U.S. Securities and Exchange Commission
Washington, D.C. 20549
Second Amendment
FORM 10-SB/A
GENERAL FORM FOR THE REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC.
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(Name of Small Business Issuer in its Charter)
Colorado 74-2929034
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(State of Incorporation) (IRS Employer Identification No.)
100 South Orange Ave., Ste. 100, Orlando, FL 32801
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number,( 407 ) 481 - 8900
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Securities to be registered under Section 12(b) of the Act: None
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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- --------------------------------- -------------------------------------
Securities to be registered under Section 12(g) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Common Stock, par value $0.0001 OTC BB
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- --------------------------------- -------------------------------------
<PAGE>
PART I
Item 1. Description of Business.
(a) Forward-looking Statements. Certain statements in this Form 10SB
Registration Statement, particularly under Items 1 and 2, constitute
"forward-looking statements" with the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve known
and unknown risks, uncertainties, and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements, expressed or implied by
the forward-looking statements.
(b) Business Development. Innovative Holdings & Technologies, Inc.
(the "Company") was incorporated under the laws of the State of Colorado on
January 7, 1987. The Company has one operating subsidiary named Xtreme Telemetry
Systems, Inc. (XTS), a Florida corporation.
(c) Business of Issuer. The company is in the business of acquiring,
creating and developing high technology companies with promising new
technologies and applications. The Company does not intend to combine with
private companies in manners which may cause it to be deemed an investment
company subject to the Investment Company Act of 1940.
In January, 1999, the Company, through its XTS subsidiary, commenced the
development of the Xtreme Telemetry System, a high technology data acquisition
and delivery system for broadcast television and Internet applications. The XTS
System incorporates exclusive sensor technologies to gather data from
biological, mechanical and environmental sources. This data is then wirelessly
transmitted from its source, by way of XTS's proprietary software and hardware,
to broadcast applications on TV or the Internet. This broadcast information is
graphically displayed on TV or Internet screens, which also serves as a
"billboard", offering unique opportunities for advertisers and sponsors to
display their messages.
In October 1999, the Company began the development of a new Internet sports and
entertainment network that will offer alternative sports information and
entertainment. The concept will incorporate the XTS System telemetry data, along
with special events, celebrity features, e-commerce, chat rooms, web cams,
virtual games and news and information.
The Company is currently in discussions with a number of sports entities
worldwide for the purpose of telemetry data acquisition (via XTS) and broadcast
delivery including soccer, football, auto racing, golf and extreme sports.
Anticipated revenues will be generated through sponsorship, advertising and
sales of telemetry content to TV and Internet providers.
The Company will offer content and information similar to many sports and
entertainment venues on the Internet, but will be unique in offering XTS's
telemetry to a global audience. It is management's belief that there is
currently no direct competition to the Company's telemetry technology.
The Company is developing propriety software and hardware applications which
have not yet been patented or copyrighted.
Employees
As of October 20, 1999, the Company employed three full employees, and uses the
services of six consulting firms/individuals on an as-needed basis.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis should be read in conjunction
with "Selected Consolidated Financial Data" and the Company's consolidated
Financial Statements and Notes thereto included elsewhere in this document.
Overview
Since its inception in 1987, the Company's initial purpose was to conduct
offerings of its securities to raise capital to acquire businesses in various
industries. For the period from January 9, 1987 (inception) to September 30,
1990, the Company incurred a total net loss of $1,840,993. During this period
the Company devoted substantially all of its efforts to establish and organize a
television cablecast facility. However, by the end of 1990 the operations of the
Company ceased.
From December 1990 through October 1997, the Company did not operate any
businesses and was inactive.
In November of 1997, the Company changed its name to Innovative Holdings &
Technologies, Inc. In the second quarter of 1998, the Company signed an
agreement to acquire BioCam Company, Inc. (BioCam), a developer of telemetry
technology in the amount of $1,000,000. The company issued convertible preferred
stock and restricted common stock to the BioCam shareholders in exchange for all
of their issued and outstanding BioCam stock. The Company began supporting the
operations of BioCam financially and funded approximately $350,000, in 1998. The
BioCam shareholders failed to perform their obligations under the terms and
conditions of the business combination agreement. The Company terminated the
agreement.
On January 8, 1999, the Company incorporated Xtreme Telemetry Systems, Inc.
(Xtreme). Xtreme is developing a product on the cutting edge of communications
technology. Xtreme is finalizing the development of a real time telemetric
monitoring device which will be marketed initially in the sports and
entertainment industries. The device will monitor performance and transmit the
data by broadcast or over the Internet. In September, 1999, the Company secured
the services of specialists in computer software development. The alpha-beta
testing of the software commenced in the fourth quarter of 1999. The products
under development are expected to be completed by January, 2000.
Marketing efforts will commence by January, 2000. Revenues are anticipated
through the sale of advertising at Xtreme's web site and through the promotion
of sponsorships by organizations and others related to the sports and
entertainment industries.
Results of Operations
The following table sets forth, for the periods indicated, certain items from
the Company's Consolidated Statements of Operations, expressed as a percentage
of total expenses.
Year Ended December 31
Eight Months Ended
August 31, 1999 1998 1997
Revenues 0.0% 0.0% 0.0%
Expenses:
General and Administrative 70.9% 24.0% 100.0%
Research and Development 27.6% 74.8% -
Interest Expense 1.5% 0.2% -
Total Expenses 100.0% 100.0% 100.0%
Net Loss 100.0% 100.0% 100.0%
<PAGE>
Revenues
The Company had no revenues for the eight months ended August 31, 1999 and for
the years ended December 31, 1998 and 1997. Revenues are expected to commence
during April, 2000 because marketing strategies of the completed real time
telemetry products will begin at the onset of 2000.
General and Administrative
General and administrative expenses have increased from $111,641 in 1998 to
$198,662 for the nine months ended in August 31, 1999. The increase in these
expenses resulted from the development operations of Xtreme and Company's
dedicated support to develop their business operations. The reduction of general
and administrative expenses in 1998 was primarily attributable to a decrease in
consulting fees.
Research and Development
Research and development expenses decreased from $348,250 in 1998 to $77,421 for
the nine months ended in August 31, 1999. The decrease was largely due to
expenditures made for consulting services related to the development of the
telemetry system in the amount of $348,250, in 1998. Research and development
expenses are not recurring expenses. Estimated research and development costs
through the completion of the telemetry system in April 2000 will be
approximately $500,000.
Interest Expense
Interest expense is due from personal loans made to the company. The interest
amounts from 1997 to 1998 have not varied considerably.
Liquidity and Capital Resources
The Company requires capital principally for the financing of operations and the
development of their wholly owned subsidiary, Xtreme Telemetry Systems, Inc. To
date, the company has financed its operations primarily through the sale it's of
equity securities. During 1999 and 1998, the Company generated $450,000 and
$350,000, respectively, from the sale of its stock. In addition, the Company
received $96,700 from notes and loans. The Company had working capital of
($89,266) as of August 31, 1999, compared to ($248,795) as of December 31, 1998.
This increase was principally the result of increase in cash due to the sale of
stock.
As stated in the Company's Consolidated Financial Statements, the Company's
ability to continue as a going concern is dependent upon sale of stock and
attaining profitable operations. The deficiency in operating cash flows is
expected to continue until such time that the Company begins to generate cash
flows from the telemetry data in the form of advertisement and sponsorship
sales. Operations are expected to begin in April 2000 and the research and
development costs should cease. Until such time, the Company sold stock in the
amount of $500,000 under a subscription receivable. It is expected that these
funds will facilitate the management of the Company's cash flows until the time
it begins to generate cash flows from its operations. There can be no assurance
the additional financing will be attained or that the operations will be
profitable.
<PAGE>
Such inability would have a material adverse effect on the Company's business,
operating results and financial condition.
Net cash used in investing activities was $16,867 for the eight months ended
August 31, 1999. These expenditures primarily related to investments in the
Company's administrative facility. The Company currently has no specific
commitments with regard to capital expenditures with the exceptions of
purchasing computer equipment and sensors. These costs will be approximately
$10,000 in the last quarter of 1999. The Company's future capital requirements
will depend on its ability to acquire complimentary business ventures, products
or technologies.
