UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, DC 20549
FOR 10-QSB
[x] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2001
-------------
[ ] Transition Report pursuant to 13 or 15 (d) of the Securities Exchange Act
of 1934
For the transition period from _______ to _______
Commission File Number 0-28607
Innovative Holdings & Technologies, Inc.
Colorado 74-2929034
- ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
300 South Orange Avenue
Suite 1500
Orlando, FL 32801
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (407-244-3756)
--------------
Indicated by a check mark, whether the issuers (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such period the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 16, 2001
- ------------------------------ ---------------------------------
Common Stock, $.0001 par value 26,405,450
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements 3
Independent Accountants' Review Report 3
Condensed Balance Sheets - June 30,
2001 and December 31, 2000 4
Condensed Statements of Operations -
three months ended June 30, 2001 and 2000,
and six months ended June 30, 2001 and 2000 5
Condensed Statements of Cash Flows -
six months ended June 30, 2001 and 2000 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis
and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 13
2
PART 1
Item 1. Financial Statements
DIROCCO & DOMBROW, P.A.
3601 W. COMMERCIAL BLVD, SUITE #39
FT. LAUDERDALE, FL 33309
(954) 731-8181
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
------------------------------------------------------------
Board of Directors
Innovative Holdings & Technologies, Inc. and Subsidiaries
Orlando, Florida
We have reviewed the accompanying condensed consolidated balance sheets of
Innovative Holdings & Technologies, Inc. and Subsidiaries as of June 30, 2001
and the related condensed consolidated statements of operations for the three
and six months ended June 30, 2001 and 2000, and statements of cash flows for
the six months ended June 30, 2001, included in the accompanying Securities and
Exchange Commission Form 10-QSB for the period ended June 30, 2001. These
condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modification that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
4 to the condensed consolidated financial statements, the Company's significant
operating losses raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters also are described in
Note 4. The condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 2000 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein). In our report dated March 2, 2001,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheet as of
December 31, 2000, is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
/s/ DiRocco & Dombrow, P.A.
August 16, 2001
Fort Lauderdale, Florida
3
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2001 2000
----------- -----------
(Unaudited) (Audited)
Current assets
Cash $ 514 $ 440
Prepaid expenses 25,000 28,953
Due from affiliate 69,800 59,800
----------- -----------
Total current assets 95,314 89,193
Investment-US Tech Materials Corp., Inc. 200 200
Property and equipment 16,291 18,567
Other assets 3,473 3,473
----------- -----------
Total assets $ 115,278 $ 111,433
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued
expenses $ 35,431 $ 52,212
Withholding taxes payable 168,690 171,816
Notes payable 25,000 25,000
Due to affiliate 97,418 126,218
Due to stockholders 253,184 155,287
----------- -----------
Total current liabilities 579,723 530,533
----------- -----------
Stockholders' equity (deficit)
Preferred stock, $.001 par value,
50,000,000 shares authorized,
no shares issued and
outstanding, respectively -- --
Common stock, $.0001 par value,
450,000,000 shares authorized,
26,374,884 issued and outstanding,
respectively 2,638 2,638
Additional paid-in capital 3,162,023 3,162,023
Stock subscriptions receivable (284,000) (284,000)
Deficit (3,345,106) (3,299,761)
----------- -----------
Total stockholders' equity (deficit) (464,445) (419,100)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 115,278 $ 111,433
=========== ===========
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
4
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Expenses
General and administrative $ 20,627 $ 64,747 $ 43,845 $ 174,997
Interest expense 750 5,883 1,500 6,641
------------ ------------ ------------ ------------
Total expenses 21,377 70,630 45,345 181,638
------------ ------------ ------------ ------------
Operating loss (21,377) (70,630) (45,345) (181,638)
Other Income -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (21,377) $ (70,630) $ (45,345) $ (181,638)
============ ============ ============ ============
Basic loss per share $ (0.001) $ (0.003) $ (0.002) $ (0.008)
============ ============ ============ ============
Weighted Average Common
Shares 26,374,884 23,960,049 26,374,884 23,542,466
============ ============ ============ ============
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
5
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2001 2000
---------- ----------
Cash flows from operating activities:
Net loss $ (45,345) $ (181,638)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation 2,276 3,068
(Increase) decrease in:
Prepaid expenses 3,953 3,681
Other assets -- (1,668)
Increase (decrease) in:
Accounts payable and accrued expenses (16,781) (6,717)
Withholding taxes payable (3,126) 553
---------- ----------
Net cash used by operating activities (59,023) (182,271)
---------- ----------
Cash flows from financing activities:
Proceeds from notes payable -- 100,000
Proceeds from affiliate (38,800) 84,352
Proceeds from stockholder 97,897 --
---------- ----------
Net cash provided by financing activities 59,097 184,352
---------- ----------
Increase in cash 74 1,631
Cash at beginning of period 440 2,011
---------- ----------
Cash at end of period $ 514 $ 3,642
========== ==========
Supplemental Inforamtion
Cash paid for:
Interest $ -- $ --
========== ==========
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
6
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Interim Information
In the opinion of the management of Innovative Holdings & Technologies, Inc. and
Subsidiaries, Inc. (the Company), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of June 30, 2001, and the
results of its operations and cash flows for the six months ended June 30, 2001
and 2000. Interim results are not necessarily indicative of results for a full
year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-QSB, and do not contain certain information included in the
Company's audited consolidated financial statements and notes for the year ended
December 31, 2000.
