662       -       962,305  
                                         
Net income for the year ended December 31, 2008
     -       -       -       41,297       41,297  
Balance, December 31, 2008
     24,436,491       24,436       14,034,678       (14,931,589 )     (872,475 )
                                         
Shares issued for services at $0.55 per share (unaudited)
     1,150,000       1,150       631,350       -       632,500  
                                         
Shares issued for equipment at $0.25 per share (unaudited)
     -       -       -       -       -  
Shares issued for services at $0.25 per share (unaudited)
     121,500       122       30,253       -       30,375  
                                         
Shares issued for services at $0.25 per share (unaudited)
     129,112       129       32,149       -       32,278  
                                         
Shares issued for cash at $0.25 per share (unaudited)
     60,000       60       14,940       -       15,000  
Beneficial conversion feature
     -       -       50,000       -       50,000  
Net loss for the nine months ended September 30, 2009 (unaudited)
     -       -       -       (1,683,740 )     (1,683,740 )
                                         
Balance, September 30, 2009 (unaudited)
     25,897,103     $ 25,897     $ 14,793,370     $ (16,615,329 )   $ (1,796,062 )

The accompanying notes are an integral part of these financial statements.

 
IB3 NETWORKS, INC.
(FKA LANGUAGE ACCESS NETWORK, INC.)
Consolidated Statements of Cash Flows
(Unaudited)

   
For the Nine
Months Ended
September 30,
2009
    
For the Nine
Months Ended
September 30,
2008
  
OPERATING ACTIVITIES:
            
Net income (loss)
   $ (1,053,466 )   $ 261,395  
Discontinued operations
     (630,274 )     (488,071 )
Add back non-cash items:
                
Depreciation
     14,390       16,112  
Gain on sale of fixed assets
     (3,891 )     52  
Amortization of discount on convertible debt
     12,500       -  
Common stock issued for services
     695,153       -  
Adjustments to reconcile net loss to net cash used by operating activities:
                
Change in accounts receivable
     7,246       5,655  
Change in other assets
     (6,225 )     (15,093 )
Change in accounts payable and accrued liabilities
     157,983       248,524  
Change in other liabilities
     (23,495 )     (22,850 )
Net cash (used in) provided by operating activities
     (830,079 )     5,724  
                 
INVESTING ACTIVITIES:
                
Sale of fixed assets
     5,860       149  
Purchase of fixed assets
     (7,893 )     (1,249 )
Net cash provided by in investing activities
     (2,033 )     (1,100 )
                 
FINANCING ACTIVITIES:
                
Cash proceeds from common stock issued
                
Repayment of notes payable
     (24,357 )     (11,732 )
Cash proceeds from notes payable
     680,466       5,000  
Cash proceeds from sale of common stock
     15,000       5,300  
Proceeds from related party loans
     132,645       -  
Stock offering costs paid
                
Proceeds from bank overdraft
     2,032       -  
Repayment of notes payable
                
Accrued interest on notes payable
     15,000       -  
Net cash provided by financing activities
     820,786       (1,432 )
                 
Net increase (decrease) in cash and cash equivalents
     (11,326 )     3,192  
Cash and cash equivalents at beginning of the year
     13,000       1,373  
Cash and cash equivalents at end of the year
   $ 1,674     $ 4,565  
                 
SUPPLEMENTAL DISCLOSURE:
                
Cash paid during the year for interest
   $ 60,878     $ 48,359  
Cash paid during the year for income taxes
   $ -     $ -  
                 
Non Cash Financing Activities
                
Common stock issued for convertible debt and accrued interest
   $ -     $ 348,750  
Common stock issued for services
   $ 695,153     $ -  

The accompanying notes are an integral part of these financial statements.

 
IB3 NETWORKS, INC.
(FKA LANGUAGE ACCESS NETWORK, INC.)
Condensed Notes to the Consolidated Financial Statements
September 30, 2009

NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2009 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2008 audited financial statements.  The results of operations for the periods ended September 30, 2009 and 2008 are not necessarily indicative of the operating results for the full years.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources.  Management's plans to obtain such resources for the Company include (1) obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses, and (2) seeking out and completing a merger with an existing operating company. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 

 
IB3 NETWORKS, INC.
(FKA LANGUAGE ACCESS NETWORK, INC.)
Condensed Notes to the Consolidated Financial Statements
September 30, 2009

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements

In May 2009, the FASB issued FAS 165, “Subsequent Events”. This pronouncement establishes standards for accounting for and disclosing subsequent events (events which occur after the balance sheet date but before financial statements are issued or are available to be issued). FAS 165 requires and entity to disclose the date subsequent events were evaluated and whether that evaluation took place on the date financial statements were issued or were available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption of FAS 165 did not have a material impact on the Company’s financial condition or results of operation.

In June 2009, the FASB issued FAS 166, “Accounting for Transfers of Financial Assets” an amendment of FAS 140. FAS 140 is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets: the effects of a transfer on its financial position, financial performance , and cash flows: and a transferor’s continuing involvement, if any, in transferred financial assets. This statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of FAS 166 to have an impact on the Company’s results of operations, financial condition or cash flows.

