UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
--------------------------------------------
[ ] 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: 234,996,914 shares of common stock,
$.001 par value, were outstanding on June 30, 2003
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]
PART I- FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2003
(Un-audited) and December 31, 2002 (Audited)
Condensed Consolidated Statement of Operations for the
Three Months and Six Months Ended June 30, 2003 and June
30, 2002, (Unaudited)
Condensed Consolidated Statements of Stockholders'
Deficiency for the Six Months ended June 30, 2003
Condensed Consolidated Statements Of Cash Flows For The Six
Months Ended June 30, 2003 And 2002 (Unaudited)
Notes To Condensed Consolidated Financial Statements As Of
June 30, 2003 (Unaudited)
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. Defaults Upon Senior Securities
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Other information
ITEM 6. Subsequent Events, Exhibits and Reports on Form 8-K
2
IVP TECHNOLOGY CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
3
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2003
(UNAUDITED) AND DECEMBER 31, 2002
PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
PAGES 3 - 4 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIENCY FOR THE SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
PAGES 5 - 6 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED)
PAGES 7 - 26 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS
OF JUNE 30, 2003 (UNAUDITED)
4
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30,
2003 December 31,
(Unaudited) 2002
------------ --------------
CURRENT ASSETS
Cash $ 754 $ 63,162
Accounts receivable, less allowance for doubtful accounts of
$43,970 as of June 30, 2003 and December 31, 2002 44,073 17,165
Inventory - -
Prepaid expenses and other current assets 146,843 34,610
------------ --------------
Total Current Assets 191,670 114,937
------------ --------------
FIXED ASSETS
Plant, property and equipment 195,016 173,246
Accumulated depreciation (117,422) (79,688)
------------ --------------
Total Fixed Assets 77,594 93,558
------------ --------------
OTHER ASSETS
License agreement - software, net of accumulated amortization
of $535,209 and $356,806 as of June 30, 2003 and December 31,
2002, respectively 178,404 356,806
Deferred consulting 149,177 -
Other assets - 71,816
------------ --------------
Total Other Assets 327,581 428,622
------------ --------------
TOTAL ASSETS $ 596,845 $ 637,117
- ------------ ============ ==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accounts payable $ 680,872 $ 657,402
Accrued liabilities 91,371 169,679
Taxes payable 155,371 32,150
Other current liabilities 2,856 134,088
Accrued interest 11,909 14,974
Due to factor - -
Leases payable, current portion 20,154 -
Net liabilities of discontinued operations - 1,417,619
Note payable, current portion 689,020 104,020
Common stock to be issued 18,000 3,617,746
Convertible preferred stock to be issued, short-term - 4,779,662
Due to related parties 76,427 369,226
------------ -------------
Total Current Liabilities 1,745,980 11,296,566
------------ -------------
LONG-TERM LIABILITIES
Convertible debentures - 150,000
Lease payable, long-term 15,855 25,570
Convertible preferred stock to be issued, long-term - 3,584,747
------------ -------------
Total Long-Term Liabilities 15,855 3,760,317
------------ -------------
TOTAL LIABILITIES 1,761,835 15,056,883
- ----------------- ------------ -------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, none issued and outstanding - -
Common stock, $0.001 par value, 500,000,000 and 150,000,000
shares authorized, 234,996,914 and 99,449,261 shares issued
and outstanding as of June 30, 2003 and December 31, 2002,
respectively 234,997 99,449
Additional paid in capital 35,114,270 20,870,864
Accumulated deficit (35,430,951) (35,248,562)
Less: treasury stock (11,000,000 shares) (770,000) -
Other comprehensive income - exchange gain (103,494) 80,795
Less deferred equity line commitment fees (134,812) (222,312)
Less deferred compensation and licensing fee (75,000) -
------------ -------------
Total Stockholders' Deficiency (1,164,990) (14,419,766)
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 596,845 $ 637,117
- ---------------------------------------------- ============ =============
See accompanying notes to condensed consolidated financial statements
5
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
For The Three For The Three For The Six For The Six
Months Ended Months Ended Months Ended Months Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------------- ------------------- ----------------- ---------------
NET SALES $ 82,300 $ 90,000 $ 231,009 $ 90,000
------------------- ------------------- ----------------- ---------------
COST OF SALES
Product costs - - 100,931 -
Development costs - 1,030 - 1,030
Distribution and other costs including
amortization 93,207 549,579 186,189 1,002,113
------------------- ------------------- ----------------- ---------------
Total Cost of Sales 93,207 550,609 287,120 1,003,143
------------------- ------------------- ----------------- ---------------
GROSS PROFIT (LOSS) (10,907) (460,609) (56,111) (913,143)
------------------- ------------------- ----------------- ---------------
OPERATING EXPENSES
Salaries and wages 157,573 - 235,974 -
Stock-based compensation 656,922 - 656,922 -
Consulting fees 45,256 330,980 93,930 349,980
Legal and accounting 57,996 165,877 153,874 211,974
Management fees - 52,452 - 89,408
General and administrative expenses 198,470 150,100 392,367 281,886
Financial advisory fees - 150,000 30,708 150,000
Research and development - - 108 -
Amortization and depreciation 10,353 6,935 18,722 66,935
------------------- ------------------- ----------------- ---------------
Total Operating Expenses 1,126,570 856,344 1,582,605 1,150,183
------------------- ------------------- ----------------- ---------------
LOSS FROM OPERATIONS (1,137,477) (1,316,953) (1,638,716) (2,063,326)
------------------- ------------------- ----------------- ---------------
OTHER INCOME (EXPENSE)
Gain on early extinguishment of debt - 96,334 - 96,334
Interest income 1,354 42 6,497 42
Interest expense (148,778) (54,218) (227,130) (66,145)
Foreign exchange gain (loss) 1,006 (11,272) 14,074 (11,272)
------------------- ------------------- ----------------- ---------------
Total Other Income (Expense) (146,418) 30,886 (206,559) 18,959
------------------- ------------------- ----------------- ---------------
LOSS FROM CONTINUING OPERATIONS (1,283,895) (1,286,067) (1,845,275) (2,044,367)
DISCONTINUED OPERATIONS (SEE NOTE 2):
Loss from discontinued operations - (211,959) (733,123) (211,959)
Gain on sale of discontinued operations 2,396,009 - 2,396,009 -
------------------- ------------------- ----------------- ---------------
Total Discontinued Operations 2,396,009 (211,959) 1,662,886 (211,959)
------------------- ------------------- ----------------- ---------------
NET INCOME (LOSS) $ 1,112,114 $ (1,498,026) $ (182,389) $ (2,256,326)
- ----------------- =================== =================== ================= ===============
(LOSS) PER COMMON SHARE FROM CONTINUING
OPERATIONS - BASIC AND DILUTED $ (0.01) $ (0.01) $ (0.02) $ (0.02)
=================== =================== ================= ===============
GAIN (LOSS) PER COMMON SHARE FROM
DISCONTINUED OPERATIONS - BASIC $ 0.02 $ (0.00) $ 0.02 $ (0.00)
=================== =================== ================= ===============
GAIN (LOSS) PER COMMON SHARE FROM
DISCONTINUED OPERATIONS -DILUTED $ 0.02 $ (0.00) $ 0.01 $ (0.00)
=================== =================== ================= ===============
NET INCOME (LOSS) PER COMMON SHARE - BASIC $ 0.01 $ (0.01) $ (0.00) $ (0.03)
=================== =================== ================= ===============
NET INCOME (LOSS) PER COMMON SHARE - DILUTED $ 0.01 $ (0.01) $ (0.00) $ (0.03)
=================== =================== ================= ===============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC 115,200,027 113,191,285 107,531,237 83,421,414
=================== =================== ================= ===============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - DILUTED 133,678,287 113,191,285 114,394,419 83,421,414
=================== =================== ================= ===============
See accompanying notes to condensed consolidated financial statements
6
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE SIX MONTHS ENDED JUNE 30, 2003
--------------------------------------
(UNAUDITED)
Additional
Preferred Stock Common Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
------------ --------- ------------- -------- ------------ ---------------
Balance, December 31, 2002 - $ - 99,449,261 $ 99,449 $ 20,870,864 $ (35,248,562)
Stock issued for services and
settlements - - 73,123,249 73,123 1,831,675 -
Stock issued for cash - - 12,424,404 12,425 512,575 -
Stock issued to former shareholders of
Ignition Entertainment, Ltd. 3,500,000 3,500 15,000,000 15,000 11,930,656 -
Conversion of preferred stock to
common stock (3,500,000) (3,500) 35,000,000 35,000 (31,500) -
Stock to be received from the sale of
Ignition Entertainment, Ltd. - - - - - -
Deferred cost recognized - - - - - -
Net loss for the period - - - - - (182,389)
Cumulative translation adjustment - - - - - -
Comprehensive loss - - - - - -
------------ --------- ------------- -------- ------------ ---------------
BALANCE, JUNE 30, 2003 - $ - 234,996,914 $ 234,997 $ 35,114,270 $ (35,430,951)
- ---------------------- ============ ======== ============= ======== ============ ===============
See accompanying notes to condensed consolidated financial statements
7
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE SIX MONTHS ENDED JUNE 30, 2003
--------------------------------------
(UNAUDITED)
Deferred Deferred
Compensation Equity
and Line Other
Treasury Licensing Commitment Comprehensive
Stock Fees Fees Income Total
---------- ------------ ------------ ------------- -----------
Balance, December 31, 2002 - $ - $ (222,312) $ 80,795 $ (14,419,766)
Stock issued for services
and settlements - (75,000) - - 1,829,798
Stock issued for cash - - - - 525,000
Stock issued to former
owners of
Ignition Entertainment,
Ltd. - - - - 11,949,156
Conversion of preferred
stock to common stock - - - - -
Stock received from the
sale of
Ignition Entertainment,
Ltd. (770,000) - - - (770,000)
Deferred cost recognized - - 87,500 - 87,500
Net loss for the period - - - - (182,389)
Cumulative translation
adjustment - - - (184,289) (184,289)
-----------
Comprehensive loss - - - - (366,678)
---------- ------------ ------------ ----------- -----------
BALANCE, JUNE 30, 2003 (770,000) $ (75,000) $ (134,812) $ (103,494) $ (1,164,990)
- ---------------------- ========== ============ ============ =========== ===========
See accompanying notes to condensed consolidated financial statements
8
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
For The Six For The
Months Six Months
Ended June Ended June
30, 2003 30, 2002
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (182,389) $ (2,256,326)
Adjustments to reconcile net loss to net cash used in
operating activities:
Gain on sale of discontinued operations (2,396,009) -
Amortization and depreciation 18,722 66,935
Amortization of licensing agreements 178,402 905,067
Amortization of consulting agreements and commitment fees 113,323 123,001
Interest expense on beneficial conversion - 64,286
Gain on early extinguishment of debt - (96,334)
Decrease in deferred tax asset 71,816 -
Stock issued for commitment fees and penalties 22,800 -
Stock issued for compensation 618,880 -
Stock issued for financing costs 129,500 -
Stock issued for services 12,500 517,782
Changes in operating assets and liabilities, net of effects
of discontinued operations:
Decrease (increase) in accounts receivable (89,973) 159,702
Decrease in inventory 304,783 3,529
Increase in prepaid expenses and other current assets (125,789) (136,678)
Increase in other assets - (26,218)
Increase (decrease) in accounts payable (83,409) 73,511
Decrease in accrued liabilities (162,333) -
Increase in taxes payable 171,214 56,448
Decrease in other current liabilities (69,430) -
Decrease in accrued interest (3,065) (26,956)
------------- ------------
Net Cash Used In Operating Activities (1,470,457) (572,251)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from acquisition - 1,132,039
Cash paid from sale of discontinued operations (160) -
Cash paid for licensing agreement - (713,610)
Purchases of fixed assets (10,906) (77,779)
------------- ------------
Net Cash (Used In) Provided By Investing Activities (11,066) 340,650
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (690,000) -
Proceeds from notes payable 1,174,146 979,801
Proceeds from convertible debentures - 150,000
Proceeds from related parties 174,221 238,363
Proceeds from factors 116,503 12,037
Proceeds from issuance of common stock 525,000 -
Payment on leases (4,179) -
------------- ------------
Net Cash Provided By Financing Activities 1,295,691 1,380,201
------------- ------------
EFFECT OF FOREIGN EXCHANGE RATES (90,499) 27,863
------------- ------------
NET INCREASE IN CASH FOR THE PERIOD (276,331) 1,176,463
CASH - BEGINNING OF PERIOD 277,085 232
------------- ------------
CASH - END OF PERIOD $ 754 $ 1,176,695
- -------------------- ============= ============
See accompanying notes to condensed consolidated financial statements
9
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
For The For The
Six Months Six Months
Ended Ended
June 30, 2003 June 30, 2002
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 36,945 $ -
============= ============
Cash paid for taxes $ - $ -
============= ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchased under capital leases $ 33,095 $ -
============= ============
Acquisition of Ignition Entertainment Ltd. $ - $ 1,132,039
============= ============
Common and preferred stock issued to satisfy common and
preferred stock to be issued for the acquisition of Ignition $ 11,949,156 $ -
============= ============
Common stock issued for deferred consulting expenses $ 250,000 $ -
============= ============
Common stock issued for payment of accrued bonuses $ 31,250 $ -
============= ============
Common stock issued for payment of commitment fees $ - $ 350,000
============= ============
Common stock issued for payment of debt and accrued interest
thereon $ - $ 223,773
============= ============
Common stock issued for payment of amounts due to related
parties $ 824,869 $ -
============= ============
Common stock issued for payment of common stock to be issued $ 15,000 $ 50,000
for services ============= ============
See accompanying notes to condensed consolidated financial statements
10
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
- ------ -----------------------------------------------------------
(A) ORGANIZATION
----------------
The consolidated financial statements of IVP Technology Corporation
d.b.a. ActiveCore Technologies, Inc. (formally Mountain Chef, Inc.)
and consolidated subsidiaries (the "Company") include the accounts of
the parent, IVP Technology Corporation, incorporated in the State of
Nevada on February 11, 1994, and its subsidiaries: Springboard
Technology Solutions, Inc. d.b.a. ActiveCore Technologies, Ltd.