The Company believes that its current cash balances will not provide the
liquidity necessary to satisfy the Company's working capital needs.
Inflation
Inflation has not had a significant impact on the Company since its inception
nor is it expected to have a significant impact in the foreseeable future.
Impact of Year 2000
The Company understands the impact of the Year 2000 (Y2K) issue. The Y2K issue
will not affect the Company's current internal structure because its internal
computers are used for administrative purposes and they are Y2K compliant. The
Company has hired an outside consultant to develop the software, which provides
real time telemetry that will store and report on data. The outside consultant
has represented and warranted that the software is Y2K compliant.
The Company cannot predict the effect of the Y2K problem on its prospective
customers and third parties. The Company has not yet established any contingency
plans, but will develop such plans as needed once it identifies the scope and
magnitude of any compliance issues with prospective customers and third parties.
There can be no assurance that the systems of other companies on which the
Company's system rely or interface will be timely converted.
Item 3. Description of Property.
The Company owns no real property. It subleases 2,778 square feet of
office space from Metcalf Limited Partnership. The premises are located at 100
South Orange Ave., Suite 300, Orlando, Florida. The lease commenced on July 1,
1999 and ends on the last effective day of the Lease, October 1, 2002, unless
terminated sooner, as set forth in the lease agreement. The monthly rent is
currently $3,472.50.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Table 1 lists the persons who are known to the Company to be the owners
of more than five percent of the Company's equity shares according to the
stockholder list provided by the Company's transfer agent as of November 8,
1999.
(a) Beneficial Ownership of more than 5%.
Table 1.
(1) (2) (3) (4)
Title of Class Name and Address Amount and Nature Percent of
Class
*Common Helmuth Wyzisk 7,392,500 40.1%
Common Trinity Funding 1,666,666 9.2%
Common Bodden & Company 1,666,666 9.2%
Common Multilink Investments 1,666,668 9.2%
<PAGE>
(b) Security Ownership of Management.
Table 2.
(1) (2) (3) (4)
Title of Class Name and Address Amount and Nature Percent of
Class
*Common Helmuth Wyzisk 7,392,500 40.1%
(3) Changes in Control. Management is unaware of any facts that would
effect a change in the control of the Company as of the date of this
Form 10 SB filing.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) Identify Directors and Executive Officers.
The Company's one director is Mr. Helmuth Wyzisk. Mr. Wyzisk is the
President and Chief Executive Officer and his age is 43. Mr. Wyzisk has served
in his present capacities since November 1997. From 1995 through 1997 he served
as the President of Celesta Corporation. Celesta offered financial and other
business services to its customers. Prior to 1995, Mr. Wyzisk was President of
ELF Investments, a company providing contract negotiation and acquisition
services to its customers.
Mr. Peter Quilty is the Secretary and Controller and his age is 43. Mr.
Quilty was employed with the Company in June 1999. Prior to this employment, he
was the Controller for Sound Money Investors and Florida Running, Inc.
magazines.
(b) Identify Significant Employees. The Company has no significant
employees, as that term is defined, other than its executive officers.
(c) Family Relationships. None.
(d) Involvement in Certain Legal Proceedings. None of the Company's
directors, officers, promoters or control persons, if any, during the
past five years was, to the best of the Company's knowledge:
1. A general partner or executive officer of a business that had a
bankruptcy petition filed by or against it either at the time of the
bankruptcy or within the two years before the bankruptcy;
2. Convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
3. Subject to any order, judgement, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his or her involvement in any type of business, securities or
banking activities; and
4. Found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgement has not been reversed, suspended or
vacated.
<PAGE>
Item 6. Executive Compensation.
The Company has two executive officers. Mr. Wyzisk has been paid no
compensation during 1998 and 1999. Mr. Wyzisk was paid executive compensation in
the form of common stock for the years 1994 through 1997 with the issuance of
6,000,000 common shares. This compensation was valued at $300,000 or five cents
per share. The company has granted stock options to its President to acquire up
to Ten Million (10,000,000) common shares for purchase price of $500,000. The
option is exercisable commencing on June 1, 2000 and expires on March 9, 2003.
Item 7. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others.
Except as otherwise set forth in this document, no member of
management, executive officer, director, nominee for a director or security
holder who is known to the Company to own of record or beneficially more than
five percent of any class of the Company's voting securities, nor any member of
the immediate family of any of the foregoing persons, has had any direct or
indirect material interest in any transaction to which the Company was or is to
be a party.
The Company retains the services of a marketing company whose principal
owner is the controlling shareholder of the Company. During 1999, payments of
$20,000 were made to this related company.
(b) Certain Business Relationships.
During 1997 and 1998 and prior to July 1, 1999 the Company's operations
were based at the offices of a shareholder. Payments were made to this
shareholder for rent, administrative and miscellaneous services. During 1998,
50,000 shares were issued to and $53,800 was paid to this shareholder. For the
eight months ended August 31, 1999, payments in the aggregate of $60,387 were
made to this shareholder.
On March 10, 1998, the Company granted an option to purchase 10,000,000 shares
of its common stock to the controlling shareholder at a price of at $.05 per
share. On March 10, 1998 the Company granted an option to purchase 2,000,000
shares of its common stock to a shareholder at a price of $.05 per share. On
March 10, 1998, the Company granted an option to purchase 8,000,000 shares of
its common stock to a consultant of the Company at a price of $.05 per share.
The options are exercisable commencing on June 1, 2000 and expire on March 9,
2003.
(c) Indebtedness of Management.
No member of the Company's management is or has been indebted to the
Company since the beginning of the Company's last fiscal year.
(d) Transactions with Promoters.
The Company's promoters have not received, directly or indirectly,
anything of value from the Company, nor are they entitled to receive anything of
value from the Company.
Item 8. Description of Securities.
(a) Common or Preferred Stock.
The Company is authorized to issue Five Hundred Million (500,000,000)
shares of capital stock of which Four Hundred Fifty Million (450,000,000) is
common stock, par value $0.0001 per share and Fifty Million (50,000,000) is
preferred stock, par value $0.001 per share. As of August 31, 1999, there are
18,054,884 shares of common stock issued and outstanding. On October 19, 1999,
the company was authorized to issue 250,000 shares of 1999 Series "A"
convertible preferred stock. The 1999 Series "A" preferred stock will entitle
the holder to one vote per share. The shares are convertible into common stock
at the option of the holder, one share of preferred stock for one share of
common stock. The conversion rate will not be affected by stock recapitalization
actions.
(b) Debt Securities.
The company has no outstanding debt securities.
(c) Other Securities To Be Registered.
The Company is only registering its common stock securities.
<PAGE>
PART II
Item 1. Market for Common Equity and Related Stockholder Matters.
(a) Market Information.
The Company's common stock trades Over-the-Counter (OTC) on the OTC
Bulletin Board under the symbol IHTL. Table 3 sets forth the high and low bid
information for each fiscal quarter within the last two years. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
<PAGE>
Table 3.
Bid Information
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Fiscal Quarter Ended High Low
- --------------------------------------------------------------------------------
September 30, 1999 1.02 0.16
June 30, 1999 0.84 0.375
March 31, 1999 1.22 0.325
December 31, 1998 0.78 0.27
September 30, 1998 0.79 0.30
June 30, 1998 0.75 0.08
March 31, 1998 0.17 0.09
December 31, 1997 0.28 0.01
September 30, 1997 0.32 0.09
- --------------------------------------------------------------------------------
(b) Holders.
The Company has 2,234 active shareholders of its common stock as of
August 31, 1999 holding 18,054,884 common shares.
(c) Dividends.
No dividends have been declared or paid to date and none are expected
to be paid in the forseeable future. There are no restrictions imposed on the
Company which limit its ability to declare or pay dividends on its common stock.
Item 2. Legal Proceedings.
The Company is not a party to any pending or threatened legal
proceedings.
Item 3. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
There have been no changes or disagreements with accountants on
accounting or financial disclosure during the Company's two most recent fiscal
years.
Item 4. Recent Sales of Unregistered Securities.
In 1997, the Company exchanged 774,880 shares of its restricted common stock to
an entity affiliated with the Company's controlling shareholder for repayment of
a loan in the amount of $96,800.
