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 September 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) 252-6200
(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: 278,707,703 shares of common
stock, $.001 par value, were outstanding on September 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 September 30, 2003
(Unaudited) and December 31, 2002
Condensed Consolidated Statement of Operations for the Nine
months and Nine Months Ended September 30, 2003 and
September 30, 2002, (Unaudited)
Condensed Consolidated Statements of Stockholders' Deficiency
for the Nine Months ended September 30, 2003 (Unaudited)
Condensed Consolidated Statements Of Cash Flows For The Nine
Months Ended September 30, 2003 And 2002 (Unaudited)
Notes To Condensed Consolidated Financial Statements As Of
September 30, 2003 (Unaudited)
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
ITEM 3. Control and Procedures
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 SEPTEMBER 30, 2003
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONTENTS
--------
PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2003 (UNAUDITED) AND
DECEMBER 31, 2002
PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002 (UNAUDITED)
PAGE 3 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2003 (UNAUDITED)
PAGES 4 - 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2003 AND 2002 (UNAUDITED)
PAGES 6 - 22 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2003
(UNAUDITED)
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
September 30, 2003 December 31,
(Unaudited) 2002
----------------- -------------
Current assets
Cash $ 65,066 $ 63,162
Accounts receivable, less allowance for doubtful accounts of $43,970
as of September 30, 2003 and December 31, 2002 66,779 17,165
Prepaid expenses and other current assets 171,723 34,610
----------------- -------------
Total Current Assets 303,568 114,937
----------------- -------------
PROPERTY AND EQUIPMENT
Property and equipment 227,177 173,246
Accumulated depreciation (131,460) (79,688)
----------------- -------------
Property and Equipment, Net 95,717 93,558
----------------- -------------
OTHER ASSETS
License agreements - software, net of accumulated amortization of
$624,411 and $356,806 as of September 30, 2003 and December 31, 2002,
respectively 204,906 356,806
Intangible asset - customer list 275,000 -
Investment at cost 250,000 -
Deferred consulting expense 196,850 71,816
Goodwill 100,000 -
----------------- -------------
Total Other Assets 1,026,756 428,622
----------------- -------------
TOTAL ASSETS $ 1,426,041 $ 637,117
- ------------ ================= =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accounts payable $ 681,763 $ 657,402
Accrued liabilities 80,775 169,679
Taxes payable 187,527 32,150
Accrued interest 58,110 14,974
Leases payable, current portion 22,013 -
Net liabilities of discontinued operations - 1,417,619
Note payable, current portion 542,886 104,020
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 97,637 369,226
Other current liabilities 2,683 134,088
----------------- -------------
Total Current Liabilities 1,691,394 11,296,566
----------------- -------------
CONTINGENCIES AND COMMITMENTS
LONG-TERM LIABILITIES
Note payable, long-term portion 500,000 -
Convertible debentures - 150,000
Lease payable, long-term 8,603 25,570
Convertible preferred stock to be issued, long-term - 3,584,747
----------------- -------------
Total Long-Term Liabilities 508,603 3,760,317
----------------- -------------
TOTAL LIABILITIES 2,199,997 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, 278,707,703 and 99,449,261 shares issued and 267,707,703
and 99,449,261 shares outstanding as of September 30, 2003 and
December 31, 2002, respectively 278,708 99,449
Additional paid-in capital 36,166,766 20,870,864
Accumulated deficit (36,185,595) (35,248,562)
Less: treasury stock (11,000,000 shares) (770,000) -
Other comprehensive (loss) income - exchange gain (111,297) 80,795
Less: deferred equity line commitment fees (91,062) (222,312)
Less: deferred compensation (61,476) -
----------------- -------------
Total Stockholders' Deficiency (773,956) (14,419,766)
----------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,426,041 $ 637,117
- ---------------------------------------------- ================= =============
See accompanying notes to condensed consolidated financial statements.
1
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
For The Three For The Three For The Nine For The Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September September
2003 2002 30, 2003 30, 2002
-------------- --------------- -------------- --------------
NET SALES $ 124,767 $ 167,070 $ 355,776 $ 257,070
-------------- -------------- ------------- --------------
COST OF SALES
Product costs 20,962 24,059 121,893 24,059
Development costs - - - 1,030
Distribution and other costs including
amortization of license 92,983 298,674 279,172 1,203,972
-------------- -------------- ------------- --------------
Total Cost of Sales 113,945 322,733 401,065 1,229,061
-------------- -------------- ------------- --------------
GROSS PROFIT (LOSS) 10,822 (155,663) (45,289) (971,991)
-------------- -------------- ------------- --------------
OPERATING EXPENSES
Salaries and wages 270,095 54,124 506,069 54,124
Stock-based compensation 37,500 3,800,000 618,080 3,800,000
Consulting fees 119,044 102,835 212,974 452,815
Legal and accounting 60,335 40,192 214,209 252,166
Management fees 44,346 23,301 120,688 81,107
General and administrative 170,540 (170,872) 562,907 153,889
Financial advisory fees 9,098 - 39,914 150,000
Amortization and depreciation 9,656 107,921 28,378 271,671
-------------- -------------- ------------- --------------
Total Operating Expenses 720,614 3,957,501 2,303,219 5,215,772
-------------- -------------- ------------- --------------
LOSS FROM OPERATIONS (709,792) (4,113,164) (2,348,508) (6,187,763)
-------------- -------------- ------------- --------------
OTHER INCOME (EXPENSE)
Gain on early extinguishment of debt - 924,904 - 1,021,238
Interest income - 5,084 6,497 5,126
Interest expense (88,673) (11,432) (315,803) (77,577)
Foreign exchange gain 43,821 - 57,895 -
-------------- -------------- ------------- --------------
Total Other Income (Expense) (44,852) 918,556 (251,411) 948,787
-------------- -------------- ------------- --------------
LOSS FROM CONTINUING OPERATIONS (754,644) (3,194,608) (2,599,919) (5,238,976)
DISCONTINUED OPERATIONS:
Loss from discontinued operations - (915,876) (733,123) (1,127,835)
Gain on sale of discontinued operations - - 2,396,009 -
-------------- -------------- ------------- --------------
(Loss) Gain from Discontinued Operations, Net - (915,876) 1,662,886 (1,127,835)
-------------- -------------- ------------- --------------
NET (LOSS) $ (754,644) $ (4,110,484) $ (937,033) $ (6,366,811)
- ---------- =============== =============== ============== ==============
LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS -
BASIC AND DILUTED $ (0.00) $ (0.03) $ (0.02) $ (0.06)
============== ============== ============= ==============
GAIN (LOSS) PER COMMON SHARE FROM DISCONTINUED
OPERATIONS - BASIC $ 0.00 $ (0.01) $ 0.01 $ (0.01)
============== ============== ============= ==============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.00) $ (0.03) $ (0.01) $ (0.07)
============== ============== ============= ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 262,456,836 118,299,435 159,960,377 95,218,392
============== ============== ============= ==============
See accompanying notes to condensed consolidated financial statements.
2
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE NINE MONTHS ENDED SEPTEMBER 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 - - 82,985,949 82,986 2,074,030 -
Stock issued for cash - - 29,000,001 29,001 869,088 -
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. - - - - - -
Stock issued for asset
acquisitions - - 7,272,492 7,272 213,628 -
Stock issued for
investment - - 10,000,000 10,000 240,000 -
Deferred cost recognized - - - - - -
Net loss for the period - - - - - (937,033)
Cumulative translation
adjustment - - - - - -
Comprehensive loss - - - - - -
---------- -------- ----------- --------- ------------ -------------
BALANCE,
SEPTEMBER 30, 2003 - $ - 278,707,703 $ 278,708 $ 36,166,766 $(36,185,595)
------------------ ========== ======== =========== ========= ============ =============
See accompanying notes to condensed consolidated financial statements.
3
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
--------------------------------------------
(UNAUDITED)
Deferred Deferred
Compensation Equity Line Other
Treasury & Licensing Commitment Comprehensive
Stock Fees Fees Income (Loss) Total
------------ ----------- ------------ -------------- -------------
Balance, December 31, 2002 $ - $ - $ (222,312) $ 80,795 $(14,419,766)
Stock issued for
services and settlements - (61,476) - - 2,095,540
Stock issued for cash - - - - 898,089
Stock issued to former
shareholders of
Ignition Entertainment, Ltd. - - - - 11,949,156
Conversion of preferred
stock to common stock - - - - -
Stock to be received
from the sale of
Ignition
Entertainment, Ltd. (770,000) - - - (770,000)
Stock issued for asset
acquisitions - - - - 220,900
Stock issued for
investment - - - - 250,000
Deferred cost recognized - - 131,250 - 131,250
Net loss for the period - - - - (937,033)
Cumulative translation
adjustment - - - (192,092) (192,092)
-------------
Comprehensive loss - - - - (1,129,125)
------------ ----------- ------------ ------------- -------------
BALANCE,
SEPTEMBER 30, 2003 $ (770,000) $ (61,476) $ (91,062) $ (111,297) $ (773,956)
------------------ ============ =========== =========== ============= =============
See accompanying notes to condensed consolidated financial statements.
