UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-QSB/A
(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 Three Months and
Six Months Ended June 30, 2002 and June 30, 2001
(Unaudited)
Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 2002 and June 30, 2001 (Unaudited)
Consolidated Statement of Changes in Stockholders' Equity
(Deficiency) for the Period January 1, 2001 through June
30, 2002 (Unaudited)
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
June 30, 2002 December 31, 2001
(Unaudited) Audited)
As Restated (As Restated
-------------- ---------------------
ASSETS
CURRENT ASSETS
1,176,695
Cash $ $ 232
Accounts Receivable (Less Allowance for Doubtful Accounts
of $43,970) 615,755 -
Inventory 53,160 -
Prepaid expenses 310,447 -
-------------- ------------------
Total Current Assets 2,156,057 232
-------------- ------------------
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 10,658,095 -
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 13,424,655 3,601,303
-------------- ------------------
TOTAL ASSETS $ 15,938,660 $ 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
Due to DcD Factors, PLC 309,211 -
Common Stock to be Issued 4,394,746 -
Convertible Preferred Stock to be Issued, Short-Term 4,779,662 -
-------------- ------------------
Total Current Liabilities 14,012,300 4,334,680
-------------- ------------------
LONG-TERM LIABILITIES
Convertible debenture 150,000 -
Notes payable 312,650 129,020
Convertible Preferred Stock to be Issued, Long-Term 3,584,747 -
-------------- ------------------
Total Long-Term Liabilities 4,047,397 129,020
-------------- ------------------
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 - 50,000
Additional paid-in capital 14,428,249 13,314,354
Accumulated deficit (accumulated in development stage
$12,883,106) (16,115,596) (13,935,272)
Exchange Gain (Loss) 27,863 -
Deferred equity line commitment fee, net (306,250) -
Deferred compensation, net (220,000) (340,000)
-------------- ------------------
Total Stockholders' Equity (Deficiency) $ (2,121,037) (862,165)
-------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) 15,938,660 $ 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, 2002 June 30, 2001 June 30, 2002 June 30, 2001
As Restated As Restated
-------------------------------- -------------------------------
(Unaudited) (Unaudited)
REVENUE
Revenue $ 497,326 $ 27,060 $ 497,326 $ 54,120
Cost of sales:
Product costs 378,581 378,581
Development costs 1,030 1,030
Distribution and other costs 3,105 3,105
-------------------------------- -------------------------------
Total cost of sales $ 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 of debt 96,334 - 96,334 -
Interest income 938 - 938 -
Interest expense (62,942) - (74,869) (76,000)
-------------------------------- -------------------------------
TOTAL OTHER INCOME (EXPENSE) 34,330 - 22,403 (76,000)
-------------------------------- -------------------------------
NET INCOME (LOSS) $ (1,498,026) $ 18,498 $ (2,256,326) $ (437,803)
================================ ===============================
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
As Restated
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,256,326) $ (437,803)
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 76,000
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 1,165,545 -
----------------- -----------------
Net Cash Provided By Financing Activities 1,165,545 -
----------------- -----------------
NET INCREASE (DECREASE) IN CASH 1,176,463 (809)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 232 1,424
----------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,176,695 $ 615
================= =================
See Accompanying Notes To Financial Statements
5
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD JANUARY 1, 2001 THROUGH JUNE 30, 2002
Additional Common Stock To Deferred Foreign
Common Stock Paid-In Accumulated Be Issued Compensation Gain
Shares Amount Capital Deficit Shares Amount and Services (Loss) Total
----------- ---------- ----------- ------------ ---------- -------- ------------- ----------------------
Balance, December 31,
2000 39,110,848 $ 39,111 $12,151,156 $(12,648,124) $ 1,000,000 $ 720,000 $(896,286) $ (634,143)
Stock issued for
services 9,512,000 9,512 883,488 - - - - 893,000
Stock issued
1,000,000 1,000 719,000 - (1,000,000) (720,000) - -
Stock rescission (870,000) (870) (515,290) - - - - (516,160)
Deferred cost
recognized - - - - - - 556,286 556,286
Stock to be issued for
services - - - - 1,000,000 50,000 - 50,000
Net loss, 2001 - - - (1,211,148) - - - (1,211,148)
----------- ---------- ----------- ------------- ----------- --------- ------------- ----------------------
Balance, December 31,
2001 48,752,848 $ 48,753 $ 13,238,354 $(13,859,272) $ 1,000,000 $ 50,000 (340,000) $ - (862,165)
Stock issued for
services 10,401,497 10,401 557,379 (1,000,000) (50,000) 517,780
Stock issued for
Commitment Fees 3,132,000 3,132 346,868 (350,000) -
Stock issued for debt 2,410,916 2,411 221,362 223,773
Exchange Gain (Loss) 27,863 27,863
Deferred Cost
recognized 163,750 163,750
Beneficial conversion
feature of
convertible debt 64,286 64,286
Net loss for the
period (2,256,326) (2,256,326)
----------- ---------- ----------- ----------------------- --------- -------------- ----------------------
Balance, June 30, 2002 64,697,261 $ 64,697 $ 14,428,249 $(16,115,596) $ - $ - $ (526,250) $27,863 (2,121,037)
============================================================================================================
6
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). On January 1,
2002, the Company began operations and emerged from the development
stage.
(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. The $200,000 was recorded as an expense in the 2000
financial statements. 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 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 wholly owned subsidiary Ignition Entertainment Limited.
All significant inter-company transactions and balances have been
eliminated.
(E) FOREIGN CURRENCY TRANSACTIONS
- ---------------------------------
Assets and liabilities of foreign subsidiaries, whose functional
currency is the local currency, are translated at year-end exchange
rates. Nonmonetary assets and liabilities are remeasured into U.S.
dollars at historical rates. Income and expense items are translated at
the average rates of exchange prevailing during the year. The adjustment
resulting from translating the financial statements of such foreign
subsidiaries is reflected as a separate component of stockholder's
equity. Foreign currency transaction gains or losses are reported in
results 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.
7
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) ALLOWANCES FOR DOUBTFUL ACCOUNTS AND SALES RETURNS
- ------------------------------------------------------
The Company makes judgments as to our ability to collect outstanding
receivables and provide allowances for the portion of receivables when
collection becomes doubtful. Provisions are made based upon a specific
review of all significant outstanding invoices. For those invoices not
specifically reviewed, provisions are provided at differing rates, based
upon the age of the receivable. In determining these percentages, we
analyze our historical collection experience and current economic
trends. If the historical data we use to calculate the allowance
provided for doubtful accounts does not reflect the future ability to
collect outstanding receivables, additional provisions for doubtful
accounts may be needed and the future results of operations could be
materially affected.
The Company also records a provision for estimated sales returns and
allowances on product and service related sales in the same period as
the related revenues are recorded. These estimates are based on
historical sales returns, analysis of credit memo data and other known
factors. If the historical data we use to calculate these estimates do
not properly reflect future returns, then a change in the allowances
would be made in the period in which such a determination is made and
revenues in that period could be adversely affected.
(J) INVENTORY
- -------------
Inventories, which consist primarily of system components, parts and
supplies and completed games and other video accessories, are stated at
the lower of weighted average cost or market. The weighted average cost
of inventories approximates the first-in, first-out ("FIFO") method.
Management performs periodic assessments to determine the existence of
obsolete, slow-moving and nonsalable inventories and records necessary
provisions to reduce such inventories to net realizable value.
(K) PLANT, PROPERTY AND EQUIPMENT
- ---------------------------------
Plant, property and equipment are stated at cost. Depreciation and
amortization are provided on the straight-line method over the shorter
of the estimated useful lives of the assets or the applicable lease term
for leasehold improvements ranging from 3 to 10 years . Maintenance and
repairs are charged to expense when incurred; betterments are
capitalized. Upon retirement or sale, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is
recognized currently.
