UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, DC 20549
FOR 10-QSB/A
[x] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2002
------------------
[ ] Transition Report pursuant to 13 or 15 (d) of the Securities Exchange Act
of 1934
For the transition period from to
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Commission File Number 0-28607
Innovative Holdings & Technologies, Inc.
Colorado 74-2929034
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
300 South Orange Avenue
Suite 1500
Orlando, FL 32801
- ---------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (407-244-3756)
--------------
Indicated by a check mark, whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such period the issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of March 31, 2002
- ------------------------------ ---------------------------------
Common Stock, $.0001 par value 29,374,884
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
And Report on Review by Independent Certifying Accountants
Condensed Balance Sheets - March 31,
2002 and December 31, 2001 4
Condensed Statements of Operations -
three months ended March 31, 2002 and 2001 5
Condensed Statements of Cash Flows -
Three months ended March 31, 2002 and 2001 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis
and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 12
2
PART 1
Item 1. Financial Statements
DIROCCO & DOMBROW, P.A.
3601 W. COMMERCIAL BLVD, SUITE #39
FT. LAUDERDALE, FL 33309
(954) 731-8181
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Innovative Holdings & Technologies, Inc. and Subsidiary
We have reviewed the accompanying condensed consolidated balance sheet of
Innovative Holdings & Technologies, Inc. and Subsidiary as of March 31, 2002 and
the related condensed consolidated statements of operations and cash flows for
the three months ended March 31, 2002 and 2001 included in the accompanying
Securities and Exchange Commission Form 10-Q for the period ended March 31,
2002. These condensed statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modification that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
4 to the condensed consolidated financial statements, the Company has
experienced continuing losses since inception and negative working capital; this
raises substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 4. The
condensed consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 2001 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended (not presented herein). In our report dated March
25, 2002, we expressed an unqualified opinion on those financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of March 31, 2002, is fairly stated in all
material respects in relation to the balance sheet from which it has been
derived.
/s/ DiRocco & Dombrow, P.A.
September 19, 2002
3
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2002 2001
------------ ------------
(Unaudited) (Audited)
Current Assets
Cash $ 1,358 $ 121
Due from affiliate -- 69,800
------------ ------------
Total Current Assets 1,358 69,921
------------ ------------
Investment 200 200
Furniture and equipment (net) 12,877 14,015
Other assets 3,473 3,473
------------ ------------
Total Assets $ 17,908 $ 87,609
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses $ 1,018,128 $ 1,006,874
Withholding taxes payable 169,723 169,723
Due to stockholder 284,006 280,506
Due to affiliates 8,736 8,736
------------ ------------
Total Current Liabilities 1,480,593 1,465,839
------------ ------------
Stockholders' 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, 29,374,884 issued and outstanding 2,938 2,938
Additional paid in capital 3,227,723 3,227,723
Stock subscriptions receivable (200,000) (200,000)
Deficit (4,493,346) (4,408,891)
------------ ------------
Total Stockholders' Deficit (1,462,685) (1,378,230)
------------ ------------
Total Liabilities and Stockholders' Deficit $ 17,908 $ 87,609
============ ============
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
4
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
2002 2001
------------ ------------
Sales $ 700 $ --
------------ ------------
Expenses
General and administrative 75,589 23,968
Interest expense 9,566 --
------------ ------------
Total Expenses 85,155 23,968
------------ ------------
Operating loss (84,455) (23,968)
Other Income -- --
------------ ------------
Net loss $ (84,455) $ (23,968)
============ ============
Basic loss per share $ (0.00) $ (0.00)
============ ============
Weighted average common shares 29,374,884 26,374,884
============ ============
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
5
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
2002 2001
--------- ---------
Cash flows from operating activities:
Net loss $ (84,455) $ (23,968)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,138 1,138
Decrease in due from affiliate 69,800 --
Decrease in prepaid expenses -- 36
Increase (decrease) in accounts payable and accrued expenses 11,254 (26,402)
Decrease in withholding taxes payable -- (3,127)
--------- ---------
Net cash used in operating activities
(2,263) (52,323)
--------- ---------
Cash flows from financing activities:
Proceeds stockholder loans
3,500 91,031
Repayments of advances from affiliate -- (38,800)
--------- ---------
Net cash provided by financing activities 3,500 52,231
--------- ---------
Net increase (decrease) in cash 1,237 (92)
Cash at beginning of period 121 440
--------- ---------
Cash at end of period $ 1,358 $ 348
========= =========
Supplemental Information
- ------------------------
Interest paid $ -- $ --
========= =========
Income taxes paid $ -- $ --
========= =========
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
6
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Interim Information
In the opinion of the management of Innovative Holdings & Technologies, Inc. and
Subsidiary, Inc. (the "Company"), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of March 31, 2002, and the
results of its operations and cash flows for the three months ended March 31,
2002 and 2001. Interim results are not necessarily indicative of results for a
full year.
