Unassociated Document
 
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008

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

For the transition period from: __________ to __________

Commission file number 1-11873

ACCELERATED BUILDING CONCEPTS CORPORATION
(Exact Name of Registrant as specified in its charter)

DELAWARE
  
13-3886065
(State of Incorporation)
  
(IRS Employer Identification Number)
 
2910 Bush Drive, Melbourne, FL
  
32935
(Address of Principal Executive Offices)
  
(Zip Code)
 
321-421-6662
(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

At March 31, 2008, 7,468,465 shares of the registrant’s common stock (no par value) were outstanding.
 
 
TABLE OF CONTENTS

FINANCIAL INFORMATION
 
 
 
 
FINANCIAL STATEMENTS
2
 
 
 
 
CONSOLIDATED BALANCE SHEETS:
 
 
MARCH 31, 2008 AND DECEMBER 31, 2007
2
 
 
 
 
CONSOLIDATED STATEMENT OF INCOME:
 
 
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
4
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS:
 
 
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
5
 
 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
 
 
MARCH 31, 2008
6
 
 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
 
 
CONDITION AND RESULTS OF OPERATIONS
16
     
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
18
 
 
 
CONTROLS AND PROCEDURES
18
 
 
 
OTHER INFORMATION
18
 
 
 
LEGAL PROCEEDINGS
18
     
ITEM 1A
RISK FACTORS
18
 
 
 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
21
 
 
 
DEFAULTS UPON SENIOR SECURITIES
21
 
 
 
SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
22
 
 
 
OTHER INFORMATION
22
 
 
 
EXHIBITS
22
     
 
SIGNATURES
23
 
 
FORWARD LOOKING STATEMENTS
 
Statements contained in this Quarterly Report on Form 10-Q which are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts regarding Accelerated Building Concepts Corporation’s (the “Company’s”) business strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, plans and objectives are forward looking statements. These forward-looking statements appear in a number of places and can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “hopes” or “certain” or the negative of these terms or other variations or comparable terminology.
 
Management cautions that forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements including, without limitation, the following: the future prospects for and growth of the Company and the industries in which it operates, the level of the Company’s future sales, customer demand and cost of raw materials, the Company’s ability to maintain its business model; the Company’s ability to retain and recruit key personnel; the Company’s ability to maintain its competitive strengths and to effectively compete against its competitors; the Company’s short-term decisions and long-term strategies for the future and its ability to implement and maintain such decisions and strategies, including its strategies: (i) to focus on manufacturing revenue growth from an increasing base of customers, (ii) to focus on leasing revenue growth from an increasing base of leasable assets, and (iii) to create infrastructure capabilities that can provide prompt and efficient project bidding, expedited manufacturing, and rapid delivery; the demand by the educational market (and the K-12 market in particular) for the Company’s modular products; the effect of delays or interruptions in the passage of statewide and local facility bond measures on the Company’s operations; the effect of changes in applicable law, and policies relating to the use of temporary buildings on the Company’s modular sales and leasing revenues, including with respect to class size and building standards; the effects of changes in the level of state funding to public schools and the use of classrooms that meet the Department of Housing requirements; the Company’s ability to maintain and upgrade modular equipment to comply with changes in applicable law and customer preference; the Company’s strategy to effectively implement its expansion into Georgia and other new markets in the U.S.; and the Company’s reliance on its information technology systems; the Company’s engaging in and ability to consummate future acquisitions; manufacturers’ ability to produce products to the Company’s specification on a timely basis; the Company’s ability to maintain good relationships with school districts, other customers, manufacturers, and other suppliers; the impact of debt covenants on the Company’s flexibility in running its business and the effect of an event of default on the Company’s results of operations; the effect of interest rate fluctuations; the Company’s ability to manage its credit risk and accounts receivable; the timing and amounts of future capital expenditures and the Company’s ability to meet its needs for working capital including its ability to negotiate lines of credit; the Company’s ability to track technology trends to make good buy-sell decisions with respect to electronic test equipment; the effect of changes to the Company’s accounting policies and impact of evolving interpretation and implementation of such policies; the risk of litigation and claims against the Company; the impact of a change in the Company’s overall effective tax rate as a result of the Company’s mix of business levels in various tax jurisdictions in which it does business; the adequacy of the Company’s insurance coverage; the impact of a failure by third parties to manufacture our products timely or properly; the level of future warranty costs of modular structures that we sell; the effect of seasonality on the Company’s business; and the Company’s ability to pass on increases in its costs of modular structures, including manufacturing costs, operating expenses and interest expense through increases in rental rates and selling prices. Further, our future business, financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties including the risks set forth above and the “Risk Factors” set forth in this Form 10-Q. Moreover, neither we assume nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.
 
Forward-looking statements are made only as of the date of this Form 10-Q and are based on management’s reasonable assumptions, however these assumptions can be wrong or affected by known or unknown risks and uncertainties. No forward-looking statement can be guaranteed and subsequent facts or circumstances may contradict, obviate, undermine or otherwise fail to support or substantiate such statements. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. We are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results or to changes in our expectations.
 

ITEM I. FINANCIAL STATEMENTS

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Consolidated Balance Sheet
 
ASSETS
 
   
unaudited
  
audited
  
   
March 31,
  
December 31,
  
   
2008
  
2007
  
           
Current Assets
              
Cash
  
$
118,836
  
$
394
  
Accounts Receivable, Net
    
567,714
   
39,606
 
Prepaid Expenses
    
116,718
   
44,773
 
               
Total Current Assets
    
803,267
   
84,773
 
               
Property, Plant and Equipment, Net
    
1,248,642
   
500,350
 
               
Total Assets
  
$
2,051,909
  
$
585,123
  

See accompanying notes to consolidated financial statements.

- 2 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Consolidated Balance Sheet

LIABILITIES AND STOCKHOLDERS' EQUITY

   
Unaudited
  
Audited
  
   
March 31,
  
December 31,
  
   
2008
  
2007
  
           
Current Liabilities
              
Notes Payable, Current Portion
  
$
951,242
  
$
647,941
  
Accounts Payable and Accrued Expenses
    
1,888,566
   
843,328
 
Accrued Payroll and Taxes
    
192,209
   
192,939
 
Billings in Excess of Costs on Uncompleted Contracts
    
790,633
   
38,010
 
Deferred Revenue
    
99,673
   
98,206
 
               
Total Current Liabilities
    
3,922,323
   
1,820,424
 
               
Noncurrent Liabilities
              
Notes Payable, Noncurrent Portion
    
578,246
   
622,918
 
               
Total Noncurrent Liabilities
    
578,246
   
622,918
 
               
Total Liabilities
    
4,500,569
   
2,443,342
 
               
Stockholders' Equity
              
Common stock, $0.10 par value, 24,000,000 shares authorized; 7,468,465 shares issued, 7,426,723 shares outstanding
    
771,844
   
771,844
 
Additional Paid In Capital
    
12,099,150
   
12,099,150
 
Treasury Stock
    
(819,296
)
  
(819,296
)
Subscription Receivable
    
(150,000
)
  
(250,000
)
Accumulated Deficit
    
(14,350,358
)
  
(13,659,917
)
               
Total Stockholders' Equity
    
(2,448,660
)
  
(1,858,219
)
               
Total Liabilities and Stockholders' Equity
  
$
2,051,909
  
$
585,123
  

See accompanying notes to consolidated financial statements.

