UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2011.
[ ] TRANSITION REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________
Commission file number 333-167667
INNOVATIVE PRODUCT OPPORTUNITIES INC.
(Name of small business issuer in its charter)
DELAWARE 42-1770123
---------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
28 ARGONAUT, SUITE 140 ALISO VIEJO CALIFORNIA 92656
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (347)789-7131
Securities registered under Section 12(b) of the Exchange Act:
NONE.
Securities registered under Section 12(g) of the Exchange Act:
NONE.
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ]; No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [ ]; No [X]
Indicate by check mark whether the registrant (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 shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]; No [ ]
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Website, if any, every Interactive Data file
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(section 229.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post
such files). Yes [ ]; No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]
(Do not check if a smaller
reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes [ ]; No [X]
State the aggregate market value of the voting and non-voting common equity,
consisting solely of common stock, held by non-affiliates computed by reference
to the price at which the common equity was last sold, or the average bid and
asked price of such common equity, as of the last business day of the
registrant's most recently completed second fiscal quarter: $21,120,000
(based on a total of 66,000,000 shares of the registrant's common stock held
by non-affiliates on June 30, 2011, at the closing price of $0.32 per share)
The number of shares of outstanding common stock of the registrant as of
March 30, 2012 was 118,000,000.
Documents incorporated by reference: None.
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INNOVATIVE PRODUCT OPPORTUNITIES INC.
FORM 10-K
TABLE OF CONTENTS
PAGE NO.
PART I
ITEM 1. Business...............................................4
ITEM 1A. Risk Factors...........................................6
ITEM 2. Properties............................................11
ITEM 3. Legal Proceedings.....................................11
ITEM 4. Submission of Matters to a Vote of Security Holders...11
PART II
ITEM 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities............................................12
ITEM 6. Selected Financial Data...............................13
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................14
ITEM 7A. Quantitative and Qualitative Disclosures About
Market Risk...........................................19
ITEM 8. Financial Statements and Supplementary Data.....F1 - F13
ITEM 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure...................20
ITEM 9A(T) Controls and Procedures...............................20
ITEM 9B. Other Information.....................................21
PART III
ITEM 10. Directors, Executive Officers and Corporate
Governance............................................22
ITEM 11. Executive Compensation................................25
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters............27
ITEM 13. Certain Relationships and Related Transactions, and
Director Independence.................................27
ITEM 14. Principal Accounting Fees and Services................28
ITEM 15. Exhibits, Financial Statement Schedules...............29
PART I
ITEM 1. BUSINESS
HISTORICAL DEVELOPMENT
We incorporated in the State of Delaware on April 3, 2009 and commenced
business, as Innovative Product Opportunities Inc.
OUR BUSINESS
Our business is a product development firm creating products designed,
prototyped and production construction in numerous industries including
consumer and household goods, office products, furniture, and toys.
We have started the implementation of our business plan and along with
developing product are working in the entertainment/magazine industry
through our licensor Cigar and Spirits.
Our business plan does not include engaging in, and we currently have no
plans to engage in, a merger or acquisition with any other company, entity
or person.
RESEARCH AND DEVELOPMENT
We have not spent any funds on research and development activities since our
inception on April 3, 2009.
EMPLOYEES
As of March 30, 2012, we had four employees. All four employees are
part-time. We believe that our relations with our employees are good.
CUSTOMERS
We intend to market our services via trade and industry publications. Many
products developed are new and innovative that requires public recognition
to realize potential. Where possible we plan to merge our efforts for both
design and publishing to maximize our opportunities.
4
COMPETITION
We compete with other designers who offer one or more services competitive
with the service we intend to sell. The product development and magazine
industry is competitive, characterized by the frequent introduction of new
products and includes numerous domestic and foreign competitors, some of
which are substantially larger and have greater financial and other resources
than we do. We compete principally on the basis of offering quality products.
Our competition includes:
* Lore Product Design * Cigar Aficionado
* SZID Design * Cigarlife
* C3 Design * Esquire
PRODUCT DEVELOPMENT
We have worked on interactive displays, school products, and home sports
products to date. We continue to investigate new product potentials along
with the magazine agreement in place.
MANUFACTURING AND PRODUCT SOURCING
Most supplies used in the manufacturing process are readily available from any
number of local and international suppliers, at competitive prices. Delivery
of product will vary depending on source and quantity required.
5
ITEM 1A. RISK FACTORS.
An investment in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and other information included
in this Form 10-K. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected and you may lose some or all of your investment. The trading price of
our common stock could decline due to any of these risks, and you could lose
all or a part of your investment. We cannot assure any investor that we will
successfully address these risks. Prospective investors should carefully
consider the following risk factors:
RISKS RELATED TO OUR BUSINESS
WE ARE A DEVELOPMENT STAGE ENTERPRISE THAT LACKS ANY OPERATING HISTORY OR
REVENUES AND WE MAY NEVER GENERATE REVENUES OR BECOME PROFITABLE.
We are a development stage enterprise without financial resources and an
operating history on which an investor can base its assessment of our business
plan. We expect to incur losses in the foreseeable future due to significant
costs associated with our business startup and development, including costs
associated with our on-going operations. Our operations may never generate
sufficient revenues to fund our continuing operations and we may never generate
positive cash flow from our operations. Further, we may not attain or sustain
profitability in any future period. If we do not successfully develop our
business, you may lose all or part of your investment.
IF WE FAIL TO SUCCESSFULLY MANAGE OUR NEW PRODUCT DEVELOPMENT OR INCREASE
MAGAZINE REVENUE, OR IF WE FAIL TO ANTICIPATE THE ISSUES ASSOCIATED WITH
SUCH DEVELOPMENT OR EXPANSION, OUR BUSINESS MAY SUFFER.
We have not completed development on any product and are new into magazine
publishing. Our ability to anticipate
and manage a variety of issues associated with any new product development or
market expansion, such as:
* difficulties faced in manufacturing or publishing;
* market acceptance;
* effective management of inventory levels in line with anticipated
Product/magazine demand; and
* obtaining quality content and advertisers for the magazine
Our business may suffer if we fail to successfully anticipate and manage these
issues associated with product development and magazine publishing and you may
lose all or part of your investment.
6
OUR INDEPENDENT AUDITORS HAVE EXPRESSED DOUBT ABOUT OUR ABILITY TO CONTINUE
AS A GOING CONCERN.
Currently, we do not have any material assets, nor do we have operations or a
source of revenue sufficient to cover our operational costs and allow us to
continue as a going concern. Since our inception on April 3, 2009 through
December 31, 2011, we have an accumulated deficit during the development stage
of $5,402,628. The Company will be dependent upon the raising of additional
capital through placement of its common stock in order to implement our
business plan. We are currently funding our initial operations by way of loans
from our Chief Executive Officer and through the issuance of common stock in
exchange for services. Accordingly, these factors raise substantial doubt as
to our ability to continue as a going concern.
CURRENT DECLINING GENERAL ECONOMIC OR BUSINESS CONDITIONS MAY HAVE A NEGATIVE
IMPACT ON OUR BUSINESS.
Our current and future business plans depend, in large part, on the overall
state of the economy. Concerns over inflation, energy costs, geopolitical
issues, the availability and cost of credit, the U.S. mortgage market and a
declining real estate market in the U.S. have contributed to increased
volatility and diminished expectations for the global economy and expectations
of slower global economic growth going forward. These factors, combined with
volatile oil prices, declining business and consumer confidence and increased
unemployment, have precipitated a global economic slowdown. If the economic
climate does not improve or continues to deteriorate, it could have a material
adverse effect on our ability to implement our business plan.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY NOT BE ABLE TO FULFILL
OUR BUSINESS PLAN.
We require substantial funds to further develop and implement our business plan
Over the next 12 months we expect to expend approximately $25,000 in cash for
legal, accounting and related services. To meet our future obligations, from
time to time, we may need to issue debt or shares of our common stock or other
equity instruments such as warrants. However, we may not be able to obtain
additional financing when needed, or if available, such financing may not be on
commercially reasonable terms. If we are unable to obtain financing when
needed, we may be forced to curtail our planned development, which would
negatively affect the value of your investment.
WE CURRENTLY DO NOT HAVE ANY CUSTOMERS AND IF WE CANNOT ATTRACT CUSTOMERS WE
WILL NOT GENERATE REVENUES AND OUR BUSINESS WILL FAIL.
As of March 30, 2012, we have not generated any profit. We may not be able to
successfully attract other customers and in the event that we do attract
customers, we may not be able to maintain such customers and as a result, we
will not generate revenues and our business will fail. If our business fails,
you will lose all or part of your investment.
OUR ORIGINAL SHAREHOLDERS HAVE CONTROL OVER OUR POLICIES AND AFFAIRS AND THEY
MAY TAKE CORPORATE ACTIONS THAT COULD NEGATIVELY IMPACT OUR BUSINESS AND
STOCK PRICE.