3A
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
For The Nine Months Ended For The Nine Months
September 30, 2003 Ended September 30, 2002
------------------------- ------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (937,033) $ (6,366,811)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of discontinued operations (2,396,009) -
Amortization and depreciation 39,721 276,712
Amortization of licensing agreements 267,603 1,172,672
Amortization of consulting agreements and commitment fees 256,874 267,500
Interest expense on beneficial conversion - 64,286
Gain on early extinguishment of debt - (1,021,238)
Decrease in deferred tax asset 71,816 -
Stock issued for commitment fees and penalties 22,800 -
Stock issued for compensation 553,501 3,800,000
Stock issued for financing costs 129,500 -
Stock issued for services 62,500 567,781
Changes in operating assets and liabilities, net of effects of discontinued
operations:
(Increase) decrease in accounts receivable (112,679) 167,324
Decrease (increase) in inventory 304,783 54,453
(Increase) decrease in prepaid expenses and other current assets (150,669) 14,611
Increase in other assets - (94,071)
Decrease in accounts payable (53,318) (281,519)
Decrease in accrued liabilities (172,929) -
Increase in taxes payable 203,370 73,909
(Decrease) increase in other current liabilities (69,603) 283,258
Increase (decrease) in accrued interest 43,136 (23,357)
Net effect of discontinued operations 213,924 -
------------------------- ------------------------
Net Cash Used In Operating Activities (1,722,712) (1,044,490)
------------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from acquisition - 1,132,039
Cash Paid for acquisition - (367,217)
Cash paid from sale of discontinued operations (160)
Cash paid for licensing agreement - (713,612)
Purchase of software rights (94,803)
Purchases of fixed assets (9,126) (402,870)
------------------------- ------------------------
Net Cash Used In Investing Activities (104,089) (351,660)
------------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft - 11,035
Repayment of notes payable (1,036,134) -
Proceeds from notes payable 1,674,146 1,300,339
Proceeds from related parties 299,878 -
Proceeds from factors 116,503 61,929
Proceeds from issuance of common stock 898,088 7,501
Payment on leases (25,474) -
------------------------- ------------------------
Net Cash Provided By Financing Activities 1,927,007 1,380,804
------------------------- ------------------------
EFFECT OF FOREIGN EXCHANGE RATES (98,302) 15,114
------------------------- ------------------------
NET DECREASE IN CASH FOR THE PERIOD 1,904 (232)
CASH - BEGINNING OF PERIOD 63,162 232
------------------------- ------------------------
CASH - END OF PERIOD $ 65,066 $ -
- -------------------- ========================= ========================
See accompanying notes to condensed consolidated financial statements.
4
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
For The Nine Months Ended For The Nine Months Ended
September 30, 2003 September 30, 2002
--------------------------- ----------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 47,182 $ -
=========================== ============================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Equipment purchased under capital leases $ 17,193 $ -
=========================== ============================
Acquisition of Ignition Entertainment Ltd. $ - $ 1,132,039
=========================== ============================
Acquisition of Springboard Technology Solutions Inc. $ - $ 260
=========================== ============================
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 to acquire other income producing assets $ 220,900 $ -
=========================== ============================
Common stock issued for deferred consulting expenses $ 383,950 $ -
=========================== ============================
Common stock issued for payment of accrued bonuses $ 60,450 $ -
=========================== ============================
Common stock issued for payment of commitment fees $ - $ 350,000
=========================== ============================
Common stock issued for payment of debt and accrued
interest thereon $ 944,329 $ 983,773
=========================== ============================
Common stock issued for payment of amounts due to related parties $ 929,316 $ -
=========================== ============================
Common stock issued for payment of common stock to be issued
for services $ 65,000 $ 50,000
=========================== ============================
Common stock issued for investment $ 250,000 $ -
=========================== ============================
See accompanying notes to condensed consolidated financial statements.
5
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 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. (formerly 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, d.b.a. ActiveCore Technologies, Inc., and
its subsidiaries: ActiveCore Technologies Ltd. (formerly Springboard
Technology Solutions Inc.), 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 in two market segments, enterprise and consumer.
The enterprise component develops, markets, licenses, installs and
services data solutions. The consumer market group develops and
publishes interactive software games designed for mobile phones, other
handheld devices, and web-sites. The consumer unit also distributes
games developed by third parties. In 2002 the Company also produced
video games for personal computers and various console gaming
platforms. (see Note 2 - Discontinued Operations)
(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 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. The condensed consolidated balance sheet information
as of December 31, 2002 was derived from the audited consolidated
balance sheet included in the Company's Annual Report Form 10-KSB. 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 Annual Report Form 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.
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 nine months ended
September 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) 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
$937,033, and a negative cash flow from operations of $1,722,712 for
the nine months ended September 30, 2003. The Company also has a
working capital deficiency of $1,387,826 and a stockholders'
deficiency of $773,956 at September 30, 2003. These matters raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plan 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
amounts to conform to the Company's current period presentation.
(E) Use of Estimates
--------------------
The preparation of condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the dates
of the condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting periods. The
most significant estimates and assumptions relate to the
7
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
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.
(F) Fair Value of Financial Instruments
---------------------------------------
The carrying amounts of the Company's financial instruments, including
cash, accounts receivable, accounts payable, accrued liabilities and
other laibilties approximate fair value because of their short
maturities. 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.
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.
(G) Earnings (Loss) Per Share
-----------------------------
Basic and diluted earnings (loss) per common share is based on net
loss divided by the weighted average number of common shares or common
equivalent shares outstanding. For the three and nine months ended
September 30, 2002, common stock equivalents were not included in the
calculation of diluted loss per share as their effect would be
anti-dilutive.
(H) Recent Accounting Pronouncements
------------------------------------
In November 2002, the Emerging Issues Task Force ("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.
8
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
In April 2003, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("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 FASB issued 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 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.
9
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
In January 2003, The FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities", an interpretation of Accounting
Research Bulletin ("ARB") No. 51, "Consolidated Financial Statements".
Interpretation No. 46 addresses consolidation by business enterprises
of variable interest entities, which have one or both of the following
characteristics: (i) the equity investment at risk is not sufficient
to permit the entity to finance its activities without additional
subordinated support from other parties, which is provided through
other interest that will absorb some or all of the expected losses of
the entity; (ii) the equity investors lack one or more of the
following essential characteristics of a controlling financial
interest: the direct or indirect ability to make decisions about the
entities activities through voting rights or similar rights; or the
obligation to absorb the expected losses of the entity if they occur,
which makes it possible for the entity to finance its activities; the
right to receive the expected residual returns of the entity if they
occur, which is the compensation for the risk of absorbing the
expected losses.
Interpretation No. 46 also requires expanded disclosures by the
primary beneficiary (as defined) of a variable interest entity and by
an enterprise that holds a significant variable interest in a variable
interest entity but is not the primary beneficiary. Interpretation No.
46 applies immediately to variable interest entities created after
January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. It applies in the
first fiscal year or interim period beginning after June 15, 2003, to
variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. Interpretation No.
46 may be applied prospectively with a cumulative-effect adjustment as
of the date on which it is first applied or by restating previously
issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year
restated.
In June 2003, the FASB issued an Exposure Draft for proposed SFAS
entitled "Qualifying Special Purpose Entities ("QSPE") and Isolation
of transferred Assets", an amendment of SFAS No. 140 ("The Exposure
Draft"). The Exposure Draft is a proposal that is subject to change
and as such, is not yet authoritative. If the proposal is enacted in
its current form, it will amend and clarify SFAS 140. The Exposure
Draft would prohibit an entity from being a QSPE if it enters into an
agreement that obliged a transferor of financial assets, its
affiliates, or its agents to deliver additional cash or other assets
to fulfill the special-purposes entity's obligation to beneficial
interest holders.
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.
10
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
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 originally
issued to and held by the former shareholders. 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 nine
months ended September 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,
2002 purchase agreement. The 50,000,000 shares were delivered, in
trust, to an independent third party upon the execution of the sale
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 9).