The condensed financial statements and notes are presented as permitted by Form
10-Q, and do not contain certain information included in the Company's audited
financial statements and notes for the year ended December 31, 2001.
2. Basic Loss Per Share
Basic loss per share is the same as diluted loss per share due to the
anti-dilutive nature of the stock options.
3. Financial Statements
The condensed consolidated financial statements include the accounts of the
Company and its subsidiary. All significant intercompany transactions and
balances have been eliminated.
4. Going Concern
As shown in the accompanying financial statements, the Company incurred a net
loss of approximately $84,400 for the three months ended March 31, 2002. The
Company's current liabilities exceeded its current assets by approximately
$1,479,000 and $1,396,000 at March 31, 2002 and December 31, 2001, 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 subsidiaries. The
Company will offer additional shares of its common stock to raise capital and
obtain financing on an as needed basis.
5. 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.
7
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Stock Options (continued)
The following is a summary of stock option plan activity for the three months
ended March 31, 2002:
Number of options outstanding on March 31, 2002
17,000,000
Weighted average exercise price per share outstanding and exercisable
$0.05
Weighted average remaining contractual life of options outstanding and
exercisable, in months 11
No options were issued, forfeited or expired during the three months ended
March 31, 2002.
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 in the year ended 2001.
6. 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.
8
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Condensed Consolidated Financial Data" and the Company's Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in this
document.
Overview
- --------
Innovative Holdings & Technologies, Inc. was incorporated under the laws of the
State of Colorado on January 7, 1987.
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. In the second quarter of 1998, the Company signed an
agreement to acquire BioCam Company, Inc. ("BioCam"), a developer of telemetry
technology, in the amount of $1,000,000. This was paid for by issuance of
convertible preferred stock and restricted common stock. The Company began
supporting the operations of BioCam financially and funded approximately
$350,000, in 1998. By the end of 1998, the principals of BioCam rescinded their
agreement with the Company and the relationship was terminated.
On January 8, 1999, the Company incorporated Xtreme Telemetry Systems, Inc.
("Xtreme") and is its sole stockholder. Xtreme began the development of real
time telemetry, to be marketed initially in the sports and entertainment
industries. The telemetry system is designed to monitor performance and transmit
the data by broadcast or over the internet. In September, 1999, the Company
secured the services of specialists in computer software development. The
alpha-beta testing of the software commenced in the fourth quarter of 1999. The
products under development have not been completed. Product completion is
predicated by end use. Further development of products by XTS have been
suspended due to lack of funding and our concentration is currently on the
business of US Tech Materials (USTM) as further described below. USTM is not
producing any products on a commercial scale, but is providing samples to
customers interested in testing the PEAR resin for potential commercial use.
