U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER the Securities Act of 1933
----------------------
Innovative Holdings and Technologies, Inc.
.............................................................
(Name of small business issuer in its charter)
Colorado 2821 74-2929034
...................... .................. .................
(State or jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification
Code Number)
300 S. Orange Ave., Suite 500, Orlando, FL 32801
.............................................................
(Address and telephone number of principal executive offices)
300 S. Orange Ave., Suite 500, Orlando, FL 32801
..............................................................
(Address of principal place of business or intended
principal place of business)
Helmut Wyzisk
300 S. Orange Ave., Suite 500, Orlando, FL 32801
..............................................................
(Name, address and telephone number of agent for service)
With Copies To :
Jonathan D. Leinwand, Esq.
2500 N. Federal Highway
Fort Lauderdale, FL 33305
954-563-1583
Fax 954-252-4265
Approximate date of commencement of proposed sale to the public From time to
time after the effective date of this Registration Statement in light of market
conditions and other factors.
- --------------------------------------------------------------------------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
i
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------
Title of each Proposed Proposed
class of Amount maximum Maximum Amount of
securities to be offering aggregate registration
to be registered price offering fee (1)
registered per unit price
- ---------------------------------------------------------------------
Common Shares 25,607,500 .07 $1,722,525 $431
(1)Estimated solely for purposes of calculating the registration fee pursuant to
Rule 457(c) of the Securities Act of 1933, as amended, on the basis of the
average high and low sales prices of the Registrant's Common Stock on the OTC
Bulletin Board on December 3, 2001, for IHTL
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
SUBJECT TO COMPLETION, DATED January ____, 2002
INFORMATION CONTAINED IN THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON FORM SB-2. THESE SECURITIES MAY NOT BE
SOLD NOR MAY AN OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICIATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
STATE.
INNOVATIVE HOLDINGS AND TECHNOLOGIES INC.
Our Common Shares trade on the OTC Bulletin Board under the symbol IHTL.
This prospectus relates to the resale from time to time by the selling
stockholders identified in this prospectus of up to:
25,607,500 shares of common stock
We will receive no proceeds from the sale of our common stock by the
selling stockholders identified in this prospectus.
You should read this prospectus and any supplement carefully before you
invest in Innovative Holdings and Technologies Inc. Please pay particular
attention to the "RISK FACTORS" APPEARING ON PAGE 3 OF THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January _______, 2002.
iii
The following table of contents has been designed to help you find important
information contained in this prospectus.
TABLE OF CONTENTS
SECTION PAGE
Prospectus Summary........................................................... 2
Risk Factors................................................................. 3
Use of Proceeds.............................................................. 5
Information on Selling Stockholders.......................................... 5
Plan of Distribution......................................................... 6
Legal Proceedings............................................................ 7
Directors, Executive Officers, Promoters and Control
Persons............................................................. 7
Security Ownership of Certain Beneficial Owners and
Management.......................................................... 7
Description of Securities.................................................... 8
Description of Business...................................................... 9
Management's Discussion and Analysis......................................... 13
Company Properties........................................................... 17
Certain Relationships and Related Transactions............................... 17
Market for Registrant's Common Equity and Related
Stockholder Matters................................................. 18
Executive Compensation....................................................... 19
Where to Find Additional Information......................................... 19
Recent Sales of Unregistered Securities...................................... 20
Index to Combined Financial Information......................................F-1
1
PROSPECTUS SUMMARY
This prospectus summary highlights selected information from this
prospectus and does not contain all of the information that may be important to
you. For a more complete description of this offering, you should read this
entire prospectus as well as the additional documents we refer to under the
heading "Where to Find Additional Information."
This prospectus contains statements about our future operations, which
involve risks and uncertainties. Our actual results could differ in important
ways from our anticipated future operations, due to many factors, including
"risk factors" beginning on page 3 and other factors. Because this is a summary
and the information is selective, it does not contain all information that may
be important to you. You should read carefully all information in the prospectus
including its detailed information and the financial statements and they're
explanatory notes before making an investment decision.
OUR COMPANY
Innovative Holdings & Technologies, Inc. was incorporated under the laws of
the State of Colorado on January 9, 1987. We have two subsidiaries: Xtreme
Telemetry Systems, Inc. (XTS), a Florida corporation and US Tech Materials
Corporation, a Nevada corporation.
The Company, through its XTS subsidiary, has developed the Xtreme Telemetry
System, a high technology data acquisition and delivery system for broadcast
television and Internet applications. The XTS System incorporates sensor
technologies to gather data from biological, mechanical and environmental
sources. This data then can be wirelessly transmitted from its source, by way of
XTS's proprietary software, to broadcast applications on TV or the Internet.
This broadcast information can then be graphically displayed on TV or the
Internet.
During 2000 there was contact with sports and broadcast entities for
the purpose of telemetry data acquisition and broadcast delivery. These
discussions have not resulted in contractual agreements and there are no
assurances that these efforts will be successful.
XTS has developed propriety software for which a US copyright has been
obtained.
US Tech Materials Corporation (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 and was revised and renewed in July 2001. We have
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. USTM, is still in its basic development stages, and there
are no guarantees that USTM 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 for
PEAR resins.
2
SUMMARY FINANCIAL AND OTHER DATA
We are providing the following summary financial information to aid you
in your analysis of the financial aspects of an investment in Innovative
Holdings. The table includes summary historical financial data for Innovative
Holdings for the years ended December 31, 2000 and 1999 and for the six months
ended June 30, 2001. We believe that this presentation is informative to you.
YEAR ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1999 2000 2001
- --------------------------------------------------------------------------------
ASSETS $ 43,326 $ 111,433 $ 114,434
- --------------------------------------------------------------------------------
LIABILITIES 257,827 530,533 544,564
- --------------------------------------------------------------------------------
REVENUES -- -- --
- --------------------------------------------------------------------------------
NET INCOME (LOSS) (612,732) (336,328) (65,685)
- --------------------------------------------------------------------------------
LOSS PER SHARE (.03) (.01) (.00)
- --------------------------------------------------------------------------------
THE OFFERING
On various dates in 1999, 2000 and 2001 we sold 4,000,000 shares of our
common stock pursuant to certain exemptions from registration under the
Securities Act of 1933. On March 10, 1998 we issued options exercisable to
purchase 21,000,000 shares of our common stock. We also issued 500,000 shares of
stock to a consultant in November 2001. We have agreed to register these shares
on this registration statement.