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 September 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 nine months ended September 30, 2002:
11
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
As of As of December
April 1, 2003 31, 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
=================== ===================
For the Period
From For the Three For the Nine
January 1, 2003 Months Ended Months Ended
Through September 30, September 30,
April 1, 2003 2002 2002
--------------------- ------------------- ------------------------
Revenues, net $ 1,087,906 $ 1,241,332 $ 1,648,658
Cost of sales 960,501 1,235,730 1,618,446
--------------------- ------------------- ------------------------
Gross profit 127,405 5,602 30,212
Operating expenses 815,985 906,967 1,135,708
--------------------- ------------------- ------------------------
Loss from discontinued
operations (688,580) (901,365) (1,105,496)
--------------------- ------------------- ------------------------
Other expense (44,543) (14,511) (22,339)
--------------------- ------------------- ------------------------
Net loss from discontinued
operations $ (733,123) $ (915,876) $ (1,127,835)
===================== =================== ========================
12
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
NOTE 3 PREPAID EXPENSES AND OTHER CURRENT ASSETS
- ------ -----------------------------------------
Prepaid expenses and other current assets as of September 30, 2003 and
December 31, 2002 consist of:
September 30, December 31,
2003 2002
-------------- ------------
Prepaid expenses $ 9,300 $ 14,763
GST receivable 21,585 18,002
Receivable, unrelated parties 140,462 -
Other 376 1,845
-------------- ------------
Total $ 171,723 $ 34,610
============== ============
NOTE 4 INVESTMENT
- ------ ----------
On June 26, 2003, the Company purchased 5% of the then issued share
capital of ePocket, Inc. for 10,000,000 shares of the Company's
unregistered common stock or the equivalent of $300,000 Canadian
dollars ("CAD"). The Company is in the process of registering the
10,000,000 shares. The shares will then be sold in the open market. If
the sale of these shares does not generate the amount of funds required
($300,000 CAD), the Company will be required to fund the difference. If
the sales of the shares exceed the minimum required amount, the Company
may increase its interest in or have any remaining unsold shares
returned for cancellation or rescission. The Company issued the
10,000,000 shares on June 26, 2003. The shares were valued at $0.025
per share or an aggregate of $250,000, representing the market value at
the date of grant. The investment in ePocket, Inc. is valued at cost in
the accompanying condensed consolidated balance sheet.
NOTE 5 ACQUISITIONS
- ------ ----------
On September 30, 2003 the Company issued 6,472,492 shares of common
stock in connection with the acquisition of the data integration
division of SCI Healthcare Group. The shares were valued based on the
closing price of the Company's common stock on September 18th, being
the contracted determination date, which represented $200,000. An
additional cash consideration of $175,000 was given in the form of a
promissory note. There is a further provision to allow for the increase
or reduction of a percentage of the issued shares if certain gross
revenue targets are not met. The shares are therefore being held in
trust by the seller's legal counsel. The Company allocated the purchase
price between goodwill ($100,000) and customer list ($275,000). The
customer list will be amortized over a term of three years based on the
tenure and cancellability of existing contracts.
13
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
The following unaudited pro forma consolidated results of operations
are presented as if the acquisition of the data integration division of
SCI Healthcare Group had been made at the beginning of the period
presented:
For the Nine
Months Ended
September 30,
2003
--------------
Net sales $ 802,479
Net loss (946,869)
Basic and diluted loss per share $ (0.01)
On July 22, 2003, the Company acquired the source code license for a
software product known as XML/Connector for the healthcare industry,
from an unrelated company, which is a Colorado and Toronto based
software development company. As part of the terms and conditions, the
Company paid (CAD) $120,000 in cash in the form of a note payable, and
on August 1, 2003, issued 500,000 shares of common stock to the seller.
These shares were valued at $.025 per share, or an aggregate of
$12,500, representing the market value on the date of grant. At
September 30, 2003, the balance owing on the promissory note was
$36,955. Subsequently, on August 19, 2003, the Company acquired the
intellectual property rights of the XML/Connector. As a result, the
seller will cease to develop the product and will transfer all existing
customer contracts to the Company. As part of the terms and conditions,
the Company paid (CAD) $10,000 in cash at closing and on September 30,
2003 issued 300,000 shares of common stock to the seller. These shares
were valued at $.028 per share or an aggregate of $8,400, representing
the market value on the date of grant. The combined values of the
XML/Connector purchase total $115,703 and are included in license
agreements on the accompanying condensed consolidated balance sheet.
Amortization will begin in the fourth quarter of 2003 as sales of the
product are expected to commence during that period.
NOTE 6 NOTES PAYABLE
Notes payable consists of the following:
September 30, December 31,
2003 2002
------------------ -------------------
1,000,000 note payable to Cornell Capital Partners, LP, $ 226,911 $ -
non-interest bearing (1)
14
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
Note payable to IBEW Local Union 105, five-year term,
no principal payments until August 2004, bearing interest
at 12% per annum (2) 500,000 -
Note payable to SCI Healthcare Group, unsecured (3) 200,000 -
Note payable to Berra Holdings, payable on demand, bearing
interest at 6% per annum 79,020 104,020
Note payable to Karora Technologies, Inc., unsecured (4) 36,955 -
------------------ -------------------
1,042,886 104,020
Less: current portion 542,886 104,020
------------------ -------------------
Notes Payable - Long-Term Portion $ 500,000 $ -
================== ===================
(1) In February 2003, the Company received $970,000 proceeds from the
issuance of a $1 million promissory note net of a 3% cash fee of
$30,000, which yields an effective interest rate of approximately
12% per annum. The promissory note was non-interest bearing and
was 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 other
financing sources. The note was not fully paid when due, and the
outstanding principal balance owed is payable in full together
with interest that will be charged at the rate of 24% per annum
or the highest rate permitted by law, if lower. The Company has
accrued $34,707 at September 30, 2003, which is included in
accrued interest in the current liabilities section of the
accompanying condensed consolidated balance sheet. See Note 8
below for partial repayment of this note.
(2) On July 31, 2003, the Company's wholly owned subsidiary
ActiveCore Technologies Limited, received the first installment
of $500,000 of a planned $2,000,000 term loan offering from an
electrical workers union in Toronto, Canada. 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
15
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
$0.0312 per share. The fair value assigned to the warrant
amounted to $0 and was determined using the Black-Scholes option
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. The loan is collateralized by substantially all of the
assets of the Company.
(3) As part of the terms and conditions of the acquisition of the
data integration division of SCI Healthcare Group (See Note 5),
part of the consideration paid was in the form of a promissory
note for $175,000. Additionally, $25,000 of the note payable was
used to purchase computer software. The terms of the note stated
that this note would be paid in full by the Company no later than
October 7, 2003. The note contained a default provision that
allowed for interest on the unpaid balance to accrue at 18% per
annum until paid in full. As of the date of this filing, the note
remains unpaid and the Company has received a waiver of default
from SCI Healthcare Group.
(4) As part of the terms and conditions of the acquisition of
XML/Connector (See Note 5), part of the consideration paid was in
the form of a promissory note for (CAD) $120,000. The terms of
the note stated that this note would be paid in full by the
Company no later than September 30, 2003. The note contained a
default provision that allowed for interest on the unpaid balance
to accrue at 10% per annum until paid in full. As of the date of
this filing, $36,955 remains unpaid and the noteholder has not
demanded payment on the overdue amount.
NOTE 7 CONTINGENCIES AND COMMITMENTS
- ------ -----------------------------
Activecore Technologies, Ltd., the Canadian subsidiary has a liability
to the Canada Customs and Revenue Agency ("CCRA") in respect of
unremitted payroll taxes in the amount of $184,000 which figure is
comprised of $101,000 for current payroll taxes, and $83,000 from a
December 31, 2002 CCRA audit assessment whereby several contract
employees were deemed to be eligible for statutory pension and
unemployment premiums not previously recorded. The Company has accrued
these liabilities together with appropriate interest and penalties.
This liability is included in taxes payable in the current liabilities
section of the accompanying condensed consolidated balance sheet as of
September 30, 2003. An aggressive collection effort by the CCRA could
have a significant negative effect on the Company's operations.
16
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
NOTE 8 STOCKHOLDERS' DEFICIENCY
- ------ ------------------------
On February 18, 2003, the Company issued 168,889 shares of common stock
to an 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 nine month period ended September 30, 2003, the Company
issued 25,508,381 shares of common stock to the Investment Bankers for
cash of $773,089 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.
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.
On June 26, 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 in 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 26, 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 in 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.
17
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
On June 26, 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 26, 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 September 30, 2003, the Company has deferred
$61,476 included in total stockholders' deficiency as deferred
compensation in the accompanying condensed consolidated balance sheets.
On June 26, 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 26, 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 September 30, 2003, the Company has deferred
$8,333, included in deferred consulting expense on the accompanying
condensed consolidated balance sheet.
