UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
IVP TECHNOLOGY CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 65-6998896
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2275 Lakeshore Blvd West, Suite 401, Toronto, Ontario M8V 3Y3 Canada
(Address of principal executive offices)
(416) 255-7578
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 119,963,261 shares of common stock,
$.001 par value, were outstanding on August 15, 2002
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2002
(Unaudited) and December 31, 2001 (Audited)
Consolidated Statement of Operations for the Six
Months Ended June 30, 2002 and June 30, 2001
Consolidated Statement of Cash Flows for the Six
Months Ended June 30, 2002 and June 30, 2001
Notes to Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II- OTHER INFORMATION
ITEM 1. Legal Matters
ITEM 2. Changes in Securities
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 6. Subsequent Events, Exhibits and Reports on Form 8-K
2
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002
June 30, December 31,
2002 2001
(Unaudited) (Audited)
------------ ---------------
ASSETS
CURRENT ASSETS
Cash $ 867,484 $ 232
Accounts Receivable (Less Allowance for
Doubtful Accounts of $43,970) 615,755 -
Inventory 53,160 -
Prepaid expenses 310,447 -
------------ ---------------
Total Current Assets 1,846,846 -
------------ ---------------
FIXED ASSETS
Plant, Property and Equipment, at Cost 382,873 -
Accumulated Depreciation (24,925) -
------------ ---------------
Total Fixed Assets 357,948 -
------------ ---------------
OTHER ASSETS
Excess of Cost Over Net Assets Acquired 5,552,449 -
Miscellaneous Receivable - 872
License Agreement, net of accumulated
amortization of $924,904 2,695,364 3,600,431
Software Development, net of accumulated
amortization of $1,261 44,106 -
Other Assets 27,090 -
------------ ---------------
Total Other Assets 8,319,009 3,601,303
------------ ---------------
TOTAL ASSETS $ 10,523,803 $ 3,601,535
============ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,345,668$ 479,571
Accounts payable - license agreement 2,906,658 3,620,268
Accrued Interest 7,885 34,841
Income Taxes Payable 139,450 -
Notes payable 129,020 200,000
------------ ---------------
Total Current Liabilities 4,528,681 4,334,680
------------ ---------------
LONG-TERM LIABILITIES
Convertible debenture 150,000 -
Notes payable 312,650 129,020
------------ ---------------
Total Long-Term Liabilities 462,650 129,020
------------ ---------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $.001 par value, 50,000,000
shares authorized, none - -
issued and outstanding
Common stock, $.001 par value 150,000,000
shares authorized, 64,697,261 and
48,752,848 shares issued and
outstanding, respectively 64,697 48,753
Common stock to be issued 7,653,509 50,000
Additional paid-in capital 14,428,249 13,238,354
Accumulated deficit (accumulated in development
stage $12,883,106) (16,115,596) (13,859,272)
Exchange Gain (Loss) 27,863 -
Deferred equity line commitment fee, net (306,250) -
Deferred compensation, net (220,000) (340,000)
------------ ---------------
Total Stockholders' Equity (Deficiency) 5,532,472 (862,165)
------------ ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY) $10,523,803 $ 3,601,535
============ ===============
See Accompanying Notes To Financial Statements
3
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2002 2001 2002 2001
--------------------------- ---------------------------
(UNAUDITED) (UNAUDITED)
REVENUE
Revenue $ 497,326 $ 27,060 $ 497,326 $ 54,120
Cost of revenue (382,716) - (382,716) -
--------------------------- ---------------------------
Gross profit 114,610 27,060 114,610 54,120
--------------------------- ---------------------------
OPERATING EXPENSES
Amortization and depreciation 566,833 - 1,079,367 -
Consulting fees 374,555 (144,635) 393,555 221,828
Legal and accounting 169,586 61,184 215,683 65,184
Salaries and wages 114,285 - 114,285 -
Infrastructure expense 117,612 - 230,406 -
Financial advisory fees 150,000 - 150,000 -
Development Fees - 45,450 - 58,050
Other general & administration 154,095 46,563 210,043 70,861
--------------------------- ---------------------------
TOTAL OPERATING EXPENSES 1,646,966 8,562 2,393,339 415,923
--------------------------- ---------------------------
INCOME (LOSS) FROM OPERATIONS (1,532,356) $ 18,498 (2,278,729) (361,803)
--------------------------- ---------------------------
OTHER INCOME (EXPENSE)
Gain on early extinguishment 96,334 - 96,334 -
of debt
Interest income 938 - 938 -
Interest expense (62,942) - (74,869) -
--------------------------- ---------------------------
NET INCOME (LOSS) $ (1,498,026) $ 18,498 $(2,256,326) $ (361,803)
=========================== ===========================
NET INCOME (LOSS) PER SHARE $ (.01) $ - $ (.03) $ (.01)
=========================== ===========================
WEIGHTED AVERAGE NUMBER OF
OUTSTANDING COMMON SHARES 113,191,285 40,706,452 83,421,414 $ 39,913,058
=========================== ===========================
See Accompany Notes To Financial Statements
4
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
------------------------------
JUNE 30, 2002 JUNE 30, 2001
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,256,326) $ (361,803)
Adjustments to reconcile net loss to net cash used
in operating activities:
Stock issued for services 617,779 (41,207)
Reserve for Bad Debts - 33,732
Interest expense on beneficial conversion 64,286 -
Gain on extinquishment of debt (96,334) -
Amortization and Depreciation 1,079,367 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 159,702 (27,280)
Prepaid Expenses (162,883) -
Inventory 3,529 -
Increase (decrease) in:
Accounts payable and accrued expenses 50,024 395,749
Accounts payable - license agreement (713,610) -
Income taxes payable 56,449 -
Interest payable and other (18,539) -
-------------- --------------
Net Cash Used In Operating Activities (1,216,556) (809)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (17,333) -
Purchase of Software (45,367) -
Net assets acquired 1,291,059 -
Other (885) -
-------------- --------------
Net Cash Provided By Investing Activities 1,227,474 -
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans and notes 856,334 -
-------------- --------------
Net Cash Provided By Financing Activities 856,334 -
-------------- --------------
NET INCREASE (DECREASE) IN CASH 867,252 (809)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 232 1,424
------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 867,484 $ 615
============== ==============
See Accompanying Notes To Financial Statements
5
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) ORGANIZATION
----------------
Mountain Chief, Inc. was incorporated in the State of Nevada on February
11, 1994. This name was subsequently changed by Articles of Amendment
dated November 16, 1994 to IVP Technology Corporation (the "Company"). The
Company was granted an extra-provincial license by the Province of Ontario
on June 20, 1995 to carry on business in Ontario, Canada. Prior to 1998,
the Company was involved with various unsuccessful activities relating to
the sale of technology products before becoming inactive by the end of
1997. The Company began negotiations with a third party in 1998 to become
an exclusive distributor of software and therefore is considered to have
re-entered the development stage on January 1, 1998. Activities from
inception of development stage included raising of capital and
negotiations and acquisition of software distribution licenses are more
fully described herein. (See Note 5).
(B) ACQUISITION AND RECAPITALIZATION
------------------------------------
Effective March 2000, the Company acquired all the outstanding shares of
common stock of Erebus Corporation, an inactive reporting shell company
with no assets or liabilities, from the stockholders thereof in an
exchange for an aggregate of 350,000 shares of the Company's common stock
and paid $200,000 of consulting expenses in connection with the
acquisition. Pursuant to Rule 12-g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, the Company elected
to become the successor issuer to Erebus Corporation for reporting
purposes under the Securities Exchange Act of 1934. For financial
reporting purposes, the acquisition was treated as a recapitalization of
the Company with the par value of the common stock charged to
additional-paid-in capital.
(C) BASIS OF PRESENTATION
-------------------------
The Company maintains its original records in United States dollars. The
consolidated financial statements are expressed in United States dollars
and have been prepared in accordance with generally accepted accounting
principles (GAAP) in the United States.
(D) PRINCIPLES OF CONSOLIDATION
-------------------------------
The consolidated financial statements include the accounts of the Company
and its subsidiary, Ignition Entertainment Limited. All significant
inter-company transactions and balances have been eliminated.
(E) FOREIGN CURRENCY TRANSACTIONS
---------------------------------
Transactions conducted in Canadian dollars and British pounds have been
translated into United States dollars using the average exchange rate for
the month in which the transactions occurred. Gains or losses are
recognized in the statement of operations.
(F) USE OF ESTIMATES
--------------------
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and
expenses during the reported period. Actual results could differ from
those estimates.
(G) CASH AND CASH EQUIVALENTS
----------------------------
For purposes of the cash flow statements, the Company considers all highly
liquid investments with original maturities of three months or less at the
time of purchase to be cash equivalents.
6
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires disclosures of information
about the fair value of certain financial instruments for which it is
practicable to estimate the value. For purposes of this disclosure, the
fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties other
than in a forced sale or liquidation.
The carrying amounts of the Company's accounts receivable, accounts
payable and accrued liabilities, and note and interest payable thereon
approximates fair value due to the relatively short period to maturity for
these instruments.
(I) INCOME TAXES
----------------
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes
the enactment date.
(J) CONCENTRATION OF CREDIT RISK
--------------------------------
The Company maintains its cash in bank deposit accounts, which, at times,
may exceed federally insured limits. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk on cash and cash equivalents.
(K) LOSS PER SHARE
------------------
Basic and diluted net loss per common share for all periods presented is
computed based upon the weighted average common shares outstanding as
defined by Financial Accounting Standards No. 128, "Earnings Per Share".
There were no common stock equivalents at June 30, 2002.
(L) BUSINESS SEGMENTS
---------------------
The Company applies Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information". The
Company operates in one segment and therefore segment information is not
presented.
(M) REVENUE RECOGNITION
-----------------------
The Company records revenue associated with the sale of software licenses
on a pro-rata basis over the license term. The Company records revenue
associated with sales of entertainment-related consumer software on a
delivered basis subject to an allowance for returns.
(N) NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------
The Financial Accounting Standards Board has recently issued several new
Statements of Financial Accounting Standards. Statement No. 141, "Business
Combinations" supersedes APB Opinion 16 and various related
pronouncements. Pursuant to the new guidance in Statement No. 141, all
business combinations must be accounted for under the purchase method of
accounting; the pooling-of-interests method is no longer permitted. SFAS
141 also establishes new rules concerning the recognition of goodwill and
other intangible assets arising in a purchase business combination and
requires disclosure of more information concerning a business combination
7
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
in the period in which it is completed. This statement is generally
effective for business combinations initiated on or after July 1, 2001.
Statement No. 142, "Goodwill and Other Intangible Assets" supercedes APB
Opinion 17 and related interpretations. Statement No. 142 establishes new
rules on accounting for the acquisition of intangible assets not acquired
in a business combination and the manner in which goodwill and all other
intangibles should be accounted for subsequent to their initial
recognition in a business combination accounted for under SFAS No. 141.