During 1998, the Company issued 9,450,000 shares of restricted common stock for
the repayment of accrued expenses in the amount of $472,500. These accrued
expenses related to services performed by stockholders of the Company for the
reorganization and reactivation of the Company. The services were valued at fair
market value based upon either the open market closing price or a board of
directors designation as of the date of each respective transaction.
In May 1998, the Company issued 20,000,000 convertible preferred shares in
connection with a business combination transaction whereby it sought to acquire
all of the issued and outstanding stock of BioCam Company, Inc. (BioCam), a
Florida corporation. In July 1998, the Company converted the preferred shares to
4,200,000 shares of its restricted common stock. In July 1999, this transaction
was terminated due to the failure of the BioCam shareholders to perform their
contractual obligations. The 4,200,000 shares were canceled.
The Company issued 50,000 and 100,000 shares of its restricted common stock in
1999 and 1998, respectively, to individuals as compensation in connection with
its reorganization and reactivation of the Company. These transactions were
valued at $10,000 and $5,000, respectively, which was the fair market value
based upon either the open market closing price or a board of directors
designation as of the date of each individual's involvement with the Company.
The above securities were issued pursuant to Section 4(2)of the Securities Act
of 1933.
<PAGE>
On March 3, 1998 the Company sold 1,000,000 common shares pursuant to Regulation
D, Rule 504 for a total price of $100,000. On September 14, 1998, the Company
sold 250,000 shares of common stock pursuant to Section 4(2) of the Securities
Act of 1933. On January 8, 1999, the Company sold 850,000 common shares for
$450,000 pursuant to Regulation D, Rule 504.
Item 5. Indemnification of Directors and Officers.
Article 7 of the Company's Articles of Incorporation provide that the
Company may indemnify any director, officer, employee, fiduciary, or agent of
the Company to the full extent permitted by the Colorado Corporation Code as in
effect at the time of the conduct by the person.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted for directors, officers and
controlling persons of the Company, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy and is
therefore, unenforceable.
PART F/S
Financial Statements.
Set forth below are the audited financial statements for the Company
for the period ending August 31, 1999 and unaudited financial statements for the
period ending September 30, 1999. The following financial statements are
attached to this report and filed as a part of it.
<PAGE>
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1999
AND THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<PAGE>
TABLE OF CONTENTS
Page
----
Independent Auditors' Report.......................................1
Consolidated Financial Statements
Consolidated Balance Sheets......................................2
Consolidated Statements of Operations............................3
Consolidated Statements of Changes
in Stockholders' Equity (Deficit)................................4
Consolidated Statements of Cash Flows............................5
Notes to Consolidated Financial Statements.........................6-12
<PAGE>
DiRocco & Dombrow, P.A.
Certified Public Accountants and Consultants
3601 Commercial Blvd., Suite 22
Fort Lauderdale, FL 33309
Tel. (954) 731-8181
Fax (954) 739-1054
November 19, 1999
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Innovative Holdings & Technologies, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Innovative
Holdings & Technologies, Inc. and Subsidiary (a State of Colorado corporation)
at August 31, 1999 and at December 31, 1998 and 1997 and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for the eight months ended August 31, 1999 and years ended
December 31, 1998 and 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes, examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Innovative Holdings
& Technologies, Inc. and Subsidiary at August 31, 1999 and at December 31, 1998
and 1997, and the results of its operations and cash flows for the eight months
ended August 31, 1999 and the years ended December 31, 1998 and 1997 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 15 to
the consolidated financial statements, the Company's significant operating
losses raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 15. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
DiRocco & Dombrow, P.A.
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
Year Ended December 31,
August 31, ---------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current assets
Cash $ 133,857 $ 4,303 $ -
Prepaid expenses 25,000 - -
---------- ---------- ----------
Total current assets 158,857 4,303 -
Investments - 1,000,000 -
Property and equipment 16,867 - -
Other assets 3,473 - -
---------- ---------- ----------
Total assets $ 179,197 $1,004,303 $ -
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued
expenses $ 21,533 $ 18,148 $ 472,500
Withholding taxes payable 164,890 163,250 163,250
Notes payable 40,000 40,000 -
Due to affiliate 21,700 31,700 -
---------- ---------- ----------
Total current liabilities 248,123 253,098 635,750
Long-term debt
Note payable 25,000 25,000 -
---------- ---------- ----------
Total liabilities 273,123 278,098 -
---------- ---------- ----------
Stockholders' equity (deficit)
Preferred Stock, $001 par value.
50,000,000 shares authorized
no shares issued and
outstanding, respectively - - -
Common stock, $.0001 par value,
450,000,000 shares authorized,
18,054,884, 21,254,884 and
6,254,884 shares issued
and outstanding, respectively 1,806 2,126 626
Additional paid-in capital 2,535,100 3,074,780 1,248,780
Deficit (2,630,832) (2,350,701) (1,885,156)
---------- ---------- ----------
Total stockholders' equity (deficit) ( 93,926) 726,205 ( 635,750)
---------- ---------- ----------
Total liabilities and stockholders' equity $ 179,197 $1,004,303 $ -
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Eight Months Ended
August 31, Year Ended December 31,
------------------ ---------------------------
1999 1998 1997
---------- ---------- ----------
Expenses
General and administrative $ 198,662 $ 111,641 $ 172,500
Research and development 77,421 348,250 -
Interest expense 4,048 5,654 -
---------- ---------- ----------
Total expenses 280,131 465,545 172,500
---------- ---------- ----------
Net loss $( 280,131) $( 465,545) $( 172,500)
========== ========== ==========
Basic loss per share $( 0.016) $( 0.024) $( 0.028)
========== ========== ==========
Diluted loss per share $( 0.014) $( 0.022) $( 0.028)
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Eight Months Ended
August 31, Year Ended December 31,
------------------ ---------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows used by operating activities:
Net loss $( 280,131) $( 465,545) $( 172,500)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Stockholder services credited
to capital 10,000 5,000 -
(Increase) decrease in:
Prepaid expenses ( 25,000) - -
Other assets ( 3,473) -
Increase (decrease) in:
Accounts payable and accrued
expenses 3,385 18,148 172,500
Withholding taxes payable 1,640 -
---------- ---------- ----------
Net cash used by operating
activities ( 293,579) ( 442,397) -
---------- ---------- ----------
Cash flows used by investing activities:
Purchases of property and equipment ( 16,867) - -
---------- ---------- ----------
Net cash used by investing
activities ( 16,867) - -
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from notes payable - 65,000 -
Proceeds from affiliate - 31,700 -
Repayment to affilate ( 10,000) - -
Proceeds from issuance of stock 450,000 350,000 -
---------- ---------- ----------
Net cash provided by financing
activities 440,000 446,700 -
---------- ---------- ----------
Increase in cash 129,554 4,303 -
Cash at beginning of year 4,303 - -
---------- ---------- ----------
Cash at end of year $ 133,857 $ 4,303 $ -
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Total
Shares of Shares of Additional Stockholder's
Preferred Common Paid-In Accumulated Equity
Stock Stock Amount Capital (Deficit) (Deficit)
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 -- 5,480,004 $ 548 $ 1,152,058 $(1,712,656) $ (560,050)
Issuance of stock for
repayment of debt -- 774,880 78 96,722 -- 96,800
Net loss for the year (172,500) (172,500)
----------- ----------- ----------- ----------- ----------- -------------
Balance at December 31, 1997 -- 6,254,884 626 1,248,780 (1,885,156) (635,750)
Issuance of stock for
repayment of accrued expenses -- 9,450,000 945 471,555 -- 472,500
Issuance of convertible
preferred stock for investment 20,000,000 -- 20,000 980,000 -- 1,000,000
Conversion of preferred stock
to common stock (20,000,000) 4,200,000 (19,580) 19,580 -- --
Issuance of stock for services -- 100,000 10 4,990 -- 5,000
Issuance of stock in connection
with March 2, 1998 offering -- 1,000,000 100 99,900 -- 100,000
Issuance of stock -- 250,000 25 249,975 -- 250,000
Net loss for the year -- -- -- -- (465,545) (465,545)
----------- ----------- ----------- ----------- ----------- -------------
Balance at December 31, 1998 -- 21,254,884 2,126 3,074,780 (2,350,701) 726,205
Cancellation of stock related
to investment -- (4,200,000) (420) (999,580) -- (1,000,000)
Issuance of stock for services -- 50,000 5 9,995 -- 10,000
Issuance of stock in connection
with January 8, 1999 offering -- 950,000 95 449,905 -- 450,000
Net loss for the eight months -- -- -- -- (280,131) (280,131)
----------- ----------- ----------- ----------- ----------- -------------
Balance at August 31, 1999 -- 18,054,884 $ 1,806 $ 2,535,100 $(2,630,832) $ (93,926)
=========== =========== =========== =========== =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
------------
Innovative Holdings and Technologies, Inc. (the "Company") was incorporated
in the State of Colorado in 1987 as Celesta Corporation. The Company's
purpose is to raise capital by sales of its' common stock in registered
security offerings for the acquisition of businesses. The Company's office
is located in Orlando, Florida.