On June 26, 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, representing
the market value on the date of grant. At September 30, 2003, the
Company has deferred $83,333, included in deferred consulting expense
on the accompanying condensed consolidated balance sheets.
On June 26, 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 $11,949,156.
The issuance of these 50,000,000 shares of common stock relieved
$11,949,156 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.)
18
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
On June 26, 2003, the Company issued 5,180,000 shares of common stock
to two unrelated parties for fees and interest payable relating to
financing for the Company. Financing costs included in interest expense
for the nine months ended September 30, 2003 totaled $129,500
representing the market value on the date of grant.
On June 26, 2003, the Company issued 500,000 shares of common stock
that were released from escrow to an individual for services rendered.
These shares were valued at $.025 per share, or an aggregate of $13,500
representing the market value on the date of grant, which was expensed
for the nine months ended September 30, 2003.
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 August 1, 2003, the Company issued 500,000 shares of common stock in
connection with the acquisition of the XML/Connector source code
license. The shares were valued at $.025 per share representing the
market value on the date of grant (See Note 5).
On September 30, 2003, the Company issued 300,000 shares of common
stock in connection with the acquisition of the intellectual property
rights of the XML/Connector. The shares were valued at $.028 per share
representing the market value on the date of grant (See Note 5).
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 $.025 per share, representing the market value on
the date of grant. The Company has deferred $75,000 included in
deferred consulting expense in the accompanying condensed consolidated
balance sheets.
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. The Company has deferred
$3,600 included in deferred consulting expense on the accompanying
condensed consolidated balance sheets.
19
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
In July 2003, the Company entered into employment agreements with two
contractors related to cell phone game development and medical data
integration services, respectively. On August 1, 2003, each contractor
was issued 500,000 shares of common stock as compensation. These shares
were valued at $.025 per share, representing the 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 $.025 per share,
representing the market value on the date of grant.
The Company 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 $0.025 per share, representing the market value on
the date of grant.
On September 30, 2003, the Company entered into a contract with an
independent advisor to consult with the Company with regard to finance
activities and general corporate development. The Company issued
1,000,000 shares of common stock, which were valued at $.029 per share,
representing the market value on the date of grant. The Company has
deferred $26,583 of this charge.
On September 30, 2003, the Company issued 6,472,492 shares in
connection with the acquisition of certain assets of the data
integration unit of SCI Healthcare Group. The shares were valued as at
the closing price on September 18, 2003 being the contracted
determination date, which represented $200,000. An additional cash
consideration of $175,000 was given in the form of a promissory note
(See Note 5).
On September 30, 2003 the Company issued 150,000 shares as bonuses to
employees for successful completion of certain technology. The shares
were valued at $.028 per share, representing the closing bid price on
the date of the board resolution.
On June 26, 2003 the Company purchased 5% of the then issued share
capital of ePocket, Inc. for 10,000,000 shares of common stock valued
at $250,000 (See Note 4).
NOTE 9 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
September 30, 2003. The value of the 11,000,000 shares to be 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.
20
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
NOTE 10 AGREEMENTS
- ------- ----------
(A) 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. The Company has not received any royalty
payments through September 30, 2003, but expects sales of these
products to begin in the fourth quarter of 2003.
(B) HOSPITAL SERVICE AGREEMENTS
-------------------------------
The Company has entered into a number of one-year agreements with
medium to large hospitals and health care facilities in Ontario. The
Company will make interfacing resources available to these customers
throughout the contract term and provide general medical data
integration support services as requested by the client, either on a
fixed cost, or time and materials basis. These agreements will
automatically be renewed for one-year terms unless terminated by either
party in accordance with the terms set forth in the agreements.
(C) MERCHANDISING LICENSE AGREEMENT
-----------------------------------
In August 2003, the Company 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
initial term of the agreement expires on March 31, 2004. There are
automatic renewal options if the Licensor receives specified royalty
amounts. These renewal options extend through March 31, 2005. The
Company has not received nor made any royalty payments through
September 30, 2003. The Company this product to be launched in December
2003.
21
IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
------------------------
(UNAUDITED)
NOTE 11 SUBSEQUENT EVENTS
- ------- -----------------
On October 15, 2003, the Company issued 3,000,000 shares of common
stock to Danson Partners, LLC in full settlement of cash and share
obligations. The shares were valued at $0.031 per share, or an
aggregate of $93,000, representing the market value on the date of
grant. This share issuance satisfies the $72,851 liability included in
accounts payable on the condensed consolidated balance sheet at
September 30, 2003 plus 1,000,000 shares due Danson Partners, LLC for
previous services rendered.
Subsequent to September 30, 2003, the Company entered into a memorandum
of understanding with EXML Limited of Padiham, Lancashire, UK to
distribute software products based on the Appworld.net development
platform. The Company is in the process of establishing two new
subsidiaries to be called ActiveCore Exml Inc. and AcitveCore Exml
Limited to market applications based on the Appworld development
platform. Through the end of March 2004, the Company will have
exclusive distributorship of products based on Appworld in North
America. During the period of exclusivity, ActiveCore and Exml will
negotiate potential joint venture arrangements for the distributorship
of the products.
On November 12, 2003, the Company entered into an agency agreement with
an unrelated party to raise up to $7,000,000 in equity financing to
enable the Company to purchase a 23% equity interest in an unrelated
company that is engaged in certain technology within the health care
industry. Under the terms of the agreement, the Company will sell
50,000,000 shares to certain investors at $.14 per share. In accordance
with the existing letter of intent, the 23% investment will cost
$10,000,000 with additional funds expected to come from a term loan.
Under the terms of the equity financing the Company will be seeking to
register the 50,000,000 shares at the earliest opportunity.
If the offering is completed, the agent will receive a cash commission
equal to 4% of the gross proceeds of the offering. The Company shall
also issue to the agent a number of freely tradable common shares equal
to 5.6% of the aggregate number of common shares issued pursuant to the
offering and a number of restricted common shares equal to 6.47% of the
aggregate number of common shares being issued pursuant to the offering
as additional compensation. Also, in connection with the above
offering, the Company will be responsible at the escrow release date
for all reasonable costs and expenses of the agent not to exceed
$100,000. As collateral for these payment obligations, Brian McDonald,
Peter Hamilton and Kevin Birch, each of whom are insiders of the
Company, have agreed to pledge an aggregate of 300,000 registered
common shares of the Company.
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Business Overview
IVP Technology operates its business under the name ActiveCore
Technologies, Inc. ("ActiveCore"). ActiveCore is a Toronto-based commercial and
consumer software developer, licensor, publisher, marketer, and distributor. We
concentrate on providing consumers and enterprises with mobile device and web
software and provide information technology services to businesses. We operate
through two divisions, enterprise and consumer. We have operations in the United
Kingdom, Canada and the United States. In the enterprise division, we develop,
market and distribute mobile device, web based and other software products and
provide services primarily in the healthcare and insurance markets. In the
consumer division, we develop, license, market, publish and distribute mobile
device and web based entertainment software primarily in Europe and North
America to wireless carriers and through web portals.
Since July 1, 2002, ActiveCore has been concentrating on expanding its
customer base and its distribution capacity in both the consumer and enterprise
segments. In the consumer division, we are continuing to develop our own, and
are searching for additional third party mobile game titles to fill our release
schedule for publication and distribution for 2004 and 2005. This may entail
completing strategic alliances with or acquiring development companies, as well
as licensing completed products/titles for publication and distribution rights
in certain geographical territories or for certain mobile hardware platforms. In
the enterprise division, we also continue to develop our own software products
as well as search for additional distribution rights for third party software
products to round out our software offerings for our clients, as well as to add
more information technology service personnel and obtain new information
technology service contracts. To accelerate this growth, the Company recently
acquired the former medical data integration clients of Toledo based SCI
Healthcare group, Inc.
In addition to the foregoing, we have also made an equity investment in one
other Company. The investment is a 5% equity stake in e-pocket Inc., which is a
private Company headquartered in Canada. e-Pocket has developed a digital cash
software solution for banks, merchants and consumers for web based purchasers
primarily for micro-payments, defined as payments under $10.00. e-Pocket is a
development stage Company that expects to have its first trial operation
commence by year-end between a number of merchants and several banks. E-Pocket
and ActiveCore have also signed a development agreement whereby ActiveCore will
develop the code for e-pocket's micro-payments software based on mobile phones.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 2002
REVENUES. During the nine months ended September 30, 2003, we generated
$355,776 in revenue in comparison to revenue of $257,070 in the corresponding
period ended September 30, 2002. From a revenue source perspective in the nine
months ended September 30, 2003, $246,015 of revenue was generated by ActiveCore
Technologies Limited (formerly Springboard) from service work and product
installation, chiefly by the Company's Medical Data Integration (MDI) division.
