iagr10qsb051208.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-122563

INTERNET ACQUISITION GROUP, INC.

(Exact name of small business issuer as specified in its charter)

California		20-0624181
(State or other jurisdiction of incorporation or oganization)		(IRS Employer Identificatin No.)

c/o American Union Securities

100 Wall Street 15th Floor New York, NY 10005

(Address of principal executive offices)

(212) 232-0120

(Issuer’s telephone number)

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

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

The number of shares of Common Stock, $0.001 par value, outstanding on May 9, 2008, was 100,000,000 shares.

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

INTERNET ACQUISITION GROUP INC.

BALANCE SHEET

MARCH 31, 2008

(Unaudited)

ASSETS


CURRENT ASSETS:
Cash	$	1,972
Inventories		14,504
Sundry current assets		783
TOTAL CURRENT ASSETS		17,259

Property and equipment, net of accumulated depreciation		3,645,960

TOTAL ASSETS	$	3,663,219

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	482,268
Notes payable – bank		1,970,640
Due to affiliated company		74,847
Due to stockholders		92,572
Accrued expenses		365,692
TOTAL CURRENT LIABILITIES		2,986,019

STOCKHOLDERS’ EQUITY:
Common stock, $0.001 par value, 100,000,000 shares authorized
100,000,000 shares issued and outstanding 6,896,363,000 shares to be issued upon authorization		6,996,363
Accumulated deficit		(6,529,395	)
Accumulated other comprehensive income		210,232
TOTAL STOCKHOLDERS’ EQUITY		677,200

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,663,219

See notes to financial statements

INTERNET ACQUISITION GROUP, INC.

STATEMENTS OF OPERATIONS

(Unaudited)


Three Months Ended		Six Months Ended
March 31,		March 31,
2008	2007	2008	2007

SALES	$	-	$	-		$	-		$	-




COSTS AND EXPENSES:
General and administrative		131,356		155,262			276,283			283,823
Interest expense		32,029		38,413			62,908			79,431
TOTAL COSTS AND EXPENSES		163,385		193,675			339,191			363,254

RECOVERY OF BAD DEBT
FROM PRIOR PERIOD		213,808		-			213,808			-


NET INCOME (LOSS)		50,423		(193,675	)		(125,383	)		(363,254	)

OTHER COMPREHENSIVE
INCOME (LOSS):
Foreign currency translation adjustment		17,821		(7,724	)		48,077			70,394


COMPREHENSIVE INCOME (LOSS)	$	68,244	$	(201,399	)	$	77,306		$	292,850



Basic and diluted earnings per common share <* lessthan $0.01>		*		N/A			*			N/A


Weighted average number of shares outstanding		100,000,000		N/A			100,000,000			N/A

See notes to financial statements

INTERNET ACQUISITION GROUP, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)


	SIX MONTHS ENDED MARCH 31,
	2008			2007
OPERATING ACTIVITIES:
Net loss	$	(125,383	)	$	(363,254	)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization		259,050			231,693
Changes in operating assets and liabilities:
Inventories		(4,840	)		-
Other current assets		(783	)		1,201
Accounts payable		(9,269	)		(18,724	)
Accrued expenses		62,122			69,266
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		180,897			(79,818	)


FINANCING ACTIVITIES:
Due from stockholder		(225,196	)		(6,459	)
Due from affiliated company		49,392			87,384
NET CASH PROVIDED BY FINANCING ACTIVITIES		(175,804	)		80,925

EFFECT OF EXCHANGE RATE ON CASH		(4,959	)		(1,123	)

INCREASE (DECREASE) IN CASH		134			(16	)

CASH – BEGINNING OF PERIOD		1,838			933

CASH – END OF PERIOD	$	1,972		$	917

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	-		$	13,625

See notes to financial statements

INTERNET ACQUISITION GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2008

(Unaudited)

1 BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Internet Acquisition Group, Inc. (the "Company") reflect all material adjustments consisting of only normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2007 as filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to change include assumptions used in determining the fair value of securities owned and non-readily marketable securities.