In June 2009, the FASB issued FAS 167, “Amendments to FASB Interpretation No. 46(R) ”. FAS 167 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in FAS 166, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provided timely and useful information about an enterprise’s involvement in a variable interest entity. This statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of FAS 167 to have an impact on the Company’s results of operations, financial condition or cash flows.

In June 2009, the FASB issued FAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”. FAS 168 will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.The Company does not expect the adoption of  FAS 168 to have an impact on the Company’s results of operations, financial condition or cash flows.

 
IB3 NETWORKS, INC.
(FKA LANGUAGE ACCESS NETWORK, INC.)
Condensed Notes to the Consolidated Financial Statements
September 30, 2009

NOTE 4 – CAPITAL STOCK

As of September 30, 2009, the Company had 100,000,000 shares of common stock authorized and 25,728,209 issued and outstanding.  During the six months ended September 30, 2009, the Company made the following issuances of common stock.

a)
60,000 shares issued for cash at $0.25 per share in accordance with the PPM dated December 30, 2008.

NOTE 5 - RELATED PARTY TRANSACTIONS

Notes Payable-Related Party
At September 30, 2009, the Company had notes payable to a shareholder totaling $56,587. The notes payable are unsecured, accrue interest at 6% per annum and are due upon demand.

Accrued Salaries and Payroll Taxes
At September 30, 2009, the Company owes certain of its officers and directors $332,065 for accrued salaries and payroll taxes under the terms of their employment agreements.

 
Item 2.
Management’s Discussion and Analysis or Plan of Operation

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We are engaged in the businesses of our wholly-owned subsidiaries, iBeam Solutions, LLC (“iBeam”) and NYC Mags, Inc (“NYC Mags”). Through iBeam, a Microsoft Certified Partner, we are engaged in delivering a variety of IT related solutions including scalable hosting solutions, managed hosting, dedicated hosting and Co-location, IT infrastructure, virtual help desk, managed services, staff augmentation, design and implementation of networks, security and Internet monitoring, technical support, web development, application development, database development and support,  and wireless solutions.  We are also a Cisco Certified Select Partner, and are authorized resellers of most IT related hardware and software, including Dell, APC, IBM, HP, 3COM, and many others.   iBeam Solutions has experienced a decrease in revenues due to the current economic environment.  As a direct result, we have reduced our current staff and reduced expenses  to allow us to continue operations while we seek new customers and other revenue sources.

Through NYC Mags, we are engaged in the development, promotion, and operation of our online dating social community MadisonAvenueMatch.com.  Due to the current economic environment, we have been unsuccessful in raising funding to complete the sites’ development as well as to launch of this online service.  We continue to seek funding to permit us to proceed with this project.  We have completed the initial design,received proposals and contracts to get the site operational.

Our principal executive offices are located at 10 South High Street, Canal Winchester, OH 43110. Our telephone number is (614) 833-9713.

 
Results of Operations for the three months Ended September 30, 2009 and 2008

Revenues. Revenues are generated through sales. We reported sales of $168,715 for the three months ended September 30, 2009, compared with revenue of $321,871 for the same period ended September 30, 2008.  We reported sales of $730,922 for the nine months ended September 30, 2009, compared with revenue of $986,990 for the same period ended September 30, 2008.  The decrease  in revenues for both periods is attributable to poor economic conditions in the overall economy causing businesses to reduce IT related projects and expenditures.

Our cost of goods sold for the three months ended September 30, 2009 was $112,036 resulting in gross profits of $56,679. Our cost of goods sold for the three months ended September 30, 2008 was $181,071  resulting in gross profits of $140,800.  Our cost of goods sold for the nine months ended September 30, 2009 was $418,849 resulting in gross profits of $312,073. Our cost of goods sold for the nine months ended September 30, 2008 was $609,414 resulting in gross profits of $377,576.  Our gross profit percentage has decreased due to reduced overall revenues and decreased sales due to current economic conditions.

Operating Expenses. Our operating expenses were $194,299 for the three months ended September 30, 2009, compared to $101,085 for the same reporting period ended September 30, 2008. Our operating expenses were $1,301,048 for the nine months ended September 30, 2009, compared to $469,362 for the same reporting period ended September 30, 2008. The increase for the nine months was primarily the result of the issuance of common stock for services valued at $695,153.

Interest Expenses. We recorded interest expenses of $40,767 for the three months ended September 30, 2009, compared with $22,341 for the three months ended September 30, 2008. We recorded interest expenses of $68,382 for the nine months ended September 30, 2009, compared with $246,338 for the nine months ended September 30, 2008. Our interest expense decreased because we converted the majority of our convertible notes payable to common stock in 2008. We expect that our interest expense will decrease even further in 2009.