As of December 3, 2001, we had 29,905,450 shares of our common stock
outstanding. This offering is comprised of securities offered by selling
security holders only. Although we have agreed to pay all offering expenses, we
will not receive any proceeds from the sale of the securities. We anticipate
offering expenses of approximately $13,000.
RISK FACTORS
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
FINANCIAL RISKS
WE MAY NOT BE ABLE TO FORECAST OUR REVENUES ACCURATELY BECAUSE WE HAVE A LIMITED
OPERATING HISTORY.
As a result of our limited operating history, we do not have historical
financial data for a significant number of periods upon which to forecast
quarterly revenues and results of operations. We believe that period-to-period
comparisons of our operating results are not meaningful and should not be relied
upon as indicators of future performance. In addition, our operating results may
vary substantially. The actual effect of these factors on the price of our
3
stock, however, will be difficult to assess due to our limited operating
history. In one or more future quarters, our results of operations may fall
below the expectations of securities analysts and investors, and the trading
price of our common stock may decline.
WE EXPECT NET LOSSES IN THE FUTURE AND MAY NEVER ACHIEVE PROFITABILITY, WHICH
MAY CAUSE OUR STOCK PRICE TO FALL.
WE MAY NOT BE ABLE TO MEET OUR STRATEGIC BUSINESS OBJECTIVES UNLESS WE OBTAIN
ADDITIONAL FINANCING, WHICH MAY NOT BE AVAILABLE TO US ON FAVORABLE TERMS OR AT
ALL.
The Company will need to raise additional funds to meet operational needs and to
fund its strategic business objectives. We cannot assure you that additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable terms, our ability to
fund our expansion, take advantage of available opportunities, develop or
enhance services or products or otherwise respond to competitive pressures would
be significantly limited. If we raise additional funds by issuing equity or
convertible debt securities, the percentage ownership of our shareholders will
be reduced, and these securities may have rights, preferences or privileges
senior to those of our shareholders.
OUR STOCK IS TRADED ON THE OTC BULLETIN BOARD AND THE TRADABILITY IN OUR STOCK
MAY BE LIMITED UNDER THE PENNY STOCK REGULATIONS
Our common stock is traded on the OTC Bulletin Board under the symbol "IHTL".
The OTC bulletin Board is not a recognized national securities exchange. If the
trading price of our common stock is less than $5.00 per share, trading in our
common stock would also be subject to the requirements of Rule 15g-9 under the
Exchange Act. Under this rule, broker/dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements. The broker/dealer must make an
individualized written suitability determination for the purchaser and receive
the purchaser's written consent prior to the transaction.
SEC regulations also require additional disclosure in connection with any trades
involving a "penny stock", including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and its
associated risks. Such requirements may severely limit the liquidity of our
common stock in the secondary market because few brokers or dealers are likely
to undertake such compliance activities. Generally, the term "penny stock"
refers to a stock with a market price of less than $5.00 per share which is not
traded on a national securities exchange or quoted on NASDAQ. An active trading
market in our common stock may not be able to be sustained because of these
restrictions.
THERE IS A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK
4
Currently, there are a limited number of market makers for our common stock and
there can be no assurance that a market for our shares will continue with any
consistency.
WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON SHARES IN THE PAST AND DO NOT
ANTICIPATE PAYING DIVIDENDS IN THE FUTURE
We have not paid or declared any dividends on our common shares in the past.
Based upon our present financial status and our contemplated financial
requirements, we do not anticipate paying any dividends upon the shares offered
by this Prospectus for the foreseeable future. While we may declare dividends at
some time in the future, we cannot assure you of the timing of future dividends,
if any.
USE OF PROCEEDS
We are registering our warrants and shares of common stock offered by this
prospectus to satisfy our contractual obligation to the selling shareholders. We
will not receive any of the proceeds from the sale of our warrants or common
stock by the selling stockholders under this prospectus.
INFORMATION ON SELLING STOCKHOLDERS
The following table includes certain information with respect to the
selling stockholders as of September 30, 2001. The selling stockholders are not
affiliates of ours and have not had a material relationship with us during the
past three years except for Helmut Wyzisk, our president and Paul Zuromski, a
consultant to us.
Maximum number of
Beneficial Ownership Shares of Common ApproximaTe
of Common Stock as Stock offered for Percentage of Common
Name of December 3, 2001 Sale After Offering Stock to be Owned
- ------------------------- -------------------- -------------------- --------------------
Leonard Aloi 2,000,000 2,000,000 0%
- ------------------------- -------------------- -------------------- --------------------
Peter Brochu 72,500 72,500 0%
- ------------------------- -------------------- -------------------- --------------------
Roger Hursh 35,000 35,000 0%
- ------------------------- -------------------- -------------------- --------------------
Allan Kornblau 1,050,000 1,050,000 0%
- ------------------------- -------------------- -------------------- --------------------
William Parente 3,000,000 3,000,000 0%
- ------------------------- -------------------- -------------------- --------------------
Dorothy Schimel 450,000 450,000 0%
- ------------------------- -------------------- -------------------- --------------------
Helmut Wyzisk 21,392,500 10,000,000 24%
- ------------------------- -------------------- -------------------- --------------------
Paul Zuromski 8,000,000 8,000,000 0%
- ------------------------- -------------------- -------------------- --------------------
Lakewood Financial 500,000 500,000 0%
Services Inc.
- ------------------------- -------------------- -------------------- --------------------
Michelle Li 500,000 500,000 0%
- ------------------------- -------------------- -------------------- --------------------
5
(1) Mr. Parente holds 3,000,000 options to purchase 3,000,000 shares of common
stock of the company which are immediately exercisable.
(2) Mr. Wyzisk holds 10,000,000 options to purchase 10,000,000 shares of common
stock of the company which are immediately exercisable.
(3) Mr. Zuromski holds 8,000,000 options to purchase 8,000,000 shares of common
stock of the company which are immediately exercisable.
PLAN OF DISTRIBUTION
The registration statement of which this Prospectus forms a part has been filed
pursuant to various agreements with the Selling Securities Holders. To our
knowledge, as of the date hereof, no Selling Security Holder had entered into
any agreement, arrangement or understanding with any particular broker or market
maker with respect to the Shares offered hereby, nor do we know the identity of
the brokers or market makers which will participate in the offering.
The Shares covered hereby may be offered and sold from time to time by the
Selling Security Holders. The Selling Security Holders will act independently of
us in making decisions with respect to the timing, manner and size of each sale.