(L) LONG-LIVED ASSETS
- ---------------------
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If such review indicates that
the asset is impaired, when the carrying amount of an asset exceeds the
sum of its expected future cash flows, on an undiscounted basis, the
asset's carrying amount is written down to fair value. Long-lived assets
to be disposed of are reported at the lower of carrying amount or fair
value less cost to sell. The Company has not recognized any impairment
loss during the six months ended June 30, 2002.
8
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
(M) EXCESS OF COST OVER NET ASSETS ACQUIRED
- -------------------------------------------
In accordance with SFAS No. 141, the Company allocates the purchase
price of its acquisitions to the tangible assets, liabilities and
intangible assets acquired based on their estimated fair values. The
excess purchase price over those fair values is recorded as "Excess of
Cost Over Net Assets Acquired." The fair value assigned to intangible
assets acquired is based on valuations prepared by independent third
party appraisal firms using estimates and assumptions provided by
management. In accordance with SFAS No. 142, goodwill and purchased
intangibles with indefinite lives acquired after June 30, 2001 are not
amortized but will be reviewed periodically for impairment. Purchased
intangibles with finite lives will be amortized on a straight-line basis
over their respective useful lives.
(N) 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.
(O) 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.
(P) 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.
(Q) 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.
Management has determined that it is not practicable to provide
geographic segment disclosures for revenues and long-lived assets
because the Company sells its products to a large variety of locations
in the Americas and Europe, and in many instances, these products are
then resold through distributors.
(R) REVENUE RECOGNITION
- -----------------------
Risk and Uncertainties
A significant portion of all of the Company's net sales are derived from
software publishing and distribution activities, which are subject to
increasing competition, rapid technological change and evolving consumer
preferences, often resulting in the frequent introduction of new
products and short product lifecycles. Accordingly, the Company's
profitability and growth prospects depend upon its ability to
continually acquire, develop and market new, commercially successful
software products and obtain adequate financing. If the Company is
unable to continue to acquire, develop and market commercially
successful software products, its operating results and financial
condition could be materially adversely affected in the near future.
9
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses
during the reported periods. The most significant estimates and
assumptions relate to the recoverability of prepaid royalties,
capitalized software development costs and other intangibles,
realization of deferred income taxes, valuation of inventories and the
adequacy of allowances for returns, price protection and doubtful
accounts. Actual amounts could differ significantly from these
estimates.
REVENUE RECOGNITION
- -------------------
Publishing revenue is derived from the sale of internally developed
interactive software titles or from the sale of titles licensed from
third-party developers. Publishing revenue amounted to $100,000 and $0
for the three months ended June 30, 2002 and 2001, respectively, and
$100,000 and $0 for the six months ended June 30, 2002 and 2001,
respectively.
Distribution revenue is derived from the sale of third-party interactive
software titles, accessories and hardware. Distribution revenue amounted
to $397,326 and $0 for the three months ended June 30, 2002 and 2001,
respectively and $397,326 and $0 for the six months ended June 30, 2002
and 2001, respectively.
Revenue from services and commercial software sold under license were $0
and $27,060 for the three months ended June 30, 2002 and 2001
respectively, and $0 and $54,120 for the six months ended June 30, 2002
and 2001, respectively.
The Company recognizes revenue in accordance with Statement of Position
("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9
"Modification of SOP 97-2 Software Revenue Recognition with respect to
Certain Transactions." SOP 97-2 provides guidance on applying generally
accepted accounting principles in recognizing revenue on software
transactions. SOP 98-9 deals with the determination of vendor specific
objective evidence of fair value in multiple element arrangements, such
as maintenance agreements sold in conjunction with software packages.
The Company's consumer software transactions generally include only one
element, the interactive software game or commercial software under
license. The Company recognizes revenue when the price is fixed and
determinable, there is persuasive evidence of an arrangement, the
fulfillment of its obligations under any such arrangement and
determination that collection is probable. Accordingly, revenue is
recognized when title and all risks of loss are transferred to the
customer, which is generally upon receipt by customer. The Company's
payment arrangements with its customers provide primarily 60 day terms
and to a limited extent with certain customers 30 or 90 day terms. The
Company does not have any multi-element arrangements that would require
it to establish VSOE for each element, nor does the Company have any
sales activity that requires the contract method of accounting.
The Company's distribution arrangements with customers generally do not
give customers the right to return products; however, the Company at its
discretion may accept product returns for stock balancing or defective
products. In addition, the Company sometimes negotiates accommodations
to customers, including price discounts, credits and product returns,
when demand for specific products falls below expectations. The
Company's publishing arrangements generally do not require the Company
to accept product returns and provide price protection. The Company
establishes a reserve for future returns and other allowances based
primarily on its return policies, price protection policies and
historical return rates. The Company may not have a reliable basis to
estimate returns and price protection for certain customers or it may be
unable to determine that collection of the receivable is probable. In
such circumstances, the Company defers the revenues at the time of the
sale and recognizes them when collection of the related receivable
becomes probable or cash is received.
(S) NEW ACCOUNTING PRONOUNCEMENTS
- ---------------------------------
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
10
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
June 15, 2002, with earlier application encouraged.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is applicable to
financial statements issued for fiscal years beginning after December
15, 2001. The FASB's new rules on asset impairment supercede SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", and portions of Accounting
Principles Board (APB) Opinion No 30, " Reporting the Results of
Operations". SFAF No. 144 provides a single accounting model for
long-lived assets to be disposed of and significantly changes the
criteria that would have to be met to classify an asset as held-for
sale. Classification as held-for sale is an important distinction since
such assets are not depreciated and are stated at the lower of fair
value or carrying amount. SFAS No. 144 also requires expected future
operating losses from discontinued operations to be displayed in the
period in which the losses are incurred, rather than as of the
measurement date as presently required.
In April 2002, the FASB issued SFAS No 145, "Rescission of FASB
Statements No. 4, 44 and 62, Amendment of FASB No 13, and Technical
Corrections", which is generally applicable to financial statements for
fiscal years beginning after May 15, 2002; however, early adoption is
encouraged. SFAS 145 eliminates the requirement under FASB No. 4,
"Reporting Gains and Losses from Extinquishment of Debt" to report gains
and losses from extinguishments of debt as extraordinary items in the
income statement.
The adoption of these pronouncements will not have a material effect on
the Company's financial position or results of operations.
(T) Restatement of Consolidated Financial Statements Resulting from a
- --------------------------------------------------------------------------------
Reclassification
----------------
The accompanying consolidated balance sheet as of June 30, 2002 has been
restated to reclassify stock to be issued from the equity section of the
balance sheet to the liability section of the balance sheet, to revalue
the acquisition of Ignition Entertainment Limited based on the
provisions of SFAS 141 and to reclassify Amounts Due DcD Factors as a
current liability which was previously netted against cash.
The restatements resulted from the Company recording the effects of the
acquisition of Ignition Entertainment Limited based upon a reasonable
period (3 trading days) before and after the date of the acquisition, as
common stock to be issued in the equity section of the balance sheet and
for the DcD Factors liability. The effect of the restatements was to
increase Excess of Cost Over Net Assets Acquired by $5,105,646, current
liabilities by $9,483,619 and long-term liabilities by $3,584,747 as a
result of the revaluation of the purchase price of Ignition
Entertainment Limited and the reclassifications of amounts from
stockholders' equity to liabilities and the DcD Factors liability. The
effect of the restatement was to also decrease stockholders' equity by
$7,653,509. Also see Notes 4 and 6.
Excess of Cost Over Net Assets Acquired, current and long-term
liability, and common stock to be issued accounts in the June 30, 2002
consolidated balance sheet has been restated for the effects of the
revaluation and reclassifications. There were no adjustments made to the
accompanying consolidated statement of operations for the six months
ended June 30, 2002 and 2001 as a result of the restatements.