Subsidiary
----------
On January 8, 1999, the Company incorporated Xtreme Telemetry Systems, Inc.
(Xtreme) in the State of Florida and is its only shareholder. The
transaction was accounted for by the purchase method of accounting for
business combinations.
The subsidiary is in the business of designing, developing, producing and
selling telemetric sensor and communication products and services. The
subsidiary is in the development stage.
Consolidation Policy
--------------------
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. Intercompany transactions and
balances have been eliminated in consolidation.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Expenditures for maintenance
and repairs are charged to expense as incurred. Depreciation is calculated
on a straight-line basis over estimated useful lives of the related assets
as follows:
Years
------
Furniture 7 - 10
Computers 5 - 7
Depreciation expense was not recorded since the property and equipment was
only in service during August, 1999.
Loss Per Share
--------------
Basic loss per share excludes any dilutive effects of stock options. Basic
loss per share is computed using the weighted-average number of common
shares outstanding during the period. Dilutive loss per share is computed
using the weighted-average number of common shares and the effects of stock
options during the period.
-6-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Organization and Summary of Significant Accounting Policies (Continued)
Summary of Significant Accounting Policies (Continued)
------------------------------------------------------
Income Taxes
------------
The Company accounts for income taxes using the asset and liability method
as required by Statements of Financial Standards No. 109. Deferred income
taxes are recognized for operating losses, if available, to offset federal
income taxes. An allowance is provided if it is more likely than not that
the Company will not realize the benefits of a deferred tax asset. As of
August 31, 1999 and December 31, 1998 and 1997, a valuation allowance has
been provided against the deferred tax asset. See Note 9.
Accounting Estimates
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2. Concentration of Risks
The Company maintains its cash accounts in one commercial bank located in
Orlando, Florida. Accounts in the bank are guaranteed by the Federal
Deposit Insurance Corporation (FDIC) up to $100,000. At various times
throughout the year the Company maintained cash balances in the bank that
exceeded the FDIC limit. As of August 31, 1999, the cash balance exceeded
the FDIC limit.
3. Property and Equipment
August 31, 1999
---------------
Furniture $ 11,867
Computers 5,000
---------
$ 16,867
=========
4. Investment
In 1998, the entered into a business combination agreement whereby it sought
to acquire 100% of the issued and outstanding common stock of BioCam
Company, Inc. (BioCam) by issuing 20,000,000 shares of its preferred stock
and 200,000 shares of its restricted common stock at an agreed upon value of
$1,000,000 and a commitment to incur $350,000 in operating expenses related
to BioCam. In 1998, the Company spent $348,250 in related research and
development costs. The investment is valued at cost because the Company does
not have the ability to exercise significant influence over the subsidiary.
-7-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Withholding Taxes Payable
The Company compensates various individuals for consulting services
rendered by issuing common stock. Back up withholding tax at a rate of 20%
is being computed for these amounts.
6. Notes Payable
Notes payable as of August 31, 1999 and December 31, 1998 consisted of the
following:
August 31, 1999 December 31, 1998
--------------- -----------------
Convertible notes payable
Issued to existing stockholders,
Interest accrues at 12% $40,000 $40,000
Note Payable to an
existing stockholder, interest
accrues at 12% $25,000 $25,000
The convertible notes payable and all accrued interest are convertible into
shares of the Company's common stock. Subsequent to August 31, 1999; 70,000
shares of the Company's common stock was issued for the balance of the debt
including accrued interest.
The note payable of $25,000 plus accrued interest matures on September 26,
2000.
7. Due to Affiliate
The Company receives funding from a related company as working capital is
needed. The related company is wholly owned by the Company's controlling
stockholder.
8. Lease
The Company is subleasing office space which commenced on July 1, 1999 and
expires October 1, 2002. The Company has the right to terminate the
sublease with a 210 day notice to the tenant who is the lessor of the
premises. Rent expense for the eight months ended August 31, 1999 was
$6,945.
Minimum required future rental payments under this lease as of August 31,
1999, are:
1999 $ 13,890
2000 42,365
2001 46,068
2002 39,355
----------
$ 141,678
==========
-8-
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Income Taxes
The total deferred tax assets are as follows:
Net Operating Loss Carryforwards Applicable Tax Rate
----------------------------------- -------------------
Valuation Amount Per
Federal State Total Federal State Allowance Balance Sheet
---------- ---------- --------- ------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Deferred tax assets at
December 31, 1996 $ 549,150 $ 85,008 $ 634,158 34% 5.0% $(634,158) $ -
Changes for the year
ended December 31, 1997 51,680 8,000 59,680 34% 5.0% (59,680) -
---------- ---------- --------- --------- -------------
Deferred tax assets at
December 31, 1997 600,830 93,008 693,838 (693,838) -
Changes for the year
ended December 31, 1998 150,371 23,277 173,648 34% 5.0% (173,648) -
---------- ---------- --------- --------- -------------
Deferred tax assets at
December 31, 1998 751,201 116,285 867,486 (867,486) -
Changes for the eight
months ended
August 31, 1999 90,483 14,007 104,490 34% 5.0% (104,490) -
---------- ---------- --------- --------- -------------
Deferred tax assets at
August 31, 1999 $ 841,684 $ 130,292 $ 971,976 $(971,976) $ -
========== ========== ========= ========= =============
</TABLE>
At August 31, 1999, the Company has net operating loss carryforwards of
$2,605,832. These losses will begin expiring in 2002.
A valuation allowance has been provided against the deferred tax assets at
August 31, 1999 and December 31, 1998 and 1997 since it is likely that the
Company will not realize the benefits of the deferred tax assets.
-9-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Loss Per Share
The following tables sets forth the computation of basic and diluted loss
per share:
Eight Months Ended Year Ended December 31,
August 31, 1999 1998 1997
------------------ ---------- ----------
Numerator:
Numerator for basic
and diluted income
per share-net loss $( 280,131) $( 465,545) $( 172,500)
========== ========== ==========
Denominator:
Denominator of basic
income per share-
weighted average
common shares 17,834,052 19,025,71 6,254,884
Effect of dilutive
securities:
Stock options based
on the treasury stock
method using average
market price 2,857,143 1,904,762 -
---------- ---------- ----------
Denominator of diluted
loss per share 20,691,195 20,930,480 6,254,884
========== ========== ==========
Basic loss per share $( 0.016) $( 0.024) $( 0.028)
========== ========== ==========
Diluted loss per share $( 0.014) $( 0.022) $( 0.028)
========== ========== ==========
11. Common Stock Transactions
During 1998, the Company issued 9,450,000 shares of restricted common stock
for the repayment of accrued expenses in the amount of $472,500. These
accrued expenses related to services performed by stockholders of the
Company for the reorganization and reactivation of the Company. The
services were valued at fair market value based upon either the open market
closing price or a board of directors designation as of the date of each
respective transaction.
In May 1998, the Company converted 20,000,000 shares of convertible
preferred stock in connection with a business combination transaction
whereby it sought to acquire 100% of the issued and outstanding stock of
BioCam Company, Inc. (BioCam), a Florida corporation. In July, 1998, the
Company converted the preferred stock into 4,200,000 shares of its
restricted common stock. In July 1999, this transaction was terminated due
to the failure of BioCam's shareholders to perform their contractual
obligations. The 4,200,000 shares of common stock were subsequently
canceled in 1999.