Such sale may be made on the OTC Bulletin Board or otherwise, at prices and on
terms then prevailing or at prices related to the then market price, or in
negotiated transactions. The Shares may be sold by one or more of the following
methods: (a) a block trade in which the broker-dealer engaged by the Selling
Security Holder will attempt to sell Shares as agent but may position and resell
a portion of the block as principal to facilitate the transaction; (b) purchases
by the broker-dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. To the best of our
knowledge, the Selling Security Holders have not, as of the date hereof, entered
into any arrangement with a broker or dealer for the sale of shares through a
block trade, special offering, or secondary distribution of a purchase by a
broker-dealer. In effecting sales, broker-dealers engaged by the Selling
Security Holders may arrange for other broker-dealers to participate.
Broker-dealers will receive commissions or discounts from the Selling Security
Holders in amounts to be negotiated.
In offering the Shares, the Selling Security Holders and any broker-dealers who
execute sales for the Selling Security Holders may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any profits realized by the Selling Security Holders and the
compensation of such broker-dealer may be deemed to be underwriting discounts
and commissions.
Rule 10b-6 under the Exchange Act prohibits participants in a distribution from
bidding for or purchasing for an account in which the participant has a
beneficial interest, any of the securities that are the subject of the
distribution. Rule 10b-7 under the Exchange Act governs bids and purchases made
to stabilize the price of a security in connection with a distribution of the
security.
6
This offering will terminate as to each Selling Security Holder on the date on
which all Shares offered hereby have been sold by the Selling Security Holders.
There can be no assurance that any of the Selling Security Holders will sell any
or all of the shares of Common Stock offered hereby.
LEGAL PROCEEDINGS
We are not a party to any pending or threatened legal proceedings.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the officers and directors of Innovative Holdings
and Technologies.
Name Position Age
- ------------- ------------------- ---
Helmut Wyzisk President, Director 44
Peter Brochu Director
John Palada Director
Helmut Wyzisk, President/Director. Mr. Wyzisk has served in his present
capacities since November 1997. From 1995 through 1997 he served as the
President of Celesta Corporation. Celesta offered financial and other business
services to its customers. Prior to 1995, Mr. Wyzisk was President of ELF
Investments, a company providing contract negotiation and acquisition services
to its customers.
Peter Brochu, Director. Mr. Brochu is President of M&G Enterprises LLC, which
owns, operates and manages restaurants, hotels and rental properties.
John Palada, Director. Has been a patient relations manager for Nu Ear
Electronics in San Diego for the past 9 years. He has a degree in Business
Administration from the University of Missouri in St. Louis.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Table 1 lists the persons who are known by us to be the owners of more than five
percent of our equity shares as of September 30, 2001.
7
(a) Beneficial Ownership of more than 5%.
Table 1.
(1) (2) (3) (4)
Title of Class Name and Address Amount and Percent of
Nature Class
- -------------- ---------------------- ---------- ----------
Common Helmut Wyzisk 21,392,500 55.7%
- -------------- ---------------------- ---------- ----------
Common Leonard Aloi 2,000,000 7.0%
- -------------- ---------------------- ---------- ----------
Common William Parente 3,000,000 9.6%
- -------------- ---------------------- ---------- ----------
Common Paul Zuromski 8,000,000 22%
- -------------- ---------------------- ---------- ----------
(1) Mr. Wyzisk holds 10,000,000 options to purchase 10,000,000 shares of common
stock of the company which are immediately exercisable. The options are
included in the total.
(2) Mr. Parente holds 3,000,000 options to purchase 3,000,000 shares of common
stock of the company which are immediately exercisable. The options are
included in the total.
(3) Mr. Zuromski holds 8,000,000 options to purchase 8,000,000 shares of common
stock of the company which are immediately exercisable. The options are
included in the total.
(b) Security Ownership of Management.
Table 2.
(1) (2) (3) (4)
Title of Class Name and Address Amount and Percent of
Nature Class
- -------------- ---------------------- ---------- ----------
*Common Helmut Wyzisk 21,392,500 55.7%
*Includes 10,000,000 options that are immediately excersiable for 10,000,000
shares of common stock.
DESCRIPTION OF SECURITIES
The Company is authorized to issue Five Hundred Million (500,000,000) shares of
capital stock of which Four Hundred Fifty Million (450,000,000) is common stock,
par value $0.0001 per share and Fifty Million (50,000,000) is preferred stock,
par value $0.001 per share. As of September 30, 2001, there were 28,405,450
shares of common stock issued and outstanding. On October 19, 1999, the company
was authorized to issue 250,000 shares of 1999 Series "A" convertible preferred
stock. The 1999 Series "A" preferred stock will entitle the holder to one vote
per share. The shares are convertible into common stock at the option of the
holder, one share of preferred stock for one share of common stock. The
conversion rate will not be affected by stock recapitalization actions.
8
DISCLOSURE ON COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Article 7 of Our Articles of Incorporation provide that the Company may
indemnify any director, officer, employee, fiduciary, or agent of the Company to
the full extent permitted by the Colorado Corporation Code as in effect at the
time of the conduct by the person.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted for directors, officers and controlling
persons of the Company, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and is therefore,
unenforceable.
DESCRIPTION OF BUSINESS
Innovative Holdings & Technologies, Inc. was incorporated under the laws of
the State of Colorado on January 7, 1987. We have two subsidiaries: Xtreme
Telemetry Systems, Inc. (XTS), a Florida corporation and US Tech Materials
Corporation, a Nevada corporation.
The Company, through its XTS subsidiary, has developed the Xtreme Telemetry
System, a high technology data acquisition and delivery system for broadcast
television and Internet applications. The XTS System incorporates sensor
technologies to gather data from biological, mechanical and environmental
sources. This data then can be wirelessly transmitted from its source, by way of
XTS's proprietary software, to broadcast applications on TV or the Internet.
This broadcast information can then be graphically displayed on TV or the
Internet.
During 2000 there was contact with sports and broadcast entities for the
purpose of telemetry data acquisition and broadcast delivery. These discussions
have not resulted in contractual agreements and there are no assurances that
these efforts will be successful.
XTS has developed propriety software for which a US copyright has been
granted.
US Tech Materials Corporation (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 and was revised and renewed in July 2001. We have
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. USTM, is still in its development stages, and there are no
guarantees that USTM 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 for
PEAR resins.
We intend to concentrate our efforts and resources on US Tech Materials and
the further development and marketing of the PEAR family of resins.