US Tech Materials Corporation (USTM) intends to develop manufacturing
and marketing for Poly Ether Amide Resin, also known as PEAR. PEAR resins were
originally developed by Ashland, Inc., who entered into a license agreement with
USTM/IHTL in July, 2000, as amended effective in August, 2000, October, 2000,
November 2000, April 2001 and October 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. The
only relationship we have with Ashland, Inc. is as their licensee.
On July 23, 2001, the Company entered into a letter of intent to increase its
interest to 51% in US Tech Materials Corporation ("USTM"). We currently have
commitments to pay Ashland Inc. $600,000 during 2002. The first payment was due
on April 1, 2002 and was not paid. An additional payment due September 1, 2002
has also not been paid. We are in contact with Ahsland and are currently
attempting to renegotiate these payments.
9
Results of operations
- ---------------------
Revenues
- --------
The Company had revenues of $700 for the three months ended March 31, 2002 and
no revenues for the same period of 2001. Revenues were derived from the sale of
samples to potential customers.
General and Administrative
- --------------------------
For the three months ended March 31, 2002 general and administrative expenses
have increased to $75,589 in 2002 from $23,968 in 2001. The increase is due to
the company writing-off a receivable in the amount of $69,800 due from USTM.
Interest Expense
- ----------------
Interest expense is from loans made to the company.
Liquidity and Capital Resources
- -------------------------------
To date, the company has financed its operations primarily through the sale its
of equity securities and through shareholder loans.
The Company had negative stockholder equity as of March 31, 2002 of $1,462,685.
As stated in the notes to the Company's consolidated financial statements, the
Company's ability to continue as a going concern is dependent upon issuance of
stock and obtaining debt financing. There can be no assurance that additional
financing will be attained or that the operations will be profitable. Such
inability would have a material adverse effect on the Company's business,
operating results and financial condition.
The Company currently has a commitment to pay license fees to Ashland, Inc. with
regard to its USTM subsidiaries license for the PEAR resins and expects
expenditures for purchasing materials to manufacture PEAR resins. The Company's
future capital requirements will depend on its business development activities.
The Company believes that its current cash balances will not provide the
liquidity necessary to satisfy the Company's working capital needs.
Other
- -----
The Company has a receivable in the amount of $69,800 due from USTM. Due to the
uncertainty with regard to the negotiations with Ashland as described below,
Management has decided to write-off that amount as unrecoverable.
10
Plan of Operation
- -----------------
We are not currently sending samples of the PEAR resins to potential customers
for testing until the license issues with Ashland are resolved. We plan to
continue the development of the resins through our research association with
Southwest Texas University's Institute for Environmental and Industrial Science,
based on adequate funding and resolution of the licensing negotiations. If we
resolve license issues with Ashland, testing by potential customers and further
development can be continued
In order to devote resources to research and development we have approached
Ashland about restructuring or eliminating the $600,000 in license payments that
are due during 2002. We presented them with a proposal in August 2002 and are
awaiting their reply. If we cannot come to an agreement with Ashland it is
expected that the license agreement will be terminated. If the license is
terminated we will need to seek other business opportunities. We have not yet
identified any such business opportunities at this time.
If our negotiations with Ashland are successful we plan to seek strategic
partners that will provide financing and expertise to continue development,
sales, manufacturing and distribution of the PEAR resins. Due to current
economic and capital market conditions management feels that reliance on
strategic partners with relevant experience is the only means to complete
development and go to manufacturing as the company believes it would be unable
to raise funds on its own. It is expected that the process of finding a
development or strategic partner could be accomplished in 3 to 6 months and that
a resumption of sampling and development activities would begin 3 months after
that.
11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NONE
(b) Reports on Form 8-K
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: September 19, 2002 By /s/ Helmut Wyzisk
-------------------------
Helmut Wyzisk, President
Innovative Holdings &
Technologies, Inc.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
I, Helmut Wyzisk, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Innovative Holdings
and Technologies Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
Date: September 20, 2002
/s/ Helmut Wyzisk
President
12