Our original shareholder on March 30, 2012 owned approximately 42.4% of our
voting securities. The original shareholders will control our policies and
affairs and all corporate actions requiring shareholder approval, including the
election of directors. Additionally, these holdings may delay, deter or prevent
transactions, such as mergers or tender offers, that would otherwise benefit
investors.
7
WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR PLANNED GROWTH, WHICH WOULD
ADVERSELY AFFECT OUR BUSINESS AND COULD RESULT IN INCREASING COSTS AS WELL
AS A DECREASE IN OUR STOCK PRICE.
We intend to establish a customer base and develop new products for them.
To manage our anticipated growth, we must continue to improve our operational
and financial systems and expand, train, retain and manage our employee base
to meet new opportunities. Because of the registration of our securities, we
are subject to reporting and disclosure obligations, and we anticipate that we
will hire additional finance and administrative personnel to address these
obligations. In addition, the anticipated growth of our business will place a
significant strain on our existing managerial and financial resources. If we
cannot effectively manage our growth, our business may be harmed.
IF WE LOSE THE SKILLS AND CAPABILITIES OF OUR FOUNDER, OUR ABILITY TO ATTAIN
PROFITABILITY MAY BE IMPEDED AND IF WE DO NOT ATTAIN PROFITABILITY,
OUR STOCK PRICE MAY DECREASE AND YOU COULD LOSE PARTOR ALL OF YOUR INVESTMENT.
Doug Clark founded our Company. He invested the necessary start-up costs from
his personal finances and he is our Certified Engineering Technician. In
addition, Mr. Clark has relationships with key parties. These relationships
with suppliers afford us access to valuable resources that help ensure product
availability. Our success depends in large part upon Mr. Clark 's contacts.
If we were to lose the benefit of his services, our ability to operate
would be adversely affected which would have a negative impact on our
operations. We presently have no employment agreement with Mr. Clark.
WE WILL INCUR INCREASED COSTS AND DEMANDS UPON MANAGEMENT AS A RESULT OF
COMPLYING WITH THE LAWS AND REGULATIONS AFFECTING PUBLIC COMPANIES, WHICH
COULD HARM OUR OPERATING RESULTS.
As a public company, we will incur significant additional legal, accounting and
other expenses that we did not incur as a private company, including costs
associated with public company reporting requirements. We also will incur costs
associated with corporate governance requirements, including requirements under
Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules
implemented by the Securities and Exchange Commission ("SEC"). The expenses
incurred by reporting companies for reporting and corporate governance purposes
have increased dramatically in recent years. We expect these rules and
regulations to substantially increase our legal and financial compliance costs
and to make some activities more time-consuming and costly. We are unable to
currently estimate these costs with any degree of certainty. We also expect
these new rules and regulations may make it more difficult and more expensive
for us to obtain director and officer liability insurance, and we may be
required to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage previously available. As a
result, it may be more difficult for us to attract and retain qualified
individuals to serve on our board of directors or as our executive officers.
Currently we do not have a system of checks and balances in place covering our
financial operations and investors will bear the economic risk associated with
the lack of such oversight.
8
BECAUSE WE DO NOT HAVE AN AUDIT COMMITTEE, SHAREHOLDERS WILL HAVE TO RELY ON
THE DIRECTORS, WHO ARE NOT INDEPENDENT, TO PERFORM THESE FUNCTIONS.
We do not have an audit or compensation committee comprised of independent
directors. These functions are performed by the board of directors as a whole.
The members of the Board of Directors are not independent directors. Thus,
there is a potential conflict in that the board members are also engaged in
management and participate in decisions concerning management compensation and
audit issues that may affect management performance.
TO DATE WE HAVE GENERATED $21,000 OF REVENUES FROM OPERATIONS SINCE INCEPTION
AND WE MAY HAVE ADDITIONAL CAPITAL REQUIREMENTS TO CONTINUE OUR OPERATIONS BUT
THEY MIGHT NOT BE AVAILABLE TO US ON FAVORABLE TERMS OR AT ALL, AND IF
UNAVAILABLE OUR ABILITY TO RUN OUR BUSINESS WILL BE IMPAIRED.
We have limited working capital. As a result, it may be impossible to expand
our operations. If we are unable to generate sufficient revenues to cover
operating expenses or raise additional funds after the twelve months or during
the twelve months should we determine to undertake additional projects, outside
of our current business plan, we will be unlikely to expand our business
operations.
RISKS RELATED TO OUR STOCK
OUR COMMON STOCK MAY BE DIFFICULT OR IMPOSSIBLE TO SELL YOUR SHARES FOR THE
FORESEEABLE FUTURE.
Our shares are listed on the Over-the-Counter Bulletin Board, trading
symbol IPRU.
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR SECURITIES DIFFICULT
WHICH MAY MAKE OUR STOCK LESS LIQUID AND MAKE IT HARDER FOR INVESTORS TO
BUY AND SELL OUR SHARES.
Trading in our securities is subject to the SEC's "penny stock" rules and
it is anticipated that trading in our securities will continue to be subject
to the penny stock rules for the foreseeable future. The SEC has adopted
regulations that generally define a penny stock to be any equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions. These rules require that any broker-dealer who recommends our
securities to persons other than prior customers and accredited investors
must, prior to the sale, make a special written suitability determination
for the purchaser and receive the purchaser's written agreement to execute
the transaction. Unless an exception is available, the regulations require
the delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with
trading in the penny stock market. In addition, broker-dealers must disclose
commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities they offer. The additional burdens
imposed upon broker-dealers by these requirements may discourage broker-dealers
from recommending transactions in our securities, which could severely limit
the liquidity of our securities and consequently adversely affect the market
price for our securities.
9
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL SHARES OF
OUR COMMON STOCK AT OR ABOVE THE PRICE YOU PAID.
We cannot predict the extent to which a trading market will remain or how
liquid that market might become. The selling stockholders will sell their
shares at such prices and such times as they determine. It is possible that
they may not sell their shares at all. The selling stockholders will sell at
prevailing market prices or privately negotiated prices. The trading price of
our common stock is therefore likely to be highly volatile and could be subject
to wide fluctuations in price in response to various factors, some of which are
beyond our control. These factors include:
- Quarterly variations in our results of operations or those of our
competitors.
- Announcements by us or our competitors of acquisitions, new products,
significant contracts, commercial relationships or capital
commitments.
- The emergence of new sales or publishing channels in which we are
unable to compete effectively.
- Commencement of, or our involvement in, litigation.
- Any major change in our board or management.
- General economic conditions and slow or negative growth of related
markets.
In addition, the stock market in general has experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of individual companies. These broad market and
industry factors may seriously harm the market price of our common stock,
regardless of our actual operating performance. In addition, in the past,
following periods of volatility in the overall market and the market price of
a company's securities, securities class action litigation has often been
instituted against these companies. This litigation, if instituted against us,
could result in substantial costs and a diversion of our management's attention
and resources.
WE MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK WHICH WOULD REDUCE INVESTORS'
PERCENTAGE OF OWNERSHIP, DECREASE THE VALUE OF INVESTORS' INVESTMENT AND MAY
DILUTE OUR SHARE VALUE.
Our Certificate of Incorporation authorizes the issuance of 500,000,000 shares
of common stock and 1,000,000 shares of preferred stock. In the past, we have
been able to pay for some of the services we require through the issuance of
our common stock. We may continue to compensate our consultants and other
staff with common stock in order to preserve our cash for other uses. The
future issuance of authorized common stock may result in substantial dilution
in the percentage of our common stock held by our then existing stockholders.
The issuance of common stock for future services or acquisitions or other
corporate actions may have the effect of diluting the value of the common
stock held by our investors, may decrease the value of our investors'
investment and might have an adverse effect on any trading market for our
common stock, if one ever exists.
10
WE DO NOT PLAN TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE, AND, AS A RESULT,
STOCKHOLDERS WILL NEED TO SELL SHARES TO REALIZE A RETURN ON THEIR INVESTMENT.
We have not declared or paid any cash dividends on our capital stock since
inception. We intend to retain any future earnings to finance the operation
and expansion of our business and do not anticipate paying any cash dividends
in the foreseeable future. As a result, stockholders will need to sell shares
of common stock in order to realize a return on their investment, if any.
YOU MAY NOT BE ABLE TO SELL YOUR SHARES IN OUR COMPANY
Our securities are subject to the penny stock rules, which apply generally to
equity securities with a price of less than $5.00 per share, other than
securities registered on certain national exchanges or quoted on the NASDAQ
system. The penny stock rules reduce the level of trading activity and the
secondary market for a security that becomes subject to the penny stock rules.
Therefore, investors may find it more difficult to sell their Shares.
ITEM 2. PROPERTIES.
On March 1, 2012, we moved from a shared office in Mississauga,
Ontario to our publishing office in Aliso Viejo California. This space is
included with our licensing agreement in place.