9
PEAR is a high-performance family of composite resins that combine
strength, low weight, chemical and temperature resistance. It doesn't burn
easily, and gives off less toxins when subjected to flames, and its easy to
formulate and process -- critical characteristics coveted by manufacturers.
While originally developed for strategic defense applications by Ashland, Inc.,
subsequent research showed that PEAR resins had many potential applications in a
variety of industries including aerospace, automotive, oil & gas
drilling/pipelines, electronic & electrical, transportation, sporting goods and
marine.
PEAR was a product of Ashland Chemical's late 1980's corporate research
initiative to develop new and innovative products. Ashland spent over 10 years
and millions of dollars to develop this resin system. Ultimately, Ashland made a
corporate decision to license PEAR to an outside manufacturer rather than
produce and market the product themselves. The reasons were that this high end,
high performance resin system did not fit in with their product mix,
manufacturing capabilities and business model at the time. Thus the PEAR resins
have been licensed to us. We reached our initial agreement with Ashland in July
2000 and revised and renewed that agreement in July 2001.
The PEAR resins have many industrial applications raging from high-tech to
everyday uses. The initial effort of US Tech is to penetrate the sports
industry. By targeting the sports industry first, the company can avoid the
additional regulations that accompany its use in industries such as aviation. We
believe that this strategy will allow us to realize revenue more quickly than by
focusing on more high-tech applications. Development of marketing and sales to
industries such as aviation and automotive will proceed in parallel to our
sports marketing efforts.
Additionally, we believe that starting in the sports market will offer the
best opportunity to market the PEAR resin and to bring PEAR to the attention of
potential customers.
Distribution of Products and Services
PEAR resins will initially reach the market in two basic ways:
1. Resin Transfer Molding (RTM): This is a vacuum-assisted molding process
using liquefied resin-based catalyzed compounds injected into an enclosed mold.
2. Prepreg (Pre-Impregnation): The process of mixing resin and filler and
effecting a partial cure before shipping to the end user. Either ready-to-mold
material in sheet form or ready-to-wind material in roving form, which may be
cloth, mat, unidirectional fiber, or paper impregnated with resin and stored for
use. The resin is partially cured to a B-stage and supplied to the fabricator,
who lays up the finished shape and completes the cure with heat and pressure.
The two distinct types of prepreg available are (1) commercial prepregs, where
the roving is coated with a hot melt or solvent system to produce a specific
product to meet specific customer requirements, and, (2) wet prepreg, where the
basic resin is installed without solvents or preservatives but has limited
room-temperature shelf life.
10
In the Future: Vacuum Bag Molding (VBM): A process in which a sheet of
flexible transparent material and a bleeder cloth and release film are placed
over the lay-up on the mold and sealed at the edges. A vacuum is applied between
the sheet and the lay-up. The entrapped air is mechanically worked out of the
lay-up and removed by the vacuum, and the part is cured with temperature,
pressure, and time. This process wastes very little material compared to other
delivery methods.
Most RTM customers will be delivering PEAR composites directly into the
final manufacturing process. There are specialized prepreg firms who will
purchase PEAR resins, create various prepreg forms, and sell them to the end
user who then add a final stage catalyst to compete the cure, and finished
product. These prepreg firms could potentially license PEAR for sale to their
customer base, serving as both a process manufacturer and representative.
Ultimately VBM may become another method of delivering PEAR directly to the end
user, as with RTM.
Competition
USTM is a supplier of high performance composite resin systems. The
marketplace for high performance resins is served by major chemical
manufacturers including Shell, 3M, BASF, GE Plastics and Dow Chemical. The major
suppliers in this niche marketplace are listed, along with their revenues (1999
figures include non-PEAR type materials):
- - Shell $12.9 Billion
- - 3M $1.2 Billion
- - Dow Chemical $5.2 Billion
- - Ciba Specialty Chemicals $1.1 Billion
These companies are larger and better capitalized than us and have greater
name recognition. We will have to compete with these large companies which may
put us at a competitive disadvantage.
There are also a number of smaller resin producers who offer formulations
that are in a similar performance category as PEAR. Polymer resins that are
considered to be PEAR competitors include: polyamides, polyimides, phenolics,
bismalimides and metal.
The big chemical companies concentrate on the lower end of the high
performance resin spectrum. They offer commodity-type resins that are relatively
inexpensive, and sold in great quantities. Offerings by smaller producers are
spread across the range of the high performance resin category. In a survey of
products in the marketplace at present there are none that offer the complete
package of PEAR's desirable processing and application properties.
11
For a competitor to attempt to duplicate PEAR, they first would have to
have the reactor material production process available, which is not the way
"commodity"-type resins are mass produced. Their properties cannot even compare
to what PEAR offers. This is a reason why Ashland, Inc. decided to license the
PEAR technology. For example, withstanding ultra high temperatures isn't an
important factor when a polymer resin is used in a low temperature environment.
These "commodity" resins are priced far below the average $20 to $30 per
kilogram (kg) that is the average price of high performance resins today.
PEAR is currently protected by 35 active patents, and therefore, USTM has
the ability to defend against attempts at duplicating the PEAR formula. PEAR
will be in an ongoing product development program, with new formulations
developed for specific applications and then patented on an ongoing basis.
It is virtually impossible to delineate how much of the marketplace each
manufacturer controls, since most companies include other types of
non-comparable resins and resin products in with the category of high
performance resins. This can include adhesives, coatings, thermoplastic resins,
etc., which do not compare with PEAR.
Competition in the high performance resin marketplace is essentially a
competition to fill an application requirement. There are many factors that
determine a polymer resin's ability to effectively fill necessary requirements.
This is PEAR's distinct advantage. PEAR starts with outstanding properties that
can be "stepped down" to accommodate an end user's special needs. For example,
if price is a factor, PEAR's formulation can be adjusted to meet the price
point, while maintaining the desired qualities to keep it ahead of the
competition. For example, if the customer requires more "tack" with PEAR prepreg
material, the chemistry can be adjusted to accommodate the requirement, while
not compromising the basic integrity of the formulation.
Sources of Raw Materials and Suppliers
We have selected Southwestern Texas State University's Institute for
Environmental and Industrial Science to conduct initial testing, manufacturing
and product engineering supplier of the PEAR resins..
As production demands ramp up, toll manufacturers will be employed when
IEIS production capacities are exceeded. There are many chemical manufacturers
in the US who could serve as USTM's toll manufacturer. Final determination will
be based on their production capacity necessary and the quality control
processes in place to insure an uninterrupted source of supply.