-10-
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Common Stock Transactions (Continued)
In 1997, the Company exchanged 774,880 shares of its restricted common
stock to an entity affiliated with the Company's controlling shareholder
for repayment of a loan in the amount of $96,800.
The Company issued 50,000 and 100,000 shares of its restricted common stock
in 1999 and 1998, respectively, to individuals as compensation in
connection with its reorganization and reactivation of the Company. These
transactions were valued at $10,000 and $5,000, respectively, which was the
fair market value based upon either the open market closing price or a
board of directors designation as of the date of each individual's
involvement with the Company.
The Company authorized shares of unregistered common stock is, as follows:
700,000 shares issued at $.50 per share on January 8, 1999
250,000 shares issued at $.40 per share on January 8, 1999
250,000 shares issued at $1.00 per share on September 17, 1998
1,000,000 shares issued at $.10 per share on March 3, 1998
The Company's legal counsel issued an opinion stating that the above shares
are exempt from registration under Section 3(b) of the Securities Act of
1993 and 504 of Regulation D.
13. Other Related Party Transactions
The Company retains the services of a marketing company whose principal
owner is a controlling shareholder of the Company. During 1999, payments of
$20,000 were made to this related company.
During 1997 and 1998 and prior to July 1, 1999 the Company's operations
were based at the offices of a shareholder. Payments were made to this
shareholder for rent, administrative and miscellaneous services. During
1998, 50,000 shares were issued to and $53,800 was paid to this
shareholder. For the eight months ended August 31, 1999, payments in the
aggregate of $60,387 were made to this shareholder.
On March 10, 1998, the Company granted an option to purchase 10,000,000
shares of its common stock to the controlling shareholder at a price of at
$.05 per share. The option is exercisable any time after June 1, 2000 and
will expire on March 9, 2003.
On March 10, 1998 the Company granted an option to purchase 2,000,000
shares of its common stock to a shareholder at a price of $.05 per share. .
The option is exercisable any time after June 1, 2000 and will expire on
March 9, 2003.
On March 10, 1998, the Company an option to purchase 8,000,000 shares of
its common stock to a consultant of the Company at a price of $.05 per
share. . The option is exercisable any time after June 1, 2000 and will
expire on March 9, 2003.
-11-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Cash Flow Information
During 1998, the Company issued restricted shares of its common stock as a
repayment of accrued expenses in the amount of $472,500.
During 1997, the Company issued restricted shares of its common stock as a
repayment of debt to a related party in the amount of $96,800.
See Note 11 for further information on the above noted transactions.
15. Going Concern
As shown in the accompanying financial statements, the Company incurred net
losses of $628,381, $117,295 and $172,500 during the eight months ended
August 31, 1999 and for the years ended December 31, 1998 and 1997,
respectively. The Company's current liabilities exceeded its current assets
by $89,266, $248,795, $635,750 at August 31, 1999 and December 31, 1998 and
1997, respectively. The ability of the Company to continue as a going
concern is dependent on the development and marketing of products to be
offered by its subsidiary. In September 1999, the Company contracted a
software developer to design and develop the software. The Company
anticipates the completion of the software by the end of 1999 and expects
to begin generating significant revenues by April, 2000. The expected costs
to complete the software, purchase of hardware and marketing will be
approximately $500,000. These costs will be funded by the issuance of its
common stock in the amount of $500,000 under a subscription agreement dated
November 9, 1999. Of the subscribed amount, $83,000 was collected to date.
The Company feels that the amount from the offering will be sufficient to
fund the completion of the project. The Company will offer additional
shares of its common stock to raise capital on an as needed basis.
-12-
<PAGE>
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<PAGE>
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
ASSETS
1999 1998
---------- ----------
Current assets
Cash $ 80,421 $ 6,752
Prepaid expenses 25,000 -
Due from affiliate 10,000 1,950
---------- ----------
Total current assets 115,241 8,702
Investments - 1,000,000
Property and equipment 16,642 -
Other assets 6,723 -
---------- ----------
Total assets $ 138,606 $1,008,702
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued
expenses $ 9,704 $ 11,778
Withholding taxes payable 165,949 163,250
Notes payable 40,000 40,000
Due to affiliate 31,700 -
---------- ----------
Total current liabilities 247,353 215,028
Long-term debt
Note payable 25,000 25,000
---------- ----------
Total liabilities 272,353 240,028
---------- ----------
Stockholders' equity (deficit)
Preferred stock, $.001 par value,
500,000,000 shares authorized,
no shares issued and
outstanding, respectively - -
Common stock, $.0001 par value,
450,000,000 shares authorized,
18,054,884, 21,254,884 and
6,254,884 shares issued
and outstanding, respectively 1,806 2,126
Additional paid-in capital 2,535,100 3,074,780
Deficit (2,670,653) (2,308,232)
---------- ----------
Total stockholders' equity (deficit) ( 133,747) 768,674
---------- ----------
Total liabilities and stockholders' equity $ 138,606 $1,008,702
========== ==========
-2-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
---------- ----------
Expenses
General and administrative $ 296,159 $ 74,826
Research and development 19,745 348,250
Interest expense 4,048 -
---------- ----------
Total expenses 319,952 423,076
---------- ----------
Net loss ( 319,952) ( 423,076)
Deficit, at beginning of year (2,350,701) (1,885,156)
---------- ----------
Deficit, at end of year $(2,670,653) $(2,308,232)
========== ==========
Basic loss per share $( 0.018) $( 0.022)
========== ==========
Diluted loss per share $( 0.022) $( 0.02)
========== ==========
-3-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
---------- ----------
Cash flows from operating activities:
Net loss $( 319,952) $( 423,076)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation 225 -
Stockholder services credited
to capital 10,000 5,000
(Increase) decrease in:
Prepaid expenses ( 25,000) -
Other assets ( 6,723) -
Increase (decrease) in:
Accounts payable and accrued
expenses ( 8,444) ( 460,722)
Withholding taxes payable 2,699 -
---------- ----------
Net cash used by operating
activities ( 347,195) ( 878,798)
---------- ----------
Cash flows from by investing activities:
Purchases of property and equipment ( 16,867) -
Purchase of investment 1,000,000 (1,000,000)
---------- ----------
Net cash provided (used) by investing
activities 983,133 (1,000,000)
---------- ----------
Cash flows from financing activities:
Proceeds from notes payable - 65,000
Due from affiliate, net ( 10,000) ( 1,950)
Proceeds from issuance of stock 450,000 1,822,500
Cancellation of stock (1,000,000) -
---------- ----------
Net cash provided (used) by financing
activities ( 560,000) 1,885,550
---------- ----------
Net increase in cash 75,938 6,752
Cash at beginning of year 4,303 -
---------- ----------
Cash at end of year $ 80,241 $ 6,752
========== ==========
-4-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
1. Organization and Summary of Significant Accounting Policies
Organization
------------
Innovative Holdings and Technologies, Inc. (the "Company") was incorporated
in the State of Colorado in 1987 as Celesta Corporation. The Company's
purpose is to raise capital by sales of its' common stock in registered
security offerings for the acquisition of businesses. The Company's office
is located in Orlando, Florida.
Subsidiary
----------
On January 8, 1999, the Company incorporated Xtreme Telemetry Systems, Inc.
(Xtreme) in the State of Florida and is its only shareholder. The
transaction was accounted for by the purchase method of accounting for
business combinations.
The subsidiary is in the business of designing, developing, producing and
selling telemetric sensor and communication products and services. The
subsidiary is in the development stage.
Consolidation Policy
--------------------
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. Intercompany transactions and
balances have been eliminated in consolidation.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Expenditures for maintenance
and repairs are charged to expense as incurred. Depreciation is calculated
on a straight-line basis over estimated useful lives of the related assets
as follows:
Years
------
Furniture 7 - 10
Computers 5 - 7
Depreciation expense was $225 and $0 for the nine months ended September
30, 1999 and 1998.
Loss Per Share
--------------
Basic loss per share excludes any dilutive effects of stock options. Basic
loss per share is computed using the weighted-average number of common
shares outstanding during the period. Dilutive loss per share is computed
using the weighted-average number of common shares and the effects of stock
options during the period.