ITEM 3. LEGAL PROCEEDINGS
We may be involved from time to time in ordinary litigation, negotiation and
settlement matters that will not have a material effect on our operations or
finances. We are not aware of any pending or threatened litigation against us
or our officers and directors in their capacity as such that could have a
material impact on our operations or finances.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fiscal year ended December 31, 2011 we did not submit any matters
to a vote of security holders.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET INFORMATION
Our common stock has traded over the counter and has been quoted on the
Over-The-Counter Bulletin Board since February 17, 2010. The stock currently
trades under the symbol "IPRU.OB." The following table sets forth the high
and low bid prices for our common stock for each quarter during the last
two fiscal years, so far as information is reported, as quoted on the
Over-the-Counter Bulletin Board. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
High Low
For the Fiscal Year Ended December 31, 2011
First Quarter ended March 31, 2011 $ 0.15 $ 0.15
Second Quarter ended June 30, 2011 $ 0.71 $ 0.15
Third Quarter ended September 30, 2011 $ 0.55 $ 0.077
Fourth Quarter ended December 31, 2011 $ 0.18 $ 0.0213
NUMBER OF STOCKHOLDERS
The number of record holders of our common stock as of March 30, 2012 was
approximately 2,500, not including nominees of beneficial owners.
DIVIDEND POLICY
We have not paid dividends on our common stock and we do not anticipate paying
dividends on our common stock in the foreseeable future. We intend to retain
our future earnings, if any, to finance the growth of our business.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
As of December 31, 2011, we do not have any securities authorized for issuance
under equity compensation plans.
SECURITIES ISSUED UNDER STOCK OPTION PLANS
During the fiscal year ended December 31, 2011, we did not issue securities
under any Stock Option Plans.
12
RECENT SALES OF UNREGISTERED SECURITIES
On April 15, 2011, the Company repaid $30,000 of advances due to related party
by exchanging 30,000,000 shares of common stock with the Company's Chief
Executive Officer and majority shareholder.
On April 18, 2011, the Company issued a total of 5,000,000 shares of common
stock valued at $5,000 as compensation to a director and the Chief Financial
Officer
On October 26, 2011, the Company issued 52,000,000 shares of common stock
valued at $5,200,000 as compensation for services. The services are valued
based on the closing price of $0.10 per share for the shares of common
stock exchanged for the services.
The securities issued in the foregoing transactions were undertaken under
Rule 506 of Regulation D under the Securities Act of 1933, as amended, by
the fact that:
- the sale was made to a sophisticated or accredited investor, as
defined in Rule 502;
- we gave the purchaser the opportunity to ask questions and receive
answers concerning the terms and conditions of the offering and to
obtain any additional information which we possessed or could acquire
without unreasonable effort or expense that is necessary to verify the
accuracy of information furnished;
- at a reasonable time prior to the sale of securities, we advised the
purchaser of the limitations on resale in the manner contained in
Rule 502(d)2;
- neither we nor any person acting on our behalf sold the securities by
any form of general solicitation or general advertising; and
- we exercised reasonable care to assure that the purchaser of the
securities is not an underwriter within the meaning of Section 2(11)
of the Securities Act of 1933 in compliance with Rule 502(d).
With respect to the sales of our securities described above, we relied on
the Section 4(2) exemption from securities registration under the federal
securities laws for transactions not involving any public offering. No
advertising or general solicitation was employed in offering the securities.
The securities were sold to accredited investors. The securities were offered
for investment purposes only and not for the purpose of resale or
distribution, and the transfer thereof was appropriately restricted by us.
ITEM 6. SELECTED FINANCIAL DATA.
As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act
and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure
reporting obligations and therefore are not required to provide the
information requested by this Item.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-K contains "forward-looking statements" that involve
risks and uncertainties. You should not place undue reliance on these
forward-looking statements. Our actual results could differ materially from
those anticipated in the forward-looking statements for many reasons, including
the risks described in this Form 10-K and other filings we make
with the Securities and Exchange Commission. Although we believe the
expectations reflected in the forward-looking statements are reasonable, they
relate only to events as of the date on which the statements are made. We do
not intend to update any of the forward-looking statements after the date of
this report to conform these statements to actual results or to changes in our
expectations, except as required by law.
The following discussion and analysis of financial condition and results of
operations is based upon, and should be read in conjunction with our audited
financial statements and related notes thereto included elsewhere in this
Form 10-K.
BUSINESS OVERVIEW
We incorporated on April 3, 2009 as Innovative Product Opportunities Inc. under
the laws of the State of Delaware. We are currently in the development stage.
We
expect to incur losses in the foreseeable future due to significant costs
associated with our business start-up, developing our business and costs
associated with on-going operations. Our business is to be a product
development participating in the creation of products, from hand sketches
and design through prototyping and construction. We also have a licence
agreement with Cigar and Spirits Magazine that we plan to grow both its
advertising and distribution.
MANAGEMENT'S STRATEGIC VISION
Our overall business strategy primarily rests on our ability to secure
additional capital through financing activities. Revenues will be
generated for new product designs and magazine publishing and we will require
minimal capital requirements.
As we secure funds, we plan to attract new clients and assist them in their
product development, advertising and publishing. We do not know when we will
sell our first product or be profitable in publishing and as a
result, when, if ever, we will generate profits. In addition to increasing our
product design and publishing/advertising offerings, we intend to introduce
distribution channels and increase our products for sale and magazine
advertising. This strategic vision will evolve as necessitated by the clients
we are able to attract. Moving from a quarterly publication to a bi-monthly
publication may also have increased costs and result in poor performance.
14
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in the Financial Statements and accompanying notes. Estimates are
used for, but not limited to, the accounting for the allowance for doubtful
accounts, inventories, impairment of long-term assets, stock-based
compensation, income taxes and loss contingencies. Management bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual results could differ
from these estimates under different assumptions or conditions.
We believe the following critical accounting policies, among others, may be
impacted significantly by judgment, assumptions and estimates used in the
preparation of the Financial Statements:
INVESTMENT SECURITIES
Equity securities are classified as available for sale and are stated at fair
value with unrealized gains and losses excluded from earnings and reported in
other comprehensive income, net of tax. All available for sale securities are
classified as current assets as they are available to support the Company's
current operating needs in the next 12 months. Realized gains and losses on
the sale of investment securities are recognized at the settlement date using
the specific identification method and are included in the statements of
operations.
In accordance with ASC 320.10, 'Investments-Debt and Equity Securities,' the
Company evaluates its securities portfolio for other-than-temporary impairment
("OTTI") throughout the year. Each investment that has a fair value less than
the book value is reviewed on a quarterly basis by Management. Management
considers at a minimum the following factors that, both individually or in
combination, could indicate that the decline is other-than-temporary: (a) the
Company has the intent to sell the security; (b) it is more likely than not
that it will be required to sell the security before recovery; and (c) the
Company does not expect to recover the entire amortized cost basis of the
security. Among the factors that are considered in determining intent is a
review of capital adequacy, interest rate risk profile and liquidity at the
Corporation. An impairment charge is recorded against individual securities
if the review described above concludes that the decline in value is
other-than-temporary.
STOCK-BASED COMPENSATION
The Company measures stock-based compensation at the grant date based on the
fair value of the award and recognizes stock-based compensation expense over
the requisite service period.
The Company also grants awards to non-employees and determines the fair value
of such stock-based compensation awards granted as either the fair value of the
15
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. If the fair value of the equity
instruments issued is used, it is measured using the stock price and other
measurement assumptions as of the earlier of (1) the date at which a commitment
for performance by the counterparty to earn the equity instruments is reached,
or (2) the date at which the counterparty's performance is completed.
The Company has not adopted a stock option plan and has not granted any stock
options.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of FASB ASC 820, Fair Value Measurements
and Disclosures, and FASB ASC 825, Financial Instruments, the Company has
determined the estimated fair value of financial instruments using
available market information and appropriate valuation methodologies.
FASB ASC 820 defines fair value as the price that would be received to sell
an asset or paid to transfer a liability (exit price) in an orderly
transaction between market participants at the measurement date.
The statement establishes market or observable inputs as the preferred sources
of values, followed by assumptions based on hypothetical transactions in the
absence of market inputs. The statement requires fair value measurements be
classified and disclosed in one of the following categories:
Level 1 - Quoted prices in active markets for identical assets and liabilities.
Level 2 - Quoted prices in active markets for similar assets and liabilities,
quoted prices for identical or similar instruments in markets that are not
active and model-derived valuations whose inputs are observable or whose
significant value drivers are observable.
Level 3 - Significant inputs to the valuation model are unobservable.
Financial assets and liabilities are classified based on the lowest level of
input that is significant to the fair value measurement.
RECENT ACCOUNTING PRONOUNCEMENTS
There have been no recent accounting pronouncements or changes in accounting
pronouncements that impacted 2011, or which are expected to impact future
periods that were not already adopted and disclosed in prior periods.
16
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AND
APRIL 3, 2009 (INCEPTION) THROUGH DECEMBER 31, 2011.
REVENUES
For the years ended December 31, 2011 and 2010 we generated $0 and $21,000
in revenue, respectively. We recorded revenue of $21,000 for the cumulative
period from Inception (April 3, 2009)through December 31, 2011. We earned
$21,000 of revenue from a contract for design consultation in 2010. We are
completely dependent upon the willingness of our management to fund our
initial operations by way of loans from our Chief Executive Officer.