- 3 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Consolidated Statement of Income
(unaudited)

   
Three Months Ended
  
   
March 31,
  
   
2008
  
2007
  
           
Sales
  
$
835,422
  
$
1,300,847
  
Cost of Sales
    
1,186,032
   
989,919
 
Gross Profit (Loss)
    
(350,609
)
  
310,928
 
Operating Expenses
    
248,021
   
279,458
 
Income (Loss) From Operations
    
(598,631
)
  
31,470
 
Interest Income / (Expense), Net
    
(91,811
)
  
(27,075
)
               
Net Income (Loss)
  
$
(690,441
)
$
4,395
  
               
Net Income (Loss) Per Share:
             
Basic and diluted based upon 7,468,465 weighted average shares outstanding
  
$
(0.09
)
      
Basic and diluted based upon 1,600,000 weighted average shares outstanding
        
$
0.00
  

See accompanying notes to consolidated financial statements.
 
- 4 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Three Months Ended March 31,
(audited)

   
2008
  
2007
  
Cash Flows From Operating Activities:
              
Net Loss
  
$
(690,441
)
$
4,395
  
Adjustments to Reconcile Net Income to Net
             
Cash Used By Operating Activities:
              
Depreciation and Amortization
    
27,958
   
31,082
 
Decrease (Increase) In:
              
Accounts Receivable, Net
    
(528,108
)
  
(476,273
)
Prepaid Expenses and Other Current Assets
    
(71,945
)
  
8,531
 
Increase (Decrease) In:
              
Accounts Payable, Accrued Expenses and Taxes Payable
    
1,044,508
   
454,986
 
Billings in Excess of Costs on Uncompleted Contracts
    
752,623
   
-
 
Deferred Revenue
    
1,467
   
-
 
               
 Net Cash Provided By Operating Activities
    
536,063
   
22,721
 
               
Cash Flows From Investing Activities:
              
Acquisition of Property, Plant and Equipment
    
(776,250
)
  
-
 
               
 Net Cash Used In Investing Activities
    
(776,250
)
  
-
 
               
Cash Flows From Financing Activities:
              
Subscription Receivable
    
100,000
   
-
 
Issuance of Notes Payable
    
301,921
   
614
 
Repayment of Notes Payable
    
(43,292
)
  
(472,994
)
               
 Net Cash Provided By (Used In) Financing Activities
    
358,629
   
(472,380
)
               
Net Increase (Decrease) in Cash
   
118,442
   
(449,659
)
               
Cash at Beginning of Year
    
394
   
458,652
 
               
Cash at End of Period
  
$
118,836
  
$
8,993
  
               
Supplemental Disclosure of Cash Flow Information:
              
Cash paid during the period for interest
  
$
91,811
  
$
186,806
  
Taxes Paid
  
$
-
  
$
-
  
 
See accompanying notes to consolidated financial statements.
 
- 5 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Operation

The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements and footnotes have been condensed and, therefore, do not contain all required disclosures. Reference should be made to the Company’s annual audited financial statement for the year ended December 31, 2007.

Accelerated Building Concepts Corporation (“ABCC” or the “Company”), was formerly known as K2 Digital, Inc., a Delaware corporation formed in 1993. In August 2007, the Board approved a name change. Reference to ABCC will include the period prior to the name change.

Through August 2001, ABCC (together with its wholly-owned subsidiary, collectively, the "Company") was a strategic digital services company that provided consulting and development services including analysis, planning, systems design and implementation. In August 2001, the Company completed the sale of fixed and intangible assets essential to its business operations to an unrelated party, Integrated Information Systems, Inc. ("IIS") and effectively became a "shell" company with no revenues and continuing general and administrative expenses.

On August 10, 2007, ABCC’s wholly-owned subsidiary, K2 Acquisition Corporation (“K2AC”), merged with New Century Structures, Inc. (“NCSI”), a Florida corporation, with NCSI the surviving entity.

NCSI, incorporated in July 2001, provides architectural / engineering, manufacturing and construction services for modular facilities utilizing concrete and structural insulated panels (SIPs) for use in commercial, educational, municipalities and residential developments. The Company utilizes processes that meet the requirements for classrooms as well as several government agencies, including NASA and The Smithsonian.

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany accounts and transactions have been eliminated.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NCSI and Sustainable Structures Leasing, Inc. (“SSL”). All significant intercompany transactions have been eliminated in consolidation. Intercompany transactions include the loans from the parent to its subsidiaries.

Net Earnings (Loss) Per Share
 
In accordance with SFAS No. 128, Earnings Per Share , basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares consist of Series A, Series B and Series C convertible preferred stock, convertible debentures, stock options and warrant common stock equivalent shares which are not utilized when the effect is anti-dilutive.

Segment Information
 
In accordance with the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company is required to report financial and descriptive information about its reportable operating segments. The Company identifies its operating segments based on how management internally evaluates separate financial information, business activities and management responsibility. As of March 31, 2008, the Company had two operating segments.
 
- 6 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008

NOTE 2 – RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheet, Statement of Operations and Statement of Cash Flows

In connection with the audit of the Company’s financial statements for the year ended December 31, 2007, certain errors associated with the Company’s recognition of the merger of NCSI with K2AC for the nine months ended September 30, 2007 were required to be restated. The error related to the recording of the entire nine months ended September 30, 2007 for NCSI, not the period August 10, 2007 through September 30, 2007.

The following table presents the impact of the balance sheet misclassification on the Company’s previously reported consolidated balance sheets for the period ended September 30, 2007.
 
   
September 30, 2007
  
   
As
     
As
  
   
Reported
  
Adjustments
  
Restated
  
               
Liabilities
                    
Current Liabilities
                    
Notes Payable, Current Portion
  
$
510,181
  
$
-
  
$
510,181
  
Accounts Payable and Accrued Expenses
    
727,688
   
-
   
727,688
 
Accrued Payroll and Taxes
    
224,113
   
-
   
224,113
 
Deferred Revenue
    
98,206
   
-
   
98,206
 
                     
 Total Current Liabilities
    
1,560,188
   
-
   
1,560,188
 
                     
Noncurrent Liabilities
                    
Notes Payable, Noncurrent Portion
    
752,384
   
-
   
752,384
 
                     
 Total Noncurrent Liabilities
    
752,384
   
-
   
752,384
 
                     
 Total Liabilities
    
2,312,572
   
-
   
2,312,572
 
                     
Stockholders' Equity
                    
Common Stock
    
71,351
   
-
   
71,351
 
Distributions
    
(158,283
)
  
158,283
   
-
 
Additional Paid In Capital
    
9,840,614
   
(208,229
)
  
9,632,385
 
Treasury Stock
    
(819,296
)
  
-
   
(819,296
)
Accumulated Other Comprehensive Income
    
25,722
   
(25,722
)
  
-
 
Accumulated Deficit
    
(10,474,629
)
  
75,668
   
(10,398,961
)
                     
 Total Stockholders' Equity
    
(1,514,521
)
  
-
   
(1,514,521
)
                     
 Total Liabilities and Stockholders' Equity
  
$
798,051
  
$
-
  
$
798,051
  

The following table presents the impact of the statement of operations misclassification on the Company’s previously reported consolidated balance sheets for the three months and the nine months ended September 30, 2007.
 