Under SFAS No. 142, intangible assets should be recorded at fair value.
Intangible assets with finite useful lives should be amortized over such
period and those with indefinite lives should not be amortized. All
intangible assets being amortized, as well as those that are not, are both
subject to review for potential impairment under SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". SFAS No. 142 also requires that goodwill arising in a
business combination should not be amortized but is subject to impairment
testing at the reporting unit level to which the goodwill was assigned at
the date of the business combination.
SFAS No. 142 is effective for fiscal years beginning after December 15,
2001 and must be applied as of the beginning of such year to all goodwill
and other intangible assets that have already been recorded in the balance
sheet as of the first day in which SFAS No. 142 is initially applied,
regardless of when such assets were acquired. Goodwill acquired in a
business combination whose acquisition date is on or after July 1, 2001,
should not be amortized, but should be reviewed for impairment pursuant to
SFAS No. 121, even though SFAS No. 142 has not yet been adopted. However,
previously acquired goodwill should continue to be amortized until SFAS
No. 142 is first adopted.
Statement No. 143 "Accounting for Asset Retirement Obligations"
establishes standards for the initial measurement and subsequent
accounting for obligations associated with the sale, abandonment, or other
type of disposal of long-lived tangible assets arising from the
acquisition, construction, or development and/or normal operation of such
assets. SFAS No. 143 is effective for fiscal years beginning after June
15, 2002, with earlier application encouraged.
The adoption of these pronouncements will not have a material effect on
the Company's financial position or results of operations.
NOTE 2 NOTES PAYABLE
(A) NOTES PAYABLE - SHORT-TERM
-------------------------------
The Company has a convertible note payable with Rainbow Investments
International Limited ("RII") for $200,000 which was outstanding at March
31, 2002 and December 31, 2001. The note bears interest at 10% per annum
and was due May 2001. As of March 31, 2002, accrued interest on the note
amounted to $37,561. The debt and accrued interest is convertible to
common stock at a conversion price equal to 80% of the average closing bid
price per share during the ten trading days immediately prior to any such
conversion. On July 16, 2001, the Company received notice from RII of
their intent to convert the note and accrued interest to common stock. On
June 28, 2002, the Company converted the note plus accrued interest into
2,410,916 shares of restricted common stock in full satisfaction of the
outstanding obligation and accrued interest.
DCD HOLDINGS, LTD. NOTE PAYABLE
-------------------------------
On February 16, 2002, the Company entered into a short-term loan agreement
for (pound)600,000 (US $856,334) with DCD Holdings, Ltd., an unrelated
party, that calls for repayment on April 30, 2002. The loan carries an
interest rate of 4% above HSBC Bank base rate. Interest is payable
monthly. On May 1, 2002, the Company agreed to repay this loan via the
issuance of 4,000,000 shares of its restricted common stock valued at $.19
per share. The Company recorded a gain on the extinguishment of this loan
in the amount of $96,334.
8
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
(B) NOTES PAYABLE - LONG-TERM
------------------------------
On July 30, 2001, the Company entered into a two-year note with Berra
Holdings, Ltd. to borrow up to $187,500 at 6% interest. As of June 30,
2002 and December 31, 2001, the Company has borrowed $129,020. The note is
collateralized by 2,500,000 shares of common stock held in the name of
Clarino Investment International, Ltd. Accrued interest of $6,179 is due
Berra Holdings, Ltd. as of June 30, 2002.
5% CONVERTIBLE DEBENTURE
------------------------
In April 2002, IVP Technology raised $150,000 of gross proceeds from the
issuance of convertible debentures. These debentures accrue interest at a
rate of 5% per year and mature two years from the issuance date. The
debentures are convertible at the holder's option any time up to maturity
at a conversion price equal to the lower of (i) 120% of the closing bid
price of the common stock as of the closing date (ii) 80% of the average
closing bid price of the common stock for the 4 lowest trading days of the
5 trading days immediately preceding the conversion date. At maturity, IVP
Technology has the option to either pay the holder the outstanding
principal balance and accrued interest or to convert the debentures into
shares of common stock at a conversion price equal to the lower of (i)
120% of the closing bid price of the common stock as of the closing date
or (ii) 80% of the average closing bid price of the common stock for the 4
lowest trading days of the 5 trading days immediately preceding the
conversion date. IVP Technology has the right to redeem the debentures
upon 30 days notice for 120% of the amount redeemed. Upon such redemption,
IVP Technology will issue the investor a warrant to purchase 10,000 shares
of common stock at an exercise price of $0.50 per share for every $100,000
of debentures that are redeemed.
The convertible debentures contain a beneficial conversion feature
computed at its intrinsic value that is the difference between the
conversion price and the fair value on the debenture issuance date of the
common stock into which the debt is convertible, multiplied by the number
of shares into which the debt is convertible at the commitment date. Since
the beneficial conversion feature is to be settled by issuing equity, the
amount attributed to the beneficial conversion feature, or $64,286, was
recorded as an interest expense and a component of equity on the issuance
date.
NOTE 3 STOCKHOLDERS' EQUITY (DEFICIENCY)
During 1998 the Company issued 8,363,000 common shares for cash of $39,610
and a related subscription receivable of $359,000 which was satisfied in
1999 with cash of $327,700 and an offset of $31,300 to due to stockholder.
During 1998 the Company issued 2,000,000 common shares for past services.
For financial reporting purposes, the stock was valued at its quoted
trading price on the grant date resulting in an aggregate consulting
expense of $3,000,000 recorded in 1998.
During 1999 the Company issued 3,650,000 common shares for cash of $56,660
and a related subscription receivable of $136,350 which was collected in
March 2000.
During 1999 the Company issued 200,000 common shares for services. For
financial reporting purposes the stock was valued at its quoted trading
price on the grant dates resulting in expense of $10,000.
During 1999 the Company issued 5,787,000 common shares valued at
$1,215,270 in exchange for $483,100 of debt, customer deposits and
accounts payable to unrelated parties. For financial reporting purposes
the stock was valued at its quoted trading price on the settlement date.
The Company recognized a $732,170 loss on extinguishment.
During 1999 the Company issued 1,500,000 common shares for the extension
of a licensing agreement. For financial statement purposes the stock was
valued at its quoted trading price.
9
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
During 2000, the Company issued 4,500,000 common shares for cash of
$675,000 and 3,500,000 common shares for costs in connection with the
offering, which were valued at $350,000. The value of the 3,500,000 shares
of common stock is a direct offering cost and accordingly has been charged
to equity in 2000.
During 2000, 2,670,000 common shares were issued for services in the
amount of $1,614,661. These shares were valued at the quoted trading price
on the grant date. Deferred compensation in the amount of $316,286 was
recorded during the year for unearned consulting services.
In March 2000, the Company acquired all the outstanding shares of common
stock of Erebus Corporation from the stockholders thereof in exchange for
an aggregate of 350,000 shares of the Company's common stock at par value.
During 2000, the Company issued 600,000 common shares valued at its quoted
trading price. The stock was issued for payment of debt.
In May 2000, the Company amended and extended its software distribution
agreement. The agreement was extended to May 31, 2003 and the territory
expanded to Switzerland. In consideration of the above the Company issued
1,000,000 common shares in August 2001 and increased the royalty fee from
5% to 7.5%. The shares were valued at $0.72 based upon the closing pricing
at May 31, 2000. The $720,000 was originally recorded as common stock to
be issued in the equity section of the balance sheet at December 31, 2000
and the cost of the agreement is being amortized over the remaining term
of the agreement.
As of December 31, 2000, the Company recognized $140,000 as licensing fee
expense and recorded $580,000 for unearned licensing fee. The balance is
deferred licensing fee and will be amortized on a pro-rata basis over the
remaining life of the agreement.
During 2001, the Company issued 9,512,000 common shares for services
valued at the quoted trading price at the time of issuance. The total
value of such issuances amounted to $893,000. The Company also incurred
and recorded $50,000 of expenses for services rendered in 2001 for which
it will issue 1,000,000 shares in 2002.
During 2001, the Company rescinded 870,000 shares previously issued to
consultants for non-performance of services. Such shares were valued at
the original issued value which reflected market prices at the time of
issuance.
During the three months ended March 31, 2002, the Company issued
50,000,000 shares of its restricted common stock to Messrs. MacDonald,
Hamilton, Birch, Villella and Bullock in accordance with the 9/17/01 Stock
Purchase Agreement with International Technology Marketing. All shares are
held in safekeeping pending completion of the escrow agreement.
On or about March 25, 2002, the Company issued 500,000 shares of common
stock to John Maxwell in lieu of compensation for services performed in
2001 as President of IVP Technology. These shares were valued at $0.05 per
share, or an aggregate of $25,000, on the date of issuance.
On or about March 25, 2002, the Company issued 500,000 shares of common
stock to John Trainor in lieu of compensation for services performed in
2001 as Secretary of IVP Technology. These shares were valued at $0.05 per
share, or an aggregate of $25,000, on the date of issuance.
10
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
On or about March 25, 2002, the Company issued 2,375,600 shares of common
stock valued at $.05 per share to Thomas Chown for the conversion of
$118,780 of debts owed by the corporation for services performed in 2001.
On or about March 25, 2002, the Company issued 1,000,000 shares of common
stock to Buford Industries as conversion of a fee of $50,000 earned for
introducing IVP to International Technology Marketing. These shares were
valued at $0.05 per share, or an aggregate of $50,000, on the date of
issuance.
On or about March 25, 2002, the Company issued 50,000 shares of common
stock to Ruffa and Ruffa, P.A. for payment of interest on outstanding
legal bills for the year 2001 - 2002. These shares were valued at $0.10
per share, or an aggregate of $5,000, on the date of issuance.
On or about March 25, 2002, the Company issued 1,000,000 shares of common
stock to J. Stephen Smith to be held in escrow for services as a board
member for the period from 2001 to 2003 to be accrued at the rate of
500,000 per year.
On or about March 25, 2002, the Company issued 1,000,000 shares of common
stock to Michael Sidrow to be held in escrow for services as a board
member for the period from 2001 to 2003 to be accrued at the rate of
500,000 per year. Subsequently these shares have been rescinded as a
result of Mr. Sidrow's resignation from the board of directors.
On or about March 25, 2002, the Company issued 1,000,000 shares of common
stock to Robert King to be held in escrow for services as a board member
for the period from 2001 to 2003 to be accrued at the rate of 500,000 per
year. Subsequently these shares have been rescinded as a result of Mr.
King's resignation from the board of directors.
On April 26, 2002, the Company issued 62,027 shares of common stock to
Danson Partners, LLC having a value of $5,000 for consulting services
rendered.