NOTE 2 ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows:
2002 2001
Unrestricted Trade Receivables $133,970
Restricted Trade Receivables 525,755
Allowance for Doubtful Accounts (43,970)
AccountsReceivable, Net $615,755 None
11
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
Restricted trade receivables are collateral for the DcD Factors secured
borrowing facility that Ignition entered into in April 2002.
Unrestricted trade receivables consists primary of vendor receivables
for enterprise software and information technology services sold by the
Company.
NOTE 3 NOTES PAYABLE
(A) NOTES PAYABLE - SHORT-TERM
- ------------------------------
The Company had 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 bore 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 was
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. See Note 7.
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. As of June 30,
2002, the common stock has not been issued and is recorded as a current
liability on the balance sheet under "Common Stock to be Issued".
DcD FACTORING AGREEMENT
- -----------------------
On April 9, 2002, Ignition Entertainment Limited entered into a one-year
factoring agreement with DcD Factors, Plc wherein Ignition Entertainment
Limited has agreed to borrow and DcD Factors, Plc has agreed to loan, on
a fully secured basis, up to (pound)500,000 to Ignition Entertainment
Limited based on 75% of its eligible accounts receivables. Interest
charged on amounts borrowed is equal to 3% above the UK Base Bank rate.
Under the terms of the factoring loan agreement, DcD Factors, Plc is
obligated to remit, from time to time, excess collections to Ignition
Entertainment Limited to the extent that collections on secured
receivables exceed the sum of (i) advances made by DcD Factors, Plc,
(ii) interest and service charges on funds advanced, (iii) monthly
services fees and (iv) customer discounts. Ignition Entertainment
Limited has granted DcD Factors, Plc a first lien and security interest
in all of Ignition Entertainment Limited's assets, including its
accounts receivable, inventories and intangible assets. In accordance
with the provisions of SFAS 140, the Company has treated this Factoring
Facility as a secured borrowing by Ignition Entertainment Limited and
not as a sale of accounts receivable because the Company maintains
effective control over the receivables transferred. As of June 30, 2002,
Ignition Entertainment Limited has borrowed $309,211 from DcD Factors,
Plc which is reported as a currently liability in the June 30, 2002
balance sheet as " Due To DcD Factors".
(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 balance due on this note was $129,020.
The note is collateralized by 2,500,000 shares of common stock held in
the name of Clarino Investment International, Ltd., an unrelated party.
Accrued interest of $6,179 is due Berra Holdings, Ltd. as of June 30,
2002.
12
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 to Cornell Capital Partners, LP.
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.
Future maturities of long-term debt as of June 30, 2002 are as follows:
YEAR AMOUNT
---- ------
2003 $ 3,494,889
2004 0
2005 312,650
---------
Total $ 3,807,539
=========
13
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
LINE OF CREDIT FACILITY
-----------------------
On April 10, 2002 Ignition Entertainment Limited entered into a
(pound)1,000,000 revolving credit facility with Revelate Limited for
the purpose of allowing Ignition Entertainment Limited to purchase
goods and services from third party vendors. Under the terms of the
revolving credit facility, Revelate will advance up to 60% of the
purchase price of goods and services purchased by Ignition
Entertainment Limited for its business. Ignition Entertainment Limited
is obligated to pay Revelate Limited interest on each advance at a rate
equal to 3% over the UK Bank Base rate, a 2% commission of total
disbursements made on behalf of Ignition Entertainment Limited and a
facility fee of (pound)500. Ignition Entertainment Limited's obligation
to repay an advance is guaranteed by DcD Factors, Plc As of June 30,
2002, the Company has not borrowed any funds under the Revolving Credit
Facility.
NOTE 4 STOCKHOLDERS' EQUITY (DEFICIENCY)
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 grant.
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 grant.
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 grant.
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 grant.
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.
14
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
On April 26, 2002 and June 28, 2002, the Company issued 3,032,000
shares of restricted common stock to Cornell Capital Partners, LP,
having a value of $330,000 as a one-time commitment fee (See Note
5(F)).
On April 26, 2002 and August 6, 2002, the Company issued 1,040,000
shares of restricted common stock to Danson Partners, LLC, having a
value of $125,000 for financial consulting services rendered. The
Company has accrued $50,000 of common stock to be issued for consulting
services rendered which has been included in common stock to be issued
on the accompanying consolidated balance sheet as of June 30, 2002.
(See Note 5(F)).
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
Entertainment Limited over a period of two years from the date of the
acquisition. Additionally, the management team of Ignition
Entertainment Limited 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 (See Note 6).
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 that the Company entered into the agreement. (See
Note 5(D)).
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 Limited. IVP Technology issued these
shares on or about August 6, 2002. As of June 30, 2002, the Company
recorded the liability to issue the shares as common stock.
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 (See Note 3(A)).
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.
On June 28, 2002, the Company issued 100,000 shares of restricted
common stock to Westrock Advisors having a value of $20,000 for
placement agent fees.
On August 6, 2002, the Company issued 560 shares of restricted common
stock to Brian MacDonald having a value of $73 for the acquisition of
Springboard Technology.
On August 6, 2002, the Company issued 560 shares of restricted common
stock to Peter Hamilton having a value of $ 73 for the acquisition of
Springboard Technology.
On August 6, 2002, the Company issued 560 shares of restricted common
stock to Kevin Birch having a value of $73 for the acquisition of
Springboard Technology.
On August 6, 2002, the Company issued 160 shares of restricted common
stock to Geno Villella having a value of $21 for the acquisition of
Springboard Technology.
On August 6, 2002, the Company issued 160 shares of restricted common
stock to Sherry Bullock having a value of $ 21 for the acquisition of
Springboard Technology.
15
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
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 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 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%.
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. As of June 30, 2002, the shares
have not been issued . The Company is currently in negotiation with the
Licensor to determine whether the shares are legally issuable.
(B) CONSULTING AGREEMENTS
- -------------------------
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. The Company is currently contesting the issuance of the additional
shares. The Company has not accrued an estimated loss for this
contingency because, in accordance with the provisions of SFAS 5, it is
not probable at the time that the financial statements were issued that
16
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
a liability had been incurred and that the amount of loss can be
reasonably estimated.
(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.
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. On September 30, 2002, the Company
renegotiated the terms of the License Agreement whereby the Licensor
agreed to extinguish the remaining amount due under the agreement, or
$2,906,656 in exchange for a change in the rights to market and
distribute the Classifier software product.
(D) MARKETING AGREEMENT
- -----------------------
On January 18, 2002, the Company entered into a one- year marketing
agreement with Ms. Vanessa Land to provide product marketing and
advisory services to the Company in the European Economic Community and
North America territories. . The Company issued 5,000,000 shares to the
consultant on March 25, 2002 which were registered in a Form S-8 filed
on May 3, 2002. The shares were valued at $.05 per share corresponding
to the date that the Company entered into the agreement with Ms Land.
The Company accounted for the cost of the marketing agreement by
recording an expense for the entire cost in the amount of $250,000 in
accordance with the provisions of SFAS 123 "Accounting for Stock-Based
Compensation". Such expense is included in Consulting Fees in the
Consolidated Statement of Operations.
(E) STOCK PURCHASE/MANAGEMENT AGREEMENT
- ---------------------------------------
On September 17, 2001, the Company entered into a stock
purchase/management agreement to acquire 100% of the outstanding stock
of International Technology Marketing, Inc. ("ITM"). In connection with
the agreement, the Company is to issue 50,000,000 shares to the former
shareholders, which will be held in escrow subject to the Company
reaching certain sales milestones. The agreement calls for the Company
to compensate the former shareholders of ITM in their efforts to meet
the sales milestones.
The revenue milestones to be 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.
>> 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. The former shareholders of ITM
include the Company's current management group. The Company has not
recorded any amounts associated with the acquisition of ITM, which had
minimal assets and/or liabilities on the date of acquisition. For
accounting purposes, the Company has not treated the acquisition as an
acquisition under the principles of APB 16, but has instead treated the
acquisition as an assumption of contingent management contracts for
services to be rendered by the former ITM shareholders to the Company.