- 7 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008

NOTE 2 – RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL STATEMENTS - continued

   
Three Months Ended September 30, 2007
  
Three Months Ended September 30, 2007
  
   
As
     
As
  
As
     
As
  
   
Reported
  
Adjustments
  
Restated
  
Reported
  
Adjustments
  
Restated
  
                           
Sales
  
$
110,972
  
$
-
  
$
110,972
  
$
10,281
  
$
1,986,736
  
$
1,997,017
  
Cost of Sales
    
265,699
   
-
   
265,699
   
-
   
1,877,392
   
1,877,392
 
                                       
Gross Profit
    
(154,727
)
  
-
   
(154,727
)
  
10,281
   
109,344
   
119,625
 
Operating Expenses
    
142,504
   
-
   
142,504
   
15,101
   
208,937
   
224,038
 
                                       
Income from Operations
    
(297,231
)
  
-
   
(297,231
)
  
(4,820
)
  
(99,593
)
  
(104,413
)
Interest Income / (Expense), Net
    
(55,164
)
  
-
   
(55,164
)
  
-
   
(33,436
)
  
(33,436
)
                                       
Net Loss
  
$
(352,395
)
$
-
  
$
(352,395
)
$
(4,820
)
$
(133,029
)
$
(137,849
)
                                       
Comprehensive Loss:
                                      
Net Loss
  
$
(352,395
)
$
-
  
$
(352,395
)
$
(4,820
)
$
(133,029
)
$
(137,849
)
Other Comprehensive Loss, unrealized gain (loss)on available-for-sale security:
                      
(480
)
  
480
   
-
 
Realized holding gain (loss) arising during the period
    
-
   
-
   
-
   
-
   
-
   
-
 
                                       
Comprehensive Loss
  
$
(352,395
)
$
-
  
$
(352,395
)
$
(5,300
)
$
(132,549
)
$
(137,849
)
                                       
Net Income (Loss) Per Share:
                                      
Basic and diluted based upon 5,502,639 weighted average shares outstanding
  
$
(0.05
)
$
(0.01
)
$
(0.06
)
                  
Basic and diluted based upon 5,024,465 weighted average shares outstanding
                    
$
(0.001
)
$
(0.03
)
$
(0.03
)

   
Nine Months Ended September 30, 2007
  
Nine Months Ended September 30, 2007
  
   
As
     
As
  
As
     
As
  
   
Reported
  
Adjustments
  
Restated
  
Reported
  
Adjustments
  
Restated
  
                           
Sales
  
$
1,789,643
  
$
(28,662
)
$
1,760,981
  
$
42,198
  
$
5,485,113
  
$
5,527,311
  
Cost of Sales
    
1,314,469
   
-
   
1,314,469
   
-
   
4,327,693
   
4,327,693
 
                                       
Gross Profit
    
475,174
   
(28,662
)
  
446,512
   
42,198
   
1,157,420
   
1,199,618
 
Operating Expenses
    
693,801
   
(104,330
)
  
589,471
   
64,106
   
749,185
   
813,291
 
                                       
Income from Operations
    
(218,627
)
  
75,668
   
(142,959
)
  
(21,908
)
  
408,235
   
386,327
 
Interest Income / (Expense), Net
    
(127,125
)
  
-
   
(127,125
)
  
-
   
(186,806
)
  
(186,806
)
                                       
Net Loss
  
$
(345,752
)
$
75,668
  
$
(270,084
)
$
(21,908
)
$
221,429
  
$
199,521
  
                                       
Comprehensive Loss:
                                      
Net Loss
  
$
(345,752
)
$
75,668
  
$
(270,084
)
$
(21,908
)
$
221,429
  
$
199,521
  
Other Comprehensive Loss, unrealized gain (loss) on available- for-sale security:
                      
2,400
   
(2,400
)
  
-
 
Realized holding gain (loss) arising during the period
    
(10,078
)
  
10,078
   
-
   
-
   
-
   
-
 
                                       
Comprehensive Loss
  
$
(355,830
)
$
85,746
  
$
(270,084
)
$
(19,508
)
$
219,029
  
$
199,521
  
                                       
Net Income (Loss) Per Share:
                                      
Basic and diluted based upon 5,185,685 weighted average shares outstanding
  
$
(0.05
)
$
-
  
$
(0.05
)
                  
Basic and diluted based upon 5,804,849 weighted average shares outstanding
                    
$
(0.004
)
$
0.034
  
$
(0.03
)
 
- 8 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008 
 
NOTE 2 – RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL STATEMENTS - continued

The following table presents the impact of the statement of cash flows misclassification on the Company’s previously reported consolidated balance sheets for the nine months ended September 30, 2007.

   
Nine Months Ended September 30, 2007
  
   
As
     
As
  
   
Reported
  
Adjustments
  
Restated
  
               
Cash Flows From Operating Activities:
                    
Net Loss
  
$
(345,752
)
$
75,668
  
$
(270,084
)
Adjustments to Reconcile Net Income to Net
                   
Cash Used By Operating Activities:
                    
Depreciation and Amortization
    
93,143
   
-
   
93,143
 
Stock Based Compensation
    
5,540
   
(5,540
)
  
-
 
Realized Gain on Sale of Available-for-Sale Security
    
(22,131
)
  
22,131
   
-
 
Conversion of Convertible Preferred Securities
    
(165,000
)
  
165,000
   
-
 
Assumed Notes Payable in Acquisition, Net
    
790,686
   
(790,686
)
  
-
 
Distributions Acquired in Acquisition
    
(158,283
)
  
158,283
   
-
 
Accumulated Deficit Acquired in Acquisition
    
(2,366,108
)
  
2,366,108
   
-
 
Decrease (Increase) In:
                    
Accounts Receivable, Net
    
(119,571
)
  
385,098
   
265,527
 
Note Receivable, Net
    
4,500
   
(4,500
)
  
-
 
Investment in Available-for-Sale Security
    
18,100
   
(18,100
)
  
-
 
Prepaid Expenses and Other Current Assets
    
(49,904
)
  
20,473
   
(29,431
)
Increase (Decrease) In:
                    
Accounts Payable, Accrued Expenses and Taxes Payable
    
879,292
   
(825,267
)
  
54,025
 
Billings in Excess of Costs on Uncompleted Contracts
    
-
   
(650,771
)
  
(650,771
)
Deferred Revenue
    
98,206
   
-
   
98,206
 
                     
 Net Cash Used In Operating Activities
    
(1,337,282
)
  
897,897
   
(439,385
)
                     
Cash Flows From Investing Activities:
                    
Acquisition of Property, Plant and Equipment
    
(717,945
)
  
620,046
   
(97,899
)
                     
 Net Cash Used In Investing Activities
    
(717,945
)
  
620,046
   
(97,899
)
                     
Cash Flows From Financing Activities:
                    
Gross Proceeds from Sale of Available-for-Sale Security
    
20,000
   
(20,000
)
  
-
 
Recapitalization due to Merger
    
-
   
(81,437
)
  
(81,437
)
Issuance of Notes Payable
    
499,337
   
(308,036
)
  
191,301
 
Repayment of Notes Payable
    
(27,458
)
  
-
   
(27,458
)
Additional Paid-in Capital
    
1,493,874
   
(1,493,874
)
  
-
 
                     
 Net Cash Provided By Financing Activities
    
1,985,753
   
(1,903,347
)
  
82,406
 
                     
Net Increase (Decrease) in Cash
   
(69,474
)
  
(385,404
)
  
(454,878
)
                     
Cash at Beginning of Year
    
73,248
   
385,404
   
458,652
 
                     
Cash at End of Period
  
$
3,774
  
$
-
  
$
3,774
  
                     
Supplemental Disclosure of Cash Flow Information:
                    
Cash paid during the period for interest
  
$
129,098
  
$
-
  
$
129,098
  
Taxes Paid
  
$
-
  
$
-
  
$
-
  
 
NOTE 3 – ACQUISITIONS, MERGERS AND NEW SUBSIDIARIES FORMED

K2 Acquisition Corp.