COSTS OF GOODS SOLD
We did not incur cost of sales for the years ended December 31, 2011 and 2010
and for the cumulative period from Inception (April 3, 2009 through
December 31, 2011.
OPERATING EXPENSES
During the year ended December 31, 2011, we recorded $21,000 bad debt expense
on an account receivable balance due from Metro One Development, Inc.
General and administrative expense of $67,741 and $17,887 were incurred for
the years ended December 31, 2011 and 2010, respectively. During the year
ended December 31, 2011 we incurred general and administrative expenses for
investor relations, accounting, audit, transfer agent fees, rent and other
miscellaneous costs.
During the year ended December 31, 2011 we incurred stock-based compensation
expense for 52,000,000 shares issued on October 26, 2011 valued at $5,200,000
for business development, consulting, design and technical services. Also
included in stock-based compensation expense are 5,000,000 shares of our common
stock issued on April 18 2011 valued at $5,000 paid to a director and Chief
Financial Officer for their services.
During the year ended December 31, 2010 we incurred $110,000 of consulting
expenses for business and software development and design, graphics arts,
accounting, bookkeeping and technical services. These consultants were paid
in full by 11,000,000 shares of our common stock for their services.
NET LOSS
Our net loss for the year ended December 31, 2011 and 2010 was $5,293,741 and
$106,887, respectively. Our net loss since inception (April 3, 2009) through
December 31, 2011 was $5,402,628. This is due to costs associated with our
incorporation, ongoing expenses as a public company, consulting services and
stock-based compensation expense as described above.
In addition, for the year ended December 31, 2010, we experienced a gain on
settlement of accounts receivable of $336,000. This gain was due to receiving
21,000,000 unregistered shares of common stock of Metro One Development, Inc.
(Metro One) on May 3, 2011 to settle a $21,000 accounts receivable balance due
to us. On May 3, 2010, Metro One's closing price was $0.02 per share. To
determine the fair value of the Metro One shares received we further adjusted
the closing price by 15%, since the shares received are unregistered. On
September 30, 2010, the cost of Metro One shares exceeded fair value
by $124,950. This amount was recorded as an other-than-temporary impairment
loss in the statement of operations since the Company does not anticipate
recovering its original investment in Metro One shares. On December 20, 2010,
the Company entered into an
17
agreement with Metro One to return 21,000,000 Metro One shares for
cancellation. It was agreed that the accounts receivable balance of $21,000
would be reinstated and due to the Company upon cancellation of the shares.
As a result of this agreement, the Company recorded a loss on cancellation of
Metro One shares of $211,050 in the statement of operations.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
As of December 31, 2011, we had total current assets of $6,642 and total
current liabilities of $62,270, resulting in a working capital deficit of
$58,447. At the end of the year ending December 31, 2011, we had cash of
$6,642. Our cash flows from operating activities for the year ended
December 31, 2011 resulted in cash used of $67,580. Our current cash balance
and cash flow from operating activities will not be sufficient to fund our
operations. Our cash flow from financing activities for the year ended
December 31, 2011 was $58,447. The Company has an accumulated deficit during
development stage at December 31, 2011 and December 31, 2010 of $5,402,628
and $108,887, respectively. The deficit reported at December 31, 2011 is
largely a result of operating expenses for incorporation costs, ongoing
expenses as a public company and for services during the year ended
December 31, 2011. These conditions led to our auditor reporting substantial
doubt about our ability to continue as a going concern.
Over the next 12 months we expect to expend approximately $25,000 in cash for
legal, accounting and related services. Cash used for other expenditures is
expected to be minimal. We hope to be able to compensate our independent
contractors with stock-based compensation, which will not require us to use
our cash, although there can be no assurances that we will be successful in
these efforts.
We expect to be able to secure capital through advances from our
Chief Executive Officer in order to pay expenses such as organizational costs,
filing fees, accounting fees and legal fees. We believe it will be difficult
to secure capital in the future because we have no assets to secure debt and
there is currently no trading market for our securities. We will need
additional capital in the next twelve months and if we cannot raise such
capital on acceptable terms, we may have to curtail our operations or terminate
our business entirely.
The inability to obtain financing or generate sufficient cash from operations
could require us to reduce or eliminate expenditures for developing products
and services, or otherwise curtail or discontinue our operations, which could
have a material adverse effect on our business, financial condition and
results of operations. Furthermore, to the extent that we raise additional
capital through the sale of equity or convertible debt securities, the
issuance of such securities may result in dilution to existing stockholders.
If we raise additional funds through the issuance of debt securities, these
securities may have rights, preferences and privileges senior to holders of
our common stock and the terms of such debt could impose restrictions on our
operations. Regardless of whether our cash assets prove to be inadequate to
meet our operational needs, we may seek to compensate providers of services
by issuing stock in lieu of cash, which may also result in dilution to
existing stockholders.
18
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
Since inception (April 3, 2009) initial operations have been funded by way of:
- Issuing 20,000,000 our common stock valued at $0.0001 per share to our
Chief Executive Officer.
- Conversion of $30,000 of cash advances from our Chief Executive Officer
for 30,000,000 shares of our common stock.
- Net cash advances of $61,649 at December 31, 2011 from our Chief
Executive Officer. These advances are non-interest bearing, unsecured and have
specified terms of repayment.
We hope to be able to compensate our independent contractors with stock-based
compensation, which will not require us to use our cash, although there can be
no assurances that we will be successful in these efforts. Our Chief Executive
Officer has committed to advancing us an additional $25,000 for certain
operating costs in order to start implementing our business plan, the funds are
loaned to the company as required to pay amounts owed by the Company. As such,
our operating capital is currently limited to the personal resources of our
Chief Executive Officer. The loans from our Chief Executive Officer are
unsecured and non-interest bearing and have no set terms of
repayment. We anticipate receiving additional capital once we are able to
have our securities quoted on a public exchange, there is no guarantee our
stock will become quoted on a public exchange or develop a market.
OFF-BALANCE SHEET TRANSACTIONS
We currently have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future material effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a Smaller Reporting Company, as defined by Rule 12b-2 of the Exchange Act
and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure
reporting obligations and therefore are not required to provide the information
requested by this Item.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and related notes are included as part of this Annual
Report.
INNOVATIVE PRODUCT OPPORTUNITIES INC.
(A Development Stage Company)
INDEX
December 31, 2011 and 2010
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM...............F1
FINANCIAL STATEMENTS
Balance Sheets....................................................... F2
Statements of Operations............................................. F3
Statement of Stockholders' Equity (Deficit).......................... F4
Statements of Cash Flows............................................. F5
Notes to Financial Statements.................................. F6 - F13
De Joya Griffith & Company, LLC
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Innovative Product Opportunities, Inc.
We have audited the accompanying balance sheets of Innovative Product
Opportunities, Inc. (A Development Stage Company) as of December 31, 2011
and 2010 and the related statements of operations, stockholders' equity
(deficit), and cash flows for the years then ended and from inception
(April 3, 2009) to December 31, 2011. Innovative Product Opportunities, Inc's.
management is responsible for these financial statements. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over the
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Innovative Product
Opportunities, Inc. (A Development Stage Company) as of December 31, 2011 and
2010 and the results of its operations and its cash flows for the years then
ended and from inception (April 3, 2009) to December 31, 2011, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has suffered recurring losses from operations, which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
De Joya Griffith & Company, LLC
/s/ De Joya Griffith & Company, LLC
Henderson, Nevada
March 22, 2012
F1
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
BALANCE SHEETS
(Audited)
December 31, 2011 December 31, 2010
----------------- -----------------
ASSETS
Current assets
Cash $ 6,642 $ 15,775
Accounts receivable -- 21,000
------------- ------------
Total current assets 6,642 36,775
------------- ------------
Total assets $ 6,642 $ 36,775
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and
accrued liabilities $ 621 $ 460
Due to related party 61,649 33,202
------------- ------------
Total current liabilities 62,270 33,662
------------- ------------
Total liabilities 62,270 33,662
------------- ------------
Stockholders' equity (deficit)
Preferred stock; $0.001 par value;
1,000,000 shares authorized,
-0- issued and outstanding -- --
Common stock; $0.0001 par value;
500,000,000 shares authorized,
118,000,000 shares and 31,000,000 shares
issued and outstanding as of
December 31, 2011 and 2010, respectively 11,800 3,100
Additional paid-in-capital 5,335,200 108,900
Accumulated deficit during
development stage (5,402,628) (108,887)
------------- ------------
Total stockholders' equity (deficit) (55,628) 3,113
------------- ------------
Total liabilities and stockholders'
equity (deficit) $ 6,642 $ 36,775
============= ============
The accompanying footnotes are an integral part of these financial statements.