("Springboard"), a Canadian company; and Erebus Corporation, an
inactive 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 capital and negotiations and
acquisition of software distribution licenses. On January 1, 2002, the
Company began operations and emerged from the development stage.
The Company operates two units, enterprise and consumer. The
enterprise unit develops, markets, licenses, installs and services
data solutions. The consumer unit develops and publishes interactive
software games designed for mobile phones, other handheld devices,
web-sites, personal computers and video game consoles. The consumer
unit also distributes games, hardware and accessories developed or
manufactured by third parties.
(B) BASIS OF PRESENTATION
-------------------------
The condensed consolidated financial statements included herein have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed
or omitted as allowed by such rules and regulations. The Company
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
December 31, 2002 audited consolidated financial statements and the
accompanying notes thereto included in the Company's 10-KSB. While
management believes the procedures followed in preparing these
condensed consolidated financial statements are reasonable, the
accuracy of the amounts are in some respects dependent upon the facts
that will exist, and procedures that will be accomplished by the
Company later in the year.
11
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
The management of the Company believes that the accompanying unaudited
condensed consolidated financial statements contain all adjustments
(including normal recurring adjustments) necessary to present fairly
the operations and cash flows for the periods presented. The
consolidated results of operations for the three and six months ended
June 30, 2003 and 2002 are not necessarily indicative of the results
to be expected for the full year. All material inter-company accounts
have been eliminated in consolidation.
(C) OPERATIONS OF THE COMPANY - GOING CONCERN
---------------------------------------------
The accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted
in the United States of America, which contemplates continuation of
the Company as a going concern. The Company has a net loss of $182,389
and a negative cash flow from operations of $1,470,457 for the six
months ended June 30, 2003. The Company also has a working capital
deficiency of $1,554,310 and a stockholders' deficiency of $1,164,990.
These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management's plan to continue in
operation is to continue to attempt to raise additional debt or equity
capital until such time the Company is able to generate sufficient
operating revenue.
In view of these matters, realization of certain of the assets in the
accompanying condensed consolidated financial statements is dependent
upon continued operations of the Company, which in turn is dependent
upon the Company's ability to meet its financial requirements, raise
additional capital, and the success of its future operations.
Management believes that its ability to raise additional capital
provides the opportunity for the Company to continue as a going
concern.
(D) RECLASSIFICATIONS
---------------------
Certain reclassifications have been made to the previously reported
statements to conform to the Company's current condensed consolidated
financial statement format.
(E) BUSINESS SEGMENTS
---------------------
The Company applies Statement of Financial Accounting Standards No.
131 "Disclosures about Segments of an Enterprise and Related
Information".
However, management has determined that it is not practicable to
provide geographic and product 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.
12
(F) USE OF ESTIMATES
--------------------
The preparation of financial statements in conformity with accounting
principles generaly accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting
periods. The most significant estimates and assumptions relate to the
recoverability of prepaid royalties and licencing, capitalized
software development costs and other intangibles and the adequacy of
allowances for returns, and doubtful accounts. Actual amounts could
differ significantly from these estimates.
(G) 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 financial instruments, including
cash, accounts receivable, accounts payable, accrued liabilities,
taxes payable and other current laibilties approximate fair value
because of their short maturities. The carrying amount of licensing
agreements and investments approximate fair value based upon the
recoverability of these assets. The carrying amount of the Company's
lines of credit approximates fair value because the interest rates of
the lines of credit are based on floating rates identified by
reference to market rates. The carrying amounts of the Company's loans
and notes payable and capital lease obligations approximate the fair
value of such instruments based upon management's best estimate of
interest rates that would be available to the Company for similar debt
obligations.
(H) EARNINGS (LOSS) PER SHARE
-----------------------------
Basic earnings (loss) per common share is based on net loss divided by
the weighted average number of common shares outstanding. For the
three and six months ended June 30, 2002, common stock equivalents
were not included in the calculation of diluted loss per share as
their effect would be anti-dilutive.
13
(I) 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.
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 $1,087,906 and
$407,326 for the six months ended June 30, 2003 and 2002,
respectively. Publishing revenues have been reclassified to gain
(loss) from discontinued operations on the accompanying condensed
consolidated statement of operations in connection with the sale of
Ignition Entertainment, Ltd. (See Note 2).
Distribution revenue is derived from the sale of third-party
interactive software titles, accessories and hardware. Distribution
revenue amounted to $103,051 and $90,000 for the six months ended June
30, 2003 and 2002, respectively.
Revenues from Services and Commercial Software sold under licenses
were $127,958 and $0 in the six months ended June 30, 2003 and 2002,
respectively. The Company had no Services or Commercial Software sales
in the corresponding period of 2002, because it had not yet acquired
Springboard Technology Solutions, a Services and Commercial Software
producing subsidiary.
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 ("VSOE") 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
14
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
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.
Revenue from product sales is recognized when title passes to the
customer, provided that: there are no uncertainties regarding customer
acceptance; persuasive evidence of an arrangement exists; the sales
price is fixed or determinable; and collectability is deemed probable.
The Company provides for estimated product returns at the time of the
product shipment, if necessary. In December 1999, the Securities and
Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition in Financial Statements, which establishes
guidance in applying generally accepted accounting principles to
revenue recognition in financial statements and is effective beginning
with the fourth quarter of the year ended December 31, 2000. The
Company has determined that its existing revenue recognition practices
comply with the requirements of SAB 101 for all periods presented.
(J) RECENT ACCOUNTING PRONOUNCEMENTS
------------------------------------
In November 2002, the EITF reached a consensus on Issue 00-21,
addressing how to account for arrangements that involve the delivery
or performance of multiple products, services, and /or rights to use
assets. Revenue arrangements with multiple deliverables are divided
into separate units of accounting if the deliverables in the
arrangement meet the following criteria: (1) the delivered item has
15
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
value to the customer on a stand-alone basis; (2) there is objective
and reliable evidence of the fair value of undelivered items; and (3)
delivery of any undelivered items is probable. Arrangement
consideration should be allocated among the separate units of
accounting based on their relative fair values, with the amount
allocated to the delivered item being limited to the amount that is
not contingent on the delivery of additional items or meeting other
specified performance conditions. The final consensus will be
applicable to agreements entered into in fiscal periods beginning
after June 15, 2003 with early adoption permitted.
In December 2002, the Financial Accounting Standards Board issued
Statement No. 148, "Accounting for Stock-Based Compensation-Transition
and Disclosure - an amendment of FASB Statement No. 123," ("SFAS
148"). SFAS 148 amends FASB Statement No. 123, "Accounting for Stock
Based Compensation" ("SFAS 123") and provides alternative methods for
accounting for a change by registrants to the fair value method of
accounting for stock-based compensation. Additionally, SFAS 148 amends
the disclosure requirements of SFAS 123 to require disclosure in the
significant accounting policy footnote of both annual and interim
financial statements of the method of accounting for stock
based-compensation and the related pro forma disclosures when the
intrinsic value method continues to be used. The statement is
effective for fiscal years beginning after December 15, 2002, and
disclosures are effective for the first fiscal quarter beginning after
December 15, 2002.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for
hedging activities under SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The changes in SFAS No. 149
improve financial reporting by requiring that contracts with
comparable characteristics be accounted for similarly. This statement
is effective for contracts entered into or modified after June 30,
2003 and all of its provisions should be applied prospectively.
In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150,
"Accounting For Certain Financial Instruments with Characteristics of
both Liabilities and Equity". SFAS No. 150 changes the accounting for
certain financial instruments with characteristics of both liabilities
and equity that, under previous pronouncements, issuers could account
for as equity. The new accounting guidance contained in SFAS No. 150
requires that those instruments be classified as liabilities in the
balance sheet.
16
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
SFAS No. 150 affects the issuer's accounting for three types of
freestanding financial instruments. One type is mandatorily redeemable
shares, which the issuing company is obligated to buy back in exchange
for cash or other assets. A second type includes put options and
forward purchase contracts, which involves instruments that do or may
require the issuer to buy back some of its shares in exchange for cash
or other assets. The third type of instruments that are liabilities
under this Statement is obligations that can be settled with shares,
the monetary value of which is fixed, tied solely or predominantly to
a variable such as a market index, or varies inversely with the value
of the issuers' shares. SFAS No. 150 does not apply to features
embedded in a financial instrument that is not a derivative in its
entirety.
Most of the provisions of Statement 150 are consistent with the
existing definition of liabilities in FASB Concepts Statement No. 6,
"Elements of Financial Statements". The remaining provisions of this
Statement are consistent with the FASB's proposal to revise that
definition to encompass certain obligations that a reporting entity
can or must settle by issuing its own shares. This Statement shall be
effective for financial instruments entered into or modified after May
31, 2003 and otherwise shall be effective at the beginning of the
first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of a non-public entity,
as to which the effective date is for fiscal periods beginning after
December 15, 2003.
The Company believes that the adoption of the above pronouncements
will, not have a material effect on the Company's condensed
consolidated financial position or results of operations.
NOTE 2 DISCONTINUED OPERATIONS
- ------ -----------------------
Effective April 1, 2003, the Company sold 100% of the issued shares
and all assets and liabilities of Ignition Entertainment, Ltd. for the
return of 11,000,000 shares of the Company's common stock. The
transaction resulted in a gain of $2,396,009, which has been included
in the condensed consolidated statements of operations for the three
and six months ended June 30, 2003, as a gain on sale of discontinued
operations.
Upon execution of the sale agreement in June 2003, the Company issued
50,000,000 shares of its common stock to the former shareholders of
Ignition Entertainment Ltd. in accordance with the original May 28,
2002 purchase agreement. Based upon the terms of the sale agreement,
the Company converted all of the 3,500,000 shares of preferred stock
to be issued, into 35,000,000 shares of common stock and accelerated
the issuance of 15,000,000 shares of common stock to be issued. The
issuance of the 50,000,000 shares of common stock in June 2003
relieved the Company's obligation as of April 1, 2003, to issue
$11,949,156 in preferred and common stock under the original May 28,
2003 purchase agreement. The 50,000,000 shares were delivered, in
trust, to an independent third party upon the execution of the sale
17
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
agreement and will be distributed to the former owners. Immediately
following the issuance of the 50,000,000 shares of the Company's
common stock, the former shareholders will return 11,000,000 shares of
common stock to the Company as proceeds for the sale of Ignition
Entertainment Ltd. The 11,000,000 shares were valued at $770,000 based
upon the fair market value of the stock on April 1, 2003, the
effective date of the sale agreement (See Note 10).
In connection with the sale agreement, the Company will retain rights
to certain intellectual property and receive a source code licensing
agreement for certain interactive software games developed by Ignition
Entertainment Ltd. In addition to the source code licensing agreement,
the Company will also receive a distribution agreement to distribute
the interactive software games on a worldwide basis for a period of
three years, renewable annually thereafter. The Company will pay
Ignition Entertainment Ltd. a royalty fee of 30% of all gross
revenues, less direct costs, from the sale, distribution or marketing
of those game titles. As of June 30, 2003, the Company did not assign
any value to the acquired intellectual property due to the uncertainty
of obtaining financing to fund the conversion of acquired intellectual
property into saleable products.