On May 28, 2002, the Company acquired Ignition Entertainment Limited. IVP
Technology will issue 15,000,000 shares of common stock and 3,500,000
shares of preferred stock as payment to Ignition over a period of two
years from the date of the acquisition. Additionally, the management team
of Ignition may earn up to 1,500,000 shares of preferred stock if certain
revenue and net income goals are met at specific time periods. These
shares will be held in escrow and disbursed by the escrow agent according
to the escrow agreement.
In May 2002, the Company entered into an agreement with Vanessa Land for
marketing and advisory services connected with product marketing in the
European Economic Community and North America. In relation with this
agreement, IVP Technology issued 5,000,000 shares of common stock to Ms.
Land. These shares were registered on a Form S-8 filed on May 3, 2002.
These shares were valued at $.05 per share, or an aggregate of $250,000,
on the date of issuance.
On May 1, 2002, the Company agreed to issue 4,000,000 shares of its
restricted common stock having a value of $760,000 in full settlement of
its obligation to DcD Holdings Ltd.. IVP Technology issued these shares on
or about August 6, 2002.
On June 28, 2002, IVP Technology issued 2,410,916 shares of common stock
to Rainbow Investments pursuant to the terms of our March 17, 2000 debt
conversion agreement.
On June 28, 2002, the Company issued 23,370 shares of common stock to
Danson Partners, LLC having a value of $5,000 for consulting services
rendered.
NOTE 4 INCOME TAXES
Income tax expense (benefit) for the three-month periods ended June 30,
2002 and 2001 is summarized as follows:
2002 2001
---------- ---------
Current:
Federal - -
State - -
Deferred-Federal and State - -
---------- ---------
Income tax expense (benefit) - -
========== =========
11
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
The Company's tax expense differs from the "expected" tax expense for the
three-month periods ended June 30, 2002 and 2001 as follows:
2002 2001
---------- ---------
U.S. Federal income tax
provision (benefit) (237,422) $(129,302)
Effect of net operating loss
carryforward 237,422 129,302
---------- ---------
- -
========== =========
At June 30, 2002 the Company had net operating loss carryforwards in
excess of $15,000,000 for U.S. federal income tax purposes available to
offset future taxable income expiring on various dates beginning in 2016
through 2021.
NOTE 5 AGREEMENTS
(A) SOFTWARE DISTRIBUTION AGREEMENTS
-------------------------------------
On March 30, 1999, the Company entered into a software distributing
agreement granting the Company an exclusive right to distribute a software
product known as "Power Audit" throughout the United States of America.
(See below for subsequent amendments and extensions.) The significant
terms and conditions governing the agreement are as follows:
>> Payment by the Company of $50,000 in development funds.
>> Issuance of 500,000 in common shares of the Company to the owners and
developers of the software upon its delivery, which was in October
1999.
>> Royalty payments of 20% on the first $500,000 of sales, 12.5% on sales
between $500,000 and $1,000,000 and 5% on sales over $1,000,000.
The agreement has a term of fourteen (14) months and could be terminated
on six-month notice by either party. It can be extended on a year-to-year
basis, provided the gross annual sales exceed $1,000,000 and all other
terms are observed by the parties.
In September 1999, for a consideration of the Company's issuance of an
additional 1,000,000 common shares, the agreement was amended to include
the European Economic Community in its distribution territory and payment
of $4,200 per month for software support and services. The 1,500,000
common shares were issued in 1999 and were valued on the dates of the
agreement and amendment based on the quoted trading prices. The resulting
$220,000 value was presented as license fees, net of $106,000 accumulated
amortization, as of December 31, 1999. During the year ended December 31,
2000, the remaining license fees of $114,000 were charged to operations as
amortization expense.
In May 2000, the parties agreed to amend and extend the software agreement
for three years to May 31, 2003. The amended agreement expanded the
territory to include the Country of Switzerland, required the Company to
issue 1,000,000 common shares (See Note 3) and complete a financing of a
minimum of $2,000,000 with a portion of the proceeds to be used to
contract services of or to develop its own technical support and internal
marketing group. In connection with the issuance of the common shares, the
Company may be obligated to absorb costs relating to the registration of
those shares. In addition, the Company is required to complete a minimum
of twelve sales or licensing agreements of the software product prior to
the expiration of the twelve-month period ending June 1, 2002. In the
event that the minimum sales requirement is not met, the Company is
required to compensate the Software Owner for unpaid royalties at the rate
of $3,750 per sale shortfall up to the maximum of twelve, or $45,000, and
issue 100,000 common shares. Lastly, the royalty fee for sales over
$1,000,000 has been changed from 5% to 7.5%.
12
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
On June 13, 2002, the Company notified the Licensor that it was canceling
its license agreement effective immediately. As of the date of
cancellation, the Company was obligated to issue 100,000 shares of common
stock to the software owner.
(B) CONSULTING AGREEMENTS
--------------------------
On November 1, 1999 (the "Agreement Date") the Company entered into a
consulting agreement whereby the consultant agreed to assist the Company
in raising stipulated minimum equity capital and perform other consulting
services. Payment of 3,500,000 common shares was placed in escrow with the
issuance thereof contingent on raising the equity capital. In accordance
with generally accepted accounting principles, the escrowed shares were
not considered outstanding until released and therefore no value had been
assigned to them. In 2000 these shares were released and were valued at
the quoted trading price on the Agreement Date and charged to equity as an
offering cost (See Note 3).
On March 17, 2000, the Company entered into a consulting agreement with
the former stockholder of the acquired inactive reporting shell company
(See Note 1(B)). The consulting agreement states that one year after the
execution of the agreement ("reset date"), the 350,000 common shares
issued by the Company to the former stockholder shall be increased or
decreased based upon the average closing price of the Company's stock 30
days prior to the reset date, so the value of the 350,000 shares will
equal $500,000. The average closing price of the stock was $0.1487 per
share. The Company is obligated to issue an additional 3,012,475 common
shares to the consultant as an additional fee. As of June 30, 2002, the
Company has not received a request for the additional shares.
(C) LICENSING AGREEMENT
------------------------
On December 28, 2001, the Company entered into a two-year licensing
agreement to distribute software used by the insurance industry, which
agreement includes a non-exclusive right to sell such software to clients
in North America, Mexico, Canada, and their overseas territories. The cost
of such agreement was (pound)2,500,000 (US $3,620,268) and is being
amortized over the two-year period of the agreement. Amortization expense
for the three-month and six month periods ended June 30, 2002 was $452,534
and $905,068, respectively.
Pursuant to the terms of this agreement, the Company is obligated to
purchase from the Innovation Group, PLC $3,620,268 worth of Classifier
Software by December 31, 2002. The Company paid the Innovation Group, PLC
approximately $714,000 in connection with the License. The Company is
obligated to pay the balance by December 31, 2002.
(D) MARKETING AGREEMENT
------------------------
On January 18, 2002, the Company entered into a marketing agreement with
Ms. Vanessa Land to provide marketing services for the Company in Europe
for one year. The Company issued 5,000,000 shares to the consultant on
March 25, 2002 and were registered in a Form S-8 filed on May 3, 2002.
(E) STOCK PURCHASE AGREEMENT
-----------------------------
On September 17, 2001, the Company entered into a stock purchase agreement
to acquire 100% of the outstanding stock of International Technology
Marketing, Inc. ("ITM"). The agreement calls for the Company to issue
50,000,000 shares, which will be held in escrow subject to the Company
reaching certain sales milestones. The agreement also calls for the
Company to reimburse the shareholders of ITM in their efforts to meet the
sales milestones.
The sales milestones reached after the closing are as follows:
>> Upon achieving revenues of $500,000 the escrow agent will release
10,000,000 shares.
>> Upon achieving an additional $500,000 of revenues the escrow agent will
release another 10,000,000 shares.
13
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
>> Upon achieving $2,000,000 in cumulative revenues the escrow agent will
release another 10,000,000 shares.
>> Upon achieving $6,000,000 in cumulative revenues the escrow agent will
release another 10,000,000 shares.
>> Upon reaching $16,200,000 in cumulative revenues the final 10,000,000
shares will be released.
Pending execution of the escrow agreement, IVP Technology is holding these
shares for the benefit of the former shareholders of International
Technology Marketing.
(F) CORNELL CAPITAL PARTNERS, L.P. EQUITY LINE OF CREDIT AGREEMENT
-------------------------------------------------------------------
In April 2002, IVP Technology entered into an Equity Line of Credit
Agreement with Cornell Capital Partners, L.P. Under this agreement, IVP
Technology may issue and sell to Cornell Capital Partners common stock for
a total purchase price of up to $10.0 million. Subject to certain
conditions, IVP Technology will be entitled to commence drawing down on
the Equity Line of Credit when the common stock to be issued under the
Equity Line of Credit is registered with the Securities and Exchange
Commission and the registration statement is declared effective and will
continue for two years thereafter. The purchase price for the shares will
be equal to 92% of the market price, which is defined as the lowest
closing bid price of the common stock during the five trading days
following the notice date. The amount of each advance is subject to an
aggregate maximum advance amount of $425,000 in any thirty-day period. IVP
Technology paid Cornell a one-time fee equal to $340,000, payable in
3,032,000 shares of common stock. Cornell Capital Partners is entitled to
retain 3.0% of each advance. In addition, IVP Technology entered into a
placement agent agreement with Westrock Advisors, Inc., a registered
broker-dealer. Pursuant to the placement agent agreement, IVP Technology
paid a one-time placement agent fee of 100,000 shares of common stock,
which were valued at $0.10 per share, or an aggregate of $10,000, on the
date of issuance. IVP Technology agreed to pay Danson Partners, LLC, a
consultant, a one-time fee of $200,000 for its work in connection with
consulting the company on various financial matters. Of the fee, $75,000
was paid in cash with the balance paid in 1,040,000 shares of common
stock.
(G) MONTPELIER LIMITED
-----------------------
On June 1, 2002, Ignition Entertainment Limited entered into a consulting
agreement with Montpelier Limited ("Montpelier") whereby Montpelier will
provide business development and financial advice to Ignition. Under the
terms of the agreement, Ignition is obligated to pay Montpelier annually
(pound)179,850 ($262,970) in equal monthly instalments. Additionally,
Montpelier was entitled to receive a signing bonus of (pound)29,975
($43,828) upon execution of the agreement.