Dependence upon one or a few major customers
We are currently in the process of providing samples to potential customers
for the PEAR resins. Several organizations have approached us to supply them
with samples for testing purposes. Additionally, we are contacting companies
that had indicated an interest in the resins who had previously contacted the
former licensee of the PEAR resins.
12
Patents, trademarks, and licenses
We have an exclusive license to manufacture and market PEAR resins in the
United States, Canada, Mexico, Central America, and, as an addition to this
latest agreement, Australia. USTM has a non-exclusive license to manufacture and
market PEAR to the rest of the world. This license agreement requires us to make
certain payments to Ashland between now and May 2002. We must also reach certain
sales goals by the end of 2002.
The base patents for the PEAR technology were issued to Ashland, Inc. in
1989 and are part of the license to us. They will not expire until 2006. A total
of 28 patents relating to PEAR and its improvements were issued to Ashland, Inc.
Additional patents for PEAR improvements are currently in the possession of
Southwestern Texas State University's Institute for Environmental and Industrial
Science, which, in the past, developed additional improvements on the PEAR
technology. These patents extend the patent life of the PEAR patents until
2014-2017. Since We will constantly be improving and adapting the PEAR
technology, new patents will be consistently issued that will effectively keep
the PEAR technology protected on a long term basis. Under our agreement with
Ashland, Inc., all patents related to PEAR are retained by Ashland, Inc. and
licensed to USTM for the 10 year agreement period. After that, all patents, and
subsequent patents, will be assigned to us. Ashland, Inc. bears all costs of
maintaining these patents during the 10 year term of the agreement.
Government Regulation
We are required to file a Pre Manufacture Notice (PMN) with the US
Environmental Protection Agency (EPA). This is a chemical registration process
required for all new chemicals by the EPA. A consultant experienced in this
process will be retained by us to facilitate this process. This process is
expected to be accomplished within 90 days from the time it is initiated with no
anticipated issues at this time. During this process, we are free to
manufacture, distribute and sell small quantities of PEAR under special EPA
regulations. When this process is completed, we will follow all standards for
manufacturing, packaging and shipping this product in accordance with EPA rules.
Employees
We have one full time employee.
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
- --------
13
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, 1999. The products under
development have not been completed as they are application specific and would
be custom designed for a customer.
On July 23, 2001, the Company entered into a letter of intent to increase its
interests to 51% in US Tech Materials Corporation (USTM) and we have
subsequently entered into negotiations to buy the remaining shares of 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.
14
We intend to take the following actions during the next twelve months to further
the business plan of USTM with regard to the PEAR resins:
- - Identify those companies that have or have had an interest in testing PEAR
resins for their applications and let them know that samples are available for
testing.
- - USTM's Research & Development, product sampling, initial product production
and technical sales support will be accomplished under a long-term agreement
with the Institute for Environmental and Industrial Science (IEIS) at Southwest
Texas State University, under the direction of Joseph H. Koo, ScD. IEIS has a
long history of development experience with the PEAR resin system, working on
various development projects with PEAR Holdings/PEAR Industries since the early
1990's.
- - Research & Development activities will be conducted as a parallel product
development program: The existing PEAR technology will be continually advanced
and refined, while exploiting the existing resin system by developing similar
resin systems that focus on materials that combine the most desirable properties
of the PEAR system engineered to accommodate particular applications,
technologies, and customer segments.
- - Continued development of the Ashland PEAR resin system. PEAR was originally
designed as a high end, extremely high performance resin that could withstand
the rigors of being a part of brutally gas turbines and space vehicles. This
original PEAR system can be adapted to less rigorous applications. The R&D
process will continue the development of the Ashland PEAR resin system to assist
in its many potential applications.
- - While continually updating, adapting and improving the Ashland PEAR resin
system, Dr. Koo and his team will be developing a sister resin system employing
the latest materials and processing technologies, and forming the basis of
USTM's ongoing resin system development, the expansion of future revenue
opportunities and the ultimate development of USTM as a broad spectrum high
performance resin manufacturer and marketer.
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.
15
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%
============== ==============
Revenues
- --------
The Company had no revenues for the nine months ended September 30, 2001 and the
year ended December 31, 2000.
General and Administrative
- --------------------------
General and administrative expenses were $109,382 in 2001 as compared to
$242,209 for the nine months ended September 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 of its equity securities and
by obtaining financing.
16
The Company had negative working capital as of September 30, 2001 of $447,818
compared to $441,341 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 PEAR resin samples for
distribution to potential customers. The Company's future capital requirements
will, depend on its ability to sell the PEAR resins in quantity.
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.
DESCRIPTION OF PROPERTY
We lease space at 300 Orange Ave. in Orlando, Florida. Rent is $175 per
month.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others.
The president of the Company is the sole shareholder of US Tech Materials
Corp.
(b) Certain Business Relationships.
During 1997 and 1998 and prior to July 1, 1999 the Company's operations
were based at the offices of a shareholder. Payments were made to this
shareholder for rent, administrative and miscellaneous services. During 1998,
50,000 shares were issued to and $53,800 was paid to this shareholder. For the
year ended August 31, 1999, payments in the aggregate of $88,098 were made to
this shareholder.
17
On March 10, 1998, the Company granted an option to purchase 10,000,000
shares of its common stock to the controlling shareholder at a price of at $.05
per share. On March 10, 1998 the Company granted an option to purchase 2,000,000
shares of its common stock to a shareholder at a price of $.05 per share. On
March 10, 1998, the Company granted an option to purchase 8,000,000 shares of
its common stock to a consultant of the Company at a price of $.05 per share.
The options are exercisable commencing on June 1, 2000 and expire on March 9,
2003.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
The Company's common stock trades Over-the-Counter (OTC) on the OTC
Bulletin Board under the symbol IHTL. This table sets forth the high and low bid
information for each fiscal quarter within the last two years. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
Bid Information
- --------------------------------------------------------------------------------
Fiscal Quarter Ended High Low
- --------------------------------------------------------------------------------
Through December 3, 2001 0.09 0.02
September 30, 2001 0.07 0.03
June 30, 2001 0.08 0.03
March 30, 2001 0.125 0.03
December 31, 2000 0.187 0.0312
September 30, 2000 0.348 0.125
June 30, 2000 0.348 0.0625
March 31, 2000 0.437 0.265
December 31, 1999 0.22 0.12
September 30, 1999 1.02 0.16
June 30, 1999 0.84 0.375
March 31, 1999 1.22 0.325
December 31, 1998 0.78 0.27
- --------------------------------------------------------------------------------
(b) Holders.