Following is a summary of net liabilities and results of operations of
Ignition Entertainment Ltd. as of April 1, 2003 and December 31, 2002
and for the period from January 1, 2003 through April 1, 2003 and for
the three and six months ended June 30, 2002:
As of As of
April 1, December 31,
2003 2002
------------- ----------------
Cash $ 160 $ 213,923
Accounts receivable, net 212,741 149,676
Inventory 78,955 383,738
Prepaid expenses 113,044 99,488
Property, plant and equipment, net 417,727 442,674
Other assets 24,963 -
------------- ----------------
Total Assets $ 847,590 $ 1,289,499
------------- ----------------
Accounts payable 1,044,294 1,182,423
Accrued liabilities 134,058 240,833
Due to factor 211,249 94,746
Taxes payable 436,513 388,520
Translation adjustment 93,790 -
Notes payable 129,366 80,220
Due to related parties 424,329 720,376
------------- ----------------
Total Liabilities 2,473,599 2,707,118
------------- ----------------
Net Liabilities of Discontinued
Operations $ 1,626,009 $ 1,417,619
============= ================
18
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
For the For the
Period From Three and
January 1, Six Months
2003 Through Ended June
April 1, 2003 30, 2002
-------------- ------------
Revenues, net $ 1,087,906 $ 407,326
Cost of sales 960,501 382,716
------------ ------------
Gross profit 127,405 24,610
Operating expenses 815,985 228,741
------------ ------------
Loss from discontinued operations (688,580) (204,131)
------------ ------------
Other income (expense) (44,543) (7,828)
------------ ------------
Net loss from discontinued
operations $ (733,123) $ (211,959)
============ ============
The results of operation for the three and six months ended June 30,
2002 are identical because Ignition Entertainment Ltd. was acquired in
May 2002.
NOTE 3 ACCOUNTS RECEIVABLE
- ------ -------------------
The components of accounts receivable are as follows:
June 30, December
2003
(Unaudited) 31, 2002
-------------- -------------
Unrestricted trade receivables $ 88,043 $ 61,135
Restricted trade receivables - -
Allowance for doubtful accounts (43,970) (43,970)
---------- ----------
Accounts receivable, net $ 44,073 $ 17,165
========== ==========
Restricted trade receivables of $149,676 are collateral for the
Company's secured borrowing facility that Ignition entered into in
April 2002, which is included in net liabilities of discontinued
operations as of December 31, 2002 (See Note 2). Unrestricted trade
receivables consists primary of vendor receivables for enterprise
software and information technology services sold by the Company and
its Springboard subsidiary.
NOTE 4 PREPAID EXPENSES AND OTHER CURRENT ASSETS
- ------ -----------------------------------------
Prepaid expenses and other current assets as of June 30, 2003 and
December 31, 2002 consist of:
19
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
June 30,
2003 December
(Unaudited) 31, 2002
-------------- -------------
Prepaid expenses $ 20,897 $ 14,763
GST receivable 20,258 18,002
Miscellaneous receivable,
unrelated parties 105,417 -
Other 271 1,845
-------------- -------------
Total $ 146,843 $ 34,610
============== =============
NOTE 5 FIXED ASSETS
- ------ ------------
As of June 30, 2003 and December 31, 2002, fixed assets consist of:
June 30,
2003 December
(Unaudited) 31, 2002
-------------- -------------
Computer equipment $ 118,802 $ 91,505
Office equipment and furniture 20,631 19,698
Computer software 6,577 13,546
Software development kits 45,367 45,367
Leasehold improvements 3,639 3,130
-------------- -------------
195,016 173,246
Less accumulated depreciation
and amoritization (117,422) (79,688)
-------------- -------------
$ 77,594 $ 93,558
============== =============
Depreciation expense from continuing operations for the three and six
months ended June 30, 2003 amounted to $10,353 and $18,722,
respectively. Depreciation expense from continuing operations for the
three and six months ended June 30, 2002 amounted to $6,935 and
$66,935, respectively.
NOTE 6 NOTES PAYABLE
- ------ -------------
During February 2003, upon the Company's SB-2 Registration becoming
effective, the Company received $970,000 proceeds from the issuance of
a $1 million promissory note to an investment banking company (the
"Investment Banker"), net of a 3% cash fee of $30,000, which yields an
effective interest rate of approximately 12% per annum. The promissory
note is non-interest bearing and is to be paid in full within 95
calendar days. The Company has the discretion to repay the note either
with the cash received from the issuance of stock under the Equity
Line of Credit Agreement or with cash received from operations or
20
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
other financing sources. If this note is not fully paid when due, the
outstanding principal balance owed will be payable in full together
with interest at the rate of 24% per annum or the highest rate
permitted by law, if lower. See Note 7 below for partial repayment of
this note.
Proceeds received from the issuance of this note were used to repay
the convertible debenture and note payable to the Investment Bankers.
As of December 31, 2002, total outstanding principal and accrued
interest payable on the convertible debenture and note payable was
$155,487 and $15,000, respectively.
NOTE 7 STOCKHOLDERS' DEFICIENCY
- ------ ------------------------
On February 18, 2003, the Company issued 168,889 shares of common
stock to the Investment Banker for payment of penalties for not
completing the SB-2 filing by the due date of July 2, 2002 per the
terms of the registration rights agreement entered into in connection
with the Equity Line of Credit Agreement. These shares were valued at
$0.13 per share or an aggregate of $21,956, representing the closing
market value on the date of grant.
On February 18, 2003, the Company issued 114,408 share of common stock
to a consultant for payment of $15,000 of consulting services accrued
at December 31, 2002 as common stock to be issued included in
currently liabilities in the accompanying consolidated balance sheet
as of December 31, 2002 and $5,000 of consulting services for January
and February of 2003. These shares were valued at $0.13 per share
representing the closing market value on the date of grant.
During the six month period ended June 30, 2003, the Company issued
8,932,783 shares of common stock to the Investment Bankers for cash of
$400,000 in connection with the Equity Line of Credit (See Note 6).
The cash was applied against the $1 million promissory note payable to
the Investment Bankers issued in February 2003. As of June 30, 2003,
the remaining balance of the note payable to the Investment Banker
totaled $600,000.
On April 23, 2003, the Company issued 3,491,620 shares of common stock
to the Investment Bankers for cash of $125,000 or $.036 per share.
On May 28, 2003, the Company amended the Articles of Incorporation to
increase the total number of authorized common and preferred stock to
500,000,000 and 50,000,000 shares, respectively.
21
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
On June 24, 2003, the Company issued 17,804,976 shares of common stock
to the President of the Company in lieu of cash in order to satisfy
shareholder loans, expenses paid on behalf of the Company and accrued
salaries included in the amounts due to related parties on the
accompanying condensed consolidated balance sheets. These shares were
valued at $.025 per share, or an aggregate of $445,124 representing
the market value on the date of grant.
On June 24, 2003, the Company issued 17,804,976 shares of common stock
to a director of the Company in lieu of cash in order to satisfy
shareholder loans, expenses paid on behalf of the Company and accrued
salaries included in the amounts due to related parties on the
accompanying condensed consolidated balance sheets. These shares were
valued at $.025 per share, or an aggregate of $445,124 representing
the market value on the date of grant.
On June 24, 2003, the Company issued 1,250,000 shares of common stock
to four employees of the Company for payment of accrued compensation
and bonuses. These shares were valued at $.025 per share, or an
aggregate of $31,250 representing the market value on the date of
grant.
On June 24, 2003, the Company issued 3,000,000 shares of common stock
to certain directors of the Company for director services for the
period from June 2003 to June 2004. These shares were valued at $.025
per share, or an aggregate of $75,000 representing the market value on
the date of grant. As of June 30, 2003, the Company has deferred
$75,000 included in total stockholders' deficiency as deferred
compensation and licensing fee on the accompanying condensed
consolidated balance sheets.
On June 24, 2003, the Company issued 300,000 shares of common stock to
an unrelated consultant having a value of $7,500 for consulting
services. These shares were valued based upon the market value on the
date of grant.
On June 24, 2003, the Company issued 2,000,000 shares of common stock
to an unrelated party in connection with an agreement to provide
investor relations services. These shares were valued at $.025 per
share, or an aggregate of $50,000 representing the market value on the
date of grant. As of June 30, 2003, the Company has deferred
approximately $33,000 included in deferred consulting expense on the
accompanying condensed consolidated balance sheet.
On June 24, 2003, the Company issued 5,000,000 shares of common stock
to an unrelated consultant as consideration for an agreement to
provide consulting services from June 2003 to June 2004. These shares
were valued at $.025 per share, or an aggregate of $125,000 on the
date of grant.
22
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
On June 24, 2003, the Company issued 50,000,000 shares of common stock
to the former shareholders of Ignition Entertainment, Ltd. in
accordance with the original May 28, 2002 purchase agreement. The
acquisition was made pursuant to the Company agreeing to issue
15,000,000 shares of common stock and 3,500,000 shares of preferred
stock convertible into 35,000,000 shares of common stock; collectively
valued at $0.23898 per share for a total purchase price of
$11,949,155. The issuance of these 50,000,000 shares of common stock
relieved $11,949,155 in preferred and common stock to be issued as of
April 1, 2003. (See Note 2, Discontinued Operations for details on the
acceleration of the issuance of these shares and the sale agreement of
Ignition Entertainment Ltd.)
On June 24, 2003, the Company issued 5,180,000 shares of common stock
to two unrelated parties to obtain financing for the Company.
Financing costs included in interest expense for the six months ended
June 30, 2003 totaled $129,500 representing the market value on the
date of grant.
On June 24, 2003, the Company issued 500,000 shares of common stock
that were released from escrow to an individual for services rendered
from November 2002 to November 2003. The Board of Directors resolved
that these shares are considered earned as of June 24, 2003. These
shares were valued at $.025 per share, or an aggregate of $13,500
representing the market value on the date of grant.
In 2002, the Company issued 50,000,000 shares of common stock to
various officers and directors of the Company in accordance with the
stock purchase agreement with International Technology Marketing
("ITM"). All shares were held in safekeeping pending the completion of
an escrow agreement. As of December 31, 2002, 30,000,000 shares were
earned and were released from escrow. The Company has accelerated the
issuance of the final 20,000,000 shares from escrow. These 20,000,000
shares were released from escrow as stock-based compensation on June
30, 2003 and were valued at $.027, or an aggregate of $540,000 on the
date of sale.
NOTE 8 BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
- ------ -------------------------------------------
Basic and diluted earnings (loss) per share for the three and six
months ended June 30, 2003 and 2002 are computed as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
BASIC:
CONTINUING OPERATIONS-
Loss from continuing operations $ (1,283,895) $ (1,286,067) $ (1,845,275) $ (2,044,367)
============= ============== =============== ==============
23
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
Weighted average shares outstanding 115,200,027 113,191,285 107,531,237 83,421,414
============= ============== =============== ==============
Basic (loss) per share from
continuing operations (0.01) (0.01) (0.02) (0.02)
============= ============== =============== ==============
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
BASIC:
DISCONTINUED OPERATIONS-
Loss from discontinued operations $ - $ (211,959) $ (733,123) $ (211,959)
Gain on sale of discontinued
operations 2,396,009 - 2,396,009 -
------------- -------------- --------------- --------------
2,396,009 (211,959) 1,662,886 (211,959)
============= ============== =============== ==============
Weighted average shares outstanding 115,200,027 113,191,285 107,531,237 83,421,414
============= ============== =============== ==============
Basic gain (loss) per share from
discontinued operations 0.02 (0.00) 0.02 (0.00)
============= ============== =============== ==============
DILUTED COMPUTATION:
CONTINUING OPERATIONS-
Loss from continuing operations $ (1,283,895) $ (1,286,067) $ (1,845,275) $ (2,044,367)
------------- -------------- --------------- --------------
DISCONTINUED OPERATIONS-
Loss from discontinued operations $ - $ (211,959) $ (733,123) $ (211,959)
Gain on sale of discontinued
operations $ 2,396,009 - 2,396,009 -
------------- -------------- --------------- --------------
2,396,009 (211,959) 1,662,886 (211,959)
------------- -------------- --------------- --------------
Adjusted net income (loss) for
earnings per share $ 1,112,114 $ (1,498,026) $ (182,389) $ (2,256,326)
============= ============== =============== ==============
Weighted average shares outstanding 115,200,027 113,191,285 107,531,237 83,421,414
Plus:
Conversion of Cornell notes
payable as of the beginning of
each quarter 18,478,260 - 6,863,182 -
------------- -------------- --------------- --------------
Diluted weighted average common
shares 133,678,287 113,191,285 114,394,419 83,421,414
============= ============== =============== ==============
DILUTIVE PER SHARE AMOUNTS:
Loss from continuing operations $ (0.01) $ (0.01) $ (0.02) $ (0.02)
============= ============== =============== ==============
Gain (loss) per share from $ 0.02 $ (0.00) $ 0.01 $ (0.00)
discontinued operations
============= ============== =============== ==============
Net gain (loss) per share $ 0.01 $ (0.01) $ (0.00) $ (0.03)
============= ============== =============== ==============
24
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
NOTE 9 EMPLOYEE STOCK OPTIONS
- ------ ----------------------
Effective January 1, 2003, the Company adopted the disclosure
requirements of SFAS No. 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure," which amends SFAS No. 123, "Accounting
for Stock-Based Compensation" to provide transition methods for a
voluntary change to measuring compensation cost in connection with
employee options using a fair value based method. The Statement also
amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures about the method of accounting for compensation
cost associated with employee options, as well as the effect of the
method used on reported results. The Company adopted the disclosure
requirements of SFAS No. 148 and has not changed its method for
measuring the compensation cost of share options.