F2
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
(Audited)
From inception
For the year For the year (April 3, 2009)
ended December ended December through December
31, 2011 31, 2010 31, 2011
---------------------------------------------------
Sales $ -- $ 21,000 $ 21,000
Cost of sales -- -- --
---------------------------------------------------
Gross profit -- 21,000 21,000
---------------------------------------------------
Operating expenses
Bad Debts 21,000 -- 21,000
General and administrative 67,741 17,887 87,628
Share-based compensation 5,205,000 110,000 5,315,000
---------------------------------------------------
Total expenses 5,293,741 127,887 5,423,628
Net operating loss (5,293,741) (106,887 (5,402,628)
---------------------------------------------------
Other income (loss)
Gain on settlement of
accounts receivable -- 336,000 336,000
Other-than-temporary
impairment loss on securities -- (124,950) (124,950)
Loss on cancellation
of securities -- (211,050) (211,050)
---------------------------------------------------
-- -- --
---------------------------------------------------
---------------------------------------------------
Net loss $ (5,293,741) $ (106,887) $ (5,402,628)
====================================================
Basic loss per common share $ (0.08) $ 0.00
============================================
Weighted average number of
common shares outstanding - basic 65,293,153 26,961,644
============================================
The accompanying footnotes are an integral part of these financial statements.
F3
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From Inception (April 3, 2009) to December 31, 2011
(Audited)
Preferred Stock Common Stock
Deficit
Accumulated Total
Additional during Shareholders
Paid-in Development Equity
Shares Amount Shares Amount Capital Stage (Deficit)
--------- ----------- ----------- ---------- ------------- -------------- -------------
Balance,
April 3, 2009 -- $ -- --- $ -- $ -- $ -- $ --
Common stock
issued to founder,
$0.0001 per share,
April 3, 2009 -- -- 20,000,000 2,000 -- -- 2,000
Net loss -- -- -- -- -- (2,000) (2,000)
--------- ----------- ----------- ---------- ------------- -------------- -------------
Balance
December 31, 2009 -- -- 20,000,000 2,000 -- (2,000) --
--------- ----------- ----------- ---------- ------------- -------------- -------------
Common stock
issued for services -- -- 11,000,000 1,100 108,900 -- 110,000
Net loss -- -- -- -- -- (106,887) (106,887)
--------- ----------- ----------- ---------- ------------- -------------- -------------
Balance
December 31, 2010 -- -- 31,000,000 3,100 108,900 (108,887) 3,113
--------- ----------- ----------- ---------- ------------- -------------- -------------
Conversion of due
to related party
for common stock -- -- 30,000,000 3,000 27,000 -- 30,000
Common stock
issued for services -- -- 57,000,000 5,700 5,199,300 -- 5,205,000
Net loss -- -- -- -- -- (5,293,741) (5,293,741)
--------- ----------- ----------- ---------- ------------- -------------- -------------
Balance
December 31, 2011 -- $ -- 118,000,000 $ 11,800 $ 5,335,200 $ (5,402,628) $ (55,628)
--------- ----------- ----------- ---------- ------------- -------------- -------------
The accompanying footnotes are an integral part of these financial statements.
F4
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
(Audited)
From Inception
(April 3, 2009)
For the year For the year through
ended December ended December December
31, 2011 31, 2010 31, 2011
--------------- --------------- ---------------
Cash flows from
operating activities
Net loss $ (5,293,741) $ (106,887) $ (5,402,628)
Adjustments to reconcile
net loss to cash used in
operating activities
Shares issued to founder -- -- 2,000
Stock issued for services 5,205,000 110,000 5,315,000
Change in operating assets
and liabilities
Decrease in accounts receivable 21,000 (21,000) --
Increase in accounts payable
and accrued liabilities 161 460 621
--------------- --------------- ---------------
Net cash used in
operating activities (67,580) (17,427) (85,007)
--------------- --------------- ---------------
Cash flow from
financing activities
Advances by related party 78,447 228,202 306,649
Repayment to related party (20,000) (195,000) (215,000)
--------------- --------------- ---------------
Net cash provided by
financing activities 58,447 33,202 91,649
--------------- --------------- ---------------
Net change in cash (9,133) 15,775 6,642
Cash, beginning of the period 15,775 -- --
--------------- --------------- ---------------
Cash, end of the period $ 6,642 15,775 6,642
--------------- --------------- ---------------
--------------- --------------- ---------------
Supplemental disclosure of
non-cash investing and
financing activities
Conversion of due to related
party for common stock $ 30,000 $ -- $ 30,000
The accompanying footnotes are an integral part of these financial statements.
F5
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
December 31, 2011 and 2010
(Audited)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Innovative Product Opportunities Inc. (the "Company" or "Innovative") was
incorporated on April 3, 2009 in the State of Delaware and established a
fiscal year end of December 31. The Company is a development stage enterprise
organized to provide product development and has a license agreement with Cigar
and Spirits Magazine. The Company is currently in the
development stage as defined in Financial Accounting Standards Board ("FASB")
Accounting Standard Codification ("ASC") 915. All activities of the Company to
date relate to its organization and share issuances for services.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements present the balance sheets, statements of operations,
stockholders' equity and cash flows of the Company. These financial statements
are presented in United States dollars and have been prepared in accordance
with accounting principles generally accepted in the United States.
GOING CONCERN
The Company's financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern. This
contemplates the realization of assets and the liquidation of liabilities
in the normal course of business. Currently, the Company does not have
material assets, nor does it have operations or a source of revenue
sufficient to cover its operation costs and allow it to continue as a going
concern. The Company has a deficit accumulated during development stage at
December 31, 2011 and 2010 of $5,402,628 and $108,887, respectively. The
Company will
be dependent upon the raising of additional capital through placement of
its common stock in order to implement its business plan. There can be no
assurance that the Company will be successful in this situation.
Accordingly, these factors raise substantial doubt as to the Company's
ability to continue as a going concern. These financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classifications of liabilities
that might result from this uncertainty. The Company is funding its
initial operations by way of loans from its Chief Executive Officer.
The Company's officers and directors have committed to advancing certain
operating costs of the Company.
F6
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers highly
liquid financial instruments purchased with a maturity of three months or
less to be cash equivalents.
INVESTMENT SECURITIES
Equity securities are classified as available for sale and are stated at fair
value with unrealized gains and losses excluded from earnings and reported in
other comprehensive income, net of tax. All available for sale securities are
classified as current assets as they are available to support the Company's
current operating needs in the next 12 months. Realized gains and losses on the
sale of investment securities are recognized at the settlement date using the
specific identification method and are included in the statements of operations.
In accordance with ASC 320-10, 'Investments-Debt and Equity Securities,' the
Company evaluates its securities portfolio for other-than-temporary impairment
("OTTI") throughout the year. Each investment that has a fair value less than
the book value is reviewed on a quarterly basis by Management. Management
considers at a minimum the following factors that, both individually or in
combination, could indicate that the decline is other-than-temporary: (a) the
Company has the intent to sell the security; (b) it is more likely than not
that it will be required to sell the security before recovery; and (c) the
Company does not expect to recover the entire amortized cost basis of the
security. Among the factors that are considered in determining intent is a
review of capital adequacy, interest rate risk profile and liquidity at the
Corporation. An impairment charge is recorded against individual securities if
the review described above concludes that the decline in value is
other-than-temporary.
REVENUE RECOGNITION
The Company recognizes revenue in accordance ASC Topic 605 - Revenue
Recognition. Under Topic 605, revenue is recognized at the point of passage to
the customer of title and risk of loss, there is persuasive evidence of an
arrangement, the sales price is determinable, and collection of the resulting
receivable is reasonably assured. The Company generally recognizes revenue at
the time of delivery of goods. Sales are
reflected net of discounts and estimated returns. Amounts billed to customers
for shipping and handling are recorded as sales revenues. Costs incurred for
shipping and handling are included in cost of sales.
F7
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is maintained to provide for losses arising
from customers' inability to make required payments. If there is a
deterioration of the credit worthiness of the Company's customers and/or there
is an increase in the length of time that the receivables are past due greater
than the historical assumptions used,
additional allowances may be required.
INCOME TAXES
The Company accounts for income taxes in accordance with Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("FASB ASC") 740,
Income Taxes. Under the assets and liability method of FASB ASC 740, deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. The Company provides a valuation allowance, if necessary,
to reduce deferred tax assets to their estimated realizable value.
NET LOSS PER SHARE
Basic net income (loss) per share includes no dilution and is computed by
dividing loss available to common stockholders by the weighted average number
of common shares outstanding for the period. Dilutive loss per share reflects
the potential dilution of securities that could share in the losses of the
Company. Because the Company does not have any potentially dilutive
securities, basic and dilutive earnings per share are equal in the accompanying
financial statement presentation.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in and Company's functional currency is
the United States dollars. In accordance with FASB ASC 830, Foreign Currency
Matters, foreign denominated monetary assets and liabilities are translated to
their United States dollar
equivalents using foreign exchange rates which prevailed at the balance sheet
date. Non-monetary assets and liabilities are translated at exchange rates
prevailing at the transaction date. Revenue and expenses are translated at
average rates of exchange during the periods presented. Related translation
adjustments are reported as a separate component of stockholders' equity
(deficit), whereas gains or losses resulting from foreign currency transactions
are included in results of operations.