The results of operations for the six and three months ended March 31, 2008 are not necessarily indicative of the results to be expected for the entire year or for any other period.

Since the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (RMB). Revenue and expense accounts are translated at the average rates during the period, and balance sheet items are translated at year-end rates. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of stockholders’ equity. Gains and losses from foreign currency transactions are recognized in current operations.

2 ACQUISITION

On September 27, 2007, the Company consummated the Reverse Acquisition in which China Renyuan International, Inc. a Delaware corporation (“CRI”) became the Company’s wholly-owned subsidiary. The agreement provides for former CRI shareholders to receive 6,926,399,370 shares of common stock (the “Purchase Price Shares”), which will constitute up to 99% of the issued and outstanding stock. As the Company is currently authorized by its Articles of Incorporation to issue 100,000,000 shares of common stock, and prior to the Reverse Acquisition, the Company had only 30,036,370 authorized by unissued shares of common stock available for issuance, the Exchange Agreement provided for the former CRI shareholders to receive 30,036,370 shares of the 6,926,399,370 shares (the “Initial Purchase Price Shares”) immediately, with the remaining 6,896,363,000 shares (the “Remaining Purchase Price Shares”) to be issued as soon as the Company has sufficient authorized common stock to effect such issuance.

The above acquisition has been accounted for as a reverse merger, since the former shareholder of CRI effectively control the Company and the only operations of the Company are solely those of CRI.

3 GOING CONCERN

The financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. The Company’s ability to continue as a going concern is dependent on, among other things, its ability to achieve profitable operations, to maintain its existing financing and to obtain additional financing to meet its obligations and to pay its liabilities when they come due. The Company is currently pursuing new debt and equity financing in conjunction with proposed future acquisitions and operations.

At the present time, the Company does not have sufficient working capital to meet its needs. The Company intends to raise additional funds through the issuance of equity or convertible debt securities. There can be no assurance that additional financing will be available on terms favorable to the Company, or at all. The inability to raise the additional funds could cause the Company to cease all operations.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

4	PROPERTY AND EQUIPMENT

A summary of property and equipment and the estimated lives used in the computation of depreciation and amortization as of March 31, 2008 is as follows:

		Amount	Life
Machinery and equipment	$	3,201,649	7 years
Building and building improvements		2,109,955	39.5 years
Automobile		5,557	3 years
Land		308,042	50 years
		5,625,203
Accumulated depreciation		1,979,243
	$	3,645,960

5 EARNINGS PER SHARE

Outstanding shares prior to September 27, 2007, the date of the merger, are undeterminable. The total shares issued are therefore used as the average shares outstanding.

6	RISK FACTORS

Vulnerability due to Operations in PRC

The Company's operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government's pursuit of economic reforms will be consistent or effective.

Substantially all of the Company's businesses are transacted in RMB, which is not freely convertible. The People’s Bank of China or other banks are authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Since the Company has its primary operations in the PRC, the majority of its revenues will be settled in RMB, not U.S. Dollars. Due to certain restrictions on currency exchanges that exist in the PRC, the Company’s ability to use revenue generated in RMB to pay any dividend payments to its shareholders may be limited.

Environmental issues

The Company conducts business in an industry that is subject to a broad array of environmental laws and regulations. The production of the products the Company intends to produce will create pollutants. The Company will incur significant costs if additional government regulations are introduced to protect the environment.

Item 2. Management’s Discussion and Analysis

The following presentation of Management's Discussion and Analysis has been prepared by internal management and should be read in conjunction with the financial statements and notes thereto included in this Form 10-QSB. Except for the historical information contained herein, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties, such as statements of our business plans, objectives, expectations and intentions as of the date of this filing. The cautionary statements about reliance on forward-looking statements made earlier in this document should be given serious consideration with respect to all forward-looking statements wherever they appear in this report, notwithstanding that the "safe harbor" protections available to some publicly reporting companies under applicable federal securities law do not apply to us as an issuer of penny stocks. Our actual results could differ materially from those discussed here.