17
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
The contingent shares will be issued and released out of escrow to the
former principal owners of ITM upon the attainment of certain
performance goals as described above. In return, the former principal
owners will perform management and marketing services to the Company.
Upon attainment of each performance milestone, the Company will record
the issuance of stock as compensation expense in the period earned
based on current market prices as of the date of grant.
(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 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
$330,000, 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 $0.20 per share,
or an aggregate of $20,000, 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 Entertainment Limited. Under the terms of the agreement,
Ignition Entertainment Limited is obligated to pay Montpelier annually
(pound)179,850 ($262,970) in equal monthly installments. Additionally,
Montpelier was entitled to receive a signing bonus of (pound)29,975
($43,828) upon execution of the agreement. The cost of this agreement
will be borne by Ignition Entertainment Limited and Montpelier will be
paid out of Ignition Entertainment Limited's operating cash flow.
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. The Company accounted for this acquisition using the
purchase method of accounting in accordance with the provisions of
SFAS 141.This acquisition is the Company's first step in expanding the
Company's business from only an enterprise software distributor to a
developer, publisher and licensor of consumer software entertainment
and video games. 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 collectively valued at $.23898 per share for a total purchase
price of $11,949,155. Based on the provisions of SFAS 141, the
purchase price was determined by using the weighted average share
price of the Company's common stock for the 3 trading days before and
after the day the Company entered into the terms of the acquisition
agreement. 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 Entertainment Limited acquisition (the "Incentive Stock") DcD
Holdings Limited 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 Entertainment Limited. The
Ignition Entertainment Limited 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
18
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
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 Company acquired net
tangible assets of $1,291,059. The excess of the consideration given
over the fair value of net assets acquired has been recorded as
goodwill of $10,658,096. The Company will account for the purchased
goodwill in accordance with the provisions of SFAS 142. The
non-incentive common and preferred stock that the Company is obligated
to issue for the purchase of Ignition Entertainment Limited's net
assets is recorded in the liability section of the balance sheet. The
liability associated with any Incentive Stock issuable in conjunction
with this acquisition based on the achievement of certain revenue and
net income results over a two-year period will be recorded as
additional goodwill as payout thresholds are achieved.
The purchase price allocation recorded for the acquisition of the
assets and liabilities of Ignition Entertainment Limited, approximate
the following:
Cash $ 1,132,039
Accounts receivables, net 775,457
Inventory 56,689
Fixed assets, net 350,461
Prepaid expenses and other assets 173,769
-----------------
Total assets 2,488,415
-----------------
Liabilities assumed:
Accounts payable & accrued expenses 384,152
Income taxes payable 83,002
Other liabilities 730,202
-----------------
Total liabilities assumed 1,197,356
-----------------
Excess of assets acquired over
liabilities assumed 1,291,059
Purchase price 11,949,155
-----------------
Goodwill $ 10,658,096
-------- =================
The 3,500,000 Convertible Preferred Shares, which are convertible into
35,000,000 shares of common stock is issuable to the Ignition
shareholders as follows; 1,000,000 convertible preferred shares to be
issued on or before May 28, 2003, with additional issuances on or
before November 28, 2003 (1,000,000 shares), May 28, 2004 (1,000,000
shares) and May 29, 2004 (500,000 shares). Because the convertibility
of the preferred stock into 35 million common shares is contingent on
the Company's shareholders ratifying the approval of an increase in the
amount of common stock that the Company is authorized to issue, the
Company has recorded the future issuance of the convertible preferred
stock as a current and long-term liability on its balance sheet and not
as a component of stockholders equity. The beneficial conversion
feature of the Convertible Preferred Stock will also result in the
Company incurring interest expense at the time that the shares are
converted into common stock.
The 15,000,000 shares of common stock that the Company has agreed to
issue as part of the consideration for the acquisition have not yet
been issued. The escrow agreement states that these shares are issuable
91 to 180 days after the acquisition. As a result of this, the Company
has recorded the future issuance of this common stock as a current
liability on its balance sheet.
19
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 Entertainment Limited
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 following unaudited pro forma consolidated balance sheet is
presented as if the acquisition of Ignition Entertainment Limited had
been made at the beginning of the calendar year ended December 31,
2001:
Consolidated Balance Sheet Data
Assets:
Cash $1,132,271
Accounts Receivable, Net 775,457
Inventory 56,689
----------
Current Assets 1,964,417
----------
Fixed Assets, Net 350,461
Prepaid Expenses and Other Assets 174,642
Deferred Licensing Fee, Net 3,600,431
Excess of Cost Over Net Assets Acquired 10,658,095
----------
Total Assets $16,748,046
===========
Liabilities:
Accounts Payable and Accrued Expenses 863,723
License Agreement 3,620,268
Note and Interest Payable 234,841
Common Stock to be Issued 3,584,747
Convertible Preferred Stock to be Issued,
Short-Term 4,779,662
----------
Current Liabilities 13,083,241
----------
Other Liabilities 942,224
Convertible Preferred Stock to be Issued,
Long-Term 3,584,747
----------
Total Liabilities 17,610,212
Stockholders' Deficiency (862,165)
----------
Total Liabilities and Stockholders' Deficiency $16,748,046
===========
20
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
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 PRIOR PERIOD ADJUSTMENTS
The Company entered into a convertible promissory note (the "Note")
with Rainbow Investments International Limited ("RII") for a principal
sum of $200,000. The Company borrowed the money to meet certain
operating expenses. The Note bears interest at 10% per annum and was
due May 14, 2001. The debt and accrued interest is convertible to
common stock at a conversion price equal to 80% of the average closing
bid price per common 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. The note was converted and the shares were
issued on June 28 2002.
In connection with the Note, the Company issued warrants to purchase up
to 100,000 shares of common stock at an exercise price equal to 80% of
the average closing bid price per share of common stock during the ten
trading days immediately prior to any such per exercise share at any
time to and through May 15, 2001. Using the Black-Scholes model, the
warrants have an estimated value of $30,000, using the following
assumptions: no annual dividend, volatility of 53.1%, risk-free
interest rate of 6.33% and a term of one year.
The Company did not account for the value of the beneficial conversion
feature and warrants upon issuance of the Note in accordance with EITF
98-5 "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios" and APB 14
"Accounting for Convertible Debt and Debt Issue with Stock Purchase
Warrants". The Company believed that the effect of EITF 98-5 and APB 14
does not affect the trend in earnings or the results of the Company's
operations and will restate the comparative prior periods presented in
the June 30, 2002 condensed consolidated statements of operations to
reflect additional interest expense for the full value of the warrants
and beneficial conversion feature. The value ascribed to the beneficial
conversion feature totaled approximately $46,000, which was based upon
80% of the average closing bid price per common share during the ten
trading days prior to January 1, 2001. The total effect of the
restatement was to increase interest expense and additional paid-in
capital by approximately $76,000 for the year ended December 31, 2001,
increasing the net loss to $1,287,148. The interest expense and
additional paid-in capital accounts in the comparative prior periods
balance sheet, statement of operations, statement of changes in
stockholders' equity and statement of cash flows have been restated for
the effects of the adjustments resulting from the correction of an
error.
NOTE 8 GOING CONCERN
As reflected in the accompanying financial statements, the Company's
net loss of $2,256,326, net cash used in operations of $1,216,556 and
its working capital deficiency of $11,856,243 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, has
raised equity capital and has expanded its business operationS.
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 9 SUBSEQUENT EVENTS
21
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2002
ACQUISITIONS OF SPRINGBOARD TECHNOLOGY SOLUTIONS, INC.
------------------------------------------------------
On July 1, 2002, IVP Technology acquired all the outstanding shares of
Springboard Technology Solutions, Inc. ("Springboard") for
consideration of 2,000 common shares on the basis of a one for one
exchange. The value of the common stock issued was $260 or $.13 per
share based on the value of the Company's common stock on the date that
the Board approved the transaction. Springboard was owned by the former
shareholders of International Technology Marketing Inc., including
Brian MacDonald, Peter Hamilton, Kevin Birch, Geno Villella and Sherry
Bullock all of whom were officers of the Company at the time of
acquisition. Springboard 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 had 10 full time employees and consultants.