STOCK-BASED COMPENSATION
The Company measures stock-based compensation at the grant date based on the
fair value of the award and recognizes stock-based compensation expense over
the requisite service period.
F8
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company also grants awards to non-employees and determines the fair value
of such stock-based compensation awards granted as either the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. If the fair value of the equity
instruments issued is used, it is measured using the stock price and other
measurement assumptions as of the earlier of (1) the date at which a commitment
for performance by the counterparty to earn the equity instruments is reached,
or (2) the date at which the counterparty's performance is completed.
The Company has not adopted a stock option plan and has not granted any stock
options.
COMPREHENSIVE INCOME (LOSS)
The Company has adopted ASC Topic 220 - Comprehensive Income, which establishes
standards for reporting and the display of comprehensive income, its components
and accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners or
distributions to owners. Among other disclosures, Topic 220 requires that all
items that are required to be recognized under the current accounting standards
as a component of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements.
Comprehensive income is displayed in the statement of stockholders' deficit and
in the balance sheet as a component of stockholders' deficit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of FASB ASC 820, Fair Value Measurements
and Disclosures, and FASB ASC 825, Financial Instruments, the Company has
determined the estimated fair value of financial instruments using
available market information and appropriate valuation methodologies.
FASB ASC 820 defines fair value as the price that would be received to sell an
asset or paid to transfer a liability (exit price) in an orderly transaction
between market participants at the measurement date. The statement establishes
market or observable inputs as the preferred sources of values, followed by
assumptions based on hypothetical transactions in the absence of market inputs.
The statement requires fair value measurements be classified and disclosed in
one of the following categories:
Level 1 - Quoted prices in active markets for identical assets and liabilities.
Level 2 - Quoted prices in active markets for similar assets and liabilities,
quoted prices for identical or similar instruments in markets that are not
active and model-derived valuations whose inputs are observable or whose
significant value drivers are observable.
Level 3 - Significant inputs to the valuation model are unobservable.
Financial assets and liabilities are classified based on the lowest level of
input that is significant to the fair value measurement.
The fair values of financial instruments are classified as current assets or
liabilities and approximate their carrying value due to the short-term maturity
of the instruments.
F9
Innovative on May 3, 2010 invoiced Metro One (MTRO) for consulting services
valued at $21,000. On May 3, 2010, for payment of these consulting services,
Metro One agreed to issue 21,000,000 restricted shares of its common stock to
Innovative. The value of the Metro One shares was valued based on its closing
price of $0.02 per share on May 3, 2010 adjusted for a 15% liquidity discount
since the Metro One shares issued are unregistered securities. The fair value
of the Metro One shares received on May 3, 2010 of $357,000 exceeded the value
of consulting services valued at $21,000 resulting in a gain of $336,000 on
accounts receivable settlement.
On September 30, 2010, a loss in Metro One shares of $124,950 was recognized as
an other-than-temporary charge to net loss representing the difference of the
investment in Metro One at cost and its fair value.
On December 20, 2010, the Company entered into an agreement with Metro One to
return 21,000,000 Metro One shares for cancellation. It was agreed that the
accounts receivable balance of $21,000 would be reinstated and due to the
Company upon cancellation of the shares. As a result of this agreement, the
Company recorded a loss on cancellation of Metro One shares of $211,050 in
the statement of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
There have been no recent accounting pronouncements or changes in accounting
pronouncements that impacted the fiscal year 2011, or which are expected to
impact future periods that were not already adopted and disclosed in prior
periods.
NOTE 3 - DUE TO RELATED PARTY
As of December 31, 2011 and 2010 advances of $61,649 and $33,202, respectively,
were due to the Company's Chief Executive Officer and majority shareholder.
The balances are non-interest bearing, unsecured and have no specified terms of
repayment.
NOTE 4 - INCOME TAXES
2011 2010
----------- ------------
Net loss before taxes $(5,402,628) $(108,887)
=========== ============
Income tax expense charged
to loss before taxes $ -- $ --
=========== ===========
A reconciliation of the expected income tax expense, computed by applying a
35% U.S. Federal corporate income tax rate to income before taxes to income
tax expense is as follows:
F10
2011 2010
----------- ------------
Expected income tax expense $ (1,852,800) $ (37,410)
Share-based payments 1,821,800 38,110
Change in valuation allowance 31,000 (700)
----------- ------------
$ -- $ --
=========== ============
At December 31, 2011 and 2010, the Company had available a net-operating loss
carry-forward for Federal tax purposes of approximately $87,600 and $0,
respectively, which may be applied against future taxable income, if any, at
various times through 2031. Certain significant changes in ownership of the
Company may restrict the future utilization of these tax loss carry-forwards.
At December 31, 2011, the Company has a deferred tax asset of $30,200
representing the benefit of its net operating loss carry-forward. The Company
has not recognized the tax benefit because realization of the tax benefit is
uncertain and thus a valuation allowance has been fully provided against the
deferred tax asset.
The Company recognizes interest and penalties, if any, related to uncertain
tax positions in general and administrative expenses. No interest and
penalties related to uncertain tax positions were accrued at December 31, 2011
and 2010.
NOTE 5 - STOCKHOLDERS' EQUITY
The Company is authorized to issue an aggregate of 500,000,000 common shares
with a par value of $0.0001 per share and 1,000,000 shares of preferred
stock with a par value of $0.001 per share. No preferred shares have been
issued.
On April 3, 2009, the Company issued 20,000,000 shares of its common stock
to its founder and Chief Executive Officer at $0.0001 per share to reimburse
$459 of incorporation costs and to pay $1,541 in exchange for services rendered
to the Company. Total incorporation costs and services of $2,000 are recorded
as general and administrative expenses in the statement of operations. The fair
value of the shares was determined by management of the Company on
the date of issue of the stock grant. On April 3, 2009, the shares of the
Company were not trading and there were no arm's length transactions in the
Company shares with an independent party. As such, a quoted market price or
a recent transaction in the Company shares was not available to estimate fair
value. On the date of issue of the stock grant, the Company was recently formed
or in the process of being formed and possessed no assets. The fair value of
the Company shares was estimated to be equal to the par value of $0.0001 per
share of the Company's common stock.
The tax years 2011, 2010 and 2009 remain open to examination by the major
taxing jurisdictions in which the Company operates. The Company expects no
material changes to unrecognized tax positions within the next twelve months.
F11
The Company issued 1,000,000 shares of common stock to Nadav Elituv on
May 14, 2010 in exchange for software development services related to
interactive displays valued at $10,000.
The Company issued 1,000,000 shares of common stock to The Cellular
Connection, Ltd. on May 14, 2010 in exchange for business development
services related to going public valued at $10,000. Stuart Turk, as the
principal owner of The Cellular Connection, Ltd., has
voting and dispositive control over these shares.
The Company issued 1,000,000 shares of common stock to Bradley Southam on
May 14, 2010 in exchange for graphic arts development services related to
interactive displays valued at $10,000.
The Company issued 1,000,000 shares of common stock to Evan Schwartzberg on
May 14, 2010 in exchange for accounting and bookkeeping services valued at
$10,000.
The Company issued 1,000,000 shares of common stock to Brett W. Gold on
May 14, 2010 in exchange for introducing us to potential customers valued
at $10,000.
The Company issued 1,000,000 shares of common stock to Al Kau on May 14, 2010
in exchange for introducing us to potential customers valued at $10,000.
The Company issued 1,000,000 shares of common stock to Larry Burke on
May 14, 2010 in exchange for design and technical services related to
potential customer usage valued at $10,000.
The Company issued 1,000,000 shares of common stock to Aaron Shrira on
May 14, 2010 in exchange for introducing us to potential customers valued
at $10,000.
The Company issued 1,000,000 shares of common stock to Danielle Goose on
May 14, 2010 in exchange for introducing us to potential customers valued
at $10,000.
The Company issued 1,000,000 shares of common stock to William Reil on
May 14, 2010 in exchange for introducing us to potential customers valued
at $10,000.
The Company issued 1,000,000 shares of common stock to Metro One Development,
Inc. in trust on May 14, 2010 in exchange for technical knowledge on its
interactive displays valued at $10,000.
On May 14, 2010, the shares of the Company were not trading and there were
no arm's length transactions in the Company shares with an independent party.
As such, a quoted market price or a recent transaction in the Company shares
was not available to estimate fair value. As such, the Company determined the
value of the consulting services on May 14, 2010 was a more reliable measure
of fair value. The value of these services totaling $110,000 is recorded as
general and administrative expenses in the statement of operations.
On April 15, 2011, the Company repaid $30,000 of advances due to a related
party by exchanging 30,000,000 shares of common stock with the Company's Chief
Executive Officer and majority shareholder.
F12
On April 18, 2011, the Company issued a total of 5,000,000 shares of common
stock valued at $5,000 as compensation to a director and the Chief Financial
Officer.