IVP Technology did not acquire Springboard Technology Solutions Inc. until July
1, 2002. Consequently this is the first quarter in which comparative revenues
for 2002 include the Canadian operation. A small additional contribution to MDI
revenues came from the September 20th acquisition of the client contracts of SCI
Health Group in the United States. A further $103,051 was derived from
distribution of third party console games developed for the US market. This
market contributed $200,000 in game distribution revenues in the nine months
ended September 30, 2002. The Company is no longer active in this arena due to
the subsequent divestment of Ignition Entertainment. The Company accounted for
the divestment of Ignition Entertainment as discontinued operations with effect
from April 1, 2003. Therefore there is no revenue from Ignition UK included in
the results for the nine months ended September 30 of either year.
COST OF SALES. Cost of sales was $401,065 for the nine months ended
September 30, 2003 versus $1,229,061 for the nine months ended September 30,
2002. The principal cost of sales in the current fiscal year consisted of
amortization of the third party software licenses of $279,172, and other
purchased resale items amounting to $30,818. A sum of $91,075 was additionally
attributable to the direct labor costs of fulfillment in the period. The
principal cost of sales in the nine months ended September 30, 2002 was video
game distribution costs in the United States, in addition to the amortization of
the third party software license. The result of the cost of sales components
elaborated above led to a negative gross margin of $45,289 in the nine months
ended September 30, 2003 versus a negative gross margin of $971,991 in the nine
months ended September 30, 2002.
3
OPERATING EXPENSES. Total operating expenses for the nine months ended
September 30, 2003 were $2,303,219 versus $5,215,772 in the nine months ended
September 30, 2002. These expenses resulted in losses from operations of
$2,348,508 in the current period and $6,187,763 for the nine months ended
September 30, 2002.
The largest components of operating expenses in both years were related to
stock based compensation, salaries and wages, consulting fees and general and
administration expenses, with financial advisory fees playing a significant role
in 2002. These expenses are discussed below.
ActiveCore's Canadian operations accounted for $506,069 of salaries and
wages which represented the cost of developers, data management staff,
administration and sales and marketing staff. A further $13,598 represents the
ten days of operations by the US division of MDI Solutions. Salaries and wages
include costs of all group insurance and various government payroll taxes. In
the period ended September 30, 2002 salaries and wages were $54,124, entirely
within the Canadian operation. The increase in current year expense reflects a
full nine months of Canadian operations versus only three in the prior year (the
latter was acquired on July 1st, 2002). Additional staff have also been added at
the operations level to facilitate the development of the RecessGames portal,
the Zorro property and other games, and the maintenance and refinement of XML
based products for the enterprise division. The Company additionally paid an
aggregate of $38,000 in performance and signing bonuses to certain key personnel
in the current year.
Stock based compensation of $618,080 in the nine months ended September 30,
2003 represents amortization of deferred directors' remuneration and the final
release of shares earned under the ITM purchase agreement, in the amount of
$540,000. In the third quarter of 2002, $3,800,000 in stock based compensation
was recorded as the managers of the Company had met the first milestone payment
on the ITM compensation shares. 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 the
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 Form SB-2 approval process it was determined that the common
stock was required to be accounted for at closing share price values as at the
quarter end in the each of the quarters where the original sales revenue targets
were achieved.
General and Administrative expenses were $562,907 for the nine months ended
September 30, 2003 versus $153,889 for the same period of 2002. In the current
period the largest components of G & A are the write down of commitment fees on
the equity line of credit ($154,050); occupancy and office costs at the
Company's main facility in Toronto; travel and promotion expenditures; and costs
associated with the retention of Hawk Associates, the annual general meeting,
and other investor relations expenditures. Hawk has been retained as the
Company's Investor Relations advisor at a rate of $7,000 per month in addition
to a one time grant of 2,000,000 shares of unregistered stock. The significantly
smaller figure for 2002 results from the Company having been largely inactive
prior to the May 28 and July 1 subsidiary acquisitions.
Consulting fees for the nine months ending September 30, 2003 were $212,974
versus $452,815 in the nine months ended September 30, 2002. The fees to the end
of September 30, 2003 reflect the amortization of several small marketing
agreements as well as the $50,000 paid to the consultant who facilitated the
Zorro license agreement. They also include external directors' fees. In the nine
months ended September 30, 2002, the costs reflected the value of various
financial and marketing consultants who were assisting the Company in relation
to the Form SB-2 filing and expanding its product set and sales opportunities.
Legal and accounting expenses were $214,209 in the nine months ended
September 30, 2003 versus $252,166 in the nine-month period ended September 30,
2002. The increase between the two most current quarters (primarily due to legal
fees incurred in the process of acquiring certain intangible assets and human
resources from SCI Health Group) is offset in the year to date numbers by the
impact of higher 2002 expenditures relative to acquisitions in the second
quarter of 2002 and the Form SB-2 preparation costs.
Management fees and financial advisory fees in the period ended September
30, 2003 were $120,688 and $39,914 respectively, versus $81,107 and $150,000
respectively for the nine months ended September 30, 2002. The current financial
advisory charges represent amortization of a consulting agreement for the
purpose of establishing a new term loan for $2,000,000 to assist with working
capital, versus the 2002 expense that related to placing the Equity Financing
arrangement with Cornell Capital Partners. Management fees have increased
overall partly due to the improved value of the Canadian dollar vis-a-vis
Toronto based personnel.
For the nine months ended September 30, 2003 the Company incurred
amortization and depreciation charges of $28,378 versus $271,671 in the nine
months ended September 30, 2002. The current charges were primarily related to
4
computer equipment in use in the Company's offices. The 2002 expense
additionally reflects the cumulative adjustment resulting from the renegotiation
of the TiG software license.
OTHER INCOME/EXPENSE
For the nine months ended September 30, 2002 the Company realized a gain of
$924,904 on the early extinguishment of debt related to the aforementioned TiG
accounts payable balance, and $96,334 in respect of amounts due to DcD Holdings.
In the nine months ended September 30, 2003 there was no corresponding event.
Interest income from cash on deposit was $6,497 for the nine months ended
September 30, 2003 versus $5,126 for the nine months ended September 30, 2002.
Interest expense was significantly higher for the nine months ended
September 30, 2003, at $315,803, than in the comparative period ended September
30, 2002 which was $77,577. In the current year the Company incurred interest
charges related to the recently negotiated first $500,000 tranche of a planned
$2,000,000 long term debt financing; interest penalties on the early retirement
of the convertible debenture; penalties for late filing of the SB-2 in
connection with the Equity Financing; commission charged on the Equity
Financing; and interest costs on the Berra term loan, whereas in the period
ended September 30, 2002 the interest expense was related principally to the
Berra note and the aforementioned convertible debenture, obtained from an
unrelated party.
The Company recorded a foreign exchange gain of $57,895 for the nine months
ended September 30, 2003 as a result of the decline of the US dollar in relation
to the Canadian Dollar. In the period ended September 30, 2002, the Company had
no foreign exchange adjustment due to the relative stability of the two
currencies subsequent to the June quarter, there being no foreign subsidiary
prior to that date.
LOSS FROM CONTINUING OPERATIONS. As a result of the items specified above,
the Company incurred a loss from continuing operations of $2,599,919 or $0.02
per share for the nine months ended September 30, 2003, versus a loss of
$5,238,976 or $0.06 per share for the nine months of 2002.
DISCONTINUED OPERATIONS
The Company recorded a net gain on discontinued operations from the sale of
Ignition Entertainment Limited of $2,396,009 for the nine months ended September
30, 2003 versus a loss on discontinued operations of $1,127,835 for the nine
months ended September 30, 2002. As a result of the divestiture of Ignition, the
Company had a net loss of $937,033, or $0.01 per share, for the nine months
ended September 30, 2003 compared to a net loss of $6,366,811, or $0.07 per
share, for the comparable period in the prior year.
THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 2002
REVENUES. During the three months ended September 30, 2003, we generated
$124,767 in revenue in comparison to revenue of $167,070 in the corresponding
period ended September 30, 2002. From a revenue source perspective in the third
quarter of fiscal year 2003, $118,057 of revenue was generated by ActiveCore
Technologies Limited from service work and product installation, chiefly by the
Company's Medical Data Integration (MDI) division. The Company accounted for the
divestiture of Ignition Entertainment as discontinued operations with effect
from April 1, 2003. Therefore there is no revenue from Ignition UK included in
the results for the three months ended September 30 of either year. IVP
Technology did not acquire Springboard, now ActiveCore Technologies Limited,
until July 1, 2002. Consequently this is the first quarter in which comparative
revenues for 2002 include the Canadian operation. The third quarter results from
2002 comprise $57,070 from Springboard's contribution, with the balance being
from distribution of third party console games in the US. During the third
quarter of 2003 revenue from the MDI division was still affected by 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. A small additional contribution to MDI
revenues came from the September 20th acquisition of the client contracts of SCI
Health Group in the United States.