On January 24, 2006, the Company completed the sale of 1,000,000 shares of its convertible preferred shares to NPOWR at a purchase of $165,000. K2, its wholly-owned subsidiary, K2 Acquisition Corp. ("Merger Sub") and NPOWR intended to enter into a merger agreement whereby Merger Sub would merge with and into NPOWR. In connection with the merger, the shareholders of NPOWR would have acquired a controlling interest in K2. Further, prior to closing of the transaction, K2 was entitled to issue up to 500,000 stock options with an exercise price of $0.11 per share to its officers and directors.
 
- 9 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008 
 
NOTE 3 – ACQUISITIONS, MERGERS AND NEW SUBSIDIARIES FORMED - continued

On July 27, 2006, the Company and NPOWR determined to abandon the contemplated merger between the parties. Pursuant to the LOI, NPOWR was obligated to pay all expenses of the Company as specified in the LOI to the date of termination. On September 29, 2006, NPOWR executed a promissory note in the amount of $18,253 representing amounts due to the Company under the LOI. The note has been paid in full.

On January 29, 2007, the Company signed a letter of intent with NCSI a Florida corporation, whereby NCSI will merge with Merger Sub and NCSI intend to enter into a merger agreement whereby Merger Sub will merge with and into NCSI. In connection with the merger, the shareholders of NCSI will acquire a controlling interest in K2. NCSI's designees will be appointed as directors of K2 and the Board and shareholders will approve a 1 x 10 reverse split of K2 shares such that the current shareholders of K2 own approximately 500,000 post merger shares representing 10% of the post merger shares issued and outstanding. In connection with this transaction, Avante Holding Group, Inc. (“Avante”, see Note 6 - Related Parties) entered into an agreement with NPOWR Digital Media, Inc. to acquire 1,000,000 shares of K2 preferred stock which is convertible into 1,500,000 common shares.

On April 27, 2007, the Company signed a Merger Agreement with NCSI, whereby NCSI would merge with Merger Sub. In connection with the merger, the shareholders of NCSI would acquire a controlling interest in K2. NCSI's designees would be appointed as directors of K2 and the Board and shareholders would approve a 1 x 10 reverse split of K2 shares such that the current shareholders of K2 own approximately 500,000 post merger shares representing 10% of the post merger shares issued and outstanding.

Under the terms of the termination of the agreement with NPOWR, certain amounts owed to K2 under the LOI were payable in the form of a note. With the acquisition of the NPOWR preferred stock by Avante, $13,500 due under the note was assumed by Avante. The note was paid in full during the quarter ended June 30, 2007.

On August 10, 2007, the merger between Merger Sub and NCSI was completed with NCSI being the surviving company.

New Century Structures, Inc.
 
NCSI of Florida was incorporated in May 2001 under the name of M3'T, Inc. In July 2003, the Company changed its name to New Century Structures, Inc.  The Company was originally incorporated as an "S" Corporation. In 2006, the Company filed with the Internal Revenue Service to change its filing status to a "C" Corporation. 
 
Sustainable Structures Leasing, Inc.
 
SSL of Florida, formerly known as Sustainable Structures Leasing, LLC, was incorporated on April 20, 2005. SSL was acquired by the Company on October 15, 2007, for $100. At the time of acquisition, SSL was converted to a C corporation.
 
NOTE 4 – BALANCE SHEET DETAILS

Property and equipment consist of the following:
 
- 10-

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008 
 
NOTE 4 – BALANCE SHEET DETAILS - continued

   
Useful
  
March 31,
  
December 31,
  
   
Life
  
2008
  
2007
  
               
Facility
    
20
  
$
182,078
  
$
182,078
  
Capital Improvements
    
5
    
55,610
   
55,610
 
Construction-in-Progress (a)
    
(a)
 
  
776,250
   
-
 
Machinery & equipment
    
5
    
347,971
   
347,971
 
Heavy equipment
    
7
    
107,156
   
107,156
 
Vehicles and trailers
    
4
    
7,000
   
7,000
 
Computer equipment
    
3
    
450
   
449
 
Furniture and fixtures
    
5
    
25,773
   
25,773
 
           
1,502,289
   
726,038
 
Less: accumulated depreciation
          
(253,647
)
  
(225,688
)
Net property and equipment
        
$
1,248,642
  
$
500,350
  
 
(a)
Modular buildings for lease. The buildings are projected to be in service in the second and/or third quarter of 2008. The useful life will be 20 years.
 
Depreciation expense was $27,958 and $124,821for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively.
 
Notes payable consists of the following:

   
Due
  
March 31,
  
December 31,
  
   
Date
  
2008
  
2007
  
               
Avante Holding Group, Inc.
    
July 2008
  
$
577,521
  
$
296,469
  
Regions Bank
    
June 2012
    
443,781
   
458,851
 
Caterpillar Financial Services Corporation
    
July 2008
    
4,634
   
5,638
 
Caterpillar Financial Services Corporation
    
July 2009
    
31,502
   
31,502
 
Bank of America
    
February 2013
    
100,000
   
100,000
 
Bridge Note (1)
    
August 2008
    
128,000
   
128,000
 
Spectra
    
December 2008
    
23,253
   
-
 
Wells Fargo
    
September 2011
    
24,493
   
24,493
 
Weaver Precast of Florida, LLC
    
December 2009
    
196,304
   
225,906
 
           
1,529,488
   
1,270,859
 
Less: Current portion
          
951,242
   
647,941
 
Total long-term debt
        
$
578,246
  
$
622,918
  
                     
(1) Multiple individuals.
                    
 
NOTE 5 – COMMITMENTS
 
The Company leases office space in Melbourne, Florida from GAMI, LLC (“GAMI”, see Note 7 - Related Parties). The terms of the agreement are monthly payments of $4,000 expiring May 31, 2012. There are two renewable five year extensions.

The Company leases the property where its manufacturing operation is located. The lease expired on December 31, 2007 and is now a month-to-month lease. Monthly lease payments are $4,000.

Future minimum obligations for the above leases are as follows:

- 11 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008 
 
NOTE 5 – COMMITMENTS - continued

2008
  
$
36,000
  
2009
    
48,000
 
2010
    
48,000
 
2011
    
48,000
 
2012
    
20,000
 
         
Total Lease Obligations
  
$
200,000
  
 
NOTE 6 - BUSINESS SEGMENTS

The Company operates primarily in two segments: manufacturing division (NCSI) and leasing division (SSL).

Information concerning the revenues and operating income (loss) for the three months ended March 31, 2008 and 2007, and the identifiable assets for the two segments in which the Company operates are shown in the following table:

   
Three Months Ended
  
   
March 31,
  
   
2008
  
2007
  
           
OPERATING REVENUE
              
Manufacturing
  
$
826,945
  
$
1,300,847
  
Leasing
    
8,477
   
-
 
               
Consolidated Totals
  
$
835,422
  
$
1,300,847
  
               
INCOME (LOSS) FROM OPERATIONS
              
Manufacturing
  
$
(581,885
)
$
31,470
  
Leasing
    
2,600
   
-
 
Corporate
    
(19,346
)
  
-
 
               
Consolidated Totals
  
$
(598,631
)
$
31,470
  
               
IDENTIFIABLE ASSETS
              
Manufacturing
  
$
1,267,182
  
$
585,123
  
Leasing
    
784,727
   
-
 
Corporate
    
-
   
-
 
               
Consolidated Totals
  
$
2,051,909
  
$
585,123
  
               
DEPRECIATION AND AMORTIZATION
              
Manufacturing
  
$
27,958
  
$
31,082
  
Leasing
    
-
   
-
 
Corporate
    
-
   
-
 
               
Consolidated Totals
  
$
27,958
  
$
31,082
  
 
NOTE 7 – RELATED PARTIES

Michael W. Hawkins, formally was a Director and the Vice President of Finance for NCSI, is also CEO and principal shareholder for Avante and the Managing Member for GAMI. Avante and GAMI each hold various amounts of shares of the Company. Mr. Hawkins, through the issuance of stock to various companies controlled by himself, owned in NCSI approximately 42.2% of the common stock issued, 25% of the Series A preferred stock, 100% of the Series B preferred stock, 0% of the Series C preferred stock and 28.4% of the Series D preferred stock which, prior to the merger with K2, converted to common stock.
 