On August 31, 2011, the Company filed a Form S-8 with the SEC registering
150,000,000 shares of the Company's common stock pursuant to the adoption of
a Stock Option Plan on August 30, 2011.
On October 26, 2011, the Company issued 30,000,000 shares of common stock
valued at $3,000,000 as compensation for business development services. The
services are valued based on the closing price of $0.10 per share for the
shares of common stock exchanged for the services.
On October 26, 2011, the Company issued 6,000,000 shares of common stock valued
at $600,000 as compensation for consulting services. The services are valued
based on the closing price of $0.10 per share for the shares of common stock
exchanged for the services.
On October 26, 2011, the Company issued 16,000,000 shares of common stock
valued at $1,600,000 as compensation for design and technical services. The
services are valued based on the closing price of $0.10 per share for the
shares of common stock exchanged for the services.
NOTE 6 - SUBSEQUENT EVENTS
On February 22, 2012, the company issued two promissory notes in the value of
$11,250 each for value received. These notes bear no interest and are payable
on demand by the note holders.
On March 1, 2012 the company entered into a liscence agreement with Cigar and
Spirits Magazine and moved offices to our new California address with Cigar
and Spirits. The agreement grants Innovative the right to market the products
including but not limited to the sales, promotion, and advertising vehicles of
the Magazine. There is no specific rent terms included in the license
agreement, but verbally they have agreed to allow IPRU to use their office on
an on-going basis free of additional charge.
F13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
We have had no changes in or disagreements with our accountants. None of our
principal independent accountants have resigned or declined to stand for
re-election.
ITEM 9A(T). CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our Chief Executive Officer
and our Chief Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this Annual Report on
Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief
Financial Officer has concluded that our disclosure controls and procedures are
not effective to ensure that information we are required to disclose in reports
that we file or submit under the Securities Exchange Act of 1934 (i) is
recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms, and
(ii) is accumulated and communicated to our management, including our Chief
Executive Officer and our Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure. Our disclosure controls and
procedures are designed to provide reasonable assurance that such information
is accumulated and communicated to our management. Our disclosure controls
and procedures include components of our internal control over financial
reporting. Management's assessment of the effectiveness of our internal control
over financial reporting is expressed at the level of reasonable assurance
that the control system, no matter how well designed and operated, can provide
only reasonable, but not absolute, assurance that the control system's
objectives will be met.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. generally accepted accounting
principles. Our internal control over financial reporting includes those
policies and procedures that:
1. pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect our transactions and dispositions
of our assets;
2. provide reasonable assurance that our transactions are recorded as
necessary to permit preparation of our financial statements in
accordance with generally accepted accounting principles, and that
our receipts and expenditures of our Company are being made only
in accordance with authorizations of our management and our
directors; and
20
3. provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of our
assets that could have a material effect on our financial
statements.
Internal control over financial reporting includes the controls themselves,
monitoring and internal auditing practices and actions taken to correct
deficiencies identified.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an
assessment of the effectiveness of our internal control over financial
reporting as of December 31, 2011. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on
this evaluation, our management concluded that our internal control over
financial reporting was not effective as of December 31, 2011.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to the temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual
report.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting, which
are included within disclosure controls and procedures, that occurred during
our fiscal quarter ended December 31, 2011 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION.
None.
21
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth the name, age, positions and offices that each
director and officer have held for the past five years as of December 31, 2011.
Members of the Board are elected and serve for one year terms or until their
successors are elected and qualify. Our executive officers are elected
by and serve at the pleasure of our Board of Directors. There are no family
relationships among our directors and executive officers.
Name Age Position
------------------------------------------------------------------------------
Doug Clark 47 President, Chairman, Chief
Executive Officer and Director
Robert McLean 43 Chief Financial Officer
Grant Stummer 46 Director
------------------------------------------------------------------------------
BOARD OF DIRECTORS
Our board of directors consists of only one class. All of the directors will
serve until the next annual meeting of stockholders and until their successors
are elected and qualified, or until their earlier death, retirement,
resignation or removal.
The following is information on the business experience of our directors and
executive officers:
BIOGRAPHIES OF EXECUTIVE OFFICERS AND DIRECTORS
Doug Clark has been our President, Chief Executive Officer and Chairman of the
Board since April 2009. Mr. Clark devotes a minimum of 40% of his working
time to the affairs of our Company. Mr. Clark graduated top of his class in
Engineering Tool Design at George Brown College and is a current member of
OACETT. Mr. Clark worked in engineering for several mold makers before starting
DC Design Inc,a product design and manufacturing firm, 14 years ago. Mr. Clark
has created numerous automotive, medical, office and consumer projects from
concept to production.
Robert McLean has been our Chief Financial Officer since
April 2009. Mr. McLean devotes a minimum of 25% of his working time to the
affairs of our Company. Mr. McLean graduated with an honors degree from
University of Toronto in 1995. Robert has worked for a
brokerage firm where he had multiple roles as VP of Operations, compliance and
also managed his own book of business. He completed his PDO
(Partners, Directors and Senior Officers Qualifying exam) shortly thereafter.
These qualifications from the financial industry qualified Robert for the
position as CFO. Mr. McLean moved from the financial business and for the
past eight years has owned Charbuster Inc., a national brand of outdoor living
products.
22
Grant Stummer, has been our director since April 2009. Mr. Stummer is CEO of
Six Points Plastics, a plastic injection tool and part manufacturer. Since 1992
he has worked his way to co-owner of the Mississauga based company. This niche
ISO9001 certified plastics company produces complex components that are used
worldwide in many industries. In the last 15 years he has tripled his sales
and has implemented systems that have increased his profitability as a lean
manufacturer. Mr. Stummer's knowledge and contacts in the plastic industry
offer our company insight and direction from the industry.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
We are not aware of any material legal proceedings that have occurred within
the past five years concerning any director, director nominee, or control
person which involved a criminal conviction, a pending criminal proceeding,
a pending or concluded administrative or civil proceeding limiting one's
participation in the securities or banking industries, or a finding of
securities or commodities law violations.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We do not have any securities registered under Section 12 of the Exchange
Act, as amended. Accordingly, our directors, executive officers, and
stockholders beneficially owning more than 10% of our common stock are not
required to comply with the reporting requirements of Section 16(a) of the
Exchange Act.
CODE OF ETHICS
We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. We will provide a
copy of our Code of Ethics to any person, free of charge, upon written
request to Doug Clark at Innovative Product Opportunities Inc., 7235-88077
Belshire Gate, Mississauga, Ontario, Canada L5N 8M1.
PROCEDURE FOR NOMINATING DIRECTORS
There have been no material changes to the procedures by which security
holders may recommend nominees to our Board of Directors.
The Board of Directors will consider candidates for director positions that
are recommended by any of our stockholders. The recommended candidate should
be submitted to us in writing addressed to 28 ARGONAUT, Suite 140 ALISO VIEJO
CALIFORNIA 92656
.. The recommendation shall include the following information:
name of candidate; address, phone, and fax number of candidate; a statement
signed by the candidate certifying that the candidate wishes to be considered
for nomination to our Board of Directors and stating why the candidate
believes that he or she meets the director qualification criteria and would
otherwise be a valuable addition to our Board of Directors; a summary of the
candidate's work experience for the prior five years and the number of shares
of our stock beneficially owned by the candidate.
23
The Board will evaluate the recommended candidate and will determine whether
or not to proceed with the candidate in accordance with our procedures. We
reserve the right to change our procedures at any time to comply with the
requirements of applicable laws.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad corporate
policies and reviewing our overall performance rather than day-to-day
operations. The Board's primary responsibility is to oversee management of
our company and, in so doing, serve the best interests of our company and our
stockholders. Our full Board of Directors performs all of the functions
normally designated to an Audit Committee, Compensation Committee and
Nominating Committee.
Although our Board does not have a separately-designated standing Audit
Committee, our full Board of Directors performs the functions usually
designated to an Audit Committee. As of December 31, 2011 Mr. McLean has
been designated as the Board's 'audit committee financial expert' as
defined in Item 407(d)(5)(ii) of Regulation S-K. We have determined that
Mr. McLean is 'independent' as independence for audit committee members
is defined in Rule 5605 of the Nasdaq Marketplace Rules and Rule 10A-3 of
the Securities Exchange Act of 1934. Mr. McLean's experience and
background has provided him with an understanding of accounting
principles generally accepted in the United States of America and
financial statements prepared thereon. Mr. McLean has experience
preparing, auditing, analyzing and evaluating financial statements that
present a breadth and level of complexity of accounting issues comparable
to the issues that can reasonably be expected to be raised by our financial
statements. Mr. McLean has an understanding of audit committee functions.