The Company continues to use the intrinsic value based method and does
not recognize compensation expense for the issuance of employee
options with an exercise price equal to or greater than the market
price at the time of grant. The Company has not granted any options to
employees during the six months ended June 30, 2003 and 2002. As a
result, the adoption of SFAS No. 148 had no impact on the Company's
results of operations or financial position and no pro forma
information will be disclosed for the three and six months ended June
30, 2003 and 2002.
NOTE 10 TREASURY STOCK
- ------- --------------
Treasury stock is shown at cost and consists of 11,000,000 shares of
common stock held in trust with an independent third party as of June
30, 2003. The value of the 11,000,000 shares received in connection
with the sale of Ignition Entertainment, Ltd. was $770,000,
representing the closing market value on the effective date of the
sale.
NOTE 11 AGREEMENTS
- ------- ----------
(A) INVESTMENT BANKER EQUITY LINE OF CREDIT AGREEMENT
-----------------------------------------------------
In April 2002, the Company entered into an Equity Line of Credit
Agreement with the Investment Banker. Under this agreement, the
Company may issue and sell to the Investment Banker common stock for a
total purchase price of up to $10 million. Subject to certain
conditions, the Company 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 monthly maximum advance amount of $425,000 in
any thirty-day period. In no event shall the number of shares issuable
to the Investment Banker, which causes them to own in excess of 9.9%
25
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
of the then outstanding shares of the Company's common stock. The
Company paid the Investment Banker a one-time fee equal to $330,000,
payable in 3,032,000 shares of common stock. The Investment Banker is
entitled to retain 3.0% of each advance. In addition, the Company
entered into a placement agent agreement with a placement agent firm,
a registered broker-dealer. Pursuant to the placement agent agreement,
the Company 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. The Company agreed to pay an
unrelated 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.
The termination date of this agreement is the earliest of: (1) the
Investment Banker makes payment of Advances of $10,000,000, (2) any
stop order or suspension of the effectiveness of the Registration
Statement for an aggregate of fifty (50) Trading Days or (3) the
Company shall at any time fail materially to comply with the
requirements of the agreement and such failure is not cured within
thirty (30) days after receipt of written notice from the Investment
Banker or (4) the date occurring twenty-four (24) months after the
Effective Date. Pursuant to the terms of the Equity Line of Credit
Agreement, the Company was required to file with the SEC a
registration statement covering the shares to be acquired by the
Investment Banker. The 24-month term commences the effective date of
the registration statement. During February 2003, the Company
completed its registration statement in connection with the Equity
Line of Credit Agreement.
To induce the Investment Banker to execute and deliver the Equity Line
of Credit Agreement, the Company agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and
the rules and regulations there under, or any similar successor
statute (collectively, the "1933 Act"), and applicable state
securities laws. During the commitment period, the Company shall not,
without the prior written consent of the Investment Banker, issue or
sell (i) any Common Stock without consideration or for a consideration
per share less than the Bid price on the date of issuance or (ii)
issue or sell any warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to
acquire Common Stock without consideration or for a consideration per
share less than the Bid Price on the date of issuance, provided,
however, that the Investment Banker is given ten (10) days prior
written notice and nothing in this section shall prohibit the issuance
of shares of Common Stock pursuant to existing contracts or
commitments, upon exercise of currently outstanding options or
convertible securities, or in connection with any acquisition.
26
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
On each advance date in the Company shall pay to the Investment
Banker, directly from the gross proceeds held in escrow, an amount
equal to three percent (3%) of the amount of each advance as a
commitment fee. The Company has paid the Investment Banker a one-time
commitment fee in the amount of 3,032,000 shares of common stock and
warrants to purchase 265,000 shares of common stock of which a warrant
to purchase 15,000 shares has an exercise price of $0.50 per share and
a warrant to purchase 250,000 shares has an exercise price of $0.099
per share. These warrants vest immediately upon issuance. The value of
the one-time commitment fee related to the issuance of common stock
totaled approximately $350,000, which was computed based upon the
market prices of the Company's common stock on the applicable issuance
dates. The warrants issued in connection with the Equity Line of
Credit Agreement for commitment fees were valued on the date of grant
using the Black-Scholes option-pricing model, which computed a value
of $6,107. The Company estimates the fair value of the warrants at the
grant date by using the Black-Scholes option pricing model with the
following weighted average assumptions used for this grant; no
dividend yield for all years; expected volatility of 24.3%; risk-free
interest rate of 4.74% and an expected life of five years. The
commitment fees will be expensed ratably over the life of the Equity
Line of Credit agreement and are included in stockholders' deficiency
in the accompanying consolidated balance sheet as of June 30, 2003 and
December 31, 2002. The Company has recognized commitment fees of
approximately $87,500 and $133,795, which has been included in general
and administrative expenses on the condensed consolidated statement of
operations for the six months and year ended June 30, 2003 and
December 31, 2002, respectively.
(B) DEVELOPMENT AND DISTRIBUTION AGREEMENT
------------------------------------------
On February 10, 2003, the Company signed a development and
distribution agreement with a distribution company for distribution of
the Company's games and other applications for mobile phones and other
handheld devices to the distribution company's mobile operator
channels on a worldwide basis. Under the terms of the agreement, which
sets forth an initial publication schedule consisting of 14 products.
The Company may also sublicense and provide games and applications
created by other developers to the distribution company for
distribution to their mobile operators. Under the terms of the
agreement, the Company will receive royalty payments as the developer
for each sale of the Company's games and other applications.
27
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
(C) HOSPITAL SERVICE AGREEMENT
------------------------------
On March 11, 2003, the Company has entered into a one-year data
integration agreement with a large hospital (the "Customer") in the
Toronto area. The Company will make an interfacing resource available
to the Customer for a fixed number of days per week to provide general
interfacing services as requested by the Customer. This agreement will
automatically be renewed for one-year terms unless terminated by
either party in accordance with the terms set forth in this agreement.
(D) LETTER OF INTENT
--------------------
On June 24, 2003, the Company entered into a Letter of Intent to
acquire a minimum of 5% of the issued share capital of an unrelated
company for the equivalent of $300,000 Canadian dollars ("CAD"). As
part of the terms and conditions of this proposed purchase, the
Company will issue 10,000,000 shares of unregistered common stock in
the name of the potential acquiree. The Company will seek to register
the 10,000,000 shares at its next available registration opportunity.
Per the terms of the Letter of Intent, the shares will be sold in the
open market to generate the funds (CAD $300,000) needed to acquire a
5% equity interest. If the sales of these shares does not satisfy the
amount of funds required, the Company will pay from other sources, if
available. If the sales of the shares exceed the minimum required
amount, the Company may increase its interest in the acquiree or have
any remaining unsold shares returned for cancellation or rescission.
As of August 2003, the Company has not finalized this transaction.
NOTE 12 SUBSEQUENT EVENTS
- ------- -----------------
On July 10, 2003, the Company entered into a Letter of Intent to
acquire the source code for a software product known as XML/Connector
for the health care vertical from an unrelated company which is a
Colorado and Toronto based software development company. As part of
the terms and conditions, the Company will pay (CAD) $120,000 in cash
in the form of a note payable. On August 1, 2003, the Company issued
500,000 shares of common stock to the acquiree. These shares were
valued at $.033 per share representing the closing market value on the
date of grant.
In late July 2003, the Company and an unrelated U.S. based healthcare
software distribution and integration company reached agreement to
sell to the Company the personnel and assets of the data management
services division of the U.S. company for an undisclosed amount of
cash and shares. As of August 2003, this transaction has not been
finalized.
28
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
On July 31, 2003, the company announced that its wholly owned
subsidiary ActiveCore Technologies Limited had received the first
installment of $500,000 of a planned $2,000,000 term loan offering.
Under the terms of the agreement, the first installment will accrue a
12% interest rate per annum and is repayable over a five-year term
with no payments required in the first 12 months - the payments will
be amortized over the remaining 48 months of the term loan. The loan
is convertible into common stock of the Company at the rate of 4.5
shares for every 1 dollar of the loan balance due, excluding interest,
remaining at the time of conversion. As additional consideration for
the loan advance by the lender, the Company issued 500,000 warrants on
July 30, 2003 to the lender for the purchase of 500,000 shares of
common stock at a purchase price of $0.0312 per share. The fair value
assigned to the warrant amounted to $0 and was determined using the
Black-Scholes pricing model. The Company estimates the fair value of
the warrant at the grant date by using the Black-Scholes
option-pricing model with the following weighted average assumptions
used for this grant; no dividend yield for all years; expected
volatility of 9.3%; risk-free interest rate of 1.12%, and an expected
life of 1 year. The warrants expire July 31, 2004.
On August 5, 2003, the Company announced that it had acquired the
rights to build a cell phone game based on the "Zorro" character and
trademark from Zorro Productions Inc. of California. A license
agreement was entered into whereby the Company shall pay no royalties
on the first $50,000 of net sales and subsequently the Company and the
licensor shall share equally a royalty of 50% on net sales. There
shall be no minimum royalty. The Company also entered into an
agreement with an unrelated company to source additional "name brand"
properties for cell phone game production and issued this unrelated
company 2,000,000 shares of common stock as a consulting fee. These
shares were issued on August 1, 2003 and were valued at $.033 per
share, representing the closing market value on the date of grant.
In July 2003, the Company entered into a consulting agreement with an
unrelated individual to provide services through June 2004. On August
1, 2003, the Company issued 150,000 shares of common stock to this
consultant. These shares were valued at $.033 per share, representing
the closing market value on the date of grant.
On July 14, 2003, the Company entered into a consulting agreement with
an unrelated individual to provide services through June 2004. On
August 1, 2003, the Company issued 4,000,000 shares of common stock to
this consultant as compensation for services to be rendered. These
shares were valued at $.033 per share, representing the closing market
value on the date of grant.
In July 2003, the Company entered into employment agreements with two
contractors related to cell phone game development and health care
services. On August 1, 2003, each contractor was issued 500,000 shares
of common stock as compensation in addition to ongoing salary costs.
These shares were valued at $.033 per share, representing the closing
market value on the date of grant.
29
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
-------------------
(UNAUDITED)
In July 2003, the Company issued 1,562,700 unregistered shares of
common stock to an officer of the Company in lieu of cash in order to
satisfy shareholder loans, expenses paid on behalf of the Company and
accrued expenses. These shares were valued at $.033 per share,
representing the closing market value on the date of grant.
On August 6, 2003, the Company announced that it had signed a letter
of intent to invest in E-communities UK Limited, a manager of 124 city
portals in the UK. The Company also announced that it intends to
purchase a 15% interest by September 30, 2003, subject to due
diligence and Board approval. The purchase price is expected to be
equal to 225,000 pounds sterling payable by issuance of the Company's
common stock. As of August 2003, the Company has not finalized this
agreement.
30
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS OVERVIEW
IVP Technology Corporation d.b.a. ActiveCore Technologies ("IVP
Technology" or "ActiveCore" or the "Company") is a software developer, licensor,
publisher, marketer, and distributor primarily in wireless markets and an IT
services and software vendor in the healthcare vertical. Its operating staff
provide products and services to certain segments of the wireless consumer
software and enterprise IT marketplaces. ActiveCore Technologies is a registered
Nevada corporation and has been publicly listed as IVP Technology Corporation
(otcbb:TALL) on the over the counter market for four years. ActiveCore currently
has its headquarters in Toronto, Ontario.
For three years prior to new senior management taking over day to day
control of the company, following the November 2001 approval by the shareholders
of IVP of the purchase of International Technology Marketing, Inc., ActiveCore
was solely focused on distributing an enterprise software product marketed under
the "PowerAudit" name. Beginning in December 2001, the company acquired rights
to distribute several additional enterprise software products from several other
third party vendors. In May 2002, the Company also acquired 100% of the shares
of Ignition Entertainment Limited, a UK based company engaged in the
development, licensing, publishing, marketing and distribution of primarily
platform (X-box, Playstation, GameCube and GameBoy) video games. A few weeks
later in July 2002, IVP acquired 100% of the shares of Springboard Technology
Solutions Inc. since renamed ActiveCore Technologies Limited, a Toronto based
consumer and enterprise software development and IT services company. In the
second quarter of 2003, with effect for accounting purposes from April 1, 2003,
the company divested the operations of its UK based subsidiary to concentrate on
games for mobile devices.