- 12 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008

NOTE 7 – RELATED PARTIES - continued

NCSI has contracted with Avante for certain investment banking and consulting services to be provided pursuant to two agreements between NCSI and Avante.

NCSI and Avante entered into a Consulting Agreement on January 1, 2006 to provide corporate guidance and financial and accounting services. As compensation, Avante receives $10,000 per month and bonus compensation. Under this agreement Avante has the unilateral authority to hire additional personnel required to perform investor relations, financial administration, and executive oversight and request reimbursement from NCSI on a reimbursable expense basis. The term of this agreement is for three years with one additional automatic three-year extension.

On May 31, 2005, NCSI and Avante entered into a Revolving Credit Agreement for $500,000. The terms of the Agreement includes interest at the rate of prime plus 4%. The Agreement terminates on May 31, 2006 with an available extension of one year at the discretion of the Lender. On May 31, 2006, Avante renewed the agreement for one year. An Amendment to the Agreement was executed in December 2006 providing an additional $500,000 credit for a total of $1,000,000. As of September 30, 2007, the balance due to Avante under this Agreement was $264,618. In August 2007, various entities that held the Avante Revolving Credit Agreement as collateral to notes owed by Avante, elected to call the note and accept issuance of common stock of ABCC in lieu of cash. The Company issued 2,000,000 shares to six separate and unrelated entities.

NCSI and Avante entered into an Exclusive Mergers and Acquisitions Services Agreement on January 1, 2006 to provide merger and acquisition consulting services. The term of the agreement is for three years. Compensation is based upon a double Lehman Formula.

Michael W. Hawkins has personally guaranteed several obligations with the primary guarantee of Regions Bank. In addition to the various notes identified above, he has also personally guaranteed the Company note payable balance with Wells Fargo associated with the financing of a cement truck. The cement truck was sold on November 9, 2007.

On July 1, 2006, GAMI contracted with Alternative Construction by ProSteel Builders, Inc. (f/k/a ProSteel Builders Corporation) (“ACP”) for the construction of a new office building for GAMI located in Melbourne, Florida. ACP subcontracted a portion of the construction to NCSI. The full contract value with ACP was $742,500. The contract, with change orders, between ACP and NCSI was $993,930. All balances due to the Company as of June 30, 2007 were paid in full. The contract and all related activities were done as an arms length transaction.

On May 31, 2007, the Company leased office space for its corporate office from GAMI for $4,000 per month for five years. The lease has two renewable five year periods.

On February 10, 2008, the Company’s subsidiary Sustainable Structures, Inc. entered into a contract to build two buildings for Gulfstream Aerospace, Inc. (“Gulfstream”). The contract with Gulfstream was viewed by the Company as the first of many such contracts with Gulfstream which are expected to yield significant long term revenue to ABCC. ABCC was unable to finance these contracts through conventional methods. Alternative Construction Technologies, Inc. (“ACT”) a company related to ABCC by common ownership of stock and common management, agreed, on a one-time emergency basis, to finance the construction of the buildings utilizing its line of credit. The costs of financing of $1,040,000, plus interest and other consideration of approximately $110,000 will be borne by ABCC, and ABCC will recognize a loss of approximately $315,300 on this contract. These costs are related, in part, to additional expenses incurred by ACT, including the issuance of warrants to the funding source, which will be borne by ABCC. It is expected that future contracts with this customer will be profitable. While the transaction between ACT and ABCC was not entered into at arms length, given the credit worthiness of ABCC’s customer, and the enhancement of a business relationship for ABCC, management of the Company determined that the financing was in the Company’s best, long-term, interest.

- 13 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008

NOTE 7 – RELATED PARTIES - continued

Joseph Sorci, the CEO for the Company, is also CEO and principal shareholder for Florida Architects, Inc. (“FLA”). FLA performs various architectural roles for the Company in conjunction with evaluating, bidding, planning and actual building of the Company’s projects. All transactions are conducted as an arms length transaction.

Joseph Sorci has personally guaranteed several obligations with vendors, banks and other business related entities. The primary guarantees are with Regions Bank, Weaver Precast of Florida, LLC and other notes payable.
 
NOTE 8 – STOCKHOLDERS’ EQUITY

Common Stock

The Company has authorized 24,000,000, issued 7,718,465 and has outstanding 7,676,723 common shares at $0.10 par value at December 31, 2007.

As part of the acquisition / merger and reverse stock split on August 10, 2007, the Company issued 4,334,429 shares of common stock to shareholders of NCSI.

On September 13, 2007, the Company issued 2,444,000 shares to various debt holders in exchange for the conversion of $611,000 in debt. As part of this conversion of outstanding payables, the Company issued 444,000 shares to officers and directors. An additional 666,668 shares were issued to individuals related to Michael W. Hawkins (see Note 6 - Related Parties) as part of a reduction in the Revolving Credit Agreement with Avante.

On October 29, 2007, the Company issued 250,000 common shares for $250,000 in a private placement. On December 31, 2007, the $250,000 was a subscription receivable. Subsequent to December 31, 2007, the Company has received only $100,000 of the funds purchased. The Company has filed a lawsuit against the individual to collect the outstanding funds.

On February 11, 2008, the Company issued 300,000 shares of common stock to various debt holders in exchange for the conversion of $135,000 in debt.

Preferred Stock

The Company has filed an amendment to designate 1,000,000 shares of convertible Series A preferred stock that has 3,000,000 underlying common shares as part of a private placement to raise up to $24 million for the Company.

On August 10, 2007, a simultaneous transaction with the merger between K2AC and NCSI, the Company’s outstanding 1,000,000 shares of preferred stock valued at $165,000 converted to common stock at a 1 for 1.5 rate resulting in 150,000 shares of common stock being issued.

Treasury Stock

Prior to January 1, 2005, the Company acquired 417,417 outstanding shares of common stock for $819,296.
 
- 14 -

ACCELERATED BUILDING CONCEPTS CORPORATION
f/k/a K2 DIGITAL, INC.
and SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2008 
 
NOTE 9 – LEGAL PROCEEDINGS

On October 2, 2006, NCSI was named in a lawsuit captioned New Millennium Enterprises, LLC and Phoenixsurf.com, LLC v. Michael W. Hawkins, et. al. U.S. District Court, Middle District of Georgia, 3: 06-CV-84 (CDC). The lawsuit alleges violations of the Georgia Securities Act, Georgia Fair Business Practices Act, Federal Securities laws and certain other unspecified laws in connection with the investment by Plaintiffs of $180,000 in NCSI and seeks rescission of this investment. Plaintiffs amended their complaint on April 11, 2007. NCSI filed an answer to the amended complaint denying all essential allegations of the complaint and asserting affirmative defenses showing why the plaintiffs are not entitled to the relief sought. In addition, NCSI filed Counterclaims against the Plaintiffs and Third Party claims against individual officers and directors of Plaintiff, alleging a malicious interference with the NCSI’s business and business relations, conspiracy to interfere with our business, libel and slander, and violation of rights under Title IX of the Organized Crime Control Act of 1970 as amended. The Parties are to establish a consolidated plan of discovery in 2008. The Company believes it has meritorious defenses to the claims and intends to vigorously defend this lawsuit and to pursue its counterclaims.