2. Financial Statements
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
balances have been eliminated.
3. Going Concern
As shown in the accompanying financial statements, the Company incurred net
losses of $45,345 for the six months ended June 30, 2001. The Company's current
liabilities exceeded its current assets by $484,409 at June 30, 2001. The
ability of the Company to continue as a going concern is dependent on the
development and marketing of products to be offered by its subsidiaries. The
Company will offer additional shares of its common stock to raise capital and
obtain financing on an as needed basis.
4. Stock Options
On March 10, 1998, the Company entered into a stock option agreement in which
the Company grants the option to shareholders and consultants to purchase up to
21,000,000 shares of common stock for an exercise price of $0.05 per share at
any time through March 9, 2003.
The following is a summary of stock option plan activity for the six months
ended June 30, 2001:
Number of options outstanding on June 30, 2001 17,000,000
===========
Weighted average exercise price per share
outstanding and exercisable $ 0.05
===========
Weighted average remaining contractual life of
options outstanding and exercisable 1.75
===========
No options were forfeited or expired in 2001.
7
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Stock Options, (Continued)
SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) was issued
during 1995 and is effective for fiscal years ending after December 15, 1996.
This pronouncement established financial accounting and reporting standards for
stock-based employee compensation plans. It encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock option
and other equity instruments to employees based on new fair accounting rules.
Companies that choose not to adopt the new fair value accounting rules are
required to disclose net income and earning per share under the new method on a
pro forma basis. The Company accounts for its options and warrants according to
APB No. 25 and follows the disclosure provision of SFAS 123. Accordingly, if
options or warrants are granted to employees or others for services and other
consideration with an exercise price below the fair market value on the date of
the grant, the difference between the exercise price and the fair market value
is charged to operations. No options were granted in the year end 2000 and 1999.
5. Contingencies
The Securities and Exchange Commission has commenced an investigation of the
Company pursuant to a Formal Order. This investigation focuses on whether the
Company and others misrepresented material facts or omitted to disclose material
facts in press releases and reports filed with the Commission, concerning, among
other things, the Company's assets, operations, financial condition and
anticipated revenue. It cannot be predicted, at this time, whether an
enforcement proceeding will be recommended by the staff to the Commission, what
the nature of such enforcement proceeding would be, the type of sanctions sought
or what the likelihood would be of reaching a settlement. Accordingly, no
provision for any liability that may result upon resolution of this
investigation has been recorded in the accompanying financial statement.
8
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Condensed Consolidated Financial Data" and the Company's Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in this
document.
Overview
- --------
Since its inception in 1987, the Company's purpose is to conduct offerings of
its securities to raise capital to acquire businesses in various industries. For
the period from January 9, 1987 (inception) to September 30, 1990, the Company
incurred a total net loss of $1,840,993. During this period, the Company devoted
substantially all of its efforts to establish and organize a television
cablecast facility. However, by the end of 1990 the operations of the Company
ceased.
From December 1990 through October 1997, the Company did not operate any
businesses and was inactive.
In November 1997, the Company changed its name to Innovative Holdings &
Technologies, Inc. The Company considers its role to be an incubator of high
technology companies and began its search for suitable business acquisitions. In
the second quarter of 1998, the Company signed an agreement to acquire BioCam
Company, Inc. (BioCam), a developer of telemetry technology in the amount of
$1,000,000. This was paid for by issuance of convertible preferred stock and
restricted common stock. The Company began supporting the operations of BioCam
financially and funded approximately $350,000, in 1998. By the end of 1998, the
principals of BioCam rescinded on their agreement with the Company and the
relationship was terminated.
On January 8, 1999, the Company incorporated Xtreme Telemetry Systems, Inc.
(Xtreme) and is its sole stockholder. Xtreme began the development of real time
telemetry, to be marketed initially in the sports and entertainment industries.
The telemetry system is designed to monitor performance and transmit the data by
broadcast or over the internet. In September, 1999, the Company secured the
services of specialists in computer software development. The alpha-beta testing
of the software commenced in the fourth quarter, 1999. The products under
development have not been completed.
On July 23, 2001, the Company entered into a letter of intent to increase its
interests to 51% in US Tech Materials Corporation (USTM). USTM intends to
develop manufacturing and marketing for Poly Ether Amid Resin, also know as
PEAR. The PEAR resins were originally developed by Ashland, Inc., who entered
into a license agreement with USTM/IHTL in July 2000. The Company has endeavored
to seek out financing and personnel to assist USTM's infrastructure, sales, and
marketing systems and strategic relationships in order to bring PEAR to the
marketplace. On June 30, 2001, the Company did not meet certain terms of the
agreement. This deadline passed and the agreement terminated. An amended
agreement was made effective as of July, 2001, reinstating USTM/IHTL's license
to manufacture and market PEAR resins subject to certain payment and performance
provisions.