The following discussion relates solely to the operations of our operating subsidiary, Renyuan Bio-Chemicy, and not to CRI or our former discontinued businesses of developing Internet based businesses and providing professional purchasing management.

Item 3. Overview

Our business is principally that of our wholly-owned subsidiary, Renyuan Bio-Chemicy. Renyuan Bio-Chemicy is a high-technology biochemical enterprise located in the Jizhou City High & New Tech Industrial Zone of Hebei Province near Beijing. Renyuan’s business is the research, production and management of chemicals, bio-pharma and pharmaceutical intermediates, however Renyuan’s ability to produce any products or conduct any research unless we are able to raise additional funds.

Principal products and their markets

At the present time, Renyuan Bio-Chemicy is not producing any products and cannot provide any assurance that it will produce products in the future.. Formerly, its principal products were D-Hydroxyphenlyglycine, an intermediate products used by pharmaceutical companies, and DL-Serine, another pharmaceutical intermediate. Both products can be produced using current production lines and equipment. The company has also developed the capability to produce D-phenylalanine, an amino acid used in pharmaceuticals and foods.

Renyuan’s D-Hydroxyphenlyglycin (or D-PHG) is produced with a non-proprietary advanced one-step enzymatic technology as opposed to the more traditional optical resolution method. Its plant was put into production in 2002 to produce high purity, high quality, and low cost D-PHG with low environmental impact. D-PHG is an intermediate used in manufacturing amoxicillin and cefadroxil.

The D-PHG plant was designed to allow the production of up to 1,500 tons of D-PHG per year, but a significant design flaw limited actual production capacity to only approximately only 720-750 tons per year. With the reduced capacity, the cost of production was considerably higher than expected. Despite these unforeseen difficulties, Renyuan’s management continued producing into 2003. At that time the SARS epidemic swept China, and local governments closed inbound traffic to try to prevent the spread of the disease. Renyuan’s locality was affected for approximately three months, during which time the company depleted its inventory of principal ingredient Benzene hydantoin and could not resupply.

In July 2003, Renyuan Bio-Chemicy recommenced production of D-PHG, but a joint directive issued by the State Reform and Development Commission and the State Drug Administration in October 2003 eventually made it impossible to continue manufacturing. Therefore, the Company was limited in 2005 and 2006 to selling the products it held in inventory which were manufactured prior to October 2003. The directive set price caps on antibiotics following reports that certain pharmaceutical companies reaped windfall profits sales of antibiotics during the SARS epidemic despite the fact that Amoxycillin is not effective against SARS and that its price had not risen abnormally. Nevertheless, the directive provided for a 30% cut of the price of Amoxycillin and certain other antibiotics. As a result, the 30% price cut made it unprofitable to produce the product. The company discontinued production and has not resumed production. However, with some technical adjustment and investment, the D-PHG plant can be redeployed to produce DL-Serine or vitamin B-2 (riboflavin). At the present time we lack sufficient funds to make the switch, but we intend to do so if and when we can secure needed funds. At this time we cannot provide any meaningful estimates as to the time and expenses needed to redeploy the D-PHG plant for the production of DL-Serine or vitamin B-2 and we cannot provide any assurances that we will be able to make such redeployment.

Renyuan’s second product, DL-Serine is a synthetic amino acid that has applications in pharmaceutical and food fields. Related compounds of DL-Serine can be converted to L-ser, D-ser, and after hydrolysis, 3-Chloroalanine. The latter is used in treatments for tuberculosis and also to make agents for foods, nutritional supplements, and animal fodder. Because of special moisture properties, it can be used in cosmetics to improve skin elasticity. DL-Serine is in short supply within China and throughout the world. Renyuan has the capacity to produce 24 tons of DL-Serine per year. As it did for D-PHG, the company gradually wound down and then ceased production of DL-Serine due to a shortage of working capital following the disruption caused by the SARS epidemic. But in contrast to D-PHG, we plan to be able to produce DL-Serine going forward, and intend to resume production if and when we have the working capital to do so.