NCSI has been sued by two vendors, each for less than $20,000. The Company believes that each will be settled.

The Company maintains a reserve for legal expenses for all cases.
 
- 15 -

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements under federal securities laws. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Our actual results could differ materially from those indicated by forward-looking statements as a result of various factors, including but not limited to those set forth under this Item, as well as those discussed in Part II - Item 1A, “Risk Factors,” and elsewhere in this document and those that may be identified from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I – Item 1 of this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related Notes and the Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 14, 2008.

DESCRIPTION OF COMPANY:

The Company is a holding company that currently has two operating subsidiaries, New Century Structures, Inc. (“NCSI”), an entity which provides design, manufacturing, and construction services for modular and component building facilities utilizing concrete and steel and structural insulated panels (SIPs) for use by commercial, educational clients and other government agencies, and Sustainable Structures Leasing, Inc. (“SSL”), an entity which provides leasing capabilities to customers of the Company on either a lease or lease-purchase basis.

On August 10, 2007, ABCC acquired all of the outstanding common stock of NCSI. For accounting purposes, the acquisition has been treated as a recapitalization of NCSI with NCSI as the acquirer (reverse acquisition). The historical financial statements prior to August 10, 2007 are those of NCSI.

OVERVIEW:
 
The Company is a design, manufacturing, and construction company, engaged in the construction of commercial, government and educational buildings in Florida.
 
Founded in 1993, the Company was originally a digital professional services company that, until August 2001, historically provided consulting and development services, including analysis, planning, systems design, creation and implementation. In August 2001, upon the sale of assets to Integrated Information Systems, Inc., the Company effectively ceased operations.

On January 29, 2007, the Company signed a letter of intent with New Century Structures, Inc. ("NCSI") a Florida corporation, whereby NCSI will merge with the Company. K2 Acquisition Corp. ("Merger Sub") and NCSI intend to enter into a merger agreement whereby Merger Sub will merge with and into NCSI. In connection with the merger, the shareholders of NCSI will acquire a controlling interest in K2. NCSI's designees will be appointed as directors of K2 and the Board and shareholders will approve a 1 for 10 reverse split of K2 shares such that the current shareholders of K2 own 540,516 post merger shares representing 10% of the post merger shares issued and outstanding. In connection with this transaction, Avante Holding Group, Inc. entered into an agreement with NPOWR Digital Media, Inc. to acquire 1,000,000 shares of K2 preferred stock which is convertible into 150,000 post merger common shares.

On April 27, 2007, the Company signed a Merger Agreement with New Century Structures, Inc. ("NCSI") a Florida corporation, whereby NCSI will merge with the Company. K2 Acquisition Corp. ("Merger Sub"). In connection with the merger, the shareholders of NCSI will acquire a controlling interest in K2. NCSI's designees will be appointed as directors of K2 and the Board and shareholders will approve a 1 x 10 reverse split of K2 shares such that the current shareholders of K2 own approximately 500,000 post merger shares representing 10% of the post merger shares issued and outstanding. In connection with this transaction, Avante Holding Group, Inc., an affiliate of NCSI, has acquired from NPOWR 1,000,000 shares of K2 preferred stock which is convertible into 1,500,000 common shares.

Incorporated in Florida in July 2001, NCSI provides architectural/engineering, manufacturing and construction services for modular facilities utilizing concrete and structural insulated panels (SIPS) for use in commercial, educational and municipalities and residential developments. The Company utilizes processes that meet the scrutiny for classrooms as well as several government agencies, including NASA and the Smithsonian.

On August 10, 2007, the merger with NCSI and Merger Sub was completed. The former shareholders of NCSI were issued 4,334,429 shares of the Company’s common stock. The Company completed its 1 for 10 reverse split. The Company changed its name from K2 Digital, Inc. to Accelerated Building Concepts Corporation.

The following Management Discussion and Analysis should be read in conjunction with the financial statements and accompanying notes included in this Form 10-QSB. 

- 16 -

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2007 TO THE THREE MONTHS ENDED MARCH 31, 2006

Results of Operations

Total revenues decreased to $835,422 for the three months ended March 31, 2008 from $1,300,847 for the three months ended March 31, 2007. The decrease of $465,425 (35.8%) resulted primarily from the lack of funding in which to fulfill its contractual obligations.

Cost of sales was $1,186,032 and $989,919, respectively for the three months ended March 31, 2008 and the three months ended March 31, 2007. As a percent of revenue, the cost of sales for the manufacturing division was 142.7% ($1,180,307) whereas the leasing division was 67.5% ($5,725). The manufacturing division recorded a loss ($315,400) on the contract with Gulfstream Aerospace (see Notes to Consolidated Financial Statements, Note 6 - Related Parties). Without the accrued loss, the cost of sales would have been $865,007 or 103.5% of revenue.

Gross profit (loss) was ($350,609) and $310,928, respectively for the three months ended March 31, 2008 and the three months ended March 31, 2007.

Total operating expenses decreased to $248,021 for the three months ended March 31, 2008 from $279,458 for the three months ended March 31, 2007. This 11.5% decrease was mainly attributable to the Company reducing costs during the period of reduced revenues. The primary expenses for NCSI are administrative payroll, rent, insurance, professional fees and payroll taxes.

Liquidity and Capital Resources
 
As of March 31, 2008, the Company had a working capital deficit of $3,119,056. Net loss was $690,441 for the three months ended March 31, 2008. The Company generated a positive cash flow from operations of $536,063 for the three months ended March 31, 2008. The positive cash flow from operating activities for the period is primarily attributable to the decrease in accounts receivable ($528,108) and prepaid expenses ($71,945) offset by an increase in accounts payable and accrued expenses ($1,044,508), billings in excess of costs of uncompleted contracts ($752,623) and deferred revenue ($1,467).

Cash flows used in investing activities of $776,250 for the three months ended March 31, 2008 related to the construction-in-progress of modular buildings to be leased by SSL.

Cash flows provided by financing activities for the three months ended March 31, 2007 was $358,629 primarily due to the issuance of notes payable and receipts of a subscription stock receivable ($100,000).

The Company had a net increase in cash of $118,442 for the three months ended March 31, 2008 compared to a decrease of $449,659 for the three months ended March 31, 2007.

For the next twelve months, the Company intends to fund its operations through private debt and equity financing and revenues from operations. However, if the pricing of commodities and other raw materials prices increase dramatically, sales grow rapidly, and we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition.

The effect of inflation on the Company's revenue and operating results was not significant. The Company's operations are located in North America and there are no seasonal aspects that would have a material effect on the Company's financial condition or results of operations.
 
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s market risk exposures from those reported in our Annual Report on Form 10-K for the year March 31, 2008.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer (the “CEO”) and Interim Chief Financial Officer (the “CFO”), performed an evaluation of the effectiveness of the design, maintenance and operation of the Company’s disclosure controls and procedures of March 31, 2008. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective. There have been no significant changes in the Company’s internal controls or in other factors that materially affected, or would reasonably be likely to materially affect, the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

On October 2, 2006, NCSI was named in a lawsuit captioned New Millennium Enterprises, LLC and Phoenixsurf.com, LLC v. Joseph Sorci, et. al. U.S. District Court, Middle District of Georgia, 3: 06-CV-84 (CDC). The lawsuit alleges violations of the Georgia Securities Act, Georgia Fair Business Practices Act, Federal Securities laws and certain other unspecified laws in connection with the investment by Plaintiffs of $180,000 in NCSI in April 2006 and seeks rescission of this investment. Plaintiffs amended their complaint on April 11, 2007. NCSI filed an answer to the amended complaint denying all essential allegations of the complaint and asserting affirmative defenses showing why the plaintiffs are not entitled to the relief sought. In addition, NCSI filed Counterclaims against the Plaintiffs and Third Party claims against individual officers and directors of Plaintiff, alleging a malicious interference with the Company’s business and business relations, conspiracy to interfere with our business, libel and slander, and violation of rights under Title IX of the Organized Crime Control Act of 1970 as amended. The Parties are to establish a consolidated plan of discovery in 2008. The Company believes it has meritorious defenses to the claims and intends to vigorously defend this lawsuit and to pursue its counterclaims.

