September 8, 2010
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E., Mail Stop 7010
Washington, DC 20549
Attention: Mr. Christopher Owings, Assistant Director
Re: Innovative Product Opportunities Inc. (the "Company")
Amendment No. 2 to Registration Statement on Form S-1
Filed August 20, 2010
File Number: 333-167667
Dear Mr. Owings:
I enclose for filing under the Securities Act of 1933, as amended, an amendment
to the Company's Registration Statement on Form S-1 (File No. 333-167667),
together with certain exhibits thereto (collectively, the " Registration
Statement ").
The Registration Statement contains revisions that have been made in response
to comments received from the staff of the Securities and Exchange Commission
(the "Staff") in their letter dated August 31, 2010.
Set forth below is the Company's response to the Staff's comments. The
numbering of the response corresponds to the numbering of the comment in the
letter from the Staff.
GENERAL
SUMMARY OF SELECTED FINANCIAL INFORMATION, PAGE 7
Comment 1
You state that your table sets forth summary financial data derived from you
audited financial statements. However, the period from inception
(April 3, 2009) through June 30, 2010 is contained in your unaudited interim
financial statements. Please revise your disclosure to clarify this matter.
Response 1
We have updated the table of summary financial data to clarify which data is
derived from unaudited interim financial statements. Please see page 6 of the
Registration Statement.
Comment 2
We also note that the amounts you disclose as Income Before Taxes, Net Income,
Weighted Average Number of Shares Outstanding, and Net Income per Share do not
agree to you Statement of Operations for this period. Please revise to
present the same numbers here as are seen in your financial statements.
Response 2
We have revised the table of summary financial data to present the same numbers
as disclosed in our financial statements. Please see page 6 of the Registration
Statement.
DESCRIPTION OF BUSINESS, PAGE 19
Comment 3
We note your response to comment seven in our letter dated August 12, 2010,
however your revised disclosure does not fully describe the types of services
provided to you by selling shareholders and the manner in which the provision
of those services facilitated the implementation of your business plan.
Please revise your disclosure accordingly.
Response 3
We have expanded the section on page 18 in an effort to provide potential
investors more detail about the services provided to facilitate the
implementation of our business plan. Please see page 18 of the Registration
Statement.
CUSTOMERS, PAGE 20
Comment 4
We note your statement that you "intend to provide a platform and vehicle"
through which your customers will achieve public recognition for their
products. Please revise your disclosure to explain the manner in which you
will provide such a "platform and vehicle" and whether these services are
intended to be discreet from or will supplement your product development
services.
Response 4
We have removed the statement "intend to provide a platform and vehicle".
Comment 5
We note your indication elsewhere that you have one customer. Please revise
this section to discuss what services you are providing for this customer.
Response 5
We have added this information to the customers section on page 19.
PRODUCT DEVELOPMENT, PAGE 20
Comment 6
Please revise to elaborate upon the technical knowledge that you have received
from Metro One, with a view to explaining how this technical knowledge will
assist you in your business. Please also provide additional detail regarding
the role you are playing in providing them with "new design solutions".
Response 6
We added this information to the product development section on page 19 where
we have listed the knowledge gained and provided a new design solution of a
display housing.
MANUFACTURING AND PRODUCT SOURCING, PAGE 21
Comment 7
We note your response to comment 12 in our letter dated August 12, 2010.
Please revise your disclosure to include the information that is contained
in your response to this comment.
Response 7
We added this information to the manufacturing and product sourcing section
on page 20.
FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 2010, PAGE F-1
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, PAGE F-5
Comment 8
We note that in the six months ended June 30, 2010 you have recognized $21,000
in revenues. Please provide an appropriate revenue recognition accounting
policy.
Response 8
An appropriate revenue recognition note as been added to the June 30, 2010
unaudited interim financial statements on page F6
GOING CONCERN, PAGE F-5
Comment 9
With reference to our comments below on the accounting for your receipt of
Metro One Development, Inc.'s (Metro One's) common stock, if you continue to
believe that you have correctly accounted for your investment in these
securities, please revise your going concern footnote to clarify to your
investors that the only reason you have retained earnings at June 30, 2010
instead of an accumulated deficit is due to the gain that you realized upon
your receipt of these securities, and that similar gains are not likely to
recur in the future. Please make a similar disclosure where you discuss
the uncertainly about your ability to continue as a going concern in the
Liquidity section of your MD&A narrative.