NOTE 6 ACQUISITION OF IGNITION ENTERTAINMENT LIMITED
On May 28, 2002, the Company acquired 100% of the stock of Ignition
Entertainment Limited, a UK corporation, that specializes in the design,
development, licensing, publishing and distribution of personal computer,
mobile devices and game console software and accessories. This acquisition
was made pursuant to the Company agreeing to issue 15,000,000 shares of
unregistered common stock and 3,500,000 of unregistered preferred stock
convertible into 35,000,000 shares of common stock, collectively valued at
$0.13687 per share for a total purchase price of $6,843,509. These shares
will be held in escrow until disbursed in accordance with the terms of the
escrow agreement. IVP has also agreed to offer incentive payments to
certain parties in connection with the Ignition acquisition. DCD Holdings
will receive 5,000,000 shares of IVP's common stock 90 to 180 days after
May 28, 2002 for maintaining adequate factoring and letter of credit lines
for Ignition. The Ignition management team will also have the opportunity
to earn an additional 1,500,000 shares of convertible preferred shares
over three years, which are also convertible into 15,000,000 shares of IVP
Technology common stock, for key employees and shareholders depending upon
the attainment of certain levels of gross revenues and net income. This
acquisition has been accounted for by the purchase method of accounting
and, accordingly, the operating results have been included in the
Company's consolidated results of operations from the date of acquisition.
The excess of the consideration given over the fair value of net assets
acquired has been recorded as goodwill of $5,552,449. The Company will
account for the purchased goodwill in accordance with the provisions of
SFAS 142.
14
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
The following unaudited pro forma consolidated results of operations are
presented as if the acquisition of Ignition had been made at the beginning
of the periods presented:
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30, 2002 DECEMBER 31, 2001
------------------ -------------------
Net sales $ 1,454,865 $ 67,358
Net earnings (loss) (4,189,115) (1,211,148)
Basic and diluted earnings
(loss) per common shares $ (.05) $ (.03)
The unaudited pro forma information is not necessarily indicative of the
results of operations that would have occurred had the purchase been made
at the beginning of the periods presented or the future results of the
combined operations.
NOTE 7 GOING CONCERN
As reflected in the accompanying financial statements, the Company's
recurring losses during the development stage of $12,883,106, and its
working capital deficiency of $2,681,835 raise substantial doubt about its
ability to continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company's ability to raise
additional capital and implement its business plan. The financial
statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
The Company has entered into new license and marketing agreements (SEE
NOTES 5(C), (D)), has raised equity capital (SEE NOTE 5(F)), and has
expanded its business operations (SEE NOTE 6). Management believes that
actions taken to obtain additional funding and to expand its products and
operations, provide the opportunity for the Company to continue as a going
concern.
NOTE 8 SUBSEQUENT EVENTS
ACQUISITION OF SPRINGBOARD TECHNOLOGY SOLUTIONS, INC.
-----------------------------------------------------
On July 1, 2002, IVP Technology acquired all the outstanding shares of
Springboard Technology Solutions, Inc. for consideration of 2,000 common
shares on the basis of a one for one exchange. Springboard Technology
Solutions Inc. was owned by the former shareholders of International
Technology Marketing Inc., including Brian MacDonald, Peter Hamilton,
Kevin Birch and Geno Villella, all of whom are officers of IVP Technology,
and has provided the physical infrastructure for IVP Technology
Corporation since December, 2001. Springboard Technology is a data
solutions company that provides network solutions, web and software
development and data interface services, which has been in operation for
three years. At the time of acquisition, Springboard Technology had 10
full time employees and consultants excluding the management of IVP
Technology.
15
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS OVERVIEW
IVP Technology Corporation is a Toronto headquartered software developer,
licensor, publisher, marketer, and distributor, and was, until December 31,
2001, engaged solely in distributing a software product marketed under the name
PowerAudit. On June 13, 2002, IVP Technology terminated the software
distribution agreement for the PowerAudit product. Since January 1, 2002, IVP
Technology has been in the process of expanding its operating businesses towards
consumer and enterprise software. In May 2002, IVP Technology acquired Ignition
Entertainment Limited, a UK company, engaged in the development, licensing,
publishing, marketing and distribution of consumer software and video games. In
July 2002, IVP Technology acquired Springboard Technology Solutions Inc., which
develops software and web applications and provides network and data interface
solutions services.
IVP Technology's enterprise software division operates in conjunction with its
wholly owned subsidiary, Springboard Technology Solutions Inc., to develop,
market, license and install data solutions that solve problems and create value
for mid-size companies, large corporations and government agencies. These data
solutions incorporate data capture, transmission, analysis reporting and
presentation. IVP Technology's data solutions use Vaayu(TM), "Classifier(TM)"
and "VIPER(TM)" to take data from the field through cross platform mobile
enterprise applications to the executive suite.
IVP Technology's consumer software division operates through its wholly-owned
subsidiary, Ignition Entertainment Limited. Ignition develops, publishes,
licenses and distributes consumer software products and related accessories for
mobile devices, PC's, Sony Playstation, Nintendo GameboyAdvance, Nintendo Game
Cube and Microsoft X-Box platforms on a worldwide basis.
LICENSED AND WHOLLY-OWNED ENTERPRISE SOFTWARE PRODUCTS
ENTERPRISE SOFTWARE LINES. The enterprise software business line currently
markets data solutions which focus on mobile enterprise applications, made up of
separate software products that can operate on a stand-alone basis or integrate
with other enterprise level software. IVP Technology believes that these
products will provide enterprises with increased economy, efficiency and
effectiveness when enterprises are faced with the necessity of obtaining data
from the field and moving it into processes that take place in the front and
back office environment through to business decision making levels. A
description of IVP Technology's current mobile enterprise software products is
described below.
CLASSIFIER. On December 28, 2001, IVP Technology entered into a two-year,
non-exclusive licensing agreement to distribute the Classifier software
program, developed by The Innovation Group, PLC, throughout the financial
services industry and other market sectors. The Innovation Group is one of
the leading developers of software and systems for financial services. IVP
Technology received a non-exclusive right to sell such software in the
United States, Mexican and Canadian territory.
Pursuant to the terms of this agreement, IVP Technology is obligated to
purchase from The Innovation Group $3,620,268 worth of Classifier software
by December 31, 2002. IVP Technology has paid The Innovation Group
(pound)500,000 or approximately $714,000 in connection with the license.
Unless the distribution agreement is amended, IVP Technology is obligated
to pay an additional (pound)500,000 or approximately $724,000 by September
30, 2002 and (pound)1.5 million or approximately $2,172,268 by December
31, 2002. On February 16, 2002, IVP Technology borrowed $864,180 from DcD
Limited that was used, in part, to pay the March 31, 2002 installment to
the Innovation Group.
DESCRIPTION OF CLASSIFIER. The Classifier product is a sophisticated
business intelligence solution that provides data analysis benchmarking
which can monitor on-going improvements on business activities, such as
specific products, lines of business or other information of a business
operation. The Classifier was designed to create and broadcast business
intelligence knowledge views direct to decision makers over corporate
Intranets and the Internet. The Classifier turns a database into a web
site, enabling more people to access data with a web-browser. The
Classifier incorporates a high-performance and powerful data analysis
server, a web-report publishing facility, versatile data transformation
features and the ability to connect and extract data from multiple back
office data sources.
16
MARKET FOR CLASSIFIER. The market for Classifier is almost exclusively
centered on larger enterprises where polling databases for changes in
volumes, makeup and conditions in various components of sales, cost of
sales and components could have a material impact on the way the business
is managed. The product can be adapted to various industry sectors.
VIPER. On February 20, 2002, IVP Technology entered into an agreement with
SmartFocus Limited, to resell its Viper(R) suite of products which
consists of Viper Analyze and Visualize, Viper Data Mining, Viper CRM,
Viper Campaign Planner and Smart Campaigner. Pursuant to the license, IVP
Technology will be entitled to a 15% commission on sales of Viper through
customer opportunities created by IVP Technology. SmartFocus will make
sales representatives available to assist in sales presentations.
DESCRIPTION OF VIPER. IVP Technology believes that Viper is a powerful,
fast and easy-to-use analysis and visualization application designed for
company marketing departments and those decision makers concerned with
gross data from voluminous rows of customer information. Viper harnesses
customer and transactional data from any touch-point or channel across any
organization to create, build and maintain customer insight and customer
intelligence. Viper is designed to empower enterprises to better
understand, predict, manage and influence customer behavior.
VAAYU. On June 27, 2002, IVP Technology announced the release of Vaayu,
which is a product that was created by Springboard Technology Solutions
Inc., which on July 1, 2002 became a wholly-owned subsidiary of IVP
Technology.
Vaayu(TM) is a platform-independent software product that enables remote
data collection through any Java-enabled device, including Palm OS
devices, RIM devices, handheld computers and mobile phones, to transmit
data to and from mobile staff in the field.
Vaayu(TM) allows forms to be manually or dynamically created through the
Vaayu(TM) Administration Studio and transmitted or "published" to a remote
field force through XML-based protocols. Data can then be collected in the
field through handheld devices and transmitted back to the enterprise, at
which point the data can populate existing systems in real time. Future
releases of Vaayu(TM) that are currently in development will enable the
remote collection of bar codes, photographs, scanned documents, voice and
any other information capable of being digitized.
Vaayu(TM) has been built exclusively using leading, standards-based
technologies, including XML (Extensible Markup Language) and J2ME(TM)
(Java(TM) 2 Platform, Micro Edition). XML is a technology that provides a
flexible way to create common information formats and share both the
format and the data on the World Wide Web, intranets, and elsewhere.
J2ME(TM) is a technology that allows use of the Java programming language
for applications developed for mobile wireless information devices such as
cellular phones and personal digital assistants (PDA's). This provides
unprecedented flexibility in mobile data collection in terms of how an
organization will deploy the solution and which devices the field force
will use for data collection.
Until May 2003, IVP Technology had the exclusive rights to market and
distribute the PowerAudit software in the United States, the European
Economic Community and Switzerland. On June 13, 2002, IVP Technology
elected to terminate the license.
CONSUMER SOFTWARE AND VIDEO GAME PRODUCTS LINES. On May 28, 2002, IVP
Technology acquired Ignition Entertainment Limited, a company organized
under the laws of England and Wales, specializing in the design,
development, licensing, publishing and distribution of personal computer,
mobile devices and game console software and accessories. Pursuant to this
agreement, IVP Technology agreed to issue 15,000,000 shares of IVP's
common stock and 3,500,000 shares of convertible preferred shares of IVP
Technology over approximately the next two years. Upon conversion of the
preferred stock, these payments will equal 50 million shares of IVP common
stock. These shares will be held in escrow until disbursed in accordance
with the escrow agreement. The parties are in the process of negotiating
the terms of the escrow.
17
IVP has also agreed to offer incentive payments to certain parties in
connection with the Ignition acquisition. DCD Holdings will receive
5,000,000 shares of IVP's common stock 90 to 180 days after May 28, 2002
for maintaining adequate factoring and letter of credit lines for
Ignition. The Ignition management team will also have the opportunity to
earn an additional 1,500,000 shares of convertible preferred shares over
three years, which are convertible into 15,000,000 shares of IVP
Technology common stock, for key employees and shareholders depending upon
the attainment of the following levels of gross revenues and net income:
PAYMENT SCHEDULE FOR ACQUISITION
OF IGNITION ENTERTAINMENT LIMITED AND INCENTIVE PAYMENTS
Between After the After the After the
Within 91 and 180 preceding time period and six preceding time
90 days of days after period to months to and On
Time Period: Closing May 28, 2002 May 28, 2003 May 28, 2003 May 28, 2004 May 29, 2004
- ------------------------ ------------ ------------ ------------- --------------- --------------- --------------
Goals: -- -- -- $13,000,00 $26,000,000 $45,000,000
Gross Revenues (in U.S.