24
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
Summary Compensation Table
--------------------------------------------
Name and Year Base Bonus Dollar Value
Principal Ended Salary of Total
Position December Compensation
31, 2011 for the
and 2010 Covered
Fiscal
Year
$ $ $
--------------------------------------------
Doug Clark,
Principal
Executive
Officer,
President,
Chairman
and
Director 2011 5,000 -0- 5,000
2010 -0- -0- -0-
Robert McLean,
Principal
Accounting
Officer 2011 2,500 -0- 2,500
2010 -0- -0- -0-
Grant Strummer,
Director 2011 2,500 -0- 2,500
2010 -0- -0- -0-
--------------------------------------------
As of March 30, 2012, we have not entered into any written employment
agreements with our Principal Executive Officer and Principal Accounting
Officer, or any other employee. We have, however, verbally agreed with
Mr. Clark that employment compensation with base salary and bonuses will
be negotiated and determined once our operations begin.
On April 18, 2011, Principal Executive Officer, President, Chairman and
Director received compensation of $5,000. In lieu of cash payment, the
advances due to related party on the balance sheet of the Company were
increased by $5,000.
On April 18, 2011, the Company issued a total of 2,500,000 shares of common
stock valued at $2,500 as compensation to the Principal Accounting Officer.
25
On April 18, 2011, the Company issued a total of 2,500,000 shares of common
stock valued at $2,500 as compensation to the Director.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
No equity awards were granted during the fiscal year ended December 31, 2011
to our named executive officer.
We do not have any qualified or non-qualified defined benefit plans or
nonqualified defined contribution plans or other deferred compensation plans.
There are no contracts, agreements, plans or arrangements that provide for
payment to our named executive officer following or in connection with the
resignation, retirement or termination of the named executive officer, a change
in control of our Company, or a change in the named executive officer's
responsibilities following a change in control.
DIRECTOR COMPENSATION
At the present time, there are no verbal or written contracts, agreements,
plans or arrangements to compensate our directors for their services on our
board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2011, Doug Clark and Grant Stummer
served as our directors. We do not have a separately standing compensation
committee and our board of directors did not perform similar functions as there
was no executive compensation paid from our inception on April 3, 2009 through
the end of our most recently completed fiscal year ended December 31, 2011.
Our board of directors performs the functions of a compensation committee,
however as of March 30, 2012, the board of directors has not set any
compensation.
During the fiscal year ended December 31, 2011, none of our executive officers:
* served as a member of the compensation committee (or other board committee
performing equivalent functions or, in the absence of any such committee,
the entire the board of directors) of another entity, one of whose
executive officers served as a member of our board of directors;
* served as a director of another entity, one of whose executive officers
served as a member of our board of directors; or
* served as a member of the compensation committee (or other board committee
performing equivalent functions or, in the absence of any such committee,
the entire the board of directors) of another entity, one of whose
executive officers served as a member of our board of directors.
26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 30, 2012, as
to shares of our common stock beneficially owned by: (1) each person who is
known by us to own beneficially more than 5% of our common stock, (2) our named
executive officer listed in the summary compensation table, (3) each of our
directors and (4) all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the
SEC. Except as indicated by the footnotes below, we believe, based on the
information furnished to us, that the persons and entities named in the table
below have sole voting and investment power with respect to all shares of
common stock that they beneficially own, subject to applicable community
property laws.
Name and Address of Common Shares Percent
of Beneficial Owner (1) Beneficially of Class (2)
Owned
------------------------ ---------------- ------------
Doug Clark 50,000,000 42.4 %
Robert McLean 2,500,000 2.1 %
Grant Stummer 2,500,000 2.1 %
Directors and executive officers
as a group (3 persons) 55,000,000 46.6 %
(1) The address of all individual directors and executive officers is c/o
Innovative Product Opportunities Inc., 28 ARGONAUT, SUITE 140
ALISO VIEJO CALIFORNIA 92656
(2) The number of shares of common stock issued and outstanding on
March 30, 2012 was 118,000,000 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 2011 and 2010, we received advances from our
Chief Executive Officer, President, Chairman of the Board and founder, Doug
Clark, totaling $61,649 and $33,202, respectively, to pay for incorporation
costs and services.
27
Our policy with regard to transactions with related persons or entities is
that such transactions must be on terms no less favorable than could be
obtained from non-related persons. The above-described transactions were
conducted at arm's length and on terms no less favorable than those that
could be obtained from non-related person.
The above related party transactions are not necessarily indicative of
the amounts that would have been incurred had a comparable transaction been
entered into with an independent party. The terms of these transactions were
more favorable than would have been attained if the transactions were
negotiated at arm's length.
DIRECTOR INDEPENDENCE
As of March 30, 2012, Doug Clark, and Grant Stummer serve as our directors.
Mr. Clark is not an independent director. Mr. Stummer is an 'independent'
director, as defined under the standards of independence set forth in the
NASDAQ Marketplace Rules. We have our common stock quoted on the
Over-the-Counter Bulletin Board, or OTCBB. The OTCBB does not require that
a majority of our board
of directors be independent.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Fees related to services performed by De Joya Griffith & Company, LLC in the
years ended December 31, 2011 and 2010 were as follows:
2011 2010
Audit Fees $ 15,750 $ 5,250
Audit-Related Fees 0 0
Tax Fees 0 0
All Other Fees 750 0
Total $ 16,500 $ 5,250
Pre-Approval Policies
The Board's policy is to pre-approve all audit services and all non-audit
services before they commence, including the fees and terms thereof, to be
provided by our independent auditor. All of the services provided during
the fiscal year ended December 31, 2011 were pre-approved. No audit, review or
attest services were approved in accordance with Section 2-01(c)(7)(i)(C)
of Regulation S-X during the fiscal year ended December 31, 2011.
During the approval process, the Board considered the impact of the types
of services and the related fees on the independence of the independent
registered public accounting firm. The services and fees were deemed
compatible with the maintenance of that firm's independence, including
compliance with rules and regulations of the SEC. Throughout the year,
the Board will review any revisions to the estimates of audit fees
initially estimated for the engagement.
28
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
a. The following documents are filed as part of this annual report on
Form 10-K:
1. FINANCIAL STATEMENTS
The following documents are filed in Part II, Item 8 of this annual
report on Form 10-K:
Report of Independent Registered Public Accounting Firm
Balance Sheets at December 31, 2011 and 2010
Statements of Operations for the years ended December 31, 2011 and 2010, and
from inception (April 3, 2009) through December 31, 2011.
Statement of Stockholders' Equity (Deficit) from inception (April 3, 2009)
through December 31, 2011
Statements of Cash Flows for the years ended December 31, 2011
and 2010, and from inception (April 3, 2009) through December 31, 2011.
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as they are not
required, not applicable, or the required information is otherwise
included.
3. EXHIBITS
The exhibits listed below are filed with or incorporated by reference in
this annual report on Form 10-K.
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
3.1 Certificate of Incorporation, dated April 3, 2009 (included as
Exhibit 3.1 to the Form S-1 filed June 22, 2010, and incorporated
herein by reference).
3.2 Bylaws, dated April 3, 2009 (included as Exhibit 3.2 to the Form S-1
filed June 22, 2010, and incorporated herein by reference).
4.1 Specimen Stock Certificate (included as Exhibit 4.1 to the Form S-1
filed June 22, 2010, and incorporated herein by reference).
10.1 Innovative Product Opportunities Inc. Trust Agreement (included as
Exhibit 10.1 to the Form S-1 filed June 22, 2010, and incorporated
herein by reference).
29
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350,as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Innovative Product Opportunities Inc.
Date: March 30, 2012 By:/s/ Doug Clark
--------------------------
Doug Clark, Principal Executive Officer,
President and Chairman of the Board
Date: March 30, 2012 By:/s/ Robert McLean
--------------------------
Robert McLean, Principal Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
date indicated.
SIGNATURE TITLE DATE
By:/s/ Doug Clark March 30, 2012
------------------------- Principal Executive Officer, -----------------
Doug Clark President and Chairman of the Board
By:/s/ Robert McLean Principal Accounting Officer March 30, 2012
------------------------- -----------------
Robert McLean
30
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Doug Clark, certify that:
1. I have reviewed this annual report of Innovative Product Opportunities Inc.;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 30, 2012
By: /s/ Doug Clark
- -------------------------------------------
Doug Clark Chief Executive Officer,
Principal Executive Officer, and President
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Robert McLean, certify that:
1. I have reviewed this annual report of Innovative Product Opportunities Inc.;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 30, 2012
By: /s/ Robert McLean
- -------------------------------------------
Robert McLean, Chief Financial Officer,
Principal Financial Officer and Principal Accounting Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
Pursuant to section 906 of the Sarbanes Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code), each of the
undersigned officers of Innovative Product Opportunities Inc, a Delaware
corporation (the "Company"), does hereby certify, to such officer's knowledge,
that:
The annual report on Form 10-K for the year ended December 31, 2011 (the "Form
10-K") of the Company fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and the information contained
in the Form 10-K fairly presents, in all material respects, the financial
condition and results of operations of the Company.
DATE: March 30, 2012
/s/ Doug Clark
- -----------------------------------------
Doug Clark, Chief Executive Officer,
Principal Executive Officer, President,
Chairman of the Board and Director