Response 9
We have revised the going concern footnote and the Liquidity section of our
MD&A to explain that the gain that was realized upon receipt of 21,000,000
shares of common stock of Metro One Development, Inc. was not likely to recur
in the future on page F5 and page 23
FAIR VALUE OF FINANCIAL INSTRUMENTS, PAGE F-7
Comment 10
We note that your investment securities account is made up of 21,000,000
shares of Metro One common stock, which were issued to you in payment for
consulting services valued at $21,000. Since your disclosures indicate that
the fair value of these shares at issuance was $357,000, please explain to us
and disclose to your readers why Metro One gave you consideration significantly
in excess of the value of your services, effectively appearing to have overpaid
you. It is unclear to us why Metro One did not give you a lesser number of
shares of its common stock with a fair value of $21,000. Please clarify
whether the additional shares issued to you beyond those with a value of
$21,000 are intended to compensate you for any additional transactions
between you and Metro One.
Response 10
Innovative Products recorded revenue based on the value of the original invoice
issued on May 3, 2010. We do not believe that we were overpaid for these
services and no further services are due to Metro One. The Company demanded
21,000,000 shares of common stock as fair payment for all services for the
following reasons:
* The shares of Metro One currently trade on Other Over-the Counter
("Pink Sheets").
* Metro One was one year behind on filing interim and audited financial
statements with the SEC.
* Metro One reported nominal assets of $32, no revenues and a shareholder
deficit of $(5,678,225) in their 10-Q/A for the period ended April 30, 2009
as posted on the SEC website on March 15, 2010.
* The share price of Metro One shares is volatile. As of May 3, 2010, the
share price ranged from $0.005 to $1.04 per share over the past year.
* We received unregistered shares and believe that it will take between six
months and one year, if ever, to have the restricted legend removed from
the share certificate.
* It may difficult to get a lawyer to provide an opinion to have the restricted
legend removed from the share certificate under Rule 144.
In order to compensate us for the risk of liquidating Metro One shares, we
agreed with Metro One, an arms-length party, that their shares should be valued
at par of $0.001 per share.
Comment 11
We note that in determining the fair value of Metro One's common stock issued
to you on May 3, 2010, you applied for a 15% liquidity discount to the price
quoted on the Over-The-Counter Bulletin Board. Please tell us how you
determined that 15% was the amount of that market participants would demand
to reflect that these shares are unregistered. Also tell us why that
liquidity discount is not longer required under ASC 820-10 when determining
the fair value of these securities at June 30, 2010.
Response 11
In order to account for the receipt of 21,000,000 Metro One shares, we
considered a 15% liquidity discount from the closing price as appropriate
given the following factors at May 3, 2010 which increase the uncertainty of
future cash flows available to Innovative Products.
* Minimal operations create uncertainty of the future value of Metro One.
For example, Metro One reports on April 30, 2009 nominal assets of $32,
no revenues and a shareholder deficit of $(5,678,225).
* Metro One is listed on the Pink Sheets. The average daily volume of
Metro One stock one year prior to May 3, 2010 is 71,289 shares per day.
Assuming the Innovative Products can command 50% of the trading volume is
would take 2.34 years to liquidate 21,000,000 shares based on historical
trading volume ((21,000,000 shares/(71,289*50%))/252 trading days per
year = 2.34 years). The low trading volume increases the period of time
required to liquidate Metro One shares.
* The share price of Metro One shares is volatile. As of May 3, 2010, the
share price ranged from $0.005 to $1.04 per share over the past year.
* Wide bid-ask spreads of Metro One stock over the past year.
* Current information about Metro One is not available. At May 3, 2010, the
last financial statement posted on the SEC website was for the quarterly
period ended April 30, 2009.
* The Metro One shares received are unregistered and will increase the time
before the shares can be liquidated.
In order to be consistent with the valuation methodology at May 3, 2009, the
June 30, 2010 interim financial statements have been restated to value Metro
One shares at closing price less a 15% liquidity discount.
Comment 12
We note that you are accounting for your investment in Metro One's common
stock as available-for-sale securities. Please explain to us in detail how
you determined that you should not account for this investment under the
equity method. As art of your response, please tell us what percentage of
Metro One's voting stock you control following your receipt of these 21
million shares of common stock.