The acquisition will enable the Company to expand its enterprise
software business and complements its existing enterprise software
products. It also provides the Company with additional employees
dedicated to the marketing and selling of the enterprise line of
software products. This acquisition will be accounted for by the
purchase method of accounting in accordance with the provisions of SFAS
141. As a result of the Springboard acquisition, the Company will
record goodwill in the amount of approximately $367,477. The Company
will account for the purchased goodwill in accordance with the
provisions of SFAS 142.
The Company's acquisition of Springboard is not considered a
"significant" or material event because Springboard's net assets and
results of operations are less than 10% of the Company's consolidated
balance sheet and results of operations.
REVALUATION OF GOODWILL
-----------------------
The Company has evaluated goodwill for impairment as of December 31,
2002. As a result of this review, the Company has determined that
goodwill in the amount of $10,658,096 recorded in connection with the
acquisition of Ignition Entertainment Limited is fully impaired. This
charge will be included in operating expenses on the accompanying
financial statements for the year ended December 31, 2002. The
Company's assessment of its goodwill is based on undiscounted future
cash flows and the uncertainty of obtaining financing to fund the
conversion of acquired intellectual property into saleable products.
22
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.
23
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.
24
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
AFTER THE
AFTER THE PRECEDING
BETWEEN PRECEDING TIME PERIOD AFTER THE
WITHIN 91 AND 180 TIME PERIOD AND SIX PRECEDING
90 DAYS OF DAYS AFTER TO MONTHS TO TIME AND ON
TIME PERIOD: CLOSING MAY 28, 2002 MAY 28, 2003 MAY 28, 2003 MAY 28, 2004 MAY 29, 2004
- ----------------------------------- ---------- ------------ ------------ ------------ ------------ ------------
GOALS: -- -- -- $13,000,000 $26,000,000 $45,000,000
Gross Revenues (in U.S. Dollars)
Net Income (in U.S. Dollars) -- -- -- $1,000,000 $5,000,000 $15,000,000
PAYMENTS: -- 5,000,000 -- if reach both if reach if reach
Incentive Payments of IVP common to DCD above goals both above both above
and preferred shares Holdings 500,000 goals goals
shares of 500,000 500,000
convertible shares of shares of
preferred convertible convertible
stock preferred preferred
stock stock
Release of 50 Million Shares of IVP -- 15,000,000 1,000,000 1,000,000 1,000,000 500,000
common stock (upon conversion of shares of shares of shares of shares of shares of
all preferred stock issued) common stock preferred preferred preferred preferred
stock stock stock stock
(convertible (convertible (convertible (convertible
to 10,000,000 to 10,000,000 to 10,000,000 to 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.
STOCK PURCHASE/MANAGEMENT AGREEMENT
On September 17, 2001, the Company entered into a stock purchase/management
agreement to acquire 100% of the outstanding stock of International Technology
Marketing, Inc. ("ITM"). In connection with the agreement, the Company is to
issue 50,000,000 shares to the former shareholders, which will be held in escrow
subject to the Company reaching certain sales milestones. The agreement calls
for the Company to compensate the former shareholders of ITM in their efforts to
meet the sales milestones.
The revenue milestones to be 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.
>> Upon achieving $2,000,000 in cumulative revenues the escrow agent
will release another 10,000,000 shares.
25
>> 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. The former shareholders of ITM include the Company's current
management group. The Company has not recorded any amounts associated with the
acquisition of ITM, which had minimal assets and/or liabilities on the date of
acquisition. For accounting purposes, the Company has not treated the
acquisition as an acquisition under the principles of APB 16, but has instead
treated the acquisition as an assumption of contingent management contracts for
services to be rendered by the former ITM shareholders to the Company. The
contingent shares will be issued and released out of escrow to the former
principal owners of ITM upon the attainment of certain performance goals as
described above. In return, the former principal owners will perform management
and marketing services to the Company. Upon attainment of each performance
milestone, the Company will record the issuance of stock as compensation expense
in the period earned based on current market prices as of the date of grant.
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
The following discussion should be read in conjunction with our
financial statements and the related notes and the other financial information
appearing elsewhere in this report.
GOING CONCERN
As reflected in IVP Technology's unaudited financial statements for the
six months ended June 30, 2002, IVP Technology's accumulated deficit of
$16,115,596, and its working capital deficiency of $11,856,243 raise substantial
doubt about its ability to continue as a going concern. The ability of IVP
Technology to continue as a going concern is dependent on IVP Technology's
ability to raise additional short term and long debt and equity funds and
implement its business plan. The financial statements do not include any
adjustments that might be necessary if IVP Technology is unable to continue as a
going concern.
IVP Technology has entered into various software distribution and
licensing agreements, has acquired an operating business and intends on raising
additional term debt and equity capital in order to expand its business
operations. Management believes that actions presently being taken to obtain
additional funding and to operate and expand its existing business operations
provide the opportunity for IVP Technology to continue as a going concern. IVP
is constantly on the look out for product and company acquisitions that will add
accretive revenue and earnings to the company. The company may acquire these
products and company acquisitions in a combination of debt and share issuances.
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, all of which were generated by our wholly-owned subsidiary,
Ignition Entertainment Limited but which have been sold by our US operation and
by our UK operation. Ignition Entertainment was formed in December 2001 and
commenced operations in April 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.
All revenue for the comparative period ended June 30, 2001 in the amount of
$27,060 was from sales of the PowerAudit software program. We generated no
revenue from other sources. All sales of PowerAudit were realized prior to the
June 13, 2002 termination date.
COST OF REVENUE. Cost of revenue was $382,716 for the three months
ended June 30, 2002. Cost of revenue related to the sale of video games by
Ignition Entertainment. IVP Technology had no cost of revenue in the comparable
period in the prior year.
26
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. The
increase in consulting and professional fees for the three-months ended June 30,
2002 as compared to June 30, 2001 is attributable to the expensing of $250,000
of product marketing consulting costs, $43,575 of consulting fees incurred by
Ignition under the Montpelier agreement, an increase in legal and accounting
costs of $94,586 and $75,000 of legal fees incurred for the Cornell Capital
Partners financing transaction that the Company currently expensed. Financial
advisory fees increased by $150,000 from the comparative three-month period
ended June 30, 2001 due to the Cornell Capital Partners financing transaction.
Our infrastructure expenses increased due to the additional costs associated
with the Company's new management team and the formation of an active business
These costs included rent, and other office operating costs such as utilities,
equipment leasing costs and other office expenses. Other general and
administrative costs increased by $107,532 from the comparative three-month
period ended June 30, 2001 and relate principally to the Ignition operations.
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 of principally from the beneficial 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, as compared to net income of $18,498 for the three
months ended June 30, 2001.
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, all of which was generated from our wholly-owned subsidiary,
Ignition Entertainment Limited. Ignition Entertainment was formed in December
2001 and commenced operations in April 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.
.. All revenue for the six-month comparative period ended June 30, 2001 in the
amount of $54,120 was from sales of the PowerAudit software program. We
generated no revenue from other sources.
COST OF REVENUE. Cost of revenue was $382,716 for the six months ended
June 30, 2002. Cost of revenue related to the sale of video games by Ignition
Entertainment. IVP Technology had no cost of revenue in the comparable period in
the prior year.
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.
The increase in consulting and professional fees for the six months ended June
30, 2002 as compared to June 30, 2001 is principally attributable to the
expensing of $250,000 of product marketing consulting costs under the Vanessa
Land agreement and $43,575 of consulting fees incurred by Ignition under the
Montpelier agreement. Our infrastructure expenses increased by $230,406 from the
comparative six-month period ended June 30, 2001 due to the additional costs
associated with the Company's new management team and the formation of an active
business. These costs included rent, and other office operating costs such as
utilities, equipment leasing costs and other office expenses. Other general and
administrative costs increased by $139,182 from the comparative six-month period
ended June 30, 2001 and relate principally to the Ignition operations.
