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 September 30, 2001
------------------
[ ] Transition Report pursuant to 13 or 15 (d) of the Securities Exchange Act
of 1934
For the transition period from to
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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 issuer (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 September 30, 2001
- ------------------------------ ------------------------------------
Common Stock, $.0001 par value 28,405,450
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements 3
Independent Accountants' Review Report 3
Condensed Balance Sheets - September 30,
2001 and December 31, 2000 4
Condensed Statements of Operations -
three months ended September 30, 2001 and 2000,
and nine months ended September 30, 2001 and 2000 5
Condensed Statements of Cash Flows -
Nine months ended September 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 September 30,
2001 and the related condensed consolidated statements of operations for the
three and nine months ended September 30, 2001 and 2000, and the statements of
cash flows for the nine months ended September 30, 2001, included in the
accompanying Securities and Exchange Commission Form 10-QSB for the period ended
September 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
3 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 3. 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 condensed consolidated
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.
November 16, 2001
3
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2000 2000
----------- -----------
(Audited)
Current assets
Cash $ 1,946 $ 440
Prepaid expenses 25,000 28,953
Due from affiliate 69,800 59,800
----------- -----------
Total current assets 96,746 89,193
Investments 200 200
Property and equipment (net) 14,015 18,567
Other assets 3,473 3,473
----------- -----------
Total assets $ 114,434 $ 362,222
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued
expenses $ 49,043 $ 52,212
Withholding taxes payable 167,190 171,816
Due to stockholder 273,983 155,287
Notes payable -- 25,000
Due to affiliate 54,348 126,218
----------- -----------
Total current liabilities 544,564 530,533
----------- -----------
Stockholders' equity (deficit)
Preferred stock, $.001 par value, 50,000,000
shares authorized, no shares issued and
outstanding -- --
Common stock, $.0001 par value, 450,000,000
shares authorized, 28,405,450 and 27,124,884
issued and outstanding, respectively 2,841 2,638
Additional paid-in capital 3,261,820 3,162,023
Stock subscriptions receivable (284,000) (284,000)
Deficit (3,410,791) (3,299,761)
----------- -----------
Total stockholders' equity (deficit) (430,130) (419,100)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 114,434 $ 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 Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Expenses
General and administrative $ 65,537 $ 67,212 $ 109,382 $ 242,209
Interest expense 148 -- 1,648 6,641
------------ ------------ ------------ ------------
Total expenses 65,685 67,212 111,030 248,850
------------ ------------ ------------ ------------
Operating loss (65,685) (67,212) (111,030) (248,850)
Other Income -- -- -- 309
------------ ------------ ------------ ------------
Net loss $ (65,685) $ (67,212) $ (111,030) $ (248,541)
============ ============ ============ ============
Basic loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============ ============ ============ ============
Weighted Average Common Shares 27,565,817 17,834,051 26,854,203 23,536,194
============ ============ ============ ============
See accompanying summary of notes to unaudited condensed consolidated
financial statements.
5
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net loss $(111,030) $(248,541)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation 4,552 3,068
(Increase) decrease in:
Prepaid expenses 3,953 --
Note receivable -- (2,108)
Other receivable -- (2,657)
Other assets -- 790
Increase (decrease) in:
Accounts payable and accrued expenses (3,169) (1,665)
Withholding taxes payable (4,626) 553
--------- ---------
Net cash used by operating activities (110,320) (250,560)
--------- ---------
Cash flows from investing activities:
Purchase of license agreement -- (60,000)
--------- ---------
Net cash used by investing activities -- (60,000)
--------- ---------
Cash flows from financing activities:
Proceeds from notes payable -- 96,700
Repayments of notes payable (25,000) --
Advances from affiliate -- 211,849
Repayments of advances from affiliate (71,870) --
Advances to affiliate (10,000) --
Loan from shareholder 118,696 --
Proceeds from issuance of stock 100,000 --
--------- ---------
Net cash provided by financing activities 111,826 308,549
--------- ---------
Increase (decrease) in cash 1,506 (2,011)
Cash at beginning of period 440 2,011
--------- ---------
Cash at end of period $ 1,946 $ --
========= =========
Supplemental Information
Interest paid $ 898 $ --
========= =========
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 (the "Company"), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of September 30, 2001, and
the results of its operations and cash flows for the nine months ended September
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 $111,030 for the nine months ended September 30, 2001. The Company's
current liabilities exceeded its current assets by $447,818 at September 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 granted the option to stockholders 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 nine months
ended September 30, 2001:
Number of options outstanding on September 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 earnings 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 during the nine months ended September
30,2001 or for the year ended December 31, 2000.
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 statements.
6. Subsequent Events
In November 2001, the Company issued 1,000,000 shares of its common stock
through a private placement at $0.05 per share. Total proceeds from the
issuance were $50,000.
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 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 of 1999. The
products under development have not been completed. Product completion is
predicated by end use.
On July 23, 2001, the Company entered into a letter of intent to increase its
interest to 51% in US Tech Materials Corporation ("USTM"). USTM intends to
develop manufacturing and marketing for Poly Ether Amid Resin, also known 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 September 30,
------------------------------------
2001 2000
------------- -------------
Revenues 0.0% 0.0%
------------- -------------
Expenses:
General and Administrative 100.0% 100.0
Interest Expense 0.0% 0.0%
------------- -------------
Total Expenses 100.0% 100.0%
------------- -------------
Net Loss 100.0% 100.0%
============= =============
The nine months ended September 30,
2001 2000
------------- -------------
Revenues 0.0% 0.0%
------------- -------------
Expenses:
General and Administrative 98.5% 97.5%
Interest Expense 1.5% 2.6%
------------- -------------
Total Expenses 100.0% 100.1%
Other Income 0.0% 0.1%
------------- -------------
Net Loss 100.0% 100.0%
============= =============
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 nine months ended September 30,
2001 and 2000.
General and Administrative
- --------------------------
For the three months ended September 30, 2001 general and administrative
expenses have decreased to $65,537 in 2001 from $67,212 in 2000. For the nine
months ended September 30, 2001 general and administrative expenses decreased to
$109,382 in 2001 from $242,209 in 2000. The decrease in these expenses resulted
from the consolidation of operating activities and the streamlining of
expenditures.
Interest Expense
- ----------------
Interest expense is 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 September 30, 2001 of $447,818
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 that 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 exception of purchasing materials to manufacture PEAR
resins. The Company's future capital requirements will depend on its business
development activities.
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 ("SFAS 133") "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 adoption of SFAS 133 did not 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 adoption of SFAS 140 did not 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 views 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.
Date: November 16, 2001 By /s/ Helmut Wyzisk
-------------------------
Helmut Wyzisk, President
Innovative Holdings &
Technologies, Inc.
13