Dollars)
Net Income (in U.S. -- -- -- $1,000,000 $5,000,000 $15,000,000
Dollars)
Payments: -- 5,000,000 to -- if reach both if reach both if reach both
Incentive Payments of DCD Holdings above goals above goals above goals
IVP common and preferred 500,000 shares 500,000 shares 500,000 shares
shares of convertible of convertible of convertible
preferred stock preferred stock preferred stock
Release of 50 Million -- 15,000,000 1,000,000 1,000,000 1,000,000 500,000 shares
Shares of IVP common shares of shares of shares of shares of of preferred
stock (upon conversion common stock preferred stock preferred stock preferred stock stock
of all preferred stock (convertible to (convertible to (convertible to (convertible to
issued) 10,000,000 10,000,000 10,000,000 5,000,000
shares of shares of shares of shares of
common stock) common stock) common stock) common stock)
ACQUISITION OF SPRINGBOARD TECHNOLOGY SOLUTIONS INC.
On July 1, 2002, IVP Technology acquired all the outstanding shares of
Springboard Technology Solutions Inc. for consideration of 2,000 common shares
on the basis of a one for one exchange. Springboard Technology Solutions Inc.
was owned by the former shareholders of International Technology Marketing Inc.,
including Brian MacDonald, Peter Hamilton, Kevin Birch and Geno Villella, all of
whom are officers of IVP Technology, and has provided the physical
infrastructure for IVP Technology Corporation since December, 2001. Springboard
Technology is a data solutions company that provides network solutions, web and
software development and data interface services, which has been in operation
for three years. At the time of acquisition, Springboard Technology had 10
full-time employees and consultants excluding the management of IVP Technology.
ACQUISITION OF INTERNATIONAL TECHNOLOGY MARKETING, INC.
On September 17, 2001, IVP Technology entered into a stock purchase agreement
with International Technology Marketing, Inc. Pursuant to this agreement, IVP
Technology agreed to issue 50 million shares of restricted common stock to the
shareholders of International Technology Marketing, who include Messrs.
MacDonald, Hamilton, Birch and Villella, the members of our current management
team, and to Ms. Bullock, a former member of our management team, in exchange
for all of International Technology Marketing's common stock. On March 25, 2002,
we issued the 50 million shares of common stock to the former shareholders of
International Technology Marketing. Pending execution of an escrow agreement,
IVP Technology is holding these shares for the benefit of the former
shareholders of International Technology Marketing. These shares will be held
pending satisfaction of certain performance related goals. As these goals are
achieved, the shares will be disbursed from the escrow to the former
shareholders of International Technology Marketing. The former shareholders are
entitled to vote the shares held in escrow pending satisfaction of the
performance goals.
18
The performance goals are as follows:
>> 10,000,000 shares will be disbursed upon aggregate sales of $500,000
>> 10,000,000 shares will be disbursed upon aggregate sales of $1,000,000
>> 10,000,000 shares will be disbursed upon aggregate sales of $2,000,000
>> 10,000,000 shares will be disbursed upon aggregate sales of $6,000,000
>> 10,000,000 shares will be disbursed upon aggregate sales of $16,200,000.
On November 16, 2001, IVP Technology held its annual stockholders' meeting. At
the meeting, a majority of IVP Technology's outstanding capital stock voted in
favor of the acquisition of International Technology Marketing, as well as the
increase in the authorized common stock to 150 million shares. Also at the
meeting, the shareholders elected two members of the new management team
together with three independent board members Messers. Smith, Sidrow and King,
to the Board of Directors. Messrs. Sidrow and King subsequently resigned as
board members.
The following is management's discussion and analysis of certain significant
factors which have affected our financial position and operating results.
Certain statements under this section may constitute
"forward-looking-statements" (See Part II-Other Information). The following
discussion should be read in conjunction with the unaudited financial statements
and notes thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH THE THREE MONTHS ENDED JUNE
30, 2001
REVENUES. During the three months ended June 30, 2002, we generated $497,326 in
revenue from the sale and/or distribution of video entertainment related
products, of which $407,326 was generated from our wholly-owned subsidiary,
Ignition Entertainment Limited. Ignition Entertainment was formed in December
2001 and commenced operations in April 5, 2002, when it made several
acquisitions of operating companies. Accordingly, Ignition Entertainment had no
revenues in the comparable period in the prior year. All revenue in the prior
period was generated from sales of PowerAudit, which we had a license to
distribute until June 13, 2002. On that date, we elected to terminate the
license for PowerAudit.
OPERATING EXPENSES. Total operating expenses for the three months ended June 30,
2002 and for the three months ended June 30, 2001 were $1,646,966 and $8,562,
respectively, or an increase of $1,638,404. The increase in operating expenses
resulted primarily from an increase in amortization and depreciation expense of
$566,833, relating to amortization of licensing fees paid on Classifier
Software, depreciation on Ignition's fixed assets and an increase in consulting
and professional fees of $627,592 from the prior quarter. Our infrastructure
expenses increased due to the additional costs associated with the Company's new
management team and the formation of an active business.
OTHER INCOME (EXPENSE). For the three months ended June 30, 2002, we recognized
a $96,334 gain on the extinguishment of the DCD Holdings Limited short-term loan
by satisfying the loan with 4,000,000 shares of common stock having a value of
$760,000. Interest expense was $62,942 for the three months ended June 30, 2002,
consisting principally from the benficial conversion feature of our convertible
debt.
NET INCOME (LOSS). As a result of the items specified above, IVP Technology had
a net loss of ($1,498,026), or $0.01 per share, for the three months ended June
30, 2002.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH THE SIX MONTHS ENDED JUNE 30,
2001
REVENUES. During the six months ended June 30, 2002, we generated $497,326 in
revenue from the sale and/or distribution of video entertainment related
products, of which $407,326 was generated from our wholly-owned subsidiary,
Ignition Entertainment Limited. Ignition Entertainment was formed in December
2001 and commenced operations in April 5, 2002, when it made several
acquisitions of operating companies. Accordingly, Ignition Entertainment had no
revenues in the comparable period in the prior year. All revenue in the prior
period was generated from sales of PowerAudit, which we had a license to
distribute until June 13, 2002. On that date, we elected to terminate the
license for PowerAudit.
OPERATING EXPENSES. Total operating expenses for the six months ended June 30,
2002 and for the six months ended June 30, 2001 were $2,393,339 and $415,923,
respectively, and represents a 475% increase from the prior period. The increase
in operating expenses resulted primarily from an increase in depreciation and
amortization expense of $1,079,367 relating primarily to amortization of
licensing fees paid on the Classifier Software and an increase in professional
and consulting expenses from $287,012 to $609,238, or $322,226. Our
infrastructure expenses increased $230,406 due to the additional costs
associated with the Company's new management team and the formation of an active
business.
OTHER INCOME (EXPENSE). For the six months ended June 30, 2002, we recognized a
$96,334 gain on the extinguishment of the DCD Holdings Limited short-term loan
19
by satisfying the loan with 4,000,000 shares of common stock having a value of
$760,000. Interest expense was $74,869 for the six months ended June 30, 2002,
consisting principally from the benficial conversion feature of our convertible
security.
NET INCOME (LOSS). For the six months ended June 30, 2002, we incurred an
overall loss of $(2,256,326) or $(.03) per share.
LIQUIDITY AND CAPITAL RESOURCES
In the past we have financed our operations through a combination of convertible
securities and the private placement of our stock. Our primary need for cash is
to fund our ongoing operations until such time that the sale of our products
generates enough revenue to fund operations. In addition, our need for cash
includes satisfying $4,528,681 in current liabilities, including software
license fees of $2,906,658 due by December 31, 2002, a convertible note of
$129,020 plus accrued interest, accounts payable and accrued expenses of
$1,345,668 and income tax payable by Ignition in the amount of $139,450. Our
independent accountants have issued a going concern opinion on our financial
statements that raise substantial doubt about our ability to continue as a going
concern. Our ability to continue as a going concern is dependent on our ability
to raise additional capital and implement our business plan to market and sell
Classifier, Viper, Vaayu and consumer entertainment software products through
our wholly-owned subsidiary, Ignition Entertainment Limited.
At June 30, 2002, IVP Technology's cash and cash equivalents balance was
$867,484, an increase of $867,252 from the balance of $232 at December 31, 2001.
During the six months ended June 30, 2002, cash (used) in operations and
investing activities amounted to $(1,216,556) and $1,227,474, respectively. Cash
used in operating activities consisted primarily of a net loss of $(2,256,326)
and a decrease in amounts payable under the licensing agreement of $(713,610).
These amounts were partially offset by stock issued for services of $617,779,
interest expense on beneficial conversion of $64,286, amortization and
depreciation of $1,079,367. Cash flows from investing activities were primarily
from the acquisition of Ignition's net assets in the amount of $1,291,059. Cash
provided by financing activities in the amount of $856,334 was from the DCD
short-term loan.
DCD Finance has provided Ignition Entertainment a Line of Credit Facility
("LOC") and a Factoring Facility. Under the LOC, Ignition Entertainment may
contract for the importation of software products to the extent of 60% of the
projected resale price of items purchased as a result of the LOC. The LOC may be
accessed by demonstrating firm orders for goods to be delivered and sold. Under
the Factoring Facility, Ignition will be able to obtain immediate credit on
sales invoices to the extent of 80% of the invoice value.
On January 31, 2002, we entered into an interim financing agreement for
(pound)600,000, (U.S.$856,334) on an unsecured basis with the European based
venture capital and merchant banking firm DcD Limited. The loan bears an
interest rate equal to the HSBC Bank base rate, minus 5% if that figure is
positive, and interest is payable monthly. The loan was due on April 30, 2002.
On May 1, 2002, we converted the loan, plus accrued interest into 4,000,000
shares of our common stock.
In April 2002, IVP Technology raised $150,000 of gross proceeds from the
issuance of convertible debentures. These debentures accrue interest at a rate
of 5% per year and mature two years from the issuance date. The debentures are
20
convertible at the holder's option any time up to maturity at a conversion price
equal to the lower of (i) 120% of the closing bid price of the common stock as
of the closing date (ii) 80% of the average closing bid price of the common
stock for the 4 lowest trading days of the 5 trading days immediately preceding
the conversion date. At maturity, IVP Technology has the option to either pay
the holder the outstanding principal balance and accrued interest or to convert
the debentures into shares of common stock at a conversion price equal to the
lower of (i) 120% of the closing bid price of the common stock as of the closing
date or (ii) 80% of the average closing bid price of the common stock for the 4
lowest trading days of the 5 trading days immediately preceding the conversion
date. IVP Technology has the right to redeem the debentures upon 30 days notice
for 120% of the amount redeemed. Upon such redemption, IVP Technology will issue
the investor a warrant to purchase 10,000 shares of common stock at an exercise
price of $0.50 per share for every $100,000 of debentures that are redeemed.