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 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 of the beneficial conversion feature
of our convertible debt. Interest of $76,000 for the six months ended June 30,
2001 is attributable to intrinsic interest on the beneficial conversion feature
of the Rainbow convertible debt which was treated as a prior period adjustment.
27
NET INCOME (LOSS). For the six months ended June 30, 2002, we incurred
an overall loss of $(2,256,326) or $(.03) per share, as compared to net loss of
($437,803) or ($.01) per share for the comparative period ended June 30, 2001.
CHANGE IN NET ASSETS. As of and through June 30, 2002, IVP Technology
experienced material changes to its net assets from the calendar year ended
December 31, 2001. During the six months ended June 30, 2002, IVP Technology
acquired the stock of Ignition Entertainment. As a result of the Ignition
acquisition, IVP Technology acquired total assets of approximately $2.5 million,
consisting principally of cash ($1.1 million), accounts receivable ($800,000)
and fixed assets, net ($350,000) and assumed approximately $1.2 million of
liabilities. Liabilities assumed consisted principally of accounts payable and
accrued expenses ($400,000) and other liabilities ($700,000). IVP Technology
also recorded goodwill in the amount of approximately $10.7 million associated
with the Ignition acquisition. The net effect of this transaction on the balance
sheet was to increase its net assets by approximately $10.0 million.
SUBSEQUENT EVENT. The Company has evaluated goodwill for impairment as
of December 31, 2002. As a result of this review, the Company has determined
that goodwill in the amount of $10,658,095 recorded in connection with the
acquisition of Ignition Entertainment Limited is fully impaired. This non-cash
charge of $10,658,095 or $(.09) per share will be included in operating expenses
on the accompanying financial statements for the year ended December 31, 2002.
The Company's assessment of its goodwill is based on undiscounted future cash
flows and the uncertainty of obtaining financing to fund the conversion of
acquired intellectual property into saleable products.
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 sales of our
products generates enough revenue to fund operations. We will also have a need
for cash to fund the acquisition of third party products, primarily games in
process or near completion for distribution and potentially cash and additional
shares to acquire other companies in the United States and Europe. In addition,
our need for cash includes satisfying $4,837,892 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. Recently we announced a renegotiation of the software license
agreement for Classifier which removed the obligation to pay the $2,906,658 by
December 31, 2002 in its entirety. 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
iBos and the various consumer entertainment software products that we currently
have in distribution through our various subsidiaries and directly by IVP
Technology.
At June 30, 2002, IVP Technology's cash and cash equivalents balance
was $1,176,695, an increase of $1,176,463 from the balance of $232 at December
31, 2001. During the six months ended June 30, 2002, cash (used) in operations
and provided by 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 $1,165,645 was from the DCD short-term loan of $856,334 and from
$309,211 of funds borrowed from DcD Factors Plc secured by Ignition's accounts
receivables and a secured lien against all of Ignition's assets.
On April 10, 2002, Ignition Entertainment entered into a 1,000,000
British Pound revolving credit facility with Revelate Limited for the purpose of
allowing Ignition to purchase goods and services from third party vendors. Under
the terms of the revolving credit facility, Revelate will advance up to 60% of
the purchase price of goods and services purchased by Ignition for its business.
Ignition is obligated to pay Revelate interest on each advance at a rate equal
to 3% over the UK Bank Base Rate, a 2% commission of total disbursements made on
behalf of Ignition and a facility fee of 500 British Pounds. The facility is
secured by a first lien on all of Ignition's assets.
On April 9, 2002, Ignition Entertainment entered into a one-year
factoring agreement with DcD Factors Plc wherein Ignition has agreed to sell and
DcD has agreed to purchase up to (pound)500,000 of Ignition's United Kingdom and
non-United Kingdom based customer accounts receivable at a rate equal to 75% of
the face amount of the receivable. Interest charged on amounts advanced against
future collections by DcD is equal to 3% above the UK Base Bank rate. Under the
terms of the factoring agreement, DcD is obligated to remit, from time to time,
excess collections to Ignition to the extent that collections on purchased
receivables exceed the sum of (i) advances made by DcD, (ii) interest and
service charges on funds advanced, (iii) monthly services fees and (iv) customer
28
discounts. Ignition has granted DcD a first lien and security interest in all of
Ignition's assets.
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 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 $330,000, 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 $0.20 per share, or
an aggregate of $20,000, 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.
SUBMISSION OF MATTERS TO A VOTE OF STOCK HOLDERS
On November 16, 2001, IVP Technology held its annual stockholders'
meeting in Las Vegas, Nevada. At the meeting, the stockholder approved the
following changes to our Articles of Incorporation:
o To increase IVP Technology's authorized shares of common stock
from 50,000,000 shares to 150,000,000; and
o To provide for a class of 50,000,000 shares of preferred stock
that will have such terms as the Board of Directors shall
determine from time to time.
In addition, the stockholders approved the acquisition of International
Technology Marketing and the provision of 50,000,000 shares to complete that
acquisition, and elected five directors, Messrs. MacDonald, Hamilton, Sidrow,
King and Smith. King and Sidrow subsequently resigned for personal reasons
primarily related to a lack of Directors and Officers insurance.
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
29
arising in a purchase business combination and requires disclosure of more
information concerning a business combination 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 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.
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). On January 1, 2002, the Company began operations
and emerged from the development stage.
(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. The $200,000 was recorded as an expense in the 2000
financial statements. 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 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.
30
D) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary Ignition Entertainment Limited.
All significant inter-company transactions and balances have been
eliminated.
(E) FOREIGN CURRENCY TRANSACTIONS
Assets and liabilities of foreign subsidiaries, whose functional
currency is the local currency, are translated at year-end exchange
rates. Nonmonetary assets and liabilities are remeasured into U.S.
dollars at historical rates. Income and expense items are translated at
the average rates of exchange prevailing during the year. The
adjustment resulting from translating the financial statements of such
foreign subsidiaries is reflected as a separate component of
stockholder's equity. Foreign currency transaction gains or losses are
reported in results 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.
(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) ALLOWANCES FOR DOUBTFUL ACCOUNTS AND SALES RETURNS
The Company makes judgments as to our ability to collect outstanding
receivables and provide allowances for the portion of receivables when
collection becomes doubtful. Provisions are made based upon a specific
review of all significant outstanding invoices. For those invoices not
specifically reviewed, provisions are provided at differing rates,
based upon the age of the receivable. In determining these percentages,
we analyze our historical collection experience and current economic
trends. If the historical data we use to calculate the allowance
provided for doubtful accounts does not reflect the future ability to
collect outstanding receivables, additional provisions for doubtful
accounts may be needed and the future results of operations could be
materially affected.
The Company also records a provision for estimated sales returns and
allowances on product and service related sales in the same period as
the related revenues are recorded. These estimates are based on
historical sales returns, analysis of credit memo data and other known
factors. If the historical data we use to calculate these estimates do
not properly reflect future returns, then a change in the allowances
would be made in the period in which such a determination is made and
revenues in that period could be adversely affected.
(J) INVENTORY
Inventories, which consist primarily of system components, parts and
supplies and completed games and other video accessories, are stated at
the lower of weighted average cost or market. The weighted average cost
of inventories approximates the first-in, first-out ("FIFO") method.
Management performs periodic assessments to determine the existence of
31
obsolete, slow-moving and nonsalable inventories and records necessary
provisions to reduce such inventories to net realizable value.
(K) PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment are stated at cost. Depreciation and
amortization are provided on the straight-line method over the shorter
of the estimated useful lives of the assets or the applicable lease
term for leasehold improvements ranging from 3 to 10 years .