The Company has approximately 2,234 active shareholders of its common stock
holding 29,405,450 common shares.
18
EXECUTIVE COMPENSATION
We have one executive officer. Mr. Wyzisk has been paid no compensation
during the fiscal years 1998 1999 and 2000. Mr. Wyzisk was paid executive
compensation in the form of common stock for the years 1994 through 1997 with
the issuance of 6,000,000 common shares. This compensation was valued at
$300,000 or five cents per share. The company has granted stock options to its
President to acquire up to ten million (10,000,000) common shares for purchase
price of $500,000. The option is exercisable commencing on June 1, 2000 and
expires on March 9, 2003.
WHERE TO FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2 in
connection with the securities offered under this prospectus. As permitted by
SEC rules, this prospectus does not all of the information contained in this
registration statement or in the exhibits to the registration statement. For
further information you may read and copy documents at the public reference room
of the SEC at 450 Fifth Street, NW, Washington, D.C. 20549 and at the regional
offices of the SEC at 7 World Trade Center, Suite 1300, New York, New York 10048
and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC charges a fee for copies. Copies of this
material should also be available through the internet at the SEC Edgar Archive,
the address of which is http://www.sec.gov.
FINANCIAL STATEMENTS
Our financial statements are presented in Exhibit F-1.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 7 of our Articles of Incorporation provide that the Company may
indemnify any director, officer, employee, fiduciary, or agent of the Company to
the full extent permitted by the Colorado Corporation Code as in effect at the
time of the conduct by the person.
Colorado statutes require that unless otherwise provided by our Articles of
Incorporation we shall indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which the person was a
party because the person is or was a director, against reasonable expenses
incurred by him in connection with the proceeding.
In order for an officer or director to benefit from indemnification by us
the officer or director must have conducted himself in good faith and reasonably
believed that his conduct was in the Company's best interest and in the case of
a criminal proceeding that he had no reasonable cause to believe his conduct was
unlawful.
19
We cannot indemnify an officer or director in connection with a proceeding
by or on behalf of the Company in which the director was adjudged liable to the
Company; or if the director was adjudged to liable on the basis that he received
an improper personal benefit.
Any indemnification is limited to reasonable expenses incurred in
connection with the proceeding. We are allowed to purchase insurance to cover
our officers and directors, but we have not done so.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We expect to incur the following fees in conjunction with this offering:
Legal $10,000
Accounting $ 2,500
Registration $ 431
Edgar Processing $ 500
Total: $13,431
RECENT SALES OF UNREGISTERED SECURITIES
In an offering completed in November 2001 we sold 1,000,000 shares of our
common stock in a private sale. The sale was made to accredited investors
pursuant to an exemption from registration afforded by section 4(2) of the
Securities Act of 1933. The shares were sold at a price of $.05 per share. As
part of the sale we agreed to register such shares.
On August 10, 2001 we sold 2,000,000 shares of our common stock in a
private sale. The sale was made to a single investor pursuant to an exemption
from registration afforded by section 4(2) of the Securities Act of 1933. The
shares were sold at a price of $.05 per share. As part of the sale we agreed to
register such shares.
On January 28, 2000 we entered into two convertible notes borrowing a total
$100,000. The notes were convertible into shares of common stock at a price of
$.10 per share. The note holders have elected to convert the notes into common
shares. Those shares are being registered on this registration statement.
On November 9, 1999 we sold a total of 5,000,000 shares of our common stock
at a price of $.10 per share in an offering pursuant to Rule 504 of Regulation
D. Those shares are being registered on this registration statement.
On October 22, 1999 we issued a total of 70,000 shares upon the conversion
of two promissory notes that totaled $46,026 including accrued interest. The
sale was made pursuant to an exemption from registration afforded by section
4(2) of the Securities Act of 1933.
20
In February and March 1999 we sold a total of 950,000 shares of our common
stock for prices between $.40 and $.50 per share in an offering pursuant to Rule
504 of Regulation D. Those shares are being registered on this registration
statement.
On March 10, 1998 we entered into agreements to issue 21,000,000 options
exercisable for 21,000,000 shares of common stock. The strike price on these
options is $.05 per share, however we have forgiven the strike price on
18,000,000 of the options in exchange for services rendered to the company. As
part of the issuance we agreed to register the shares underlying the options.
EXHIBITS
3.1 Articles of Incorporation and amendment filed as an exhibit to the
Company's registration statement on Form 10-SB filed on December 22, 1999
are incorporated by reference.
3.2 By-Laws filed as an exhibit to the Company's registration statement on Form
10-SB filed on December 22, 1999 are incorporated by reference.
5.1 Opinion of Jonathan D. Leinwand, P.A.
23 Consent of DiRocco & Dombrow, P.A.
UNDERTAKINGS
The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereto) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
21
That, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Signatures
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Orlando State of Florida , on December ___ 2001.
Innovative Holdings and Technologies, Inc.
By /s/ Helmut Wyzisk
- --------------------
Helmut Wyzisk, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
/s/ Helmut Wyzisk
- -----------------
President
December 10, 2001
/s/ Peter Brochu
- ----------------
Director
December 10, 2001
/s/ John Palada
- ---------------
Director
December 10, 2001
22
DIROCCO & DOMBROW, P.A.
3601 WEST COMMERCIAL BLVD., SUITE #39
FT. LAUDERDALE, FL 33309
(954) 739-1054
FAX (954) 739-1054
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Innovative Holdings & Technologies, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Innovative
Holdings & Technologies, Inc. and Subsidiary (a State of Colorado corporation)
at December 31, 2000 and 1999 and the related consolidated statements of
operations, changes in stockholders' deficit and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes, examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Innovative Holdings
& Technologies, Inc. and Subsidiary at December 31, 2000 and 1999, and the
results of its operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 12 to
the 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 12. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
DiRocco & Dombrow, P.A.