5
COST OF SALES. Cost of sales was $113,945 for the three months ended
September 30, 2003 versus $322,733 for the three months ended September 30,
2002. The principal cost of sales items in the third quarter 2003 consisted of
amortization of the Classifier software license of $89,202 while the principal
cost of sales in the third quarter ended September 30, 2002 was video game
distribution costs, in the United States, in addition to the amortization of the
classifier license. The Company recorded amortization of prepaid licenses of
$92,983 related to IVP's Classifier(TM) and I-Bos(TM) distribution and license
agreements in the third quarter of both 2003 and 2002. The result of the cost of
sales components elaborated above led to a gross profit of $10,822 for the three
months ended September 30, 2003 versus a negative gross profit of $155,663 for
the three months ended September 30, 2002.
OPERATING EXPENSES. Total operating expenses for the three months ended
September 30, 2003 were $720,614 versus $3,957,501 for the three months ended
September 30, 2002. These expenses resulted in a loss from operations of
$709,792 in the most recent quarter and $4,113,164 in the quarter ended
September 30, 2002.
The largest components of third quarter fiscal year 2003 operating expenses
were related to stock based compensation, salaries and wages, consulting fees
and general and administration expenses. These expenses are discussed below.
ActiveCore's Canadian operations accounted for $256,497 of salaries and
wages which represented the cost of developers, data management staff,
administration and sales and marketing staff. Additional staff have been added
throughout the year, at the operations level, to facilitate the development of
the RecessGames portal, the Zorro property and other games, and the maintenance
and refinement of XML based products for the enterprise division. A further
$13,598 represents the ten days of operations by the US division of MDI
Solutions. Salaries and wages include costs of all group insurance and various
government payroll taxes. For the period ended September 30, 2002 salaries and
wages were only $54,124, entirely within the Canadian operation, which at that
point had not begun developing consumer products.
Stock based compensation of $44,346 for the third quarter ended September
30, 2003 represents amortization of directors' remuneration. In the third
quarter of 2002, $3,800,000 in stock based compensation was recorded as the
managers of the Company had met the first milestone payment on the ITM
compensation shares. 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 the 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 Form SB-2 approval process it was determined that the common stock was
required to be accounted for at closing share price values as at the quarter end
in the each of the quarters where the original sales revenue targets were
achieved.
General and Administrative expenses were $170,540 for the quarter ended
September 30, 2003 versus $(170,872) in the quarter ended September 30, 2002.
For the most current quarter the largest component of G & A was the 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 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. The negative figure for 2002 results from the
restatement of infrastructure and management fees previously billed to the IVP
parent by Springboard Technology Solutions, prior to its acquisition by IVP.
Consulting fees for the three months ended September 30, 2003 were $119,044
versus $102,835 for the quarter ended September 30, 2002. The fees for the
quarter ended September 30, 2003 reflect the amortization of several small
marketing agreements as well as the $50,000 paid to the consultant who
facilitated the Zorro license agreement. For the third quarter ended September
30, 2002, the costs reflected the value of various financial and marketing
consultants who were assisting the Company in relation to the Form SB-2 filing
and expanding its product set and sales opportunities.
Legal and accounting expenses were $60,335 for the three months ended
September 30, 2003 versus $40,192 for the three month period ended September 30,
2002. The increase between the periods was primarily due to legal fees incurred
in the process of acquiring certain intangible assets and human resources from
SCI Health Group.
Management fees and financial advisory fees for the three months ended
September 30, 2003 were $44,346 and $9,098 respectively, versus $23,301 and $0
respectively for the quarter ended September 30, 2002. The financial advisory
charges represent amortization of a consulting agreement for the purpose of
establishing a new term loan for $2,000,000 to assist with working capital.
For the quarter ended September 30, 2003 the Company incurred amortization
and depreciation charges of $9,656 versus $107,921 for the quarter ended
September 30, 2002. The current charges were primarily related to computer
6
equipment in use in the Company's offices. The 2002 expense additionally
reflects the cumulative adjustment resulting from the renegotiation of the TiG
software license.
OTHER INCOME/EXPENSE
For the quarter ended September 30, 2002 the Company realized a gain of
$924,904 on the early extinguishment of debt related to the aforementioned TiG
accounts payable balance. For the quarter ended September 30, 2003 there was no
corresponding event.
Interest income from cash on deposit was $0 for the quarter ended September
30, 2003 versus $5,084 for the quarter ended September 30, 2002.
Interest expense was significantly higher for the quarter ended September
30, 2003, at $88,673, than in the comparative period ended September 30, 2002
which was $11,432. For the current quarter the Company incurred interest charges
related to the recently negotiated first $500,000 tranche of a planned
$2,000,000 long term debt financing and interest costs on the Berra term loan in
addition to accruing interest arising from the expiry of the grace period on the
Equity line of credit. For the quarter ended September 30, 2002 the interest
expense was related principally to the Berra note and a convertible debenture
obtained from an unrelated party.
The Company recorded a foreign exchange gain of $43,821 for the three
months ended September 30, 2003 as a result of the decline of the US dollar in
relation to the Canadian Dollar. For the quarter ended September 30, 2002, the
Company had no foreign exchange adjustment due to the relative stability of the
two currencies subsequent to the June quarter.
LOSS FROM CONTINUING OPERATIONS. As a result of the items specified above,
the Company incurred a loss from continuing operations of $754,644 or $0.00 per
share versus a loss of $3,194,608 or $0.03 per share for the third quarter of
2002.
NET INCOME (LOSS)
DISCONTINUED OPERATIONS
For the three months ended September 30, 2003 there was no effect on
operations relating to the discontinued operations of Ignition Entertainment
Limited. For the three months ended September 30, 2003 the Company had a net
loss from the discontinued operations of Ignition Entertainment Limited of
$915,876 or $(0.01) per share.
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 since been cancelled in
conjunction with the sale of Ignition Entertainment Limited. 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 increase sufficiently to meet operating costs and the
costs of remaining a public Company.
As of September 30, 2003, our need for cash included satisfying $1,691,394
of current liabilities which consisted of accounts payable of $681,763, which
includes $72,851 owing to Danson Partners and which was satisfied by the
issuance of shares subsequent to the quarter end, and an amount of $226,824
recorded as owing to Orchestral, which is in dispute; $80,775 of accrued
liabilities; taxes payable of $187,527; other current liabilities of $2,683,
accrued interest of $58,110; the current portion of leases payable of $22,013;
amounts payable to related parties, consisting of management, of $97,637; and
notes payable of $542,886, which includes outstanding amounts to Berra, Cornell,
and SCI Health Group. As indicated in the liquidity section above, the Company
entered in to a $500,000 term loan in July 2003 which is the first tranche of a
planned $2,000,000 term debt offering. In the quarter ended September 30, 2003
this $500,000 tranche and the extended portion of leases payable of $8,603, were
7
the only components of long-term debt. 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 September 30, 2003 Mr. Kevin Birch converted
$39,068 of amounts due to him by the Company, into 1,562,700 shares of common
stock.
The Company's condensed consolidated financial statements have been
presented on the basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has a net loss of $937,033 and a negative cash flow
from operations of $1,722,712 for the nine months ended September 30, 2003 and
has a working capital deficit of $1,387,826 and a stockholders deficiency of
$773,956 at September 30, 2003. Our ability to continue as a going concern is
dependent on our ability to raise additional bank or non-bank term and operating
credit, convertible debt, equity capital or to 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. Subsequent to the quarter end the Company began
negotiations to purchase an equity interest in another Company to the extent of
$10,000,000. As part of the capital financing being negotiated with regard to
that investment, the Company plans to raise additional funds which will assist
the Company's working capital position.
At September 30, 2003 the Company had cash on hand of $65,066 versus
$63,162 at the commencement of the year. In addition, as at the quarter end,
certain shareholders have also supported the Company to the extent of $97,637
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 current liabilities and they have no fixed
terms for repayment. Subsequent to the end of the quarter certain shareholders
have assisted the Company to the extent of an additional $150,000
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, 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. 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. To date,
IVP Technology has repaid $788,089 of this note. Since the note is now past due,
interest has been accrued, in accordance with the terms of the agreement, in an
aggregate amount of $34,707 to the end of the current quarter.