Maintenance and repairs are charged to expense when incurred;
betterments are capitalized. Upon retirement or sale, the cost and
accumulated depreciation are removed from the accounts and any gain or
loss is recognized currently.
(L) LONG-LIVED ASSETS
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If such review indicates
that the asset is impaired, when the carrying amount of an asset
exceeds the sum of its expected future cash flows, on an undiscounted
basis, the asset's carrying amount is written down to fair value.
Long-lived assets to be disposed of are reported at the lower of
carrying amount or fair value less cost to sell. The Company has not
recognized any impairment loss during the six months ended June 30,
2002.
(M) EXCESS OF COST OVER NET ASSETS ACQUIRED
In accordance with SFAS No. 141, the Company allocates the purchase
price of its acquisitions to the tangible assets, liabilities and
intangible assets acquired based on their estimated fair values. The
excess purchase price over those fair values is recorded as "Excess of
Cost Over Net Assets Acquired." The fair value assigned to intangible
assets acquired is based on valuations prepared by independent third
party appraisal firms using estimates and assumptions provided by
management. In accordance with SFAS No. 142, goodwill and purchased
intangibles with indefinite lives acquired after June 30, 2001 are not
amortized but will be reviewed periodically for impairment. Purchased
intangibles with finite lives will be amortized on a straight-line
basis over their respective useful lives.
(N) 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.
(O) 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.
(P) 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.
(Q) 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.
32
Management has determined that it is not practicable to provide
geographic segment disclosures for revenues and long-lived assets
because the Company sells its products to a large variety of locations
in the Americas and Europe, and in many instances, these products are
then resold through distributors.
(R) REVENUE RECOGNITION
Risk and Uncertainties
A significant portion of all of the Company's net sales are derived
from software publishing and distribution activities, which are subject
to increasing competition, rapid technological change and evolving
consumer preferences, often resulting in the frequent introduction of
new products and short product lifecycles. Accordingly, the Company's
profitability and growth prospects depend upon its ability to
continually acquire, develop and market new, commercially successful
software products and obtain adequate financing. If the Company is
unable to continue to acquire, develop and market commercially
successful software products, its operating results and financial
condition could be materially adversely affected in the near future.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reported periods. The most significant
estimates and assumptions relate to the recoverability of prepaid
royalties, capitalized software development costs and other
intangibles, realization of deferred income taxes, valuation of
inventories and the adequacy of allowances for returns, price
protection and doubtful accounts. Actual amounts could differ
significantly from these estimates.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with Statement of Position
("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9
"Modification of SOP 97-2 Software Revenue Recognition with respect to
Certain Transactions." SOP 97-2 provides guidance on applying generally
accepted accounting principles in recognizing revenue on software
transactions. SOP 98-9 deals with the determination of vendor specific
objective evidence of fair value in multiple element arrangements, such
as maintenance agreements sold in conjunction with software packages.
The Company's consumer software transactions generally include only one
element, the interactive software game or commercial software under
license. The Company recognizes revenue when the price is fixed and
determinable, there is persuasive evidence of an arrangement, the
fulfillment of its obligations under any such arrangement and
determination that collection is probable. Accordingly, revenue is
recognized when title and all risks of loss are transferred to the
customer, which is generally upon receipt by customer. The Company's
payment arrangements with its customers provide primarily 60 day terms
and to a limited extent with certain customers 30 or 90 day terms. The
Company does not have any multi-element arrangements that would require
it to establish VSOE for each element, nor does the Company have any
sales activity that requires the contract method of accounting.
The Company's distribution arrangements with customers generally do not
give customers the right to return products; however, the Company at
its discretion may accept product returns for stock balancing or
defective products. In addition, the Company sometimes negotiates
accommodations to customers, including price discounts, credits and
product returns, when demand for specific products falls below
expectations. The Company's publishing arrangements generally do not
require the Company to accept product returns and provide price
protection. The Company establishes a reserve for future returns and
other allowances based primarily on its return policies, price
protection policies and historical return rates. The Company may not
have a reliable basis to estimate returns and price protection for
certain customers or it may be unable to determine that collection of
the receivable is probable. In such circumstances, the Company defers
the revenues at the time of the sale and recognizes them when
collection of the related receivable becomes probable or cash is
received.
33
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:
34
PAYMENT SCHEDULE FOR ACQUISITION
OF IGNITION ENTERTAINMENT LIMITED AND INCENTIVE PAYMENTS
AFTER THE
AFTER THE PRECEDING
BETWEEN PRECEDING TIME PERIOD AFTER THE
WITHIN 91 AND 180 TIME PERIOD AND SIX PRECEDING
90 DAYS DAYS AFTER TO MONTHS TO TIME AND ON
TIME PERIOD: OF CLOSING MAY 28, 2002 MAY 28, 2003 MAY 28, 2003 MAY 28, 2004 MAY 29, 2004
- ------------------------------------ ---------- ------------ ------------ ------------- ------------ ------------
GOALS: -- -- -- $13,000,000 $26,000,000 $45,000,000
Gross Revenues (in U.S. Dollars)
Net Income (in U.S. Dollars) -- -- -- $1,000,000 $5,000,000 $15,000,000
PAYMENTS: -- 5,000,000 -- if reach both if reach if reach
Incentive Payments of IVP common to DCD above goals both above both above
and preferred shares Holdings 500,000 goals goals
shares of 500,000 500,000
convertible shares of shares of
preferred convertible convertible
stock preferred preferred
stock stock
Release of 50 Million Shares of IVP -- 15,000,000 1,000,000 1,000,000 1,000,000 500,000
common stock (upon conversion of shares of shares of shares of shares of shares of
all preferred stock issued) common stock preferred preferred preferred preferred
stock stock stock stock
(convertible (convertible (convertible (convertible
to 10,000,000 to 10,000,000 to 10,000,000 to 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.
35
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 $330,000, 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 $0.20 per share, or an aggregate of
$20,000, 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
36
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.
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.