-5-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 30, 1999 AND 1998
1. Organization and Summary of Significant Accounting Policies (Continued)
Summary of Significant Accounting Policies (Continued)
------------------------------------------------------
Income Taxes
------------
The Company accounts for income taxes using the asset and liability method
as required by Statements of Financial Standards No. 109. Deferred income
taxes are recognized for operating losses, if available, to offset federal
income taxes. An allowance is provided if it is more likely than not that
the Company will not realize the benefits of a deferred tax asset. As of
September 30, 1999 and 1998, a valuation allowance has been provided
against the deferred tax asset. See Note 9.
Accounting Estimates
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2. Concentration of Risks
The Company maintains its cash accounts in one commercial bank located in
Orlando, Florida. Accounts in the bank are guaranteed by the Federal
Deposit Insurance Corporation (FDIC) up to $100,000. At various times
throughout the year the Company maintained cash balances in the bank that
exceeded the FDIC limit.
3. Property and Equipment
September 30, 1999
------------------
Furniture $11,867
Computers 5,000
-------
$16,867
=======
4. Investment
In 1998, the Company entered into a business combination agreement whereby
it sought to acquire 100% of the issued and outstanding common stock of
BioCam Company, Inc. (BioCam) by issuing 20,000,000 shares of its preferred
stock and 200,000 shares of its restricted common stock at an agreed upon
value of $1,000,000 and a commitment to incur $350,000 in operating
expenses related to BioCam. In 1998, the Company spent $348,250 in related
research and development costs. The investment is valued at cost because
the Company does not have the ability to exercise significant influence
over the subsidiary.
-6-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 30, 1999 AND 1998
5. Withholding Taxes Payable
The Company compensates various individuals for consulting services
rendered by issuing common stock. Back up withholding tax at a rate of 20%
is being computed for these amounts.
6. Notes Payable
Notes payable as of September 30, consisted of the following:
1999 1998
------- -------
Convertible notes payable
Issued to existing stockholders,
Interest accrues at 12% $40,000 $40,000
Note Payable to an
existing stockholder, interest
accrues at 12% $25,000 $25,000
The convertible notes payable and all accrued interest are convertible into
shares of the Company's common stock. Subsequent to September 30, 1999;
70,000 shares of the Company's common stock was issued for the balance of
the debt including accrued interest.
The note payable of $25,000 plus accrued interest matures on September 26,
2000.
7. Due to Affiliate
The Company receives funding from a related company as working capital is
needed. The related company is wholly owned by the Company's controlling
stockholder.
8. Lease
The Company is subleasing office space which commenced on July 1, 1999 and
expires October 1, 2002. The Company has the right to terminate the
sublease with a 210 day notice to the tenant who is the lessor of the
premises. Rent expense for the nine months ended September 30, 1999 was
$10,418.
Minimum required future rental payments under this lease as of September
30, 1999, are:
1999 $ 10,417
2000 42,365
2001 46,068
2002 39,355
----------
$ 138,205
==========
-7-
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 30, 1999 AND 1998
9. Income Taxes
The total deferred tax assets are as follows:
Net Operating Loss Carryforwards Applicable Tax Rate
--------------------------------- -------------------
Valuation Amount Per
Federal State Total Federal State Allowance Balance Sheet
------- ------- ------- ------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Deferred tax assets at
December 31, 1997 600,830 93,008 693,838 (693,838) -
Changes for the year
ended December 31, 1998 150,371 23,277 173,648 34% 5.0% (173,648) -
------- ------- ------- ------- ------- --------- -------------
Deferred tax assets at
December 31, 1998 751,201 116,285 867,486 (867,486) -
Changes for the nine
months ended
September 30, 1999 103,344 15,998 119,342 34% 5.0% (119,342) -
------- ------- ------- ------- ------- --------- -------------
Deferred tax assets at
September 30, 1999 $854,545 $132,283 $986,828 $ (986,828) $ -
======= ======= ======= ========= =============
</TABLE>
At September 30, 1999, the Company has net operating loss carryforwards of
$2,645,653. These losses will begin expiring in 2002.
A valuation allowance has been provided against the deferred tax assets at
September 30, 1999 and 1998, since it is likely that the Company will not
realize the benefits of the deferred tax assets.
-8-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 30, 1999 AND 1998
10. Loss Per Share
The following tables sets forth the computation of basic and diluted loss
per share as of September 30:
1999 1998
---------- ----------
Numerator:
Numerator for basic
and diluted income
per share-net loss $( 319,952) $( 423,076)
========== ==========
Denominator:
Denominator of basic
income per share-
weighted average
common shares 17,834,052 19,025,718
Effect of dilutive
securities:
Stock options based
on the treasury stock
method using average
market price 2,857,143 1,904,762
---------- ----------
Denominator of diluted
loss per share 20,691,195 20,930,480
========== ==========
Basic loss per share $( 0.018) $( 0.022)
========== ==========
Diluted loss per share $( 0.015) $( 0.020)
========== ==========
11. Common Stock Transactions
During 1998, the Company issued 9,450,000 shares of restricted common stock
for the repayment of accrued expenses in the amount of $472,500. These
accrued expenses related to services performed by stockholders of the
Company for the reorganization and reactivation of the Company. The
services were valued at fair market value based upon either the open market
closing price or a board of directors designation as of the date of each
respective transaction.
In May 1998, the Company issued 20,000,000 shares of convertible preferred
stock in connection with the business combination transaction whereby it
sought to acquire 100% of the issued and outstanding stock of BioCam
Company, Inc. (BioCam), a Florida corporation. In July 1998, the Company
converted the preferred stock for 4,200,000 shares of its restricted common
stock. In July 1999, this transaction was terminated due to the failure of
BioCam's shareholders to perform their contractual obligations. The
4,200,000 shares of common stock were subsequently cancelled in 1999.
-9-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 30, 1999 AND 1998
11. Common Stock Transactions (Continued)
The Company issued 50,000 and 100,000 shares of its restricted common stock
in 1999 and 1998, respectively, to individuals as compensation in
connection with its reorganization and reactivation of the Company. These
transactions were valued at $10,000 and $5,000, respectively, which was the
fair market value based upon either the open market closing price or a
board of directors designation as of the date of each individual's
involvement with the Company.
The Company authorized shares of unregistered common stock is, as follows:
700,000 shares issued at $.50 per share on January 8, 1999
250,000 shares issued at $.40 per share on January 8, 1999
250,000 shares issued at $1.00 per share on September 17, 1998
1,000,000 shares issued at $.10 per share on March 3, 1998
The Company's legal counsel issued an opinion stating that the above shares
are exempt from registration under Section 3(b) of the Securities Act of
1993 and 504 of Regulation D.
13. Other Related Party Transactions
The Company retains the services of a marketing company whose principal
owner is a controlling shareholder of the Company. During 1999, payments of
$20,000 were made to this related company.
During 1997 and 1998 and prior to July 1, 1999 the Company's operations
were based at the offices of a shareholder. Payments were made to this
shareholder for rent, administrative and miscellaneous services. During
1998, 50,000 shares were issued to and $53,800 was paid to this
shareholder. For the nine months ended September 30, 1999, payments in the
aggregate of $60,387 were made to this shareholder.
On March 10, 1998, the Company granted an option to purchase 10,000,000
shares of its common stock to the controlling shareholder at a price of at
$.05 per share. The option is exercisable any time after June 1, 2000 and
will expire on March 9, 2003.
On March 10, 1998 the Company granted an option to purchase 2,000,000
shares of its common stock to a shareholder at a price of $.05 per share.
The option is exercisable any time after June 1, 2000 and will expire on
March 9, 2003.
On March 10, 1998, the Company granted an option to purchase 8,000,000
shares of its common stock to a consultant of the Company at a price of
$.05 per share. The option is exercisable any time after June 1, 2000 and
will expire on March 9, 2003.
-10-
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 30, 1999 AND 1998
14. Cash Flow Information
During 1998, the Company issued restricted shares of its common stock as a
repayment of accrued expenses in the amount of $472,500.
See Note 11 for further information on the above noted transactions.