ENTERPRISE DIVISION
IVP's enterprise software division primarily operates through its
wholly owned subsidiary, ActiveCore Technologies Limited, formerly Springboard,
which was acquired on July 1, 2002 to develop, market, license and install data
solutions and other applications for mid-size companies, large corporations and
government agencies. A number of ActiveCore's clients are in the health care
field thus, in-order to provide marketing focus for the health care sector
clients, the company created the fictitious name of MDI Solutions ("MDI") to
identify products and services specifically for the health care vertical. The
MDI Solutions group has developed, and currently markets, two software products
specific to the health care vertical namely "MD Link" and "MD Eye". IVP's other
enterprise data solution offerings use Vaayu(TM), developed by ActiveCore, and
Classifier(TM), Viper(TM) and iBos(TM), developed by several third party
software companies. In addition to its enterprise operations ActiveCore also has
an established wireless and web application development group which operates
under the trade style of SilverBirch Studios. SilverBirch focuses on developing
"handheld" applications most recently in the form of on-line games for web
portals and mobile games for Java enabled mobile phones or Symbian OS devices.
On a world wide basis "SilverBirch Studios" has been established as a Nevada
registered trade name for ActiveCore Technologies Inc.
ENTERPRISE SOFTWARE PRODUCTS
The enterprise software division currently markets data solutions.
These solutions are made up of separate software products that can operate on a
stand-alone basis or integrate with other enterprise level software. The Company
believes that these products provide enterprises with increased economy,
efficiency and effectiveness when enterprises are faced with the necessity of
obtaining data from the field, wherever that may be, and moving it into
processes that take place in the front and back office environment through to
business decision making levels. The enterprise software products currently
represented by the Company are described below.
THIRD PARTY VENDOR PRODUCTS
CLASSIFIER(TM). On December 28, 2001, we entered into a two-year,
non-exclusive licensing agreement to distribute the Classifier(TM) software
program, developed by The Innovation Group, Plc. Subsequently, on September 30,
2002 we renegotiated the agreement with the Innovation Group, Plc to add another
product, i-Bos(TM) (see product description herein), and relinquished the
financial services industry vertical back to the Innovation Group, Plc. In the
course of our contract renegotiation we also obtained the right, on a
non-exclusive basis, to distribute both the Classifier(TM) and the i-Bos(TM)
product in the UK market. Meanwhile we retained the right to sell such software
31
in the United States, Mexican and Canadian markets. Our distribution agreement
allows us to earn up to a 100% margin on the wholesale price, provided certain
minimum selling prices are met. We anticipate that the distribution agreement
will be renewed on December 31, 2003.
The Classifier(TM) 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 and other information of a business operation. The Classifier(TM) was
designed to create and broadcast business intelligence knowledge views direct to
decision makers over corporate Intranets and the Internet. The Classifier(TM)
turns a database into a website, enabling more people to access data with a web
browser. The Classifier(TM) 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.
I-BOS(TM). On September 30, 2002, the Company obtained the
non-exclusive right to market the Innovation Group, Plc's i-Bos(TM) product
(Innovative Business Operating System) in North America and the United Kingdom
to all verticals except financial services.
I-Bos(TM) is an application development environment for business
analysts. It is process and rule centric and allows analysts to build complete
business applications for specific vertical markets without any programming
knowledge in a language that is understood by that business sector. i-Bos(TM) is
currently used primarily in financial services arenas, however it can be used in
any process driven organization such as government, health care or any other
organization where it is important that certain steps be taken prior to other
operations being performed.
VIPER(TM). On February 20, 2002, the company entered into an agreement
with Smart Focus Limited, to resell its Viper(TM) suite of products which
consists of Viper Analyze(TM) and Viper Visualize(TM), Viper Data Mining(TM),
Viper CRM(TM), Viper Campaign Planner(TM) and Viper Smart Campaigner(TM).
Pursuant to the license, ActiveCore will be entitled to a 15% commission on
sales of Viper(TM) through customer opportunities created by ActiveCore. Smart
Focus Limited will make sales representatives available to assist in sales
presentations.
The Company believes that Viper(TM) is a powerful, fast and easy-to-use
analysis and visualization application designed for corporate marketing
departments and those decision makers concerned with gross data from voluminous
rows of customer information. Viper(TM) 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(TM) is designed
to empower enterprises to better understand, predict, manage and influence
customer behavior. To date no sales of this product have materialized and
ActiveCore is reviewing whether it wishes to continue maintaining a knowledge
base in this product.
INTERNALLY DEVELOPED PRODUCTS
VAAYU(TM). Vaayu(TM) is a platform-independent software product that
mobile-enables existing Enterprise Applications within an organization, allowing
staff and field workers to remotely access internal data and systems through a
variety of handheld and wireless devices, including Palm OS devices, RIM
devices, handheld computers and other mobile devices. Recently the company
obtained an exclusive source code agreement for XML/Connector from Karora
Technologies Inc. which will allow ActiveCore to expand the use of Vaayu into
the health care vertical where multiple legacy systems may be connected to
Vaayu's mobile enablement capabilities.
MD LINK. During the last fiscal year the company has also developed for
its medical data integration business a software product that connects
independent data systems within a healthcare organization, enabling connectivity
and information sharing with stand-alone or legacy applications through industry
protocols such as HL7 and XML. This capabilities of this product will also be
improved as a result of the acquisition of the XML/Connector source code.
MD EYE. MD Eye is a software product that monitors the runtime status
of systems and interfaces within an interfacing environment, keeping watch over
critical elements such as disk space usage, processor utilization, network
connectivity, queue sizes and other IT system critical elements. This product is
used in many of MDI Solutions services contracts to assist in monitoring systems
and to automatically call for human intervention.
ENTERPRISE SERVICES
The primary services provided by the Enterprise Division are performed
by staff that are on call or operate under contract as outsourced IT personnel
in both the health care market and in the network solutions market. Network
solutions staff are typically specialists in working with data networks, often
32
in high value professional office environments. Specialists in particular
medical data structures are employed under the MDI Solutions banner for the
health care market.
CONSUMER DIVISION
Since the divestiture of Ignition Entertainment Limited the Consumer
Division has been reduced to two operating tradenames, specifically SilverBirch
Studios and Recessgames.com under which ActiveCore develops and markets mobile
and on-line games. On May 28, 2002, the Company acquired Ignition Entertainment
Limited, a company organized in late 2001 under the laws of England and Wales,
specializing in the design, development, licensing, publishing and distribution
of personal computer and game console software and accessories. Effective April
1, 2003 the company divested Ignition and its operations have been recorded as
discontinued operations for the current fiscal year. Ignition had been solely
concerned with developing for the personal computer and video games platforms
market. Through Ignition the company had development license agreements with
Microsoft(TM), Nintendo(TM) and Sony(TM) to support its platform game
development activities. The development of high quality platform video games is
an expensive and time consuming process entailing long lead times and has
substantial risk associated with picking the correct genres of games, correct
timing for releases and is subject to retail acceptance in the market. With the
divestiture of Ignition ActiveCore was able to rid itself of this business risk
which had risen in the development of high quality platform video games is an
expensive and time consuming process entailing long lead times and has
substantial risk associated with picking the correct genres of games, correct
timing for releases and is subject to retail acceptance in the market. With the
divestiture of Ignition ActiveCore was able to rid itself of this business risk
which had risen in a relatively short time period with the rapid development of
the market space and the severe competition for retail shelf space.
CURRENT EVENTS
Subsequent to the fiscal year end on December 31, 2002 and to the
company's last operational review included in the SB2 filing dated February 12,
2003 the company has made significant progress in both its consumer and in its
enterprise divisions.
CONSUMER DIVISION
During the first quarter of 2003 IVP Technology signed a development
and distribution agreement with Tira Wireless Inc. (www.tirawireless.com), for
non-exclusive distribution of IVP's games and other applications for mobile
phones and other handheld devices through to Tira's Mobile Operator/Carrier
channels on a world wide basis. Tira distributes games and applications through
AT&T Wireless, Nokia, Mobilkom Austria, End2End, Telecom1, Vodaphone, Vizzavi
Portugal, Jamba and O2 which span the globe in terms of service to mobile
subscribers. In addition to using Tira Wireless as a distributor and publisher,
IVP has also executed a software distribution agreement with Handango, Inc.
which firm distributes a wide range of mobile applications through its on-line
web store. Handango is the leading publisher and platform for mobile software.
Handango markets more than 25,000 applications from more than 8,000 Handango
Software Partners through an extensive global distribution network of online,
retail, and enterprise channels reaching more than five million mobile users
each month. Handango provides its partners with worldwide distribution,
marketing support, on-time payment processing, e-commerce services, product
launch assistance and business development expertise.
IVP's initial publication and release schedule for Java(TM) games
consists of 14 entertainment products which have been created specifically for
mobile phone platforms. During the second quarter of 2003 the company delivered
4 cell phone games to Tira which are now in various stages of the distribution
cycle including replication for various phone models, acceptance testing by
carriers and placement on wireless carrier game portals. ActiveCore's mobile
games have been created by SilverBirch Studios, an internal development group.
In addition to developing mobile applications, the SilverBirch group is
currently completing work on a mobile phone game website "vortal" for a school
age demographic segment to be initiated and marketed under the trade name
"Recessgames.com". The Recessgames.com portal is scheduled for launch in late
2003.
ENTERPRISE DIVISION
The enterprise division has made steady progress with particular
emphasis on the MDI Solutions group. In February 2003 the group received its
first order for the MD Link product as an HL7 integration solution from Guelph
General Hospital for current and future system interfaces within their facility.
Due to the SARS outbreak in Toronto the installation of the MD Link product was
not completed until the second quarter of 2003. In addition MDI Solutions has
executed multiple contracts with four of the Toronto area's largest hospitals
and has been awarded a short term contract for services at the Sault Area
Hospital. Most of these contracts are for a combination of time, material and
retained consulting services and have an initial term ranging from six to twelve
33
months with four automatically renewing for additional periods. The outbreak of
SARS in Toronto which resulted in 44 deaths including a number of health care
workers was concentrated in health care facilities. The business impact on
ActiveCore was substantial as the company was faced with minimal revenues from
its service contracts and prolonged collection periods during the later part of
the first quarter and the entire second quarter. The financial repercussions of
the outbreak have continued into the third quarter however the company believes
that the fourth quarter will show improvement as various Toronto based hospitals
catch up on integration issues and the movement of Toronto service personnel is
again allowed in to US and other region health care facilities.
The key health centers which are serviced by MDI under these contracts
are Mount Sinai, a 462 bed hospital and critical care facility, located in
downtown Toronto; St. Joseph's Health Centre, a 350 bed community service
facility located in West Toronto; York Central Hospital, a 430 bed community
hospital located in Toronto's North West region; and The Rouge Valley Health
System, a two site 411 bed hospital health center, located in Toronto's Eastern
region. The four health centers are amongst the ten largest hospitals in the
Toronto area. ActiveCore has hired additional staff to service the anticipated
growth in service contracts and is investing in marketing and sales personnel to
obtain greater penetration in both the US and Canadian health care markets. The
company is also in the process of negotiating the acquisition of a health care
services group from a US based company which primarily operates along the
eastern US. The Company expects that this acquisition, if completed, will begin
to add revenues in the third quarter. If completed the services group will
operate under the MDI trade name.
The anticipated growth of the MDI Solutions Group and the enterprise
division is expected to provide a rising level of recurring revenue to IVP. We
anticipate that there will be continuing and substantial growth in the
enterprise division in the future.
ACQUISITIONS AND REORGANIZATIONS
IVP Technology maintains an active interest in acquisitions and the
reorganization of its component parts to better service clients of both its
consumer and enterprise divisions. Investment in its existing operations
augmented by growth through acquisitions is a key goal of company management as
is the effective use of capital to drive acceptable returns on investment. At
its annual general meeting of shareholders in Miami on May 28, 2003 ActiveCore
shareholders gave consent to an increase in the authorized common shares from
150,000,000 to 500,000,000 shares. The increase in the number of authorized
common shares was necessary to complete the issuance of shares to the original
shareholders of Ignition and to provide sufficient room in its share structure
to complete acquisitions using shares and for other equity and debt capital
raising activities. It is management's belief that acquisitions and
reorganizations ought to be undertaken when such activities are perceived to be
accretive i.e. the cost of share dilution is offset by earnings in the future.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2003 COMPARED WITH THE THREE MONTHS
ENDED JUNE 30, 2002
REVENUES. During the three months ended June 30, 2003, we generated
$82,300 in revenue in comparison to revenue of $90,000 in the corresponding
period ended June 30, 2002. From a revenue source perspective in the second
quarter of fiscal year 2003, $82,300 of revenue was generated by ActiveCore
Technologies Limited from services work and product installation chiefly by the
company's MDI group. The company accounted for the divestiture of Ignition
Entertainment as discontinued operations with effect from April 1, 2003
therefore no revenue from Ignition UK was included in the results for the three
months ended June 30, 2003. IVP Technology acquired Ignition on May 28, 2002 and
did not acquire Springboard, now ActiveCore Technologies Limited, until July 1,
2002 consequently the revenue recorded in the second quarter of fiscal year 2002
was entirely generated by Ignition Entertainment Limited in the UK. During the
second quarter of 2003 revenue from the MDI group was down substantially from
what was expected as a result of the SARS outbreak in Toronto which constrained
revenue earning opportunities within the existing hospital contracts and in
terms of expanding our operations to other health care units in the US and
Canada.