Discontinued Operations. On January 16, 2008, pursuant to an acquisition agreement between the Company and Interim Support, LLC, we sold Language Access Network, LLC. in exchange for the assumption of certain liabilities contained in the Acquisition Agreement. Accordingly, the assets, liabilities and operations of Language Access Network LLC are reclassified as discontinued operations in the accompanying financial statements. We recorded a loss of $0 from discontinued operations for the three months ended September 30, 2009, compared to a $0 from discontinued operations for the same period ended September 30, 2008.  We recorded a loss of $630,274 from discontinued operations for the nine months ended September 30, 2009, compared to a gain of $599,571 from discontinued operations for the same period ended September 30, 2008. The gain in the nine months ended September 30, 2008 is attributable to the disposal of Language Access Network, LLC.

Net Income (Loss). We reported a net loss of $178,387 or $(0.01) per share for the three months ended September 30, 2009 compared with income of $17,374  or $0.00 per share for the three months ended September 30, 2008.  We reported a net loss of $1,683,740 or $(0.07) per share for the nine months ended September 30, 2009 compared with income of $261,395 or $0.04 per share for the nine months ended September 30, 2008.


Liquidity and Capital Resources

As of September 30, 2009, we had total current assets of $51,929. As of September 30, 2009, we had total current liabilities of $1,390,258. We thus had a working capital deficit of $1,338,329 at September 30, 2009.  As of September 30, 2009, we had total assets of $349,662.  As of September 30, 2009 we had total liabilities of $2,145,724 resulting in a total stockholders deficit of $1,796,062.

Net cash used by operating activities was $(830,079) for the nine months ended September 30, 2009 compared to net cash provided by operating activities of $5,724 for the nine months ended September 30, 2008. Net cash used in investing activities was $(2,033) for the nine months ended September 30, 2009, as compared with net cash used of $(1,100) for the nine months ended September 30, 2008. Net cash flow provided by financing activities amounted to $820,786 for the nine months ended September 30, 2009, compared to net cash used in financing activities of $(1,432) for the same period ended September 30, 2008.  During the nine months ended September 30, 2009, the primary factors of our cash provided by financing activities was proceeds of notes payable of $680,466 and proceeds of related party loan of $132,645.  During the nine months ended September 30, 2008, the primary factor of our cash provided by financing activities was proceeds from notes payable of $5,000.

We anticipate that we will be dependent, for the immediate future, upon additional investment capital to fund operating expenses.

Going Concern

The Company's financial statements are prepared using accounting principles   generally   accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources.  Management's plans to obtain such resources for the Company include (1) obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses, and (2) seeking out and completing a merger with an existing operating company. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Off Balance Sheet Arrangements

As of September 30, 2009, there were no off balance sheet arrangements.

 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4T.
Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2009.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Eric Schmidt.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2009, our disclosure controls and procedures are effective.  There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2009.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

 
PART II – OTHER INFORMATION

Item 1.
Legal Proceedings

Except as follows, we are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

On July 15, 2009, iBeam Solutions, LLC, our wholly owned subsidiary, commenced an action against Data Center 101, LLC in the Court of Common Pleas of Franklin County, Ohio for Negligent Misrepresentation, Common Law Fraud, Breach of Sublease Agreement and Declaratory Relief, requesting money damages and a declaration that a sublease agreement to lease 5,000 square feet of office space located on the third floor of the building at 101 East Town Street, Columbus, Ohio  has been terminated and is of no further legal force or effect.  At this time, we cannot make any evaluation of the outcome of this litigation.  A proposal to settle this action was received from Data Center 101, LLC and is currently under evaluation by our board of directors.

On September 17, 2009, iB3 Networks, Inc. received a judgement against iB3 Networks, Inc. filed by Jeffrey D. Katz in the amount of $10,359.49 pursant to Mr. Katz’s claim for legal fees that resulted from the merger of NYC MAGS, Inc.  In accordance with our agreement with NYC MAGS, Inc., legal fees were to be the responsibility of each party to the merger, and this expense for the other party’s legal fees was not to be the responsibility of iB3 Networks, Inc.  This judgement was also made against Michael Jacobson, a board member of iB3 Networks, Inc., a shareholder of iB3 Networks, Inc., the seller of NYC MAGS, Inc. to iB3 Networks, Inc., and President of our NYC MAGS, Inc. wholly owned subsidiary, jointly and severably.  Michael Jacobson has filed a motion to vacate the judgement against him, and that is pending before the court.  iB3 Networks, Inc. filed a motion to vacate the judgement against it in District Court of Maryland for Montgomery County on October 9, 2009 based upon the agreement of merger agreement between the parties.  As of 11/5/2009 we received paperwork that the motion on behalf of iB3 Networks has been denied.  Consideration is being given to a possible appeal of this ruling, however the current judgement is in effect against iB3 Networks, Inc..  At this time, we cannot make any evaluation of the outcome of this potenial appeal.

Item 1A:
Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2009, we issued no equity securities:

Item 3.
Defaults upon Senior Securities

None

Item 4.
Submission of Matters to a Vote of Security Holders

No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended September 30, 2009.

Item 5.
Other Information

None

Item 6.
Exhibits

Exhibit
Number
Description of Exhibit
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
IB3 NETWORKS, INC.
     
Date: November 11, 2009
     
 
By:
/s/ Eric Schmidt
   
Eric Schmidt
 
Title:
Chief Executive Officer and Chief Financial Officer