15. Going Concern
As shown in the accompanying financial statements, the Company incurred net
losses of $319,952 and $423,076 during the nine months ended September 30,
1999 and 1998, respectively. The Company's current liabilities exceeded its
current assets by $132,112 and $206,326 at September 30, 1999 and 1998,
respectively. The ability of the Company to continue as a going concern is
dependent on the development and marketing of products to be offered by its
subsidiary. In September 1999, the Company contracted a software developer
to design and develop the software. The Company anticipates the completion
of the software by the end of 1999 and expects to begin generating
significant revenues by April, 2000. The expected costs to complete the
software, purchase of hardware and marketing will be approximately
$500,000. These costs will be funded by the issuance of its common stock in
the amount of $500,000 under a subscription agreement dated November 9,
1999. Of the subscribed amount, $83,000 was collected to date. The Company
feels that the amount from the offering will be sufficient to fund the
completion of the project. The Company will offer additional shares of its
common stock to raise capital on an as needed basis.
-11-
<PAGE>
PART III
Item 1. Index to Exhibits.
(3) Amendment of Articles of Incorporation of Celesta Corporation
(3) Certificate of Amendment of Articles of Incorporation of
Innovative Holdings & Technologies, Inc.
(3) By-Laws
(27) Financial Data Schedule
(27.1) Financial Data Schedule Interim Financial Statements
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, who are duly authorized.
Dated: March 23, 2000, 2000
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
a Colorado corporation
/s/ Helmuth Wyzisk
- -------------------
Helmuth Wyzisk
President
/s/ Peter Quilty
- -------------------
Peter Quilty
Secretary
Exhibit (3)
Articles of Amendment
Filed with the Colorado Secretary
of State, February, 1998
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is CELESTA CORPORATION.
SECOND: The following amendment to the Articles of Incorporation was adopted on
December 5th, 1997, as prescribed by the Colorado Business Corporation Act, in
the manner marked with an "X" below:
No shares have been issued or Directors elected-Action by incorporators
- ---
X No shares have been issued but Directors Elected-Action by Directors
- ---
Such amendment was adopted by the board of directors where shares have been
- --- issued and shareholder action was not required.
Such amendment was adopted by a vote of the shareholders. The number of
- --- shares voted for the amendment was sufficient for approval.
THIRD: If changing corporate name, the new name of the corporation is INNOVATIVE
HOLDINGS & TECHNOLOGIES, INC.
FOURTH: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the amendment
shall be effected, is as follows:
If these amendments are to have a delayed effective date, please list that date:
(Not to exceed ninety (90) days from the date of filing.
- ----------------
Signature /s/ Helmuth Wyzisk
---------------------------------------
Title Celesta Corporation/President, Director
<PAGE>
File with the Colorado Secretary
of State on ___________
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC.
The undersigned, being a director of Celesta Corporation, Inc., does
hereby the Articles of Incorporation of the Company as follows:
Article I
Name
The name of this Corporation shall be Innovative Holdings and
Technologies, Inc.
Article II
Capital Stock
Article is hereby amended as follows:
The corporation is authorized to issue an aggregate of 500,000,000
shares of which 450,000,000 will be $0.0001 par value common stock and
50,000,000 shares will be $0.001 par value preferred stock. The common stock
will have voting rights of one vote per share. The board of directors may issue
preferred stock from time to time in one or more series, to have such voting
rights, preference in dividends and in liquidation and such other rights,
preferences and conditions as the board of directors may designate by an
amendment to these articles of incorporation by action duly adopted without
shareholder action and shareholder action shall not be required therefor fully
paid stock of this Corporation shall not be liable to any further call or
assessment.
I hereby certify that a majority vote of the shareholders and directors of the
Corporation adopted the following on February 20, 1998 and that the number of
votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this Amendment to
Articles of Incorporation this 27th day of February, 1998.
/s/ Helmuth Wyzisk
- -----------------------------
By: Helmuth Wyzisk, Director
<PAGE>
Exhibit (3)
Articles of Amendment
File with the Colorado Secretary
of State on October 19, 1999
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC.
The undersigned, being a director of Innovative Holdings and Technologies, Inc.,
a Colorado corporation, does hereby the Articles of Incorporation of
Innovative Holdings and Technologies, Inc as follows:
Article II
Capital Stock
Article is hereby amended as follows:
The corporation is authorized to issue an aggregate of 500,000,000
shares of which 450,000,000 will be $0.0001 par value common stock and
50,000,000 shares will be $0.001 par value preferred stock. The common stock
will have voting rights of one vote per share. The board of directors may issue
preferred stock from time to time in one or more series, to have such voting
rights, preference in dividends and in liquidation and such other rights,
preferences and conditions as the board of directors may designate by an
amendment to these articles of incorporation by action duly adopted without
shareholder action.
The corporation is authorized to issue Two Hundred Fifty-Thousand
(250,000) 1999 Series "A" Convertible Preferred Shares, par value $0.001 per
share. Series A shares will entitle the holder to one vote per share. The shares
are convertible into common shares at the option of the holder, one share of
preferred stock for one share of common stock. The conversion rate will not be
affected by any reverse stock splits.
This amendment was duly adopted this 18th day of October, 1999 by the
corporation's board of directors. No shareholder action was required.
Dated this 18th day of October, 1999.
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC.
/s/ Helmuth Wyzisk
- -----------------------------
By: Helmuth Wyzisk
Title: Director and President
Exhibit (3)
ByLaws of Celesta Corporation
ARTICLE I
OFFICES
1.1 Business Office. The principal office and place of business of
the corporation in the State of Colorado shall be at 4428 So. Argonne Way,
Aurora, Colorado 80015. Other offices and places of business may be established
from time to time by resolution of the Board of Directors or as the business of
the corporation may require.
1.2 Registered Office. The registered office of the corporation,
required by the Colorado Corporation Code to be maintained in the State of
Colorado, may be, but need not be, identical with the principal office in the
State of Colorado, and the address of the registered office may be changed from
time to time by the Board of Directors.
ARTICLE II
SHARES AND TRANSFER THEREOF
2.1 Regulation. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
2.2 Certificates for Shares. Certificates representing shares of the
corporation shall be respectively numbered serially for each class of shares, or
series thereof, as they are issued, shall be impressed with the corporate seal
or a facsimile thereof, and shall be signed by the Chairman or Vice Chairman of
the Board of Directors or by the President or a Vice-President and by the
Treasurer or an Assistant Treasurer or by the Secretary or an Assistant
Secretary; provided that any or all of the signatures may be facsimiles if the
certificate is countersigned by a transfer agent, or registered by a registrar,
other than the corporation itself or its employee. Each certificate shall state
the name of the corporation, the fact that the corporation is organized or
incorporated under that laws of the State of Colorado, the name of the person to
whom issued, the date of issue, the class (or series of any class), the number
of shares represented thereby or a statement that such shares are without par
value. A statement of the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
class shall be set forth in full or summarized on the face or back of the
certificates which the corporation shall issue, or in lieu thereof, the
certificate may set forth that such a statement or summary will be furnished to
any shareholder upon request without charge. Each certificate shall be otherwise
in such form as may be prescribed by the Board of Directors and as shall conform
to the rules of any stock exchange on which the shares may be listed. The
corporation shall not issue certificates representing fractional shares and
shall not be obligated to make any transfer creating a fractional interest in a
share of stock. The corporation may, but shall not be obligated to, issue scrip
in lieu of any fractional shares, such scrip to have terms and conditions
specified by the Board of Directors.
2.3 Cancellation of Certificates. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of shares
shall have been surrendered and canceled, except as herein provided with respect
to lost, stolen or destroyed certificates.
<PAGE>
2.4 Lost. Stolen or Destroyed Certificates. Any shareholder claiming
that his certificate for shares is lost, stolen or destroyed may make an
affidavit or affirmation of the fact and lodge the same with the Secretary of
the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation), a
new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged t.3 be lost, stolen or destroyed.
2.5 Transfer of Shares. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of the
corporation shall be transferable on the books of the corporation by t.~e holder
thereof in person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of shares. Upon
presentation and surrender of a certificate for shares properly endorsed and
payment of all taxes therefor, the transferee shall be entitled to a new
certificate or certificate in lieu thereof. As against the corporation, a
transfer of shares can be made only on the books 3f the corporation and in the
manner herein above provided, and the corporation shall be entitled to treat the
holder of record of any share as the owner thereof and shall not be found to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the statutes of the State of Colorado.