March 2, 2001
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
Year Ended December 31,
--------------------------
2000 1999
----------- -----------
Current assets
Cash $ 440 $ 2,011
Prepaid expenses 28,953 3,681
Note receivable -- 10,250
Due from Affiliate 59,800
----------- -----------
Total current assets 89,193 15,942
Investments-US Tech Materials Corp., Inc. 200 --
Property and equipment, net 18,567 23,121
Other assets 3,473 4,263
----------- -----------
Total assets $ 111,433 $ 43,326
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued
expenses $ 52,212 $ 25,826
Withholding taxes payable 171,816 163,250
Notes payable 25,000 25,000
Due to affiliate 126,218 43,751
Due to stockholders 155,287 --
----------- -----------
Total current liabilities 530,533 257,827
----------- -----------
Stockholders' Deficit
Common stock, $.0001 par value,
450,000,000 shares authorized,
26,374,884 and 23,124,884 issued
and outstanding, respectively 2,638 2,313
Additional paid-in capital 3,162,023 3,080,619
Stock subscriptions receivable (284,000) (334,000)
Deficit (3,299,761) (2,963,433)
----------- -----------
Total stockholders' deficit (419,100) (214,501)
----------- -----------
Total liabilities and stockholders' deficit $ 111,433 $ 43,326
=========== ===========
The accompanying notes are an integral part of these financial statements.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
----------------------------
2000 1999
------------ ------------
Expenses
General and administrative $ 300,898 $ 431,050
Research and development 28,455 177,253
Interest expense 9,729 5,744
------------ ------------
Total expenses 339,082 614,047
------------ ------------
Net loss from operations (339,082) (614,047)
Other Income
Interest income 2,754 1,315
------------ ------------
Net Loss $ (336,328) $ (612,732)
============ ============
Net loss per share $ (0.013) $ (0.033)
============ ============
Weighted average common shares 25,172,830 18,679,052
============ ============
The accompanying notes are an integral part of these financial statements.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Shares of Additional Stock Total
Common Paid-In Subscriptions Accumulated Equity
Stock Amount Capital Receivable (Deficit) (Deficit)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 21,254,884 $ 2,126 $ 3,074,780 $ -- $(2,350,701) $ 726,205
Cancellation of stock related
to investment (4,200,000) (420) (999,580) -- -- (1,000,000)
Issuance of stock for services 50,000 5 9,995 -- -- 10,000
Issuance of stock in connection
with January 8, 1999 offering 950,000 95 449,905 -- -- 450,000
Issuance of stock for repayment
of notes payable 70,000 7 46,019 -- -- 46,026
Issuance of stock under
subscriptions agreements 5,000,000 500 499,500 (334,000) -- 166,000
Net loss for the year -- -- -- -- (612,732) (612,732)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 23,124,884 2,313 3,080,619 (334,000) (2,963,433) (214,501)
----------- ----------- ----------- ----------- ----------- -----------
Cancellation of stock
subscriptions (2,500,000) (250) (249,750) 250,000 -- --
Issuance of stock for services 250,000 25 24,975 -- -- 25,000
Issuance of stock for repayment
of notes payable 1,500,000 150 106,579 -- -- 106,729
Issuance of stock under
subscriptions agreements 4,000,000 400 199,600 (200,000) -- --
Net loss for the year -- -- -- -- (336,328) (336,328)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2000 26,374,884 $ 2,638 $ 3,162,023 $ (284,000) $(3,299,761) $ (419,100)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
2000 1999
--------- ---------
Cash flows from operating activities:
Net loss $(336,328) $(612,732)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Stockholder services credited
to capital -- 10,000
Stock issued for services and expenses 31,729
Depreciation 4,554 1,670
(Increase) decrease in:
Prepaid expenses (25,272) (3,681)
Notes receivable 10,250 (10,250)
Other assets 790 (4,263)
Increase (decrease) in:
Accounts payable and accrued
expenses 26,386 13,704
Withholding taxes payable 8,566 --
--------- ---------
Net cash used by operating
activities (279,325) (605,552)
--------- ---------
Cash flows from investing activities:
Purchase of investment (200) --
Purchases of property and equipment -- (24,791)
--------- ---------
Net cash used by investing
activities (200) (24,791)
--------- ---------
Cash flows from financing activities:
Proceeds from stockholders 255,287 --
Net proceeds to affiliate 22,667 12,051
Proceeds from issuance of stock -- 616,000
--------- ---------
Net cash provided by financing
activities 277,954 628,051
--------- ---------
Net Decrease in cash (1,571) (2,292)
Cash at beginning of year 2,011 4,303
--------- ---------
Cash at end of year $ 440 $ 2,011
========= =========
The accompanying notes are an integral part of these financial statements.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Innovative Holdings and Technologies, Inc. (the "Company") was incorporated
in the State of Colorado in 1987 as Celesta Corporation. The Company's
purpose is to raise capital by sales of its' common stock in registered
security offerings for the acquisition of businesses. The Company's office
is located in Orlando, Florida.
Subsidiary
On January 8, 1999, the Company incorporated Xtreme Telemetry Systems, Inc.
(Xtreme) in the State of Florida and is its only shareholder. The
transaction was accounted for by the purchase method of accounting for
business combinations.
The subsidiary is in the business of designing, developing, producing and
selling telemetric sensor and communication products and services. The
subsidiary is in the development stage.
Consolidation Policy
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. Intercompany transactions and
balances have been eliminated in consolidation.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for maintenance
and repairs are charged to expense as incurred. Depreciation is calculated
on a straight-line basis over estimated useful lives of the related assets
as follows:
Years
-----
Furniture 7
Computers 5
Loss Per Share
Basic loss per share is computed using the weighted-average number of
common shares outstanding during the period.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Organization and Summary of Significant Accounting Policies (Continued)
Summary of Significant Accounting Policies (Continued)
Income Taxes
The Company accounts for income taxes using the asset and liability method
as required by Statements of Financial Standards No. 109. Deferred income
taxes are recognized for operating losses, if available, to offset federal
income taxes. An allowance is provided if it is more likely than not that
the Company will not realize the benefits of a deferred tax asset. As of
December 31, 2000 and 1999, a valuation allowance has been provided against
the deferred tax asset. See Note 9.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2. Concentration of Risks
The Company maintains its cash accounts in one commercial bank located in
Orlando, Florida. Accounts in the bank are guaranteed by the Federal
Deposit Insurance Corporation (FDIC) up to $100,000. At various times
throughout 2000 and1999 the Company maintained cash balances in the bank
that exceeded the FDIC limit.
3. Property and Equipment
December 31,
------------
2000 1999
------- -------
Furniture $ 7,082 $ 7,082
Computers 17,709 17,709
------- -------
24,971 24,971
Less accumulated depreciation 6,404 1,850
------- -------
Net property and equipment $18,567 $23,121
======= =======
Depreciation Expense $ 4,554 $ 1,670
======= =======
4. Investment - US Tech Material Corp., Inc.
In 2000, the Company purchased 1% of the outstanding common stock of USTech
Material Corp., Inc (US Tech) in the amount of $200. This investment is
valued at cost because the Company does not have the ability to exercise
significant influence over US Tech.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Withholding Taxes Payable
The Company compensates various individuals for consulting services
rendered by issuing common stock. Back up withholding tax at a rate of 20%
is being computed for these amounts.