In April 2002, IVP Technology entered into an Equity Line of Credit Agreement
with Cornell Capital Partners, L.P. Under this agreement, IVP Technology may
issue and sell to Cornell Capital Partners common stock for a total purchase
price of up to $10.0 million. Subject to certain conditions, IVP Technology will
be entitled to commence drawing down on the Equity Line of Credit when the
common stock to be issued under the Equity Line of Credit is registered with the
Securities and Exchange Commission and the registration statement is declared
effective and will continue for two years thereafter. The purchase price for the
shares will be equal to 92% of the market price, which is defined as the lowest
closing bid price of the common stock during the five trading days following the
notice date. The amount of each advance is subject to an aggregate maximum
advance amount of $425,000 in any thirty-day period. IVP Technology paid Cornell
a one-time fee equal to $340,000, payable in 3,032,000 shares of common stock.
Cornell Capital Partners is entitled to retain 3.0% of each advance. In
addition, IVP Technology entered into a placement agent agreement with Westrock
Advisors, Inc., a registered broker-dealer. Pursuant to the placement agent
agreement, IVP Technology paid a one-time placement agent fee of 100,000 shares
of common stock, which were valued at $0.10 per share, or an aggregate of
$10,000, on the date of issuance. IVP Technology agreed to pay Danson Partners,
LLC, a consultant, a one-time fee of $200,000 for its work in connection with
consulting the company on various financial matters. Of the fee, $75,000 was
paid in cash with the balance paid in 1,040,000 shares of common stock.
CRITICAL ACCOUNTING POLICIES
(A) ORGANIZATION
Mountain Chief, Inc. was incorporated in the State of Nevada on February 11,
1994. This name was subsequently changed by Articles of Amendment dated November
16, 1994 to IVP Technology Corporation (the "Company"). The Company was granted
an extra-provincial license by the Province of Ontario on June 20, 1995 to carry
on business in Ontario, Canada. Prior to 1998, the Company was involved with
various unsuccessful activities relating to the sale of technology products
before becoming inactive by the end of 1997. The Company began negotiations with
a third party in 1998 to become an exclusive distributor of software and
therefore is considered to have re-entered the development stage on January 1,
1998. Activities from inception of development stage included raising of capital
and negotiations and acquisition of software distribution licenses are more
fully described herein. (See Note 5).
(B) ACQUISITION AND RECAPITALIZATION
Effective March 2000, the Company acquired all the outstanding shares of common
stock of Erebus Corporation, an inactive reporting shell company with no assets
or liabilities, from the stockholders thereof in an exchange for an aggregate of
350,000 shares of the Company's common stock and paid $200,000 of consulting
expenses in connection with the acquisition. Pursuant to Rule 12-g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission, the
Company elected to become the successor issuer to Erebus Corporation for
reporting purposes under the Securities Exchange Act of 1934. For financial
reporting purposes, the acquisition was treated as a recapitalization of the
Company with the par value of the common stock charged to additional-paid-in
capital.
(C) BASIS OF PRESENTATION
The Company maintains its original records in United States dollars. The
consolidated financial statements are expressed in United States dollars and
have been prepared in accordance with generally accepted accounting principles
(GAAP) in the United States.
(D) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiary, Ignition Entertainment Limited. All significant inter-company
transactions and balances have been eliminated.
(E) FOREIGN CURRENCY TRANSACTIONS
Transactions conducted in Canadian dollars and British pounds have been
translated into United States dollars using the average exchange rate for the
month in which the transactions occurred. Gains or losses are recognized in the
statement of operations.
(F) USE OF ESTIMATES
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
21
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
(G) CASH AND CASH EQUIVALENTS
For purposes of the cash flow statements, the Company considers all highly
liquid investments with original maturities of three months or less at the time
of purchase to be cash equivalents.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires disclosures of information about the
fair value of certain financial instruments for which it is practicable to
estimate the value. For purposes of this disclosure, the fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties other than in a forced sale or
liquidation.
The carrying amounts of the Company's accounts receivable, accounts payable and
accrued liabilities, and note and interest payable thereon approximates fair
value due to the relatively short period to maturity for these instruments.
(I) INCOME TAXES
The Company accounts for income taxes under the Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("Statement 109"). Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
(J) CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
(K) LOSS PER SHARE
Basic and diluted net loss per common share for all periods presented is
computed based upon the weighted average common shares outstanding as defined by
Financial Accounting Standards No. 128, "Earnings Per Share". There were no
common stock equivalents at June 30, 2002.
(L) BUSINESS SEGMENTS
The Company applies Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information". The
Company operates in one segment and therefore segment information is not
presented.
(M) REVENUE RECOGNITION
The Company records revenue associated with the sale of software licenses on a
pro-rata basis over the license term. The Company records revenue associated
with sales of entertainment-related consumer software on a delivered basis
subject to an allowance for returns.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued several new
Statements of Financial Accounting Standards. Statement No. 141, "Business
Combinations" supersedes APB Opinion 16 and various related pronouncements.
Pursuant to the new guidance in Statement No.141, all business combinations must
be accounted for under the purchase method of accounting; the
pooling-of-interests method is no longer permitted. SFAS 141 also establishes
new rules concerning the recognition of goodwill and other intangible assets
arising in a purchase business combination and requires disclosure of more
information concerning a business combination in the period in which it is
22
completed. This statement is generally effective for business combinations
initiated on or after July 1, 2001.
Statement No.142, "Goodwill and Other Intangible Assets" supercedes APB Opinion
17 and related interpretations. Statement No.142 establishes new rules on
accounting for the acquisition of intangible assets not acquired in a business
combination and the manner in which goodwill and all other intangibles should be
accounted for subsequent to their initial recognition in a business combination
accounted for under SFAS No. 141. Under SFAS No.142, intangible assets should be
recorded at fair value. Intangible assets with finite useful lives should be
amortized over such period and those with indefinite lives should not be
amortized. All intangible assets being amortized as well as those that are not,
are both subject to review for potential impairment under SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of'. SFAS No.142 also requires that goodwill arising in a business
combination should not be amortized but is subject to impairment testing at the
reporting unit level to which the goodwill was assigned to at the date of the
business combination.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 and
must be applied as of the beginning of such year to all goodwill and other
intangible assets that have already been recorded in the balance sheet as of the
first day in which SFAS No.142 is initially applied, regardless of when such
assets were acquired. Goodwill acquired in a business combination whose
acquisition date is on or after July 1, 2001, should not be amortized, but
should be reviewed for impairment pursuant to SFAS No. 121, even though SFAS
No.142 has not yet been adopted. However, previously acquired goodwill should
continue to be amortized until SFAS No.142 is first adopted.
Statement No. 143 "Accounting for Asset Retirement Obligations" establishes
standards for the initial measurement and subsequent accounting for obligations
associated with the sale, abandonment, or other type of disposal of long-lived
tangible assets arising from the acquisition, construction, or development
and/or normal operation of such assets. SFAS No.143 is effective for fiscal
years beginning after June 15, 2002, with earlier application encouraged.
The adoption of these pronouncements will not have a material effect on IVP
Technology's financial position or results of operations.
ACQUISITIONS
ACQUISITION OF IGNITION ENTERTAINMENT LIMITED
On May 28, 2002, IVP Technology entered into a purchase agreement with Ignition
Entertainment Limited, a company organized under the laws of England and Wales.
Pursuant to this agreement, IVP Technology agreed to issue 15,000,000 shares of
IVP Technology's common stock and 3,500,000 shares of convertible preferred
shares (convertible into 35,000,000 shares of common stock) over approximately
the next two years. Upon conversion, these payments will equal 50 million shares
of IVP Technology common stock. These shares will be held in escrow until
disbursed in accordance with the escrow agreement.
Additionally, IVP Technology will also offer incentive payments to certain
parties in connection with the Ignition acquisition. DCD Holdings will receive
5,000,000 shares of IVP Technology's common stock 90 to 180 days after May 28,
2002 for maintaining adequate factoring lines for Ignition. Additionally, the
Ignition management team will have the opportunity to earn an additional
1,500,000 shares of convertible preferred shares for key employees and
shareholders depending upon the attainment of the following levels of gross
revenues and net income:
23
PAYMENT SCHEDULE FOR ACQUISITION
OF IGNITION ENTERTAINMENT LIMITED AND INCENTIVE PAYMENTS
BETWEEN AFTER THE AFTER THE AFTER THE
WITHIN 91 AND 180 PRECEDING TIME PERIOD AND SIX PRECEDING TIME
90 DAYS OF DAYS AFTER PERIOD TO MONTHS TO AND ON
TIME PERIOD: CLOSING MAY 28, 2002 MAY 28, 2003 MAY 28, 2003 May 28, 2004 May 29, 2004
- ------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Goals: -- -- -- $13,000,00 $26,000,000 $45,000,000
Gross Revenues (in U.S.
Dollars)
Net Income (in U.S. -- -- -- $1,000,000 $5,000,000 $15,000,000
Dollars)
Payments: -- 5,000,000 to -- if reach both if reach both if reach both
Incentive Payments of DCD Holdings above goals above goals above goals
IVP common and preferred 500,000 shares 500,000 shares 500,000 shares
shares of convertible of convertible of convertible
preferred stock preferred stock preferred stock
Release of 50 Million -- 15,000,000 1,000,000 1,000,000 1,000,000 500,000 shares
Shares of IVP common shares of shares of shares of shares of of preferred
stock (upon conversion common stock preferred stock preferred stock preferred stock stock
of all preferred stock (convertible to (convertible to (convertible to (convertible to
issued) 10,000,000 10,000,000 10,000,000 5,000,000
shares of shares of shares of shares of
common stock) common stock) common stock) common stock)
ACQUISITION OF SPRINGBOARD TECHNOLOGY SOLUTIONS INC.
On July 1, 2002, IVP Technology acquired all the outstanding shares of
Springboard Technology Solutions Inc. for consideration of 2,000 common shares
on the basis of a one for one exchange. Springboard Technology Solutions Inc.
was owned by the former shareholders of International Technology Marketing Inc.
(including Brian MacDonald, Peter Hamilton, Kevin Birch and Geno Villella, all
of whom are officers of IVP Technology) and has provided the physical
infrastructure for IVP Technology Corporation since December, 2001 Springboard
Technology is a data solutions company that provides network solutions, web and
software development and data interface services, which has been in operation
for three years. At the time of acquisition, Springboard Technology had 10 full
time employees and consultants excluding the management of IVP Technology.