Renyuan plans to develop the capability to produce D-phenylalanine, an amino acid used in pharmaceuticals and foods. It is an ingredient in a treatment for diabetes, and is also used to make medicines that treat tumors and obesity. The company’s believes its enzymatic synthesis production technology for D-phenylalanine is superior to traditional chemical synthesis methods in terms of efficiency and cost. Because of the shortage of funds discussed in connection with D-PHG and DL-Serine above, the company is currently delayed in its effort to commercialize its D-phenylalanine production process. We cannot provide any assurance that we will ever be able to successfully commercialize this process. Nor, at this time, are we able to provide any meaningful estimates as to the time and expenses needed to commercialize this process.

RESULTS OF OPERATIONS

Quarter Ended March 31, 2008 compared to Quarter Ended March 31, 2007

Our level of operations was minimal during our quarter ended March 31, 2008. During the quarter, we had revenues of nil compared to the quarter ended March 31, 2007 when our revenues were also nil. The primary reason for the lack of revenue was the lack of operating capital to manufacture our products.

Our selling, general and administrative expense nonetheless has decreased from $193,675 in the quarter ended March 31, 2007 to $163,385 in the quarter ended March 31, 2008. The primary reason for the decrease was due to the decrease in general and administrative expenses.

We expect that in the next two years our selling, general and administrative expense will remain at its fiscal 2007 level or higher, as we will incur the expenses attributable to being a U.S. public company and as we continue to expand the focus of our business operations, necessitating a staff of skilled administrators.

Six Months Ended March 31, 2008 compared to Six Months Ended March 31, 2007

Our level of operations was minimal during our six months ended March 31, 2008. During the six months, we had revenues of nil compared to the six months ended March 31, 2007, when our revenues were also nil. The primary reason for the lack of revenue was the lack of operating capital to manufacture our products.

Our selling, general and administrative expense was almost at same level in the six months ended March 31, 2007 and in the six months ended March 31, 2008. This was due to the fact that the Company had no operations during the period.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended March 31, 2008, the operations of Renyuan Bio-Chemicy Co. provided $180,897 in cash, primarily due to $259,050 in depreciation and amortization as compared to a total of $79,818 cash used in the six months ended March 31, 2007.

We do not have adequate resources to fund our operations for the foreseeable future and we will need to raise funds going forward in order to fund our operations. Even as the government relaxes their directives on the products we used to sell, without sufficient working capital, we will not be able to resume production. Since Renyuan Bio-Chemicy was organized in February 2001, its operations have been funded primarily by capital contributions from Mr. Chaozhong Ren, who is our Vice President and who will be our majority shareholder following the issuance of the Remaining Purchase Price Shares its President and majority shareholder.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS

We do not own the type of market risk sensitive instruments described in Regulation S-K Section 305.

ITEMS 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried out, under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) in ensuring that information required to be disclosed by the Company in its reports is recorded, processed, summarized and reported within the required time periods. In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting.

The material weakness identified by Management consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company. The relatively small number of employees who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. However, as there has been no instance in which the company failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, management determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use of our resources at this time.

Accordingly, based on their evaluation of our disclosure controls and procedures as of March 31, 2008, the Company's Chief Executive Officer and its Chief Financial Officer have concluded that, as of that date, the Company's controls and procedures were not effective for the purposes described above.

There was no change in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the six months ended March 31, 2008 that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting.

PART 3 - OTHER INFORMATION

Item 1	Legal Proceedings

	None

Item 1A	Risk Factors: There have been no material changes in the risk factors disclosed in our Annual Report or Form 10-KSB for the year ended September 30, 2007

Item 2	Unregistered Sale of Equity Securities and Use of Proceeds

	None

Item 3	Defaults upon Senior Securities

	None

Item 4	Submission of Matters to a Vote os Shareholders

	None

Item 5	Other Information

	None

Item 6	Exhibits

Exhibit Number Description

31.1 Section 302 Certification of Chief Executive Officer and Chief Financial Officer

32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 – Chief Executive Officer And Chief Financial Officer

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERNET ACQUISITION GROUP, INC.

Date: May 13, 2008	By: /s/Qingfu Ren
	Qingfu Ren
	Chief Executive Officer