6. Notes Payable
Notes payable as of December 31, 2000 and 1999 consisted of the following:
December 31,2000 December 31,1999
---------------- ----------------
Note Payable to an
existing stockholder, interest
accrues at 12%, matures
September 26, 2001 $25,000 $25,000
7. Related Party Transactions
During 2000, the Company advanced $59,800 to an affiliate. These advances
are uncollaterized and there are no formal repayment terms.
The Company is indebted to various affiliate in the amount of $126,218 and
$43,751 at December 31, 2000 and 1999 respectively. There are no formal
repayment terms.
The Company retains the services of a marketing company whose principal
owner is a controlling shareholder of the Company. During 1999, the
payments of $20,000 were made to related company.
During 1999, the Company made payments to a shareholder for rent,
administrative and consulting services. For the year ended December 31,
1999, payments in the aggregate of $88,098 were made to this shareholder.
The Company is indebted to various shareholders in the amount of $155,287
at December 31, 2000. There are no formal repayment terms.
8. Lease
The Company is subleasing office space which commenced on July 1, 1999 and
expires October 1, 2002. The Company has the right to terminate the
sublease with a 210 day notice to the tenant who is the lessor of the
premises. Rent expense for the years ended December 31, 2000 and 1999 was
$45,274 and $22,085.
Minimum required future rental payments under this lease as of December 31,
2000, are:
2001 $ 48,832
2002 41,716
----------
$ 90,548
==========
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Income Taxes
The total deferred tax assets are as follows:
9. Income Taxes
The total deferred tax assets are as follows:
Net Operating Loss Carryforwards Applicable Tax Rate
-------------------------------------- ------------------------- Valuation Amount Per
Federal State Total Federal State Allowance Balance Sheet
----------- ----------- ----------- ----------- ----------- ----------- -----------
Deferred tax assets at
December 31, 1998 $ 751,201 $ 116,285 $ 867,486 $ (867,486) $ --
Changes for the
year ended
December 31, 1999 194,647 30,131 224,778 34% 5.0% (224,778) --
----------- ----------- ----------- ----------- -----------
Deferred tax assets at
December 31, 1999 945,848 146,416 1,092,264 (1,092,264) --
Changes for the
year ended
December 31, 2000 107,069 16,574 123,643 34% 5.0% (123,643) --
----------- ----------- ----------- ----------- -----------
Deferred tax assets at
December 31, 2000 $ 1,052,917 $ 162,990 $ 1,215,907 $(1,215,907) $ --
=========== =========== =========== =========== ===========
At December 31, 2000, the Company has net operating loss carryforwards of
$3,259,805. These losses will begin expiring in 2002.
A valuation allowance has been provided against the deferred tax assets at
December 31, 2000 and 1999 since it is likely that the Company will not
realize the benefits of the deferred tax assets.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Common Stock Transactions
Common Stock transactions during 1999:
In July 1999, the Company cancelled, 4,200,000 shares of common stock, due
to termination of Biocam's contractual obligations.
The Company issued 50,000 shares of its restricted common stock in 1999 to
individuals as compensation in connection with its reorganization and
reactivation of the Company. These transactions were valued at $10,000
which was the fair market value based upon either the open market closing
price or a board of directors designation as of the date of each
individual's involvement with the Company.
The Company authorized shares of unregistered common stock as follows:
700,000 shares issued at $.50 per share on January 8, 1999
250,000 shares issued at $.40 per share on January 8, 1999
The Company's legal counsel issued an opinion stating that the above
shares are exempt from registration under Section 3(b) of the
Securities Act of 1993 and 504 of Regulation D.
In 1999, the Company issued 70,000 shares of its restricted common stock
for repayment of a note payable plus accrued interest. This transaction was
valued at $46,026, which was based on the note payable balance due plus
accrued interest.
The Company issued 5,000,000 shares of unregistered common stock in the
amount of $.10 per share for a total of $500,000. These shares were issued
under stock subscriptions agreements date November 9, 1999, in accordance
with the terms and conditions of the Offering Document dated January 8,
1999. The total collected to date is $166,000.
Common stock transactions during 2000:
The Company cancelled 2,500,000 shares of its restrictive common stock for
nonpayment of stock subscriptions.
The Company issued 250,000 shares of its restricted common stock in payment
for future services in the amount of $25,000.
The Company issued 1,500,000 shares of its restricted common stock in lieu
of payment of notes payable plus accrued interest in the amount of
$106,729.
The Company issued 4,000,000 shares of its restricted common stock in
connection with a stock option under a subscription agreement.
11. 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 restricted common stock for an exercise
price of $0.05 per share at any time through March 9, 2003.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Stock Options (Continued)
The following is a summary of stock option plan activity for the year ended
December 31, 2000 and 1999.
Number of options outstanding on January 1, 1999 21,000,000
Number of options exercised by shareholder in 2000 (4,000,000)
-----------
Number of options outstanding on December 31, 2000 17,000,000
===========
Number of options exercisable at December 31, 2000 17,000,000
===========
Weighted average exercise price per share outstanding
and exercisable $ 0.05
===========
Weighted average remaining contractual life of options
outstanding and exercisable 2.2
===========
No options were forfeited or expired in 2000 and 1999.
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.
12. Going Concern
As shown in the accompanying financial statements, the Company incurred net
losses of $336,328 and $612,732 for the years ended December 31, 2000 and
1999, respectively. The Company's current liabilities exceeded its current
assets by $441,340 and $241,885 at December 31, 2000 and 1999,
respectively. 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
subsidiary.
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Cash Flow Information
During 1999:
The Company cancelled stock related to purchase of an investment in
the amount of $1,000,000.
The Company issued restricted shares of its common stock as a
repayment of notes payable plus accrued interest in the amount of
$46,026.
The Company issued stock under a subscription receivable in the amount
of $334,000.
During 2000:
The Company issued restricted shares of its common stock as a
repayment of notes plus accrued interest in the amount of $ 106,729.
The Company issued restricted common issued stock under a subscription
receivable in the amount of $200000.
The Company cancelled 2,500,000 shares of its restricted common stock
in the amount of $250,000.
See Note 10 for further information on the above noted transactions.
14. 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 sough 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.