24
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
On July 1, 2002, IVP Technology acquired all the outstanding shares of
Springboard Technology Solutions, Inc. for consideration of 2,000 common shares
on the basis of a one for one exchange.
On June 28, 2002, IVP Technology issued 2,410,916 shares of common stock to
Rainbow Investments pursuant to the terms of our March 17, 2000 debt conversion
agreement.
On June 28, 2002, IVP Technology issued 23,370 shares of common stock to Danson
Partners, LLC having a value of $5,000 for consulting services rendered.
On May 28, 2002, IVP Technology acquired Ignition Entertainment Limited. IVP
Technology will issue 15,000,000 shares of common stock and 3,500,000 shares of
preferred stock as payment to Ignition over a period of two years from the date
of the acquisition. Additionally, the management team of Ignition may earn up to
1,500,000 shares of preferred stock if certain revenue and net income goals are
met at specific time periods. These shares will be held in escrow and disbursed
by the escrow agent according to the escrow agreement. The parties are still
negotiating the terms of the escrow agreement.
In May 2002, IVP Technology entered into an agreement with Vanessa Land for
marketing and advisory services connected with product marketing in the European
Economic Community and North America. In relation with this agreement, IVP
Technology issued 5,000,000 shares of common stock to Ms. Land. These shares
were registered on a Form S-8 filed on May 3, 2002. These shares were valued at
$.05 per share, or an aggregate of $250,000, on the date of issuance.
On May 1, 2002, IVP Technology agreed to issue 4,000,000 shares of its
restricted common stock having a value of $760,000 in full settlement of its
obligation to DcD Holdings Ltd.. IVP Technology issued these shares on or about
August 6, 2002.
In April 2002, IVP Technology entered into an Equity Line of Credit Agreement
with Cornell Capital Partners, L.P. Under this agreement, IVP Technology may
issue and sell to Cornell Capital Partners common stock for a total purchase
price of up to $10.0 million. Subject to certain conditions, IVP Technology will
be entitled to commence drawing down on the Equity Line of Credit when the
common stock to be issued under the Equity Line of Credit is registered with the
Securities and Exchange Commission and the registration statement is declared
effective and will continue for two years thereafter. The purchase price for the
shares will be equal to 92% of the market price, which is defined as the lowest
closing bid price of the common stock during the five trading days following the
notice date. The amount of each advance is subject to an aggregate maximum
advance amount of $425,000 in any thirty-day period. IVP Technology paid Cornell
a one-time fee equal to $340,000, payable in 3,032,000 shares of common stock.
Cornell Capital Partners is entitled to retain 3.0% of each advance. In
addition, IVP Technology entered into a placement agent agreement with Westrock
Advisors, Inc., a registered broker-dealer. Pursuant to the placement agent
agreement, IVP Technology paid a one-time placement agent fee of 100,000 shares
of common stock, which were valued at $0.10 per share, or an aggregate of
$10,000, on the date of issuance. IVP Technology agreed to pay Danson Partners,
LLC, a consultant, a one-time fee of $200,000 for its work in connection with
consulting the company on various financial matters. Of the fee, $75,000 was
paid in cash with the balance paid in 1,040,000 shares of common stock.
In April 2002, IVP Technology raised $150,000 of gross proceeds from the
issuance of convertible debentures. These debentures accrue interest at a rate
of 5% per year and mature two years from the issuance date. The debentures are
convertible at the holder's option any time up to maturity at a conversion price
equal to the lower of (i) 120% of the closing bid price of the common stock as
of the closing date (ii) 80% of the average closing bid price of the common
stock for the 4 lowest trading days of the 5 trading days immediately preceding
the conversion date. At maturity, IVP Technology has the option to either pay
the holder the outstanding principal balance and accrued interest or to convert
the debentures into shares of common stock at a conversion price equal to the
lower of (i) 120% of the closing bid price of the common stock as of the closing
25
date or (ii) 80% of the average closing bid price of the common stock for the 4
lowest trading days of the 5 trading days immediately preceding the conversion
date. IVP Technology has the right to redeem the debentures upon 30 days notice
for 120% of the amount redeemed. Upon such redemption, IVP Technology will issue
the investor a warrant to purchase 10,000 shares of common stock at an exercise
price of $0.50 per share for every $100,000 of debentures that are redeemed.
The convertible debentures contain a beneficial conversion feature computed at
its intrinsic value that is the difference between the conversion price and the
fair value on the debenture issuance date of the common stock into which the
debt is convertible, multiplied by the number of shares into which the debt is
convertible at the commitment date. Since the beneficial conversion feature is
to be settled by issuing equity, the amount attributed to the beneficial
conversion feature, or $64,286, was recorded as an interest expense and a
component of equity on the issuance date.
On April 26, 2002, IVP Technology issued 62,027 shares of common stock to Danson
Partners, LLC having a value of $5,000 for consulting services rendered.
On or about March 25, 2002, IVP Technology issued 100,000 shares of common stock
to Barry Gross that was earned pursuant to a consulting contract signed in 2000.
These shares were valued at $0.09 per share, or an aggregate of $9,000, on the
date of issuance.
On or about March 25, 2002, IVP Technology issued 14,000,000 shares of common
stock to Brian MacDonald to be held in escrow pending achievement of the
performance clauses related to the September 17, 2001 agreement with
International Technology Marketing.
On or about March 25, 2002, IVP Technology issued 14,000,000 shares of common
stock to Peter Hamilton to be held in escrow pending achievement of the
performance clauses related to the September 17, 2001 agreement with
International Technology Marketing.
On or about March 25, 2002, IVP Technology issued 14,000,000 shares of common
stock to Kevin Birch to be held in escrow pending achievement of the performance
clauses related to the September 17, 2001 agreement with International
Technology Marketing.
On or about March 25, 2002, IVP Technology issued 4,000,000 shares of common
stock to Geno Villella to be held in escrow pending achievement of the
performance clauses related to the September 17, 2001 agreement with
International Technology Marketing.
On or about March 25, 2002, IVP Technology issued 4,000,000 shares of common
stock to Sherry Bullock to be held in escrow pending achievement of the
performance clauses related to the September 17, 2001 agreement with
International Technology Marketing. Subsequently, Ms. Bullock left employment
with IVP Technology and has accepted a partial payment of 800,000 shares and the
remainder of her performance based shares will be reallocated to the remaining
members of International Technology Marketing.
On or about March 25, 2002, IVP Technology issued 500,000 shares of common stock
to John Maxwell in lieu of compensation for services performed in 2001 as
President of IVP Technology. These shares were valued at $0.05 per share, or an
aggregate of $25,000, on the date of issuance.
On or about March 25, 2002, IVP Technology issued 500,000 shares of common stock
to John Trainor in lieu of compensation for services performed in 2001 as
Secretary of IVP Technology. These shares were valued at $0.05 per share, or an
aggregate of $25,000, on the date of issuance.
On or about March 25, 2002, IVP Technology issued 2,375,600 shares of common
stock valued at $.05 per share to Thomas Chown for the conversion of $118,780 of
debts owed by the corporation for services performed in 2001.
On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common
stock to Buford Industries as conversion of a fee of $50,000 earned for
introducing IVP to International Technology Marketing. These shares were valued
at $0.05 per share, or an aggregate of $50,000, on the date of issuance.
26
On or about March 25, 2002, IVP Technology issued 50,000 shares of common stock
to Ruffa and Ruffa, P.A. for payment of interest on outstanding legal bills for
the year 2001 - 2002. These shares were valued at $0.10 per share, or an
aggregate of $5,000, on the date of issuance.
On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common
stock to J. Stephen Smith to be held in escrow for services as a board member
for the period from 2001 to 2003 to be accrued at the rate of 500,000 per year.
On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common
stock to Michael Sidrow to be held in escrow for services as a board member for
the period from 2001 to 2003 to be accrued at the rate of 500,000 per year. In
June 2002, these shares were rescinded as a result of Mr. Sidrow's resignation
from the board of directors.
On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common
stock to Robert King to be held in escrow for services as a board member for the
period from 2001 to 2003 to be accrued at the rate of 500,000 per year. In June
2002, these shares were rescinded as a result of Mr. King's resignation from the
board of directors.
On or about August 17, 2001, IVP Technology issued 1,000,000 shares of common
stock to Orchestral Corporation for extension of the licensing contract and to
obtain market distribution to Switzerland. These shares were valued at $0.12 per
share, or an aggregate of $120,000, on the date of issuance.
On or about July 30, 2001, IVP Technology rescinded the issuance of 870,000
shares of common stock previously issued to Koplan Consulting Corp. and Mr.
Peter Kertes for services not performed.
On or about April 26, 2001, IVP Technology issued 1,200,000 shares of common
stock to Gross Capital Associates for marketing and promotion consulting
services. These shares were valued at $0.14 per share, or an aggregate of
$168,000, on the date of issuance.
On or about April 26, 2001, IVP Technology issued 1,000,000 shares of common
stock to John Coady for financial advisory services. These shares were valued at
$0.14 per share, or an aggregate of $140,000, on the date of issuance.
With respect to the sale of unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated under the
1933 Act. In each instance, the purchaser had access to sufficient information
regarding IVP Technology so as to make an informed investment decision. More
specifically, IVP Technology had a reasonable basis to believe that each
purchaser was an "accredited investor" as defined in Regulation D of the 1933
Act and otherwise had the requisite sophistication to make an investment in IVP
Technology's securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
OTHER INFORMATION
Not applicable.