COST OF SALES. Cost of sales was $93,207 for the three months ended
June 30, 2003 versus $550,609 in the three months ended June 30, 2002. The
principal cost of sales items in the second quarter 2003 consisted of
amortization of the Classifier software license of $89,202 while the principal
cost of sales in the second quarter ended June 30, 2002 was video game
production costs in the Ignition operation in addition to the amortization of
the classifier license. The company recorded amortization of prepaid licences of
$92,982 related to IVP's Classifier(TM) and I-Bos(TM) distribution and license
agreement in both the second quarter of 2003 and 2002. The result of the cost of
sales components elaborated above led to a negative gross margin of $10,907 in
the three months ended June 30, 2003 versus a negative gross margin of $460,609
in the three months ended June 30, 2003.
34
OPERATING EXPENSES. Total operating expenses for the three months ended
June 30, 2003 were $1,126,570 versus $856,344 in the three months ended June 30,
2002. These expenses resulted in losses from operations of $1,137,477 in the
most recent quarter and $1,316,953 in the quarter ended June 30, 2002.
The largest components of second quarter fiscal year 2003 operating
expenses were related to stock based compensation, salaries and wages and other
general and administration expenses. These expenses are discussed below.
ActiveCore's Canadian operations accounted for $157,573 in wages and
salary costs which represented the cost of developers, data management staff,
administration and sales and marketing staff. Salaries and wages include costs
of all group insurance and various government programs. In the period ended June
30, 2002 there were no wage and salary costs incurred for operations as
Ignition's figures have been removed and shown as discontinued operations and
that subsidiary's US operation Ignition USA was not in place at the time.
Stock based compensation of $656,922 in the second quarter ended June
30, 2003 includes $540,000 due to the acceleration of release of 20,000,000
shares that were formerly part of the acquisition terms of ITM in September
2001. In the quarter ended June 30 2002 there was no stock based compensation
paid. Under the original ITM purchase agreement stock was to be released to the
managers of ITM as sales revenue targets were met - at the time the original
agreement was made it was anticipated by both the former directors of IVP and
the owners of ITM that the stock issued in exchange for ITM acquisition would
have been valued as at the date of the agreement and accounted for as a large
goodwill value on the balance sheet. However during the company's prolonged SB 2
approval process it was determined that the common stock needed to be accounted
for as at the quarter end in the each of the quarters where the original sales
revenue targets were achieved. In practice this meant that regardless of how
successful the company was in achieving increased sales, and regardless of how
well the share price responded to the increased revenue, the company was likely
to record large losses based on the valuation of the share releases at the time
the revenues were recognized. In addition the recording of higher share
compensation values was acting as a disincentive for management since management
were likely to be taxed on the increased value of the stock received as it was
being recognized as income rather than a one time capital gain over the original
purchase price of the equity purchase in ITM. The other stock based compensation
amounts consist of payments of $63,500 related to director's fees for the
current year and $125,000 related to payment to a consultant for the next twelve
months. No costs related to Ignition were recorded in the quarter as Ignition
was divested with effect from April 1, 2003. In the second quarter of 2002 no
stock based compensation was recorded as the managers of the company had not yet
met the first milestone payment on the ITM compensation shares.
General and Administrative expenses were $198,470 in the quarter ended
June 30, 2003 versus $150,100 in the quarter ended June 30, 2002. In the most
current quarter the largest component of G & A was write down of commitment fees
on the equity line of credit and the cost associated with the retention of Hawk
Associates as the company's new Investor Relations firm. Hawk has been retained
at a rate of $7,000 per month in addition to a one time 2,000,000 unregistered
stock grant.
Consulting fees for the three months ending June 30, 2003 were $45,256
versus $330,980 in the quarter ended June 30, 2002. The fees in the second
quarter ended June 30, 2003 reflect the cost of management's accrued salaries
whereas, in the second quarter ended June 30, 2002, the costs reflected the
value of various financial and marketing consultants who were assisting the
company in making it ready for the SB2 filing and expanding its product set and
sales opportunities.
Legal and accounting expenses were $57,996 in the three months ended
June 30, 2003 versus $165,877 in the three month period ended June 30, 2002. The
decrease between the periods was primarily due to reduced audit fees as a result
of the groundwork that had been laid during the company's extended SB 2 process.
Likewise the Company had lower legal fees due to the end of the SB 2 process.
Management fees and financial advisory fees in the period ended June
30, 2003 were nil versus $52,452 and $150,000 respectively in the quarter ended
June 30, 2002. The financial advisory charges were directly related to the costs
of retaining Danson Associates to assist in bringing the company up to SEC
standards in accounting and finance, the contract with Danson Associates expired
at the end of February 2003.
In the quarter ended June 30, 2003 the company incurred deprecation
charges of $10,353 versus $6,935 in the quarter ended June 30, 2002. These
charges were related to primarily computer equipment in use in the company's
offices.
35
OTHER INCOME/EXPENSES
In the quarter ended June 30, 2002 the company realized a gain of
$96,334 on the early extinguishment of debt related to the short term loan from
DCD Group. In the quarter ended June 30, 2003 there was no corresponding event.
Interest income from cash on deposit was $1,354 in the quarter ended
June 30, 2003 versus $42 in the quarter ended June 30, 2002.
Interest expense was much higher in the period ended June 30, 2003 at
$148,778 than in the comparative period ended June 30, 2002 which was $54,218.
In the current quarter the company incurred imputed interest charges related to
the Equity Line of Credit and interest costs on the Berra term loan whereas in
the quarter ended June 30, 2002 the interest expense was related to several term
loans including the Berra note and a convertible debenture obtained from an
unrelated party.
The company recorded a foreign exchange gain of $1,006 for the three
months ended June 30, 2003 as a result of the decline of the US dollar in
relation to the Canadian Dollar. In the quarter ended June 30, 2002 the company
had a foreign exchange loss of $11,272 in respect of the decline of the Canadian
dollar versus the US dollar.
NET LOSS FROM CONTINUING OPERATIONS. As a result of the items specified
above, the Company incurred a net loss of $1,283,895 or 0.01 cent per share
versus a loss of $1,286,067 or 0.02 cents per share in the second quarter of
2002.
NET INCOME (LOSS)
DISCONTINUED OPERATIONS
The company recorded a net gain on discontinued operation from the sale
of Ignition Entertainment Limited of $2,396,009 in the quarter ended June 30,
2003 versus a loss on discontinued operations of $211,959 for the quarter ended
June 30, 2002. As a result of the divestiture of Ignition the company earned net
income of $1,112,114 for the quarter ended June 30, 2003 versus a net loss of
$1,498,026 in the quarter ended June 30, 2002. This resulted in a earnings per
share of 1 cent per diluted share for the quarter ended June 30, 2003 versus a
loss of 1 cent per share in the quarter ended June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Prior to December 31, 2001 the company financed its operations through
a combination of convertible securities and the private placement of shares. In
the fiscal year ended December 31, 2002 the company entered into several
financing arrangements. These included an equity line of credit with Cornell
Capital Partners LP for $10,000,000 and factoring and letter of credit
facilities with DcD Group to assist in providing working capital for Ignition
Entertainment Limited. This latter arrangement has been cancelled as at the
quarter ended June 30, 2003. In the third quarter of 2003, the company obtained
the first $500,000 tranche of a planned $2,000,000 term debt offering. With the
divestiture of Ignition our need for cash to fund operations has been reduced
substantially with most of the need to repay extended payables and to fund day
to day operations until our product sales and service revenues are sufficient to
meet operating costs and the costs of remaining a public company.
As of June 30, 2003, our need for cash included satisfying $1,745,980
of current liabilities which consisted of accounts payable of $680,872, $91,371
of accrued liabilities, taxes payable of $155,371, and other current liabilities
of $2,856, accrued interest of $11,909, the current portion of leases payable of
$20,154, amounts payable to related parties of $76,427 and notes payable of
$689,020. which includes an outstanding amounts to Berra, Cornell and a
promissory note in the first quarter of 2003 for $221,824, which evidences the
cash portion owed to a software licensor. The note will be repaid in nine equal
installments of $25,203, commencing on June 1, 2003. As indicated in the
liquidity section above the company subsequent to the quarter ended June 30,
2003 entered in to $500,000 term loan. In the quarter ended June 30, 2003 the
only long term debt was the extended portion of leases payable of $15,855. The
Company substantially reduced its short term and long term debt from the fiscal
period ended December 31, 2002 through the issuance of the common shares that
were due to the original shareholders of Ignition Entertainment and also from
the conversion of shareholders loans, accrued expenses and unpaid salaries to
several directors and officers. In the quarter ended June 30, 2003 Mr. MacDonald
and Mr. Hamilton converted debts of $445,319.40 each into 17,804,976 restricted
common shares each.
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 bank or non-bank term and operating credit,
36
convertible debt, equity capital or access capital under the equity line and
implement our business plan to market and sell our various enterprise software
and services and our various consumer software titles through our wholly owned
subsidiaries.
At June 30, 2003 the Company had cash on hand of $754 versus $63,162 at
the fiscal year end. In addition, as at the quarter end, certain shareholders
have also supported the company to the extent of $76,427 and while there is no
legal commitment for them to do so the company believes that certain
shareholders will continue to support the company in a similar manner. These
advances are shown in short term liabilities and they have no fixed terms for
repayment.
During February 2003, upon the Company's SB-2 registration becoming
effective, the Company received $970,000 proceeds from the issuance of a $1
million promissory note to the Investment Bankers, net of a 3% cash fee of
$30,000, which yields an effective interest rate of approximately 12% per annum.
The promissory note is non-interest bearing and is to be paid in full within 95
calendar days. The Company has the discretion to repay the note either through
cash received from the issuance of stock under the Equity Line of Credit
Agreement or by cash from other sources. In connection with the note, the
Company has agreed to escrow 10 requests for advances under the Equity Line of
Credit Agreement in the amount not less than $100,000. The request will be held
in escrow by an independent law firm, who will release such requests to the
Investment Banker every 7 calendar days commencing on March 3, 2003 unless
otherwise agreed between the Company and Cornell Capital. If this note is not
fully paid when due, the outstanding principal balance owed will be payable in
full together with interest at the rate of 24% per annum or the highest rate
permitted by law, if lower. See below for partial repayment of this note.
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. On
February 14, 2003 an SB2 that was filed by the company was declared effective by
the SEC. Under the terms of the equity line of credit the company may provide
notice to Cornell and Cornell will purchase from the company shares 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 Cornell Capital Partners is entitled to retain 3.0% of
each advance. In April 2002, IVP Technology paid Cornell a one-time fee equal to
$330,000, paid in the form of 3,032,000 shares of common stock. 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. To the
end of June 2003, the Company has received under the Equity Line of Credit
$525,000 in exchange for 12,424,404 shares of common stock. Except for the
Equity Line of Credit, the company has no commitments for equity capital
although the company continues to explore other funding alternatives in an
effort to broaden its capital sources.
The company anticipates that its cash needs over the next 12 months
will consist of general working capital needs of $2,000,000, which would include
the satisfaction of current liabilities of $1,745,980. As of June 30, 2003 the
company had a working capital deficiency of $1,554,310. The company anticipates
that its cash needs over the next 12 months will come primarily from a
combination of operating credit lines, term loans, which may or may not be
secured by assets, or contain conversion features which may lead to additional
shares being issued, or the sale of equity under the Cornell equity line of
credit. Draw downs on the equity line of credit may cause the share price to
decline in value unless buyers are present to take up the supply of new shares
entering the market.
If the company is unable to obtain additional funding through our
Equity Line of Credit facility or from other sources of debt and equity capital,
then the failure to obtain this funding will have a material adverse effect on
our business and this may force us to re-organize, reduce our investment in, or
otherwise divest of one or more of our operations, or to reduce the cost of all
operations to a lower level of expenditure which may have the effect of reducing
our expected revenues and potentially net income in 2003 and 2004.
37
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following chart sets forth IVP's contractual obligations and
commercial commitments and the time frames for which such commitments and
obligations come due.