Response 12
On May 3, 2010, the date the 21,000,000 shares of Metro One shares of common
stock were issued to Innovative Products, Metro One had 322,495,969 shares
of common stock outstanding. Therefore, Innovative Products controls 6.51%
of the voting stock of Metro One. As such, we determined our investment in
Metro One should not be accounted for under the equity method.
NOTE 3 - STOCK BASED COMPENSATION, PAGE F-9
Comment 13
We note your disclosures in response to comment 13 from our letter dated
August 12, 2010. Specifically, we note that you valued these issuances of
your common stock based on the fair value of the consulting services received
because there were no quoted market prices or recent transactions in your
company's stock, making the fair value of these services more reliably
determinable. Please clarify for us whether you actually received all these
services on May 14, 2010 or whether these services were rendered at different
times over several days. Also explain to us why the several different types
of services that you received from several different individuals all have the
same fair value of $10,000 apiece, given your policy that you value the
issuance of your common stock in exchange for services based on the fair
value of the services received. To help us better understand this matter,
please explain to us in more detail how you determined the fair value of
the services received for each transaction listed in this footnote.
Response 13
We confirm that all the services, for which shares of common stock were
issued on May 14, 2010 disclosed in Note 3 - Stock-Based Compensation, were
received by May 14, 2010. The value of the services provided was negotiated
separately with each contractor. All contractors are at arms length. Many
of the contractors requested compensation in excess of the $10,000 amount
actually received. Compensation of each of the contractors was reduced to
$10,000 in separate negotiations with each contractor as that was the most
we were willing to commit to any one contractor.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND FINANCIAL
DISCLOSURE OR PLAN OF OPERATION, PAGE 23
Comment 14
We note your revised disclosure in response to comment one in our letter
dated August 12, 2010. Please revise your disclosure to also cover the
fiscal years required by Item 303(a) of Regulation S-K.
Response 14
We have revised the disclosure as requested.
MANAGEMENT'S STRATEGIC VISION, PAGE 23
Comment 15
We note your revised disclosure in response to comment 14 in our letter
dated August 12, 2010, however, the revised disclosure you have provided
does not provide sufficient detail regarding your business plan. Please
revise to provide detailed disclosure regarding how you plan to attract new
customers, whether you will target any particular kind of customers at first,
what you intend your role to be once retained, and the milestones for each of
these events. Currently, your disclosure provides reader with no indication
as to how you plan to generate revenues and, considering this offering will
not provide you with any capital to fund your operations; it is unclear how
your business will progress beyond the development state.
Response 15
We have revised the disclosure and added Additional information in this
section on page 22
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS, PAGE 25
Comment 16
We note your response to comment 16 in our letter dated August 12, 2010.
You appear to indicate that you will require minimal cash for expenditures
other than legal, accounting and related services because you will attempt
to compensate independent contractors for their design services. Please
revise your disclosure to explain how you will pay to market your services.
And, regardless of the manner in which you intend to compensate third parties
for their services, please revise to quantify the amount necessary to implement
your business plan.
Response 16
We added information in section liquidity and capital resources on page 23 to
include advertising costs. As well in the Operating Capital and Capital
expenditure Requirements, on page 24
BIOGRAPHIES OF EXECUTIVE OFFICERS AND DIRECTORS, PAGE 26
Comment 17
We not you response to comment 17 in our letter dated August 12, 2010. Please
revise Mr. Clark's biography to include the explanation contained in your
response regarding the qualifications and skills that led to the conclusion
that he should serve as a director.
Response 17
We have added the information requested to Mr. Clark's biography on page 25
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES, PAGE 29
Comment 18
We note your response to comment 18 in our letter dated August 12, 2010.
However, it does not appear that you have revised your disclosure as
requested. In addition to the description currently contained in this
section of the general effect of the provisions of your constituent documents
under which your controlling persons, directors and officers are indemnified,
please include a description of the general effect of any statute under which
any of your controlling persons, directors or officers is insured or
indemnified in any manner against liability which he may incur in his
capacity as such, including, for example, Delaware law. Refer to Item 702
of Regulation S-K.
Response 18.
We have revised this section in response to this comment. Please see page 28
of the Registration Statement.
If you have further questions or comments, please feel free to contact us or
our counsel.
We are happy to cooperate in any way we can.
Regards,
/s/ Doug Clark, CEO