ITEM 6. SUBSEQUENT EVENTS, EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ---------------------------------------------------------------- --------------------------------------------------
2.1 Agreement and Plan of Reorganization dated March 21, 2000 Incorporated by reference to Exhibit 4.1 to IVP
between IVP Technology Corporation and Erebus Corporation Technology's Form 8-K12G3 filed on April 19, 2000
3.1 Certificate of Amendment of Articles of Incorporation Incorporated by reference to Exhibit 3.1 to IVP
Technology's Form 10-KSB filed on April 15, 2002
4.4 Description of Securities Incorporated by reference to Exhibit 4.4 to IVP
Technology's Form S-8 filed on July 23, 2001
10.4 Second Amending Agreement to Software Distribution Agreement Incorporated by reference to Exhibit 10.4 to IVP
dated as of May 31, 2000 between the Registrant and Orchestral Technology's Form 10-QSB filed on September 24, 2000
Corporation
10.5 Service Bureau Arrangement Agreement dated September 28, 2000 Incorporated by reference to Exhibit 10.5 to IVP
between the Registrant and E-RESPONSES.COM Technology's Form 10-QSB filed on November 14, 2000
10.6 Stock Purchase Agreement dated September 17, 2001 among the Incorporated by reference to Exhibit 10.6 to IVP
Registrant, International Technology Marketing, Inc., Brian Technology's Form 10-KSB filed on April 15, 2002
MacDonald, Peter Hamilton, Kevin Birch, Sherry Bullock, and Geno
Villella
10.7 Agreement dated May 15, 2000 between the Registrant and Rainbow Incorporated by reference to Exhibit 10.7 to IVP
Investments International Limited Technology's Form 10-KSB filed on April 15, 2002
10.8 Employment Agreement dated August 30, 2001 between International Incorporated by reference to Exhibit 10.8 to IVP
Technology Marketing, Inc. and Brian J. MacDonald Technology's Form 10-KSB filed on April 15, 2002
10.9 Agreement dated February 12, 2002 between the Registrant and Incorporated by reference to Exhibit 10.9 to IVP
SmartFOCUS Limited Technology's Form 10-KSB filed on April 15, 2002
10.10 Warrant Agreement dated May 15, 2000 between the Registrant and Incorporated by reference to Exhibit 10.10 to IVP
Rainbow Investments International Limited Technology's Form 10-KSB filed on April 15, 2002
10.11 Convertible Promissory Note dated May 2000 between the Incorporated by reference to Exhibit 10.11 to IVP
Registrant and Rainbow Investments International Technology's Form 10-KSB filed on April 15,
Limited 2002
10.12 Software Distribution Agreement dated December 28, 2001 between Incorporated by reference to Exhibit 10.12 to IVP
the Registrant and TIG Acquisition Corporation Technology's Form 10-KSB filed on April 15, 2002
10.13 Loan Agreement dated January 16, 2002 between the Registrant and Incorporated by reference to Exhibit 10.13 to IVP
DCD Holdings Limited Technology's Form 10-KSB filed on April 15, 2002
10.14 Agreement for the Provision of Marketing Services dated May 3, Incorporated by reference to Exhibit 10.1 to IVP
2002 between the Registrant and Vanessa Land Technology's Form S-8 filed with the SEC on May 3,
2002
10.15 Reserved
EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ---------------------------------------------------------------- --------------------------------------------------
10.16 Employment Agreement dated August 30, 2001 between International Incorporated by reference to Exhibit 10.16 to IVP
Technology Marketing, Inc. and Geno Villella Technology's Form 10-KSB filed on April 15, 2002
10.17 Employment Agreement dated August 30, 2001 between International Incorporated by reference to Exhibit 10.17 to IVP
Technology Marketing, Inc. and Kevin Birch Technology's Form 10-KSB filed on April 15, 2002
10.18 Employment Agreement dated August 30, 2001 between International Incorporated by reference to Exhibit 10.18 to IVP
Technology Marketing, Inc. and Peter J. Hamilton Technology's Form 10-KSB filed on April 15, 2002
10.19 Employment Agreement dated August 30, 2001 between International Incorporated by reference to Exhibit 10.19 to IVP
Technology Marketing, Inc. and Sherry Bullock Technology's Form 10-KSB filed on April 15, 2002
10.20 Loan and Security Agreement dated July 30, 2001 among the Incorporated by reference to Exhibit 10.20 to IVP
Registrant, Clarino Investments International Ltd., and Berra Technology's Form 10-KSB filed on April 15, 2002
Holdings Ltd.
10.21 Consulting and Advisory Extension Agreement dated February 14, Incorporated by reference to the Exhibit to IVP
2001 between the Registrant and Barry Gross D/B/A Gross Capital Technology's Form 10-QSB filed on May 21, 2001
Associates
10.22 Letter Agreement dated June 28, 2001, between the Registrant and Incorporated by reference to Exhibit 4.1 to IVP
Andris Gravitis Technology's Form S-8 filed on July 23, 2001
10.23 Letter Agreement dated June 28, 2001, between the Registrant and Incorporated by reference to Exhibit 4.2 to IVP
Thomas Chown. Technology's Form S-8 filed on July 23, 2001
10.24 Letter Agreement dated May 30, 2001, between the Registrant and Incorporated by reference to Exhibit 4.3 to IVP
Ruffa & Ruffa, P.C. for Modification of Retainer Agreement Technology's Form S-8 filed on July 23, 2001
10.25 Consulting Agreement dated September 1, 2000 between the Incorporated by reference to Exhibit 13.1 to IVP
Registrant and Barry Gross d/b/a Gross Capital Associates Technology's Form 10-KSB filed on July 5, 2001
10.26 Consulting and Advisory Agreement dated September 25, 2000 Incorporated by reference to Exhibit 13.2 to IVP
between the Registrant and Koplan Consulting Corporation Technology's Form 10-KSB filed on July 5, 2001
10.27 Warrant Agreement dated April 3, 2002 between the Registrant and Incorporated by reference to Exhibit 10.27 to IVP
Cornell Capital Partners LP Technology's Form 10-KSB filed on April 15, 2002
10.28 Equity Line of Credit Agreement dated April 3, 2002 between the Incorporated by reference to Exhibit 10.28 to IVP
Registrant and Cornell Capital Partners LP Technology's Form 10-KSB filed on April 15, 2002
10.29 Registration Rights Agreement dated April 3, 2002 between the Incorporated by reference to Exhibit 10.29 to IVP
Registrant and Cornell Capital Partners, LP Technology's Form 10-KSB filed on April 15, 2002
EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ---------------------------------------------------------------- --------------------------------------------------
10.30 Escrow Agreement dated April 3, 2002 among the Registrant, Incorporated by reference to Exhibit 10.30 to IVP
Cornell Capital Partners, LP, Butler Gonzalez, and First Union Technology's Form 10-KSB filed on April 15, 2002
National Bank
10.31 Securities Purchase Agreement dated April 3, 2002 among the Incorporated by reference to Exhibit 10.31 to IVP
Registrant and the Buyers Technology's Form 10-KSB filed on April 15, 2002
10.32 Escrow Agreement dated April 3, 2002 among the Registrant, the Incorporated by reference to Exhibit 10.32 to IVP
Buyers, and First Union National Bank Technology's Form 10-KSB filed on April 15, 2002
10.33 Debenture Agreement Dated April 3, 2002 between the Registrant Incorporated by reference to Exhibit 10.33 to IVP
and Cornell Capital Partners LP Technology's Form 10-KSB filed on April 15, 2002
10.34 Investor Registration Rights Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.34 to IVP
between the Registrant and the Investors Technology's Form 10-KSB filed on April 15, 2002
10.35 Placement Agent Agreement dated April 3, 2002 among the Incorporated by reference to Exhibit 10.35 to IVP
Registrant, Westrock Advisors, Inc. and Cornell Capital Partners Technology's Form 10-KSB filed on April 15, 2002
LP
10.36 Letter Agreement dated February 20, 2002 between the Registrant Incorporated by reference to Exhibit 10.36 to IVP
and Buford Industries Inc. Technology's Form 10-KSB filed on April 15, 2002
10.37 Letter Confirmation Agreement dated July 21, 2001 between the Incorporated by reference to Exhibit 10.37 to IVP
Registrant and Buford Industries Inc. Technology's Form 10-KSB filed on April 15, 2002
10.38 Consulting Agreement dated March 1, 2002 between the Registrant Incorporated by reference to Exhibit 10.38 to IVP
and Danson Partners LLC Technology's Form 10-KSB filed on April 15, 2002
10.39 Term Sheet between the Registrant and Cornell Capital Partners, Incorporated by reference to Exhibit 10.39 to IVP
LP Increasing the Commitment under the Equity Line of Credit to Technology's Form SB-2 filed on May 15, 2002
$10 million
10.40 Consulting Agreement dated February 12, 2002 between the Incorporated by reference to Exhibit 10.40 to IVP
Registrant and Danson Partners LLC Technology's Form SB-2 filed on May 15, 2002
10.41 Escrow Agreement dated as of May 15, 2002 among the Registrant, Incorporated by reference to Exhibit 10.41 to IVP
Brian MacDonald, Peter Hamilton, Kevin Birch, Sherry Bullock, Technology's Form SB-2 filed on May 15, 2002
and Gino Villella
10.42 Termination letter dated June 13, 2002 between the Registrant Provided herewith
and Orchestral Corporation
10.43 Acquisition Agreement dated as of May 28, 2002 regarding the Provided herewith
purchase of Ignition Entertainment
10.44 Consulting Agreement dated as of June 1, 2002 Ignition Provided herewith
Entertainment Limited and Montpelier Limited
(b) Reports on Form 8-K.
On August 8, 2002, IVP Technology filed a Form 8-K disclosing that it was not
required to file financial information regarding its acquisition of Ignition
Entertainment.
27
On May 29, 2002, IVP Technology filed a report on Form 8-K disclosing that on
May 22, 2002 IVP Technology Corporation entered into a Purchase and Sale
agreement to acquire all of the common shares of Ignition Entertainment Limited,
an entity formed in the United Kingdom, that develops, produces and distributes
consumer software and games for multiple computer, game, communication and hand
held device platforms.
In the same May 29, 2002 report on Form 8-K, IVP Technology disclosed that on
May 13, 2002, Dr. Michael Sidrow and Mr. Robert King resigned from IVP
Technology's Board of Directors due to personal reasons associated with their
other obligations. The board of directors of IVP Technology has invited Shabir
Randeree, Managing Director of DCD Limited, and Hassan Sadiq, Chief Operating
Officer of The Innovation Group to become members of the board in replacement
for Messrs. Sidrow and King to serve until the next Annual General Meeting of
shareholders expected in the Fall of 2002. Both Mr. Sadiq and Mr. Randeree
reside in the United Kingdom.
IVP Technology filed a report on Form 8-K on May 6, 2002 disclosing that on May
1, 2002, IVP Technology received written notice that the lender, DCD Limited,
agreed to convert the loan for $864,180 due on April 30, 2002 to 4,000,000
shares of common stock. This equates to a conversion price of approximately
$0.19 per share.
IVP Technology filed a report on Form 8-K on February 20, 2002 disclosing that
on January 18, 2002, IVP Technology entered into an agreement for the provision
of marketing advisory services by Vanessa Land, president of Devonshire
Marketing Limited of London, UK. Additionally, IVP Technology also disclosed
that it also signed a reseller distribution agreement with SmartFocus Company
Limited of Bristol UK.
IVP Technology filed a report on Form 8-K on January 31, 2002 disclosing that on
December 28, 2001, IVP Technology executed a distribution agreement with The
Innovation Group through TIG Acquisition Corporation whereby IVP Technology
Corporation was grated a license on a non-exclusive basis to market TIG plc's
Classifier (R) Information System software product and solution to companies in
North America.
28
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of IVP Technology Corporation (the
"Company") on Form 10-QSB for the period ended June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REGISTRANT:
IVP TECHNOLOGY CORPORATION
/s/ Brian MacDonald August 19, 2002
- --------------------------------------------
By: Brian MacDonald
President, Chief Executive Officer and
Acting Chief Financial Officer
29