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 a Form SB-2 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 September 2003, the Company has received $1,000,000 under the Equity Line
of Credit and in exchange for 25,508,380 shares of common stock. The Company
received an additional advance of $125,000, in exchange for 3,491,620 shares.
Except for the Equity Line of Credit, the Company has no commitments for equity
capital although management 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 $1,691,394. As of September 30, 2003, the
Company had a working capital deficiency of $1,387,826. 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 equity line of credit. Draw
8
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 increasing our net loss in 2003 and 2004.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following chart sets forth IVP's contractual obligations and commercial
commitments as of September 30, 2003 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 $1,028,858 $1,028,858 $ -- $ -- $ --
Leases Payable 30,616 22,013 8,603 -- --
Due to Related Parties 97,637 97,637 -- -- --
Notes Payable 1,042,886 542,886 375,000 125,000 --
--------- ------- ------- ------- -------
Total Contractual Cash Obligations $2,199,997 $1,691,394 $ 383,603 $ 125,000 $ --
========== ========== ========= ========= =========
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 $0.04 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.
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash on the condensed consolidated balance sheet of IVP Technology
Corporation increased from $63,162 at December 2002 to $65,066 on September 30,
2003.
9
NET CASH USED IN OPERATING ACTIVITIES
Net cash used in operating activities was $1,722,712 for the nine months
ended September 30, 2003 and $1,044,490 for the nine months ended September 30,
2002. Cash used in operating activities consisted primarily of a net loss of
$937,033, a gain on sale of Ignition Entertainment of $2,396,009, an increase in
accounts receivable of $112,679, an increase in prepaid expenses of $150,669 and
a decrease in accrued liabilities of $172,929. These items were partially offset
by non-cash charges of amortization of $564,198, stock based compensation and
fees of $768,301, a decrease in inventory of $304,783 and an increase in taxes
payable of $203,370.
NET CASH USED IN INVESTING ACTIVITIES
Net cash used in investing activities of $104,089 related primarily to the
purchase of software rights.
NET CASH PROVIDED BY FINANCING ACTIVITIES
During the nine months ended September 30, 2003, the Company raised net
cash of $1,890,052 from financing activities. These consisted primarily of
proceeds from notes payable of $1,674,146, related parties of $299,878, factors
of $116,503 and the issuance of stock of $898,088. These items were partially
offset by the repayment of $1,073,089 of notes payable.
CRITICAL ACCOUNTING POLICIES
ORGANIZATION
The consolidated financial statements of IVP Technology Corporation d.b.a.
ActiveCore Technologies (formally Mountain Chef, Inc.) and consolidated
subsidiaries (the "Company") include the accounts of the parent, ActiveCore
Corporation, incorporated in the State of Nevada on February 11, 1994, and its
subsidiaries: Springboard Technology Solutions, Inc. d.b.a. ActiveCore
Technologies ("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.
REVENUE RECOGNITION
RISK AND UNCERTAINTIES
A portion 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
software or from the sale of software licensed from third-party developers.
Publishing revenue amounted to $6,995 and NIL for the nine months ended
September 30, 2003 and 2002, respectively. Distribution revenue is derived from
the sale of third-party interactive software titles, accessories and hardware.
10
Distribution revenue amounted to $109,761 and $200,000 for the nine months ended
September 30, 2003 and 2002, respectively.
Revenues from Services and Commercial Software sold under licenses were
$239,020 and $57,070 in the nine months ended September 30, 2003 and 2002,
respectively. The Company recognizes revenue in accordance with Statement of
Position ("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9
"Modification of SOP 97-2 Software Revenue Recognition with respect to Certain
Transactions." SOP 97-2 provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions. SOP 98-9
deals with the determination of vendor specific objective evidence ("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 30 day terms and to a limited extent with certain customers,
60 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.
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 Emerging Issues Task Force ("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 April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards ("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, FASB issued 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
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.
11
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.
In January 2003, The FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities", an interpretation of Accounting Research Bulletin
("ARB") No. 51, "Consolidated Financial Statements". Interpretation No. 46
addresses consolidation by business enterprises of variable interest entities,
which have one or both of the following characteristics: (i) the equity
investment at risk is not sufficient to permit the entity to finance its
activities without additional subordinated support from other parties, which is
provided through other interest that will absorb some or all of the expected
losses of the entity; (ii) the equity investors lack one or more of the
following essential characteristics of a controlling financial interest: the
direct or indirect ability to make decisions about the entities activities
through voting rights or similar rights; or the obligation to absorb the
expected losses of the entity if they occur, which makes it possible for the
entity to finance its activities; the right to receive the expected residual
returns of the entity if they occur, which is the compensation for the risk of
absorbing the expected losses.
Interpretation No. 46 also requires expanded disclosures by the primary
beneficiary (as defined) of a variable interest entity and by an enterprise that
holds a significant variable interest in a variable interest entity but is not
the primary beneficiary. Interpretation No. 46 applies immediately to variable
interest entities created after January 31, 2003, and to variable interest
entities in which an enterprise obtains an interest after that date. It applies
in the first fiscal year or interim period beginning after June 15, 2003, to
variable interest entities in which an enterprise holds a variable interest that
it acquired before February 1, 2003. Interpretation No. 46 may be applied
prospectively with a cumulative-effect adjustment as of the date on which it is
first applied or by restating previously issued financial statements for one or
more years with a cumulative-effect adjustment as of the beginning of the first
year restated.
In June 2003, the FASB issued an Exposure Draft for proposed SFAS entitled
"Qualifying Special Purpose Entities ("QSPE") and Isolation of transferred
Assets", an amendment of SFAS No. 140 ("The Exposure Draft"). The Exposure Draft
is a proposal that is subject to change and as such, is not yet authoritative.
If the proposal is enacted in its current form, it will amend and clarify SFAS
140. The Exposure Draft would prohibit an entity from being a QSPE if it enters
into an agreement that obliged a transferor of financial assets, its affiliates,
or its agents to deliver additional cash or other assets to fulfill the
special-purposes entity's obligation to beneficial interest holders.
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.
ITEM 3. CONTROLS AND PROCEDURES
Based on their evaluation of the effectiveness of our disclosure controls
and procedures as of the period covered by this report, our Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures are effective for gathering, analyzing and disclosing the
information we are required to disclose in our reports filed under the
Securities and Exchange Act of 1934. There have not been significant changes in
our controls or in other factors that could significantly affect these controls
subsequent to the evaluation date.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
The Company made the following issuances of unregistered securities since
January 1, 2003.
On October 14, 2003 the Company issued 3,000,000 shares to Danson Partners
LLC in respect of consulting fees during the period March 1, 2002 to February 28
2003. The shares have been valued as at the date of issue.
On September 30, 2003 the Company issued 10,200,000 shares with respect to
an investment transaction for financing that has not yet closed. If the
financing does not close the shares will be rescinded.
On September 30, 2003 the Company entered into a contract with an
independent advisor to consult with the Company with regard to financing
activities and general corporate development. The Company issued 1,000,000
shares. The shares were valued at $.029 per share, representing the closing bid
price on the date of the board resolution. As of September 30, 2003, the Company
has deferred $26,583 included in deferred consulting expense on the accompanying
condensed consolidated balance sheet.
On September 30, 2003, the Company issued 6,472,942 shares in connection
with the acquisition of the data integration assets of SCI Healthcare Group. The
shares were valued at $.0309, representing the closing price on September 18th,
being the contracted determination date.
On September 30, 2003, the Company issued 300,000 shares to complete the
purchase of the XML Connector source code from Karora Technologies Inc. The
shares were valued at $.028 per share, representing the closing bid price on the
date of the board resolution.
On September 30, 2003, the Company issued 150,000 shares as bonuses to
employees for successful completion of certain technology. The shares were
valued at $.028 per share, representing the closing bid price on the date of the
board resolution.
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 $0.025 per share, representing the closing
bid price on the date of the board resolution.
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.
13
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 $.025 per
share, representing the closing market value on the date of grant. As of
September 30, 2003, the Company has deferred $75,000 included in deferred
consulting expense on the accompanying condensed consolidated balance sheet.
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
is to 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 $.025 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. As of September 30, 2003, the Company has deferred $3,600
included in deferred consulting expense on the accompanying condensed
consolidated balance sheet.
In July 2003, the Company entered into employment agreements with two
contractors related to cell phone game development, and health care services
respectively. 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 $.025 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 $.025 per share, representing the closing market
value on the date of grant.
During the nine month period ended September 30, 2003, the Company issued
25,508,380 shares of common stock to the Investment Bankers for cash of $788,089
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 September 30, 2003, the remaining balance of the note
payable to the Investment Banker totaled $226,911.