PAYMENTS DUE BY PERIOD
TOTAL
LESS THAN AFTER
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS 5 YEARS
Current Obligations $ 1,649,399 $ 1,649,399 $ -- $ -- $ --
Convertible Debenture -- -- -- -- --
Leases Payable 36,009 20,154 15,855 -- --
Due to Related Parties 76,427 76,427 -- -- --
Operating Leases -- -- -- -- --
Montpelier Consulting Agreement -- -- -- -- --
Officer Contracts -- -- -- -- --
Software Licensing Contracts -- -- -- -- --
---------- ---------- --------- --------- -------
Total Contractual Cash Obligations $1,761,835 $1,745,980 $ 15,855 $ -- $ --
========== ========== ========= ========= =======
CAPITAL RESOURCES
Pursuant to the Equity Line of Credit, the company may periodically
sell shares of common stock to Cornell Capital Partners, L.P. to raise capital
to fund its working capital needs. The periodic sale of shares is known as an
advance. The company may request an advance every 5 trading days. A closing will
be held 7 trading days after such written notice at which time the company will
deliver shares of common stock and Cornell Capital Partners, L.P. will pay the
advance amount, less the 3% retention. The company may request advances under
the Equity Line of Credit once the underlying shares are registered with the
Securities and Exchange Commission. Thereafter, the company may continue to
request advances until Cornell Capital Partners has advanced $10.0 million or
two years after the effective date of the registration statement, whichever
occurs first. The amount of each advance is subject to an aggregate maximum
advance amount of $425,000 in any thirty-day period. The amount available under
the Equity Line of Credit is not dependent on the price or volume of our common
stock.
The company registered 30,000,000 shares of common stock in connection
with the Equity Line of Credit and upon conversion of the debentures. The
company cannot predict the actual number of shares of common stock that will be
issued pursuant to the Equity Line of Credit, in part, because the purchase
price of the shares will fluctuate based on prevailing market conditions and the
company has not determined the total amount of advances the company intends to
draw. Nonetheless, if the company issued all 30,000,000 shares of common stock
at a recent price of $0.04 per share (which assumes that no shares would need to
be issued upon conversion of debentures), then the company would receive
$1,200,000 under the Equity Line of Credit (after deducting a 3% retention
payable to Cornell). This is $8,800,000 less than is available under the Equity
Line of Credit. The company's stock price would have to rise substantially for
us to have access to the full amount available under the Equity Line of Credit.
These shares would represent 20% of our outstanding common stock upon issuance.
Accordingly, the company would need to register additional shares of common
stock in order to fully utilize the $10 million available under the Equity Line
of Credit at the current price of $0.19 per share. At a recent price of $0.04
per share, the company would be required to issue 250,000,000 shares of common
stock in order to fully utilize the $10.0 million available.
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. As is further disclosed in the company's financial statements
38
the company redeemed this convertible debenture and accrued interest in February
2003.
On January 31, 2002, the company 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 Holdings 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, the company converted the loan, plus accrued
interest into 4,000,000 shares of our common stock.
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash on the balance sheet of IVP Technology Corporation decreased from
$63,162 in December 2002 to $754 on June 30, 2003. While there was a net loss on
operations of $182,389 in the six months ended June 30, 2003, there were net
non-cash expense adjustments of $(1,288,066). In the period ended June 30, 2002,
the non-cash adjustments were $1,580,737 consisting of amortization of a portion
of the Classifier license agreement and stock issued for services.
NET CASH USED IN OPERATING ACTIVITIES
Net cash used in operating activities was $1,470,457 for the six months
ended June 30, 2003 and $572,251 for the six months ended June 30, 2003. The use
of cash in operating activities was principally the result of net losses during
both reporting periods although in 2002 cash was primarily used to maintain a
public listing and to service the Classifier and Orchestral PowerAudit
distribution agreements while in 2003 the company was carrying on an active
business.
NET CASH USED IN INVESTING ACTIVITIES
Net cash used by investing activities was $11,066 related to an
increase in fixed assets in the six months ended June 30, 2003.
NET CASH PROVIDED BY FINANCING ACTIVITIES
During the six months ended June 30, 2003 the company raised cash of
$1,295,691 from financing activities and repaid a notes payable, the convertible
debenture from Cornell Capital and made a reduction on certain items payable to
employees or shareholders together with lease payments to yield a net decrease
in cash of 276,331 cash. In the same period in 2002 the company completed one
transaction which consisted of borrowing $856,334 from DCD group which was
subsequently converted to shares in May 2002.
CRITICAL ACCOUNTING POLICIES
ORGANIZATION
The consolidated financial statements of IVP Technology Corporation
d.b.a. ActiveCore Technologies, Inc. (formally Mountain Chef, Inc.) and
consolidated subsidiaries (the "Company") include the accounts of the parent,
IVP Technology Corporation, incorporated in the State of Nevada on February 11,
1994, and its subsidiaries: Springboard Technology Solutions, Inc. d.b.a.
ActiveCore Technologies, Ltd. ("Springboard"), a Canadian company; and Erebus
Corporation, an inactive 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 capital and
negotiations and acquisition of software distribution licenses. On January 1,
2002, the Company began operations and emerged from the development stage.
The Company operates two units, enterprise and consumer. The enterprise
unit develops, markets, licenses, installs and services data solutions. The
consumer unit develops and publishes interactive software games designed for
mobile phones, other handheld devices, web-sites, personal computers and video
game consoles. The consumer unit also distributes games, hardware and
accessories developed or manufactured by third parties.
39
OPERATIONS OF THE COMPANY - GOING CONCERN
The accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplates continuation of the Company as a
going concern. The Company has a net loss of $182,389 and a negative cash flow
from operations of $1,470,457 for the six months ended June 30, 2003. The
Company also has a working capital deficiency of $1,554,310 and a stockholders'
deficiency of $1,164,990. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plan to continue
in operation is to continue to attempt to raise additional debt or equity
capital until such time the Company is able to generate sufficient operating
revenue.
In view of these matters, realization of certain of the assets in the
accompanying condensed consolidated financial statements is dependent upon
continued operations of the Company, which in turn is dependent upon the
Company's ability to meet its financial requirements, raise additional capital,
and the success of its future operations. Management believes that its ability
to raise additional capital provides the opportunity for the Company to continue
as a going concern.
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.
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 $1,087,906 and $407,326 for the six
months ended June 30, 2003 and 2002, respectively. Publishing revenues have been
reclassified to gain (loss) from discontinued operations on the accompanying
condensed consolidated statement of operations in connection with the sale of
Ignition Entertainment, Ltd. (See Note 2).
Distribution revenue is derived from the sale of third-party
interactive software titles, accessories and hardware. Distribution revenue
amounted to $103,051 and $90,000 for the six months ended June 30, 2003 and
2002, respectively.
Revenues from Services and Commercial Software sold under licenses were
$127,958 and $0 in the six months ended June 30, 2003 and 2002, respectively.
The Company had no Services or Commercial Software sales in the corresponding
period of 2002, because it had not yet acquired Springboard Technology
Solutions, a Services and Commercial Software producing subsidiary.
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 ("VSOE") 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.
40
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.
Revenue from product sales is recognized when title passes to the
customer, provided that: there are no uncertainties regarding customer
acceptance; persuasive evidence of an arrangement exists; the sales price is
fixed or determinable; and collectability is deemed probable. The Company
provides for estimated product returns at the time of the product shipment, if
necessary. In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements, which establishes guidance in applying generally accepted accounting
principles to revenue recognition in financial statements and is effective
beginning with the fourth quarter of the year ended December 31, 2000. The
Company has determined that its existing revenue recognition practices comply
with the requirements of SAB 101 for all periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2002, the EITF reached a consensus on Issue 00-21,
addressing how to account for arrangements that involve the delivery or
performance of multiple products, services, and /or rights to use assets.
Revenue arrangements with multiple deliverables are divided into separate units
of accounting if the deliverables in the arrangement meet the following
criteria: (1) the delivered item has value to the customer on a stand-alone
basis; (2) there is objective and reliable evidence of the fair value of
undelivered items; and (3) delivery of any undelivered items is probable.
Arrangement consideration should be allocated among the separate units of
accounting based on their relative fair values, with the amount allocated to the
delivered item being limited to the amount that is not contingent on the
delivery of additional items or meeting other specified performance conditions.
The final consensus will be applicable to agreements entered into in fiscal
periods beginning after June 15, 2003 with early adoption permitted.
In December 2002, the Financial Accounting Standards Board issued
Statement No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure - an amendment of FASB Statement No. 123," ("SFAS 148"). SFAS 148
amends FASB Statement No. 123, "Accounting for Stock Based Compensation" ("SFAS
123") and provides alternative methods for accounting for a change by
registrants to the fair value method of accounting for stock-based compensation.
Additionally, SFAS 148 amends the disclosure requirements of SFAS 123 to require
disclosure in the significant accounting policy footnote of both annual and
interim financial statements of the method of accounting for stock
based-compensation and the related pro forma disclosures when the intrinsic
value method continues to be used. The statement is effective for fiscal years
beginning after December 15, 2002, and disclosures are effective for the first
fiscal quarter beginning after December 15, 2002.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
changes in SFAS No. 149 improve financial reporting by requiring that contracts
with comparable characteristics be accounted for similarly. This statement is
effective for contracts entered into or modified after June 30, 2003 and all of
its provisions should be applied prospectively.
In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting For
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". SFAS No. 150 changes the accounting for certain financial instruments
with characteristics of both liabilities and equity that, under previous
pronouncements, issuers could account for as equity. The new accounting guidance
contained in SFAS No. 150 requires that those instruments be classified as
liabilities in the balance sheet.
SFAS No. 150 affects the issuer's accounting for three types of
freestanding financial instruments. One type is mandatorily redeemable shares,
which the issuing company is obligated to buy back in exchange for cash or other
assets. A second type includes put options and forward purchase contracts, which
involves instruments that do or may require the issuer to buy back some of its
shares in exchange for cash or other assets. The third type of instruments that
are liabilities under this Statement is obligations that can be settled with
41
shares, the monetary value of which is fixed, tied solely or predominantly to a
variable such as a market index, or varies inversely with the value of the
issuers' shares. SFAS No. 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety.
Most of the provisions of Statement 150 are consistent with the
existing definition of liabilities in FASB Concepts Statement No. 6, "Elements
of Financial Statements". The remaining provisions of this Statement are
consistent with the FASB's proposal to revise that definition to encompass
certain obligations that a reporting entity can or must settle by issuing its
own shares. This Statement shall be effective for financial instruments entered
into or modified after May 31, 2003 and otherwise shall be effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of a non-public entity, as to which
the effective date is for fiscal periods beginning after December 15, 2003.
The Company believes that the adoption of the above pronouncements
will, not have a material effect on the Company's condensed consolidated
financial position or results of operations.
42
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
The Company made the following issuances of unregistered securities
since January 1, 2003.
On August 5, 2003, the Company announced that it had acquired the
rights to build a cell phone game based on the "Zorro" character and trademark
from Zorro Productions Inc. of California. A license agreement was entered into
whereby the Company shall pay no royalties on the first $50,000 of net sales and
subsequently the Company and the licensor shall share equally a royalty of 50%
on net sales. There shall be no minimum royalty. The Company also entered into
an agreement with an unrelated company to source additional "name brand"
properties for cell phone game production and issued this unrelated company
2,000,000 shares of common stock as a consulting fee. These shares were issued
on August 1, 2003 and were valued at $.033 per share, representing the closing
market value on the date of grant.
On July 31, 2003, the company announced that its wholly owned
subsidiary ActiveCore Technologies Limited had received the first installment of
$500,000 of a planned $2,000,000 term loan offering. Under the terms of the
agreement, the first installment will accrue a 12% interest rate per annum and
is repayable over a five-year term with no payments required in the first 12
months - the payments will be amortized over the remaining 48 months of the term
loan. The loan is convertible into common stock of the Company at the rate of
4.5 shares for every 1 dollar of the loan balance due, excluding interest,
remaining at the time of conversion. As additional consideration for the loan
advance by the lender, the Company issued 500,000 warrants on July 30, 2003 to
the lender for the purchase of 500,000 shares of common stock at a purchase
price of $0.0312 per share. The fair value assigned to the warrant amounted to
$0 and was determined using the Black-Scholes pricing model. The Company
estimates the fair value of the warrant at the grant date by using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for this grant; no dividend yield for all years; expected
volatility of 9.3%; risk-free interest rate of 1.12%, and an expected life of 1
year. The warrants expire July 31, 2004.
On July 14, 2003, the Company entered into a consulting agreement with
an unrelated individual to provide services through June 2004. On August 1,
2003, the Company issued 4,000,000 shares of common stock to this consultant as
compensation for services to be rendered. These shares were valued at $.033 per
share, representing the closing market value on the date of grant.
On July 10, 2003, the Company entered into a Letter of Intent to
acquire the source code for a software product known as XML/Connector for the
health care vertical from an unrelated company which is a Colorado and Toronto
based software development company. As part of the terms and conditions, the
Company will pay (CAD) $120,000 in cash in the form of a note payable. On August
1, 2003, the Company issued 500,000 shares of common stock to the acquiree.
These shares were valued at $.033 per share representing the closing market
value on the date of grant.
In July 2003, the Company entered into a consulting agreement with an
unrelated individual to provide services through June 2004. On August 1, 2003,
the Company issued 150,000 shares of common stock to this consultant. These
shares were valued at $.033 per share, representing the closing market value on
the date of grant.