The Company also has two pending lawsuits, each for less than $20,000, with one vendor and one supplier.
 
ITEM 1A. RISK FACTORS
 
You should carefully consider the following discussion of various risks and uncertainties. We believe these risk factors are the most relevant to our business and could cause our results to differ materially from the forward-looking statements made by us. The following risk factors are not the only risk factors facing our Company. Additional risks that we do not consider material, or of which we are not currently aware, may also have an adverse impact on us. Our business, financial condition, and result of operations could be seriously harmed if any of these risks or uncertainties actually occurs or materializes. In that event, the market price for our common stock could decline, and you may lose all of part of your investment.
 
If we do not receive additional financing to meet sales growth and cash flow needs, the Company will not be able to support ongoing operations.
 
The Company currently has a working capital deficit. The current cash available will not meet the current liabilities outstanding. In addition, the Company’s current accounts payable exceed 60 days. NCSI, the primary operating entity, experienced tremendous growth in 2005 followed by a slowdown in 2006, and a virtual stoppage of all its educational contracts in 2007. This has created a net loss in operations and has strained the Company’s ability to move forward. In addition, the Company is dependent on purchasing materials from outside vendors to manufacture its products. Should cash flow not be sufficient to support these relationships, in addition to financing not being available, it would become increasingly difficult to support ongoing operational expenses associated with the Company's business. There is no guarantee that we will succeed in obtaining additional financing, or if available, that it will be on terms favorable to us, or that raw and/or component material prices will be in the range necessary to support ongoing operations.
 
If the price of raw and/or component materials increases or their availability decreases, it may create a reduction in our capability to produce our product.

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The key components to our product are concrete and steel. Steel is a commodity product therefore the Company continues to seek various suppliers, to provide sufficient source and pricing to meet our development schedule and pricing points. In the current market for concrete and steel, key ingredients to our product rise and fall in cost, which could affect our abilities to procure enough raw materials based on cash and credit availability to produce enough products to meet demand and sell finished products at a profit. With an increase in raw material pricing, which often fluctuates due to availability, natural disasters, and force majures, the Company may not maintain adequate cash to procure raw materials to meet current demand and expanded growth. As additional funding is required in the future, obtaining such financing is at the sole discretion of numerous third party financial institutions. Therefore, the Company cannot predict its ability to obtain future financing or the specific terms associated with such agreements. As such, the Company would be required to adjust production schedules based on cash availability and market pricing for its finished products which could therefore reduce production and limit its sales growth potential.
 
In the event the Company is unable to pay off existing debt holders all of our assets are collateral and would cause a closure of our operations.
 
Regions Bank holds a note in the principal amount of $500,000 (with a current pay-off of approximately $430,000) secured by all of our assets. The note originally existed as a revolving credit agreement but was converted into a five-year term note on July 1, 2007. The maturity date of the note is July 30, 2012. The note bears an interest rate equal to the prime rate and contains no prepayment penalty clause. If we become in default of the payment terms or other provisions of the note, there is no assurance that we will be able to successfully negotiate new terms favorable to us. In that event, the lenders may elect to accelerate the payment terms and may exercise their right against our collateral.
 
With only an outdoor manufacturing facility leased on a month-by-month basis, the Company could lose substantial revenue due to down time due to inclement weather and/or having to relocate to an alternate facility.

The Company currently builds in an open field with elongated concrete pads. While this meets requirements for building modular facilities, work must be stopped, or temporarily delayed when weather conditions are unfavorable. The Company maintains three modular units on site for administrative use, tool storage and security, and employee break rooms. The land consists of 4.3 acres and is currently on a month-by-month lease basis. In the event the company is required to vacate the premises, the Company would lose significant time and resources relocating to an alternate site. There is no guarantee the company will find adequate facilities in an appropriate time frame in order not to disrupt its current operations.

Our corporate office in Florida is located in an area subject to hurricanes and other tropical storms. We believe our insurance policies are adequate with the appropriate limits and deductibles to mitigate the potential loss exposure of our business. We do not have financial reserves for policy deductibles and we do have exclusions under our insurance policies that are customary for our industry, including earthquakes, flood and terrorism. If any of our facilities or a significant amount of our manufacturing equipment were to experience a catastrophic loss, it could disrupt our operations, delay orders, shipments and revenue recognition resulting in expenses to repair or replace the damaged manufacturing equipment and facility not covered by insurance.
 
We may be required to indemnify our Directors and Officers at a high cost to the Company.
 
We have authority under Section 607.0850 of the Florida Business Corporation Act and Delaware law to indemnify our directors and officers to the extent provided in that statute. Our Articles of Incorporation require the Company to indemnify each of our directors and officers against liabilities imposed upon them (including reasonable amounts paid in settlement) and expenses incurred by them in connection with any claim made against them or any action, suit or proceeding to which they may be a party by reason of their being or having been a director or officer of the company. We maintain officer's and director's liability insurance coverage with limits of liability of $1,000,000. Consequently, if such potential judgment exceeds the coverage under the policy, ABCC may be forced to pay such difference. We have entered into indemnification agreements with each of our officers and directors containing provisions that may require us, among other things, to indemnify our officers and directors against certain liabilities that may arise by reason of their status or service as officers or directors (other than liabilities arising from willful misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. Management believes that such indemnification provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.

Future changes in financial accounting standards and the applicable regulations by the various governmental regulatory agencies may cause lower than expected operating results and affect our reported results of operations.

Changes in accounting standards and their application may have a significant effect on our reported results on a going forward basis and may also affect the recording and disclosure of previously reported transactions. New standards have occurred and will continue to occur in the future. For example, in December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), as amended, “Share Based Payment” (“SFAS No. 123R”), which requires us to expense stock options at fair value effective January 1, 2006. Under SFAS No. 123R, the recognition of compensation expense for the fair value of stock options reduces our reported net income and net income per share subsequent to implementation, however, this accounting change will not have any impact on the cash flows of our business. Under the prior rules, expensing of stock options was not required and therefore, no compensation expense for stock options was included in reported net income and net income per share.
 
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The Sarbanes-Oxley Act of 2002 and various new rules subsequently implemented by the Securities and Exchange Commission (“SEC”) and the NASDAQ National Market have imposed additional reporting and corporate governance practices on public companies. Since adoption of these regulations, our legal, accounting and financial compliance costs have increased and a significant portion of management’s time has been diverted to comply with these rules. We expect these additional costs and the diversion of management’s time to continue and to the extent additional rules and regulations are adopted, the diversion of resources may potentially increase over time, with respect to these legal initiatives.

In addition, if we do not adequately comply with or implement the requirements of Section 404 in a timely manner, we may not be able to accurately report our financial results or prevent fraud, which may result in sanctions or investigation by regulatory authorities, such as the SEC. Any such action could harm our business, financial results or investors’ confidence in our company, and could cause our stock price to fall.