37
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, Incorporated by reference to Exhibit 4.1 to
2000 between IVP Technology Corporation and Erebus IVP Technology's Form 8-K12G3 filed on
Corporation April 19, 2000
38
EXHIBIT NO. DESCRIPTION LOCATION
- ------------- ------------------------------------------------------ ----------------------------------------------
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 Incorporated by reference to Exhibit 10.4 to
Agreement dated as of May 31, 2000 between the IVP Technology's Form 10-QSB filed on
Registrant and Orchestral Corporation September 24, 2000
10.5 Service Bureau Arrangement Agreement dated September Incorporated by reference to Exhibit 10.5 to
28, 2000 between the Registrant and E-RESPONSES.COM IVP Technology's Form 10-QSB filed on November
14, 2000
10.6 Stock Purchase Agreement dated September 17, 2001 Incorporated by reference to Exhibit 10.6 to
among the Registrant, International Technology IVP Technology's Form 10-KSB filed on
Marketing, Inc., Brian MacDonald, Peter Hamilton, April 15, 2002
Kevin Birch, Sherry Bullock, and Geno Villella
10.7 Agreement dated May 15, 2000 between the Registrant Incorporated by reference to Exhibit 10.7 to
and Rainbow Investments International Limited IVP Technology's Form 10-KSB filed on
April 15, 2002
10.8 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.8 to
International Technology Marketing, Inc. and Brian J. IVP Technology's Form 10-KSB filed on
MacDonald April 15, 2002
10.9 Agreement dated February 12, 2002 between the Incorporated by reference to Exhibit 10.9 to
Registrant and SmartFOCUS Limited IVP Technology's Form 10-KSB filed on
April 15, 2002
10.10 Warrant Agreement dated May 15, 2000 between the Incorporated by reference to Exhibit 10.10 to
Registrant and Rainbow Investments International IVP Technology's Form 10-KSB filed on
Limited April 15, 2002
10.11 Convertible Promissory Note dated May 2000 between the Incorporated by reference to Exhibit 10.11 to
Registrant and Rainbow Investments International IVP Technology's Form 10-KSB filed on
Limited April 15, 2002
10.12 Software Distribution Agreement dated December 28, Incorporated by reference to Exhibit 10.12 to
2001 between the Registrant and TIG Acquisition IVP Technology's Form 10-KSB filed on
Corporation April 15, 2002
10.13 Loan Agreement dated January 16, 2002 between the Incorporated by reference to Exhibit 10.13 to
Registrant and DCD Holdings Limited IVP Technology's Form 10-KSB filed on
April 15, 2002
10.14 Agreement for the Provision of Marketing Services Incorporated by reference to Exhibit 10.1 to
dated May 3, 2002 between the Registrant and Vanessa IVP Technology's Form S-8 filed with the SEC
Land on May 3, 2002
10.15 Reserved
39
EXHIBIT NO. DESCRIPTION LOCATION
- ------------- ------------------------------------------------------ ----------------------------------------------
10.16 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.16 to
International Technology Marketing, Inc. and Geno IVP Technology's Form 10-KSB filed on
Villella April 15, 2002
10.17 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.17 to
International Technology Marketing, Inc. and Kevin IVP Technology's Form 10-KSB filed on
Birch April 15, 2002
10.18 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.18 to
International Technology Marketing, Inc. and Peter J. IVP Technology's Form 10-KSB filed on
Hamilton April 15, 2002
10.19 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.19 to
International Technology Marketing, Inc. and Sherry IVP Technology's Form 10-KSB filed on
Bullock April 15, 2002
10.20 Loan and Security Agreement dated July 30, 2001 among Incorporated by reference to Exhibit 10.20 to
the Registrant, Clarino Investments International IVP Technology's Form 10-KSB filed on
Ltd., and Berra Holdings Ltd. April 15, 2002
10.21 Consulting and Advisory Extension Agreement dated Incorporated by reference to the Exhibit to
February 14, 2001 between the Registrant and Barry IVP Technology's Form 10-QSB filed on May 21,
Gross D/B/A Gross Capital Associates 2001
10.22 Letter Agreement dated June 28, 2001, between the Incorporated by reference to Exhibit 4.1 to
Registrant and Andris Gravitis IVP Technology's Form S-8 filed on July 23,
2001
10.23 Letter Agreement dated June 28, 2001, between the Incorporated by reference to Exhibit 4.2 to
Registrant and Thomas Chown. IVP Technology's Form S-8 filed on July 23,
2001
10.24 Letter Agreement dated May 30, 2001, between the Incorporated by reference to Exhibit 4.3 to
Registrant and Ruffa & Ruffa, P.C. for Modification of IVP Technology's Form S-8 filed on July 23,
Retainer Agreement 2001
10.25 Consulting Agreement dated September 1, 2000 between Incorporated by reference to Exhibit 13.1 to
the Registrant and Barry Gross d/b/a Gross Capital IVP Technology's Form 10-KSB filed on July 5,
Associates 2001
10.26 Consulting and Advisory Agreement dated September 25, Incorporated by reference to Exhibit 13.2 to
2000 between the Registrant and Koplan Consulting IVP Technology's Form 10-KSB filed on July 5,
Corporation 2001
10.27 Warrant Agreement dated April 3, 2002 between the Incorporated by reference to Exhibit 10.27 to
Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on
April 15, 2002
10.28 Equity Line of Credit Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.28 to
between the Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on
April 15, 2002
10.29 Registration Rights Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.29 to
between the Registrant and Cornell Capital Partners, LP IVP Technology's Form 10-KSB filed on
April 15, 2002
40
EXHIBIT NO. DESCRIPTION LOCATION
- ------------- ------------------------------------------------------ ----------------------------------------------
10.30 Escrow Agreement dated April 3, 2002 among the Incorporated by reference to Exhibit 10.30 to
Registrant, Cornell Capital Partners, LP, Butler IVP Technology's Form 10-KSB filed on
Gonzalez, and First Union National Bank April 15, 2002
10.31 Securities Purchase Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.31 to
among the Registrant and the Buyers IVP Technology's Form 10-KSB filed on
April 15, 2002
10.32 Escrow Agreement dated April 3, 2002 among the Incorporated by reference to Exhibit 10.32 to
Registrant, the Buyers, and First Union National Bank IVP Technology's Form 10-KSB filed on
April 15, 2002
10.33 Debenture Agreement Dated April 3, 2002 between the Incorporated by reference to Exhibit 10.33 to
Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on
April 15, 2002
10.34 Investor Registration Rights Agreement dated April 3, Incorporated by reference to Exhibit 10.34 to
2002 between the Registrant and the Investors IVP Technology's Form 10-KSB filed on
April 15, 2002
10.35 Placement Agent Agreement dated April 3, 2002 among Incorporated by reference to Exhibit 10.35 to
the Registrant, Westrock Advisors, Inc. and Cornell IVP Technology's Form 10-KSB filed on
Capital Partners LP April 15, 2002
10.36 Letter Agreement dated February 20, 2002 between the Incorporated by reference to Exhibit 10.36 to
Registrant and Buford Industries Inc. IVP Technology's Form 10-KSB filed on
April 15, 2002
10.37 Letter Confirmation Agreement dated July 21, 2001 Incorporated by reference to Exhibit 10.37 to
between the Registrant and Buford Industries Inc. IVP Technology's Form 10-KSB filed on
April 15, 2002
10.38 Consulting Agreement dated March 1, 2002 between the Incorporated by reference to Exhibit 10.38 to
Registrant and Danson Partners LLC IVP Technology's Form 10-KSB filed on
April 15, 2002
10.39 Term Sheet between the Registrant and Cornell Capital Incorporated by reference to Exhibit 10.39 to
Partners, LP Increasing the Commitment under the IVP Technology's Form SB-2 filed on May 15,
Equity Line of Credit to $10 million 2002
10.40 Consulting Agreement dated February 12, 2002 between Incorporated by reference to Exhibit 10.40 to
the Registrant and Danson Partners LLC IVP Technology's Form SB-2 filed on May 15,
2002
10.41 Escrow Agreement dated as of May 15, 2002 among the Incorporated by reference to Exhibit 10.41 to
Registrant, Brian MacDonald, Peter Hamilton, Kevin IVP Technology's Form SB-2 filed on May 15,
Birch, Sherry Bullock, and Gino Villella 2002
10.42 Termination letter dated June 13, 2002 between the Incorporated by reference to Exhibit 10.42 to
Registrant and Orchestral Corporation IVP Technology's Form 10-QSB filed on August 19,
2002
10.43 Acquisition Agreement dated as of May 28, 2002 Incorporated by reference to Exhibit 10.43 to
regarding the purchase of Ignition Entertainment IVP Technology's Form 10-QSB filed on August 19,
2002
41
EXHIBIT NO. DESCRIPTION LOCATION
- ------------- ------------------------------------------------------ ----------------------------------------------
10.44 Consulting Agreement dated as of June 1, 2002 Ignition Incorporated by reference to Exhibit 10.44 to
Entertainment Limited and Montpelier Limited IVP Technology's Form 10-QSB filed on August 19,
2002
(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.
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.
42
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 February 12, 2003
- ------------------------------------------
By: Brian MacDonald
President, Chief Executive Officer and
Acting Chief Financial Officer
43
OFFICER'S CERTIFICATE
PURSUANT TO SECTION 302
-----------------------
CERTIFICATION
I, Brian MacDonald, certify that:
1. I have reviewed this amended quarterly report on Form 10-QSB of IVP
Technology Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
Date: February 12, 2003 By: /s/ Brian MacDonald
--------------------
Brian MacDonald
President, Chief Executive Officer and
Acting Chief Financial Officer
44
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 Amendment No. 1 to 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.
Date: February 12, 2003 By: /s/ Brian MacDonald
--------------------
Brian MacDonald
President, Chief Executive Officer and
Acting Chief Financial Officer
45