In July 2003, the Company entered into employment agreements with two
contractors related to cell phone game development and health care services. On
August 1, 2003, each contractor was issued 500,000 shares of common stock as
compensation in addition to ongoing salary costs. These shares were valued at
$.033 per share, representing the closing market value on the date of grant.
In July 2003, the Company issued 1,562,700 unregistered shares of
common stock to an officer of the Company in lieu of cash in order to satisfy
shareholder loans, expenses paid on behalf of the Company and accrued expenses.
These shares were valued at $.033 per share, representing the closing market
value on the date of grant.
43
During the six month period ended June 30, 2003, the Company issued
8,932,783 shares of common stock to the Investment Bankers for cash of $400,000
in connection with the Equity Line of Credit (See Note 6). The cash was applied
against the $1 million promissory note payable to the Investment Bankers issued
in February 2003. As of June 30, 2003, the remaining balance of the note payable
to the Investment Banker totaled $600,000.
On June 24, 2003, the Company issued 17,804,976 shares of common stock
to the President of the Company in lieu of cash in order to satisfy shareholder
loans, expenses paid on behalf of the Company and accrued salaries included in
the amounts due to related parties on the accompanying condensed consolidated
balance sheets. These shares were valued at $.025 per share, or an aggregate of
$445,124 representing the market value on the date of grant.
On June 24, 2003, the Company issued 17,804,976 shares of common stock
to a director of the Company in lieu of cash in order to satisfy shareholder
loans, expenses paid on behalf of the Company and accrued salaries included in
the amounts due to related parties on the accompanying condensed consolidated
balance sheets. These shares were valued at $.025 per share, or an aggregate of
$445,124 representing the market value on the date of grant.
On June 24, 2003, the Company issued 1,250,000 shares of common stock
to four employees of the Company for payment of accrued compensation and
bonuses. These shares were valued at $.025 per share, or an aggregate of $31,250
representing the market value on the date of grant.
On June 24, 2003, the Company issued 3,000,000 shares of common stock
to certain directors of the Company for director services for the period from
June 2003 to June 2004. These shares were valued at $.025 per share, or an
aggregate of $75,000 representing the market value on the date of grant. As of
June 30, 2003, the Company has deferred $75,000 included in total stockholders'
deficiency as deferred compensation and licensing fee on the accompanying
condensed consolidated balance sheets.
On June 24, 2003, the Company issued 300,000 shares of common stock to
an unrelated consultant having a value of $7,500 for consulting services. These
shares were valued based upon the market value on the date of grant.
On June 24, 2003, the Company issued 2,000,000 shares of common stock
to an unrelated party in connection with an agreement to provide investor
relations services. These shares were valued at $.025 per share, or an aggregate
of $50,000 representing the market value on the date of grant. As of June 30,
2003, the Company has deferred approximately $33,000 included in deferred
consulting expense on the accompanying condensed consolidated balance sheet.
On June 24, 2003, the Company issued 5,000,000 shares of common stock
to an unrelated consultant as consideration for an agreement to provide
consulting services from June 2003 to June 2004. These shares were valued at
$.025 per share, or an aggregate of $125,000 on the date of grant.
On June 24, 2003, the Company issued 50,000,000 shares of common stock
to the former shareholders of Ignition Entertainment, Ltd. in accordance with
the original May 28, 2002 purchase agreement. The acquisition was made pursuant
to the Company agreeing to issue 15,000,000 shares of common stock and 3,500,000
shares of preferred stock convertible into 35,000,000 shares of common stock;
collectively valued at $0.23898 per share for a total purchase price of
$11,949,155. The issuance of these 50,000,000 shares of common stock relieved
$11,949,155 in preferred and common stock to be issued as of April 1, 2003. (See
Note 2, Discontinued Operations for details on the acceleration of the issuance
of these shares and the sale agreement of Ignition Entertainment Ltd.)
On June 24, 2003, the Company issued 5,180,000 shares of common stock
to two unrelated parties to obtain financing for the Company. Financing costs
included in interest expense for the six months ended June 30, 2003 totaled
$129,500 representing the market value on the date of grant.
On June 24, 2003, the Company issued 500,000 shares of common stock
that were released from escrow to an individual for services rendered from
November 2002 to November 2003. The Board of Directors resolved that these
shares are considered earned as of June 24, 2003. These shares were valued at
$.025 per share, or an aggregate of $13,500 representing the market value on the
date of grant.
On May 28, 2003, the Company amended the Articles of Incorporation to
increase the total number of authorized common and preferred stock to
500,000,000 and 50,000,000 shares, respectively.
44
On April 23, 2003, the Company issued 3,491,620 shares of common stock
to the Investment Bankers for cash of $125,000 or $.036 per share.
In 2002, the Company issued 50,000,000 shares of common stock to
various officers and directors of the Company in accordance with the stock
purchase agreement with International Technology Marketing ("ITM"). All shares
were held in safekeeping pending the completion of an escrow agreement. As of
December 31, 2002, 30,000,000 shares were earned and were released from escrow.
The Company has accelerated the issuance of the final 20,000,000 shares from
escrow. These 20,000,000 shares were released from escrow as stock-based
compensation on June 30, 2003 and were valued at $.027, or an aggregate of
$540,000 on the date of sale.
On February 18, 2003, the Company issued 168,889 shares of common stock
to the Investment Banker for payment of penalties for not completing the SB-2
filing by the due date of July 2, 2002 per the terms of the Equity Line of
Credit Agreement. These shares were valued at $0.13 per share or an aggregate of
$21,956, representing the closing market value on the date of grant.
On February 18, 2003, the Company issued 114,408 share of common stock
to a consultant for payment of $15,000 of consulting services accrued at
December 31, 2002 as common stock to be issued included in currently liabilities
in the accompanying consolidated balance sheet as of December 31, 2002. These
share were valued at $0.13 per share representing the closing market value on
the date of grant.
During March 2003, the Company issued 2,155,964 shares of common stock
to the Investment Bankers for cash of $150,000 or $.07 per share, in connection
with the Equity Line of Credit.
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
On May 28, 2003, the Company held its 2002 annual shareholders meeting.
At the meeting, Brian MacDonald, Peter Hamilton and J. Stephen Smith were
elected to the board of directors. In addition, the shareholders voted to
increase the Company's authorized common stock to 500,000,000 shares. In
connection with the re-election of the directors, there were 73,111,302 shares
voted in favor of the directors, no votes against and 130,830 abstentions. In
connection with the increase in authorized common stock, there were 71,390,374
shares voted in favor, 1,847,758 votes against and 4,000 abstentions.
ITEM 5. OTHER INFORMATION
Not applicable.
45
ITEM 6. SUBSEQUENT EVENTS, EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
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
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
3.2 Bylaws Incorporated by reference to Exhibit 3.2 to
IVP Technology's Amendment No. 2 to the Form
SB-2 filed on November 14, 2002
3.3 Certificate of Amendment of Articles of Incorporation Provided herewith
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 Incorporated by reference to Exhibit 10.11 to
the Registrant and Rainbow Investments International IVP Technology's Form 10-KSB filed on
Limited April 15, 2002
46
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
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 IVP Technology's Form S-8 filed on July 23,
of 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
47
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, IVP Technology's Form 10-KSB filed on
LP April 15, 2002
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
48
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
10.44 Consulting Agreement dated as of June 1, 2002 Incorporated by reference to Exhibit 10.44 to
Ignition Entertainment Limited and Montpelier IVP Technology's Form 10-QSB filed on August
Limited 19, 2002
10.45 Amendment to Equity Line of Credit Agreement dated Incorporated by reference to Exhibit 10.45 to
May 2002 between IVP Technology and Cornell Capital IVP Technology's Amendment No. 2 to the Form
Partners SB-2 filed on November 14, 2002
10.46 Letter of Credit Facility dated as of April 10, 2002 Incorporated by reference to Exhibit 10.46 to
between Revelate Limited and Ignition Entertainment IVP Technology's Amendment No. 2 to the Form
Limited SB-2 filed on November 14, 2002
10.47 Debenture dated as of June 14, 2002 between Revelate Incorporated by reference to Exhibit 10.47 to
Limited and Ignition Entertainment Limited IVP Technology's Amendment No. 2 to the Form
SB-2 filed on November 14, 2002
10.48 Standard Conditions for Purchase of Debts dated May Incorporated by reference to Exhibit 10.48 to
23, 2002 between DCD Factors PLC and Ignition IVP Technology's Amendment No. 2 to the Form
Entertainment Limited SB-2 filed on November 14, 2002
10.49 All Assets Debenture dated as of May 23, 2002 between Incorporated by reference to Exhibit 10.49 to
DCD Factors PLC and Ignition Entertainment Limited IVP Technology's Amendment No. 2 to the Form
SB-2 filed on November 14, 2002
10.50 Memorandum of Agreement dated as of July 1, 2002 Incorporated by reference to Exhibit 10.50 to
between Springboard Technology Solutions Inc. and IVP IVP Technology's Amendment No. 2 to the Form
Technology SB-2 filed on November 14, 2002
10.51 Heads of Agreement dated as of December 28, 2001 and Incorporated by reference to Exhibit 10.51 to
amended on September 30, 2002 between TiG Acquisition IVP Technology's Amendment No. 2 to the Form
Corporation and IVP Technology SB-2 filed on November 14, 2002
10.52 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.1 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and Mount Sinai Hospital on April 1, 2003
entered into March 11, 2003 (Contract No. MDI02008)
10.53 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.2 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and Mount Sinai Hospital on April 1, 2003
entered into March 11, 2003 (Contract No. MDI02009)
49
10.54 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.3 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and Rouge Valley Health on April 1, 2003
System entered into September 12, 2002 (Contract No.
MDI02003)
10.55 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.4 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and Rouge Valley Health on April 1, 2003
System entered into September 12, 2002 (Contract No.
MDI02004)
10.56 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.5 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and York Central Hospital on April 1, 2003
entered into September 13, 2002 (Contract No.
MDI02006)
10.57 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.6 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and York Central Hospital on April 1, 2003
entered into September 13, 2002 (Contract No.
MDI02007)
10.58 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.7 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and St. Joseph's Medical on April 1, 2003
Centre entered into March 18, 2003 (Contract No.
MDI03001)
10.59 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.8 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and St. Joseph's Medical on April 1, 2003
Centre entered into March 18, 2003 (Contract No.
MDI03002-Expires March 31, 2004)
10.60 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.9 to
Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC
Integration Solutions group and St. Joseph's Medical on April 1, 2003
Centre entered into March 18, 2003 (Contract No.
MDI03002-Expires June 11, 2004)
10.61 Intentionally omitted Intentionally omitted
10.62 Developer and Distribution Agreement dated as of Incorporated by reference to Exhibit 10.1 to
February 10, 2003 between the Company and Tira the Company's Form 8-K filed with the SEC on
Wireless, Inc. February 27, 2003.
10.63 Letter of Intent dated as of July 10, 2003 Provided herewith
between the Company and Karora
10.64 Promissory Note dated as of July 30, 2003 Provided herewith
10.65 Warrant Certificate dated as of July 30, 2003 Provided herewith
10.66 Conversion Privilege of Lender Provided herewith
10.67 General Security Agreement dated as of July 30, Provided herewith
2003
10.68 Guarantee Agreement dated as of July 30, 2003 Provided herewith
10.69 Consulting Agreement dated as of June 3, 2003 Provided herewith
between the Company and Rodger J. Cowwan
10.70 Agreement dated as of May 1, 2003 between the Provided herewith
Company and Hawk Associates, Inc.
10.71 Letter of Intent dated as of June 16, 2003 Provided herewith
between the Company and ePocket Inc.
10.72 Consulting Agreement dated as of July 14, 2003 Provided herewith
between the Company and Gerald Campbell
10.73 Letter of Intent dated as of June 16, 2003 Provided herewith
between the Company and SCI Healthcare Group, Inc.
10.74 Merchandising License Agreement dated as of Provided herewith
July 21, 2003 between the Company and Zorro
Productions, Inc.
50
31.1 Certification re: Section 302 Provided herewith
32.1 Certification re: Section 906 Provided herewith
(B) REPORTS ON FORM 8-K.
On August 8, 2003, the Company announced that it had entered into a
Letter of Intent with E Communities UK Limited.
On June 3, 2003, the Company announced that it intended to sell
Ignition Entertainment.
On April 1, 2003, the Company announced that its Medical Data
Integration Solutions Group entered into service agreements with four Toronto
hospitals.
On February 27, 2003, the Company announced it entered into an
agreement with Tira Wireless.
51
SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
REGISTRANT:
IVP TECHNOLOGY CORPORATION
/S/ BRIAN MACDONALD August 27, 2003
- -----------------------------------------------------
By: Brian MacDonald
President, Chief Executive Officer and
Acting Chief Financial Officer
52