The nature of our businesses exposes us to the risk of litigation and liability under environmental, health and safety and products liability laws that could have a negative impact on the financial performance of the Company.

Certain aspects of our businesses involve risks of liability. In general, litigation in our industry, including class actions that seek substantial damages, arises with increasing frequency. Claims may be asserted under environmental, labor, health and safety or product liability laws. Litigation is invariably expensive, regardless of the merit of the plaintiffs’ claims. We may be named as a defendant in the future, and there can be no assurance that regardless of the merit of such claims, we will not be required to make substantial settlement payments in the future.
 
Conducting our routine businesses exposes us to risk of litigation from employees, vendors and other third parties.

We are subject to claims arising from disputes with employees, vendors and other third parties in the normal course of business; these risks may be difficult to assess or quantify and their existence and magnitude may remain unknown for substantial periods of time. If the plaintiffs in any suits against us were to successfully prosecute their claims, or if we were to settle such suits by making significant payments to the plaintiffs, our operating results and financial condition would be harmed.

If we do not effectively manage our credit risk, collect on our accounts receivable, or recover our rental equipment from our customers’ sites, it could have a material adverse effect on our operating results.

We generally sell to customers on a 30-day payment term; however, our average collection time is 60 days. We individually perform credit evaluation procedures on our customers on each transaction and will require security deposits or other forms of security from our customers when a significant credit risk is identified.

The Company has implemented a policy of filing Notice to Owners (“NTO”) on each property in which it produces product for to alleviate the inability to collect. However, if a customer fails to pay, there could be considerable time between the need to pay our vendors and the acceptance of our final payment. If we are not able to manage credit risk issues, or if a large number of customers should have financial difficulties at the same time, our credit losses would increase above historical levels. If this should occur, our results of operations may be materially and adversely affected.

Failure by third parties to supply our raw materials to our specifications or on a timely basis may harm our reputation and financial condition.

We are dependent on third parties to provide steel, concrete, and other building materials/components even though we are able to purchase products from a variety of third-party suppliers. In the future, we may be limited as to the number of third-party suppliers for some of our products. Currently, we do not have any long-term purchase contracts with any third-party supplier. In the future, we may not be able to negotiate arrangements with these third parties on acceptable terms, if at all. If we cannot negotiate arrangements with these third parties to produce our products or the third parties fail to produce our products to our specifications or in a timely manner, our reputation and financial condition could be harmed.
 
A significant reduction of construction due to economic downturns, population growth variations and/or other definable effects on the construction industry could cause the demand for our product to decline, which could result in a reduction in our revenues and profitability.

Sales of modular portable classrooms for the Florida public school districts for use as portable classrooms, restroom buildings, and administrative offices for kindergarten through grade twelve declined in 2007. Funding for public school facilities is derived from a variety of sources including the passage of both statewide and local facility bond measures, developer fees and various taxes levied to support school operating budgets. Many of these funding sources are subject to financial and political considerations, which vary from district to district, and are not tied to demand. Historically, we have benefited from the passage of facility bond measures and believe these are essential to our business. While all forecast reports believe 2008 to be a substantial year in the school facility market, there is no guarantee that this business sector will return to its historical 2005 levels.
 
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To the extent public school districts’ funding is reduced for the rental and purchase of modular facilities, our business could be harmed and our results of operations negatively impacted. We believe that interruptions or delays in the passage of facility bond measures, changes in legislative or educational policies at either the state or local level, including the contraction or elimination of class size reduction programs, a lack or insufficient amount of fiscal funding, a significant reduction of funding to public schools, or changes negatively impacting enrollment, may reduce the rental and sale demand for our educational products thereby resulting in lower revenues and related profitability.
 
Public policies that create demand for our products and services may change, stall in Congress or State Legislation creating a downturn in sales.

Florida has passed legislation to limit the number of students that may be grouped in a single classroom for certain grade levels. School districts with class sizes in excess of these limits have been and continue to be a significant source of demand for modular classrooms. The educational priorities and policies were stalled in 2007, therefore demand for our products and services declined. While legislation still dictates the need for additional modular classrooms, we may not experience the growth levels witnessed in 2005 and 2006, therefore, we may not grow as quickly as or reach the levels that we anticipate.
 
Similar to conventionally constructed buildings, the modular building industry, including the manufacturers and lessors of portable classrooms, are subject to evolving regulations by multiple governmental agencies at the federal, state and local level. This oversight includes but is not limited to governing code bodies, environmental, health, safety and transportation. Failure by our customers to comply with these laws or regulations could impact our business. Compliance with building codes and regulations have always entailed a certain amount of risk as municipalities do not necessarily interpret these building codes and regulations in a consistent manner, particularly where applicable regulations may be unclear and subject to interpretation. Many aspects of the construction and modular industry have developed “best practices” which are constantly evolving.

Our warranty costs may increase reducing our gross profit margin.

Sales of modular buildings constructed of concrete and/or structural insulated panels are typically covered by warranties. We provide a one year warranty on our facilities. Historically, our warranty costs have not been significant, and we monitor the quality of our products closely. If a defect were to arise in the manufacturing of our modular buildings at our facility, we may experience increased warranty claims. Such claims could disrupt our sales operations, damage our reputation and require costly repairs or other remedies, negatively impacting revenues and operating income.

 Economics and cyclical downturns in the construction industry may result in periods of low demand for our services resulting in the reduction of our operating results and cash flows.

The severity and length of any downturn on an industry may also affect overall access to capital, which could adversely affect our customers. During periods of reduced and declining demand for construction material, we are exposed to additional risk from reduced revenue and may need to rapidly align our cost structure with prevailing market conditions while at the same time motivating and retaining key employees. While the market demand for construction related products is the primary portion of the areas in our focus, especially with the devastation due to hurricanes in Florida in 2004 and 2005, no assurance can be given regarding the length or extent of the recovery, and no assurance can be given that our rates, operating results and cash flows will not be adversely impacted by the reversal of any current trends or any future downturns or slowdowns in the rate of capital investment in this industry.
 
ITEM 2.  UNREGISTERED SALE OF EQUITY SECURITIES AND IN SECURITIES AND USE OF PROCEEDS

On August 9, 2007, the Company issued 4,334,429 post-split shares proportionately to the shareholders of New Century Structures, Inc., as part of a reverse merger into K2 Acquisition, Inc.

On September 20, 2007 the Company issued 2,000,000 shares of common stock as part of a conversion of $500,000 in debt to six various debt holders.

On September 20, 2007 the Company issued 300,000 shares of common stock to Thomas G. Amon, the Company’s Corporate Counsel and member of the Board of Directors in satisfaction of an outstanding payable of $75,000.

On September 20, 2007 the Company issued 144,000 shares of common stock to Joseph J. Sorci, the Company’s CEO in exchange for the outstanding payable of $36,500.

On November 1, 2007, the Company issued 250,000 shares of common stock in exchange for Two Hundred Fifty Thousand Dollars ($250,000) in a private sale of securities under exemption of Rule 144 of the Securities Exchange Act of 1934.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION
 
Effective on May 16, 2008 Bruce Harmon has resigned as the Interim CFO and a member of the Board of Directors.

ITEM 6.  EXHIBITS

Exhibits

No.
  
Description
31.1
  
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
  
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
  
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
  
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

      Accelerated Building Concepts Corporation

Date: May 15, 2008    
By:
/s/ Joseph Sorci
 
Chief Executive Officer
 
(Principal Executive Officer)
   
Date: May 15, 2008    
By:
/s/ Bruce Harmon
 
Interim Chief Financial Officer (Principal
 
Accounting and Financial Officer)
 
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