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
the Chief Executive Officer 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 September
30, 2003, the Company has deferred $61,476 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 September 30,
2003, the Company has deferred $8,334 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. As of September 30,
2003, the Company has deferred $83,333 included in deferred consulting expense
on the accompanying condensed consolidated balance sheet.
14
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 nine months ended September 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 August
2002 to August 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.
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
In February 2003, the Company received $970,000 proceeds from the issuance
of a $1 million promissory note net of a 3% cash fee of $30,000, The promissory
note was non-interest bearing and was 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 an equity line of credit agreement or
with cash received from operations or other financing sources. The note was not
fully paid when due, and the outstanding principal balance owed at September 30,
2003 of $226,911 is payable in full together with interest. The note has been
accruing interest at the default interest rate of 24% per annum or the highest
rate permitted by law, if lower since the due date. The Company has accrued
$34,707 for interest at September 30, 2003.
The Company has not received a waiver of default from the note holder nor
has the note holder demanded payment on the note.
15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not applicable.
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-K filed on April 19,
Corporation 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 Incorporated by reference to Exhibit 3.3 to
IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
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
16
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
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
17
10.25 Consulting Agreement dated September 1, 2000 between Incorporated by reference to Exhibit 13.1 to
the Registrant and Barry Gross d/b/a Gross Capital IVP Technology's Form 10-KSB filed on July 5,
Associates 2001
10.26 Consulting and Advisory Agreement dated September 25, Incorporated by reference to Exhibit 13.2 to
2000 between the Registrant and Koplan Consulting IVP Technology's Form 10-KSB filed on July 5,
Corporation 2001
10.27 Warrant Agreement dated April 3, 2002 between the Incorporated by reference to Exhibit 10.27 to
Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on
April 15, 2002
10.28 Equity Line of Credit Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.28 to
between the Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on
April 15, 2002
10.29 Registration Rights Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.29 to
between the Registrant and Cornell Capital Partners, 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
18
10.39 Term Sheet between the Registrant and Cornell Capital Incorporated by reference to Exhibit 10.39 to
Partners, LP Increasing the Commitment under the IVP Technology's Form SB-2 filed on May 15,
Equity Line of Credit to $10 million 2002
10.40 Consulting Agreement dated February 12, 2002 between Incorporated by reference to Exhibit 10.40 to
the Registrant and Danson Partners LLC IVP Technology's Form SB-2 filed on May 15,
2002
10.41 Escrow Agreement dated as of May 15, 2002 among the Incorporated by reference to Exhibit 10.41 to
Registrant, Brian MacDonald, Peter Hamilton, Kevin IVP Technology's Form SB-2 filed on May 15,
Birch, Sherry Bullock, and Gino Villella 2002
10.42 Termination letter dated June 13, 2002 between the Incorporated by reference to Exhibit 10.42 to
Registrant and Orchestral Corporation IVP Technology's Form 10-QSB filed on August
19, 2002
10.43 Acquisition Agreement dated as of May 28, 2002 Incorporated by reference to Exhibit 10.43 to
regarding the purchase of Ignition Entertainment IVP Technology's Form 10-QSB filed on August
19, 2002
10.44 Consulting Agreement dated as of June 1, 2002 Incorporated by reference to Exhibit 10.44 to
Ignition Entertainment Limited and Montpelier Limited IVP Technology's Form 10-QSB filed on August
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)
19
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)
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 Ignition Agreement Incorporated by reference to Exhibit 3.3 to
IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
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.
20
10.63 Letter of Intent dated as of July 10, 2003 between Incorporated by reference to Exhibit 3.3 to
the Company and Karora IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.64 Promissory Note dated as of July 30, 2003 Incorporated by reference to Exhibit 3.3 to
IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.65 Warrant Certificate dated as of July 30, 2003 Incorporated by reference to Exhibit 3.3 to
IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.66 Conversion Privilege of Lender Incorporated by reference to Exhibit 3.3 to
IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.67 General Security Agreement dated as of July 30, 2003 Incorporated by reference to Exhibit 3.3 to
IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.68 Guarantee Agreement dated as of July 30, 2003 Incorporated by reference to Exhibit 3.3 to
IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.69 Consulting Agreement dated as of June 3, 2003 between Incorporated by reference to Exhibit 3.3 to
the Company and Rodger J. Cowan IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.70 Agreement dated as of May 1, 2003 between the Company Incorporated by reference to Exhibit 3.3 to
and Hawk Associates, Inc. IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.71 Letter of Intent dated as of June 16, 2003 between Incorporated by reference to Exhibit 3.3 to
the Company and ePocket Inc. IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.72 Consulting Agreement dated as of July 14, 2003 Incorporated by reference to Exhibit 3.3 to
between the Company and Gerald Campbell IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.73 Letter of Intent dated as of June 16, 2003 between Incorporated by reference to Exhibit 3.3 to
the Company and SCI Healthcare Group, Inc. IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
21
10.74 Merchandising License Agreement dated as of July 21, Incorporated by reference to Exhibit 3.3 to
2003 between the Company and Zorro Productions, Inc. IVP Technology's Form 10-QSB for the quarter
ended June 30, 2003 filed on August 27, 2003
10.75 Letter of Intent dated November 10, 2003 Provided herewith
by and between Activecore Technologies,
Inc. and Genetic Diagnostics
10.76 Letter Agreement dated November 12, 2003 Provided herewith
by and between Panfin Equity Corp. and
Activecore Technologies, Inc.
31.1 Certification of CEO re: 302 Provided herewith
31.2 Certification of CFO re: 302 Provided herewith
32.1 Certification of CEO re: 906 Provided herewith
32.2 Certification of CFO re: 906 Provided herewith
(b) REPORTS ON FORM 8-K.
On August 6, 2003, IVP Technology d/b/a ActiveCore Technologies announced
that it signed a letter of intent with E Communities UK Limited for placement of
mobile games and ring tones sales channel operated by ActiveCore on 124
community portals in the United Kingdom operated by Touch Plc.
On September 19, 2003, IVP Technology doing business as ActiveCore
Technologies acquired the Integration Services Division of SCI Healthcare for a
combination of shares of common stock and cash.
22
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 November 17, 2003
- ----------------------------------------------
By: Brian MacDonald
President and Chief Executive Officer
23
EXHIBIT 31.1
OFFICER'S CERTIFICATE
PURSUANT TO SECTION 302
I, Brian MacDonald, certify that:
1. I have reviewed this form 10-QSB for the nine months September 30, 2003
of IVP Technology Corporation;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the small
business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Omitted;
(c) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: November 17, 2003
By: /s/ Brian MacDonald
-------------------------------------
Brian MacDonald
President and Chief Executive Officer
The introductory paragraph of Section 4 of this certification that refers to the
certifying officers' responsibility for establishing and maintaining internal
control over financial reporting for the Company, as well as paragraph 4(b),
have been omitted in accordance with Release No. 33-8238 (June 5, 2003) because
the compliance period has been extended for small business issuers until the
first fiscal year ending on or after April 15, 2005.
EXHIBIT 31.2 - 1
EXHIBIT 31.2
OFFICER'S CERTIFICATE
PURSUANT TO SECTION 302
I, Graham Lowman, certify that:
1. I have reviewed this form 10-QSB for the nine months September 30, 2003
of IVP Technology Corporation;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the small
business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Omitted;
(c) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting. Date: November 17, 2003 By: /s/
Graham Lowman Graham Lowman Chief Financial Officer
Date: November 17, 2003
By: /s/ Graham Lowman
-------------------------------
Graham Lowman
Chief Financial Officer
The introductory paragraph of Section 4 of this certification that refers to the
certifying officers' responsibility for establishing and maintaining internal
control over financial reporting for the Company, as well as paragraph 4(b),
have been omitted in accordance with Release No. 33-8238 (June 5, 2003) because
the compliance period has been extended for small business issuers until the
first fiscal year ending on or after April 15, 2005.
EXHIBIT 31.2 - 1
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of IVP Technology Corporation (the
"Company") on Form 10-QSB for the period ended September 30, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
Date: November 17, 2003 By: /s/ Brian MacDonald
------------------------------------
Brian MacDonald,
President and Chief Executive Officer
A signed original of this written statement required by Section 906, or other
document authentications, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to Celerity Systems, Inc.
and will be retained by Celerity Systems, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.
EXHIBIT 31.2 - 2
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of IVP Technology Corporation (the
"Company") on Form 10-QSB for the period ended September 30, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
Date: November 17, 2003 By: /s/ Graham Lowman
---------------------------------
Graham Lowman,
Chief Financial Officer
A signed original of this written statement required by Section 906, or other
document authentications, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to Celerity Systems, Inc.
and will be retained by Celerity Systems, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.
EXHIBIT 31.2 - 3