9
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, (Continued)
Overview, Continued
Xtreme and USTM are in their development stage, and there are no guarantees that
either company will successfully raise sufficient capital, attract management
and other personnel, and be able to develop manufacturing facilities, materials
sources, R&D capabilities, marketing channels and delivery methods.
Results of operations
- ---------------------
The following table sets forth, for the periods indicated, certain items from
the Company's Consolidated Statements of Operations, expressed as a percentage
of total expenses.
The three months ended June 30,
-------------------------------
2001 2000
------------- -------------
Revenues 0.0% 0.0%
------------- -------------
Expenses:
General and Administrative 96.5% 91.7%
Interest Expense 3.5% 8.3%
------------- -------------
Total Expenses 100% 100%
------------- -------------
Net Loss 100% 100%
============= =============
The six months ended June 30,
-------------------------------
2001 2000
------------- -------------
Revenues 0.0% 0.0%
------------- -------------
Expenses:
General and Administrative 96.7% 96.3%
Interest Expense 3.3% 3.7%
------------- -------------
Total Expenses 100% 100%
------------- -------------
Net Loss 100% 100%
============= =============
10
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, (Continued)
Results of Operations, continued
- --------------------------------
Revenues
- --------
The Company had no revenues for the three and six months ended June 30, 2001 and
2000.
General and Administrative
- --------------------------
General and administrative expenses have decreased to $20,627 in 2001 from
$64,747 for the three months ended June 30, 2001, and decrease to $43,845 in
2001 from $174,997 in 2000 for the six months ended June 30, 2001. The decrease
in these expenses resulted from consolidation of operating activities and stream
lining of expenditures.
Interest Expense
- ----------------
Interest expense is due from personal loans made to the company. The amounts
from 2000 to 2001 have not varied considerably.
Liquidity and Capital Resources
- -------------------------------
The Company requires capital principally for the financing of operations and the
development and marketing of its subsidiary's products. To date, the company has
financed its operations primarily through the sale its of equity securities and
by obtaining financing.
The Company had negative working capital as of June 30, 2001 of $484,409
compared to $441,340 as of December 31, 2000.
As stated in the Company's Consolidated Financial Statements, the Company's
ability to continue as a going concern is dependent upon issuance of stock and
obtaining debt financing. There can be no assurance the additional financing
will be attained or that the operations will be profitable. Such inability would
have a material adverse effect on the Company's business, operating results and
financial condition.
The Company currently has no specific commitments with regard to capital
expenditures with the exceptions of purchasing computer equipment and sensors.
The Company's future capital requirements will, depend on its ability to acquire
complementary business ventures, products or technologies.
The Company believes that its current cash balances will not provide the
liquidity necessary to satisfy the Company's working capital needs.
Inflation
- ---------
Inflation has not had a significant impact on the Company since its inception
nor is it expected to have a significant impact in the foreseeable future.
11
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, (Continued)
Recent Accounting Pronouncements
- --------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.133
(SFAS133) "Accounting for Derivative Instruments and Hedging Activities", which
was amended by SFAS No. 137, issued in June 1999. SFAS 133 established standards
for accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. SFAS 133, as
amended, is effective for fiscal years beginning after June 15, 2000. The
Company does not believe that the adoption of SFAS 133 will have a material
effect on the financial statements.
In March 2000, FASB Interpretation, No. 44, "Accounting for Certain Transactions
Involving Stock Compensation-An Interpretation of APB Opinion No. 25," (FIN 44)
was issued. FIN 44 clarifies the application of APB No. 25 for certain
stock-based compensation issues. FIN 44 clarifies the definition of employee for
purposes of applying APB No. 25, the criteria for determining whether a plan
qualifies as a non-compensatory plan, the accounting consequences of various
modifications to the terms of a previously fixed option or award, and the
accounting for an exchange of share compensation awards in a business
combination, among other matters. FIN 44 was effective July 1, 2000, but certain
conclusions in this interpretation cover specific events that occurred after
either December 15, 1998 or January 12, 2000. The implementation of FIN 44 did
not have a significant impact on our financial position or results of
operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 140).
SFAS 140 replaces FASB Statement No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities" and provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001 and is
effective for recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years ending
after December 31, 2000. The Company does not believe that the adoption of SFAS
140 will have a material effect on the financial statements.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No.101, "Revenue Recognition in Financial Statements."
SAB 101 provides the SEC Staff's view's in applying generally accepted
accounting principles to selected revenue issues. The Company does not believe
that the adoption of SAB 101 will have a material effect on the financial
statements.
12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NONE
(b) Reports on Form 8-K
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
---------------------------------------
Innovative Holdings & Technologies, Inc.
Date: August 16, 2001 By /s/ Helmuth Wyzisk
--------------------------
Helmuth Wyzisk, President
13