2.6 Transfer Agent. Unless otherwise specified by the Board of
Directors by resolution, the Secretary of the corporation shall act as transfer
agent of the certificates representing the shares of stock of the corporation.
He shall maintain a stock transfer book, the stubs in which shall set forth
among other things, the names and addresses of the holders of all issued shares
of the corporation, the number of shares held by each, the certificate numbers
representing such shares, the date of issue of the certificates representing
such shares, and whether or not such shares originate from original issue or
from transfer. Subject to Section 3.7, the names and addresses of the
shareholders as they appear on the stubs of the stock transfer book shall be
conclusive evidence as to who are the shareholders of record and as such
entitled to receive notice of the meeting of shareholders; to vote at such
meetings; to examine the hit of the shareholders entitled to vote at meetings;
to receive dividends; and to own, enjoy and exercise any other property or
rights deriving from such shares against the corporation. Each shareholder shall
be responsible for notifying the Secretary in writing of any change in his name
or address and failure so to do will relieve the corporation, its directors,
officers and agents, from liability for failure to direct notices or other
documents, or pay over or transfer dividends or other property or rights, to a
name or address other than the name and address appearing on the stub of the
stock transfer book.
2.7 Close of Transfer Book and Record. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders, or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose, the
Board of Directors may provide that the stock transfer books shall be closed for
a stated period, but not to exceed, in any case, fifty days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of, or to vote at a meeting of shareholders, such books shall
be closed for at least ten days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any came to be not more than fifty days and, in case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action requiring such determination of shareholders entit1ed to notice of or to
vote at a meeting of shareholders, or shareholders entitled to receive payment
of a dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
<PAGE>
ARTICLE III
SHAREHOLDERS AND MEETINGS THEREOF
3.1 Shareholders of Record. Only shareholders of record on the books
of the corporation shall be entitled to be treated by the corporation as holders
in fact of the shares standing in their respective names, and the corporation
shall not be bound to recognize any equitable or other claim to, or interest in,
any shares on the part of any other person, firm or corporation, whether or not
it shall have express or other notice thereof, except as expressly provided by
the laws of Colorado.
3.2 Meetings. Meetings of shareholders shall be held at the principal
office of the corporation, or at such other place as specified from time to time
by the Board of Directors. If the Board of Directors shall specify another
location such change in location shall be recorded on the notice calling such
meeting.
3.3 Annual Meeting. The annual meeting of shareholders of the
corporation for the election of directors, and for the transaction of such other
business as may properly come before the meeting, shall be held at such time as
may be determined by the Board of Directors by resolution in conformance with
Colorado law. If the election of Directors shall not be field on the day
designated herein for any annual meeting of the shareholders, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as may be convenient.
3.4 Special Meetings. Special meetings of shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President, the Board of Director, the holders of not less than one-tenth of
all the shares entitled to vote at the meeting, or legal counsel of the
corporation as last designated by resolution of the Board of Directors.
3.5 Notice. Written notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered unless otherwise prescribed by statute not
less than ten days nor more than fifty days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the officer or person calling the meeting to each shareholder of
record entitled to vote at such meeting except that, if the authorized shares
are to be increased, at least thirty days notice shall be given, and if the sale
of all or substantially all of the corporation assets is to be voted upon, at
least twenty days notice shall be given. Any shareholder may waive notice of any
meeting. Notice to shareholders of record, if mailed, shall be deemed given as
to any shareholder of record, when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid, but if three successive
letters mailed to the last-known address of any shareholder of record are
returned as undeliverable, no further notices to such shareholder shall be
necessary, until another address for such shareholder is made known to the
corporation.
<PAGE>
3.6 Meeting of All Shareholders. If all of the shareholders shall
meet at any time and place, either within or without the State of Colorado, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or notice, and at such meeting any corporate action may be
taken.
3.7 Voting Record. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before such meeting of shareholders, a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address and the number of shares held
by each. The record, for a period of ten days prior to such meeting, shall be
kept on file at the principal office of the corporation, whether within or
without the State of Colorado, and shall be subject to inspection by any
shareholder for any purpose germane to the meeting at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
for any purpose germane to the meeting during the whole time of the meeting for
the purposed thereof. The original stock transfer books shall be the prima facie
evidence as to who are the shareholders entitled to examine the record or
transfer books or to vote at any meeting of shareholders.
3.8 Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders. In the absence of a quorum at any such meeting,
a majority of the shares so represented may adjourn the meeting from time to
time for a prior not to exceed sixty days without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
3.9 Manner of Acting. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders. When, with respect to
any action to be taken by shareholders of this Corporation, the laws of Colorado
require the vote or concurrence of the holders of two-thirds of the outstanding
shares, of the shares entitled to vote thereon, or of any class or series, such
action may be taken by the vote or concurrence of a majority of such shares or
class or series thereof.
3.10 Proxies. At all meetings of shareholders a shareholder may vote
in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
3.11 Voting of Shares. Unless otherwise provided by these Bylaws or
the Articles of Incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, and each fractional share shall be entitled to a corresponding
fractional vote on each such matter. Cumulative voting shall not be allowed.
<PAGE>
3.12 Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such other corporation may determine. Shares
standing in the name of a deceased person, a minor ward or an incompetent
person, may be voted by his administrator, executor, court appointed guardian or
conservator, either in person or by proxy without a transfer of such shares into
the name of such administrator, executor, court appointed guardian or
conservator. Shares standing in the name of a trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name. Shares
standing in the name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by such receiver without
the transfer thereof into his name if authority so to do be contained in an
appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither shares of its own stock belonging to the corporation, nor shares of its
own stock held by it in a fiduciary capacity, nor shares of its own stock held
by another corporation if the majority of shares entitled to vote for the
election of directors of such corporation is held by this corporation may be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time. Redeemable
shares which have been called for redemption shall not be entitled to vote on
any matter and shall not be deemed outstanding shares on and after the date on
which written notice of redemption has been mailed to shareholders and a sum
sufficient to redeem such shares has been deposited with a bank or trust company
with irrevocable instruction and authority to pay the redemption price to the
holders of the shares upon surrender of certificates therefor.
3.13 Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action taken, shall be signed
by all of the shareholders entitled to vote with respect to the subject matter
thereof.
3.14 Voting by Ballot. Voting on any question or in any election may
be by voice vote unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
3.15 Cumulative Voting. No shareholder shall be permitted to cumulate
his votes by giving one candidate as many votes as the number of such directors
multiplied by the number of his shares shall equal, or by distributing such
votes on the same principle among any number of candidates.
ARTICLE IV
DIRECTORS, POWERS AND MEETINGS
4.1 BOARD OF DIRECTORS. The business and affairs of the corporation
shall be managed by a board of not less than three (3) directors no more than
seven (7) directors except that there shall be only as many directors as there
are shareholders in the event the outstanding shares are held of record by fewer
than three shareholders. Directors need not be shareholders of the corporation
or residents of the State of Colorado and shall be elected at the annual meeting
of shareholders or some adjournment thereof. Directors shall hold office until
the next succeeding annual meeting of shareholders and until their successors
shall have beers elected and shall qualify.
4.2 Regular Meetings. A regular, annual meeting of the Board of
Directors shall be held at the same place as, and immediately after, the annual
meeting of shareholders, and no notice shall be required in connection
therewith. The annual meeting of the Board of Directors shall be for the purpose
of electing officers and the transaction of such other business as may come
before the meeting. The Board of Directors may provide, by resolution, the time
and place, either within or without the State of Colorado, for the holding of
additional regular meetings without other notice than such resolution.
<PAGE>
4.3 Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the President or any two directors. The person
or persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Colorado, as the place of
holding any special meeting of the Board of Directors called by them.
4.4 Notice. Written notice of any special meeting of directors shall
be given as follows:
(a) By mail to each director at his business address at least three
days prior to the meeting; or
(b) By personal delivery or telegram at least twenty-four hours prior
to the meeting to the business address of each director, or in the event such
notice is given on a Saturday, Sunday or holiday, to the residence address of
each director. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company. Any director may waive
notice of any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
4.5 Participation by Electronic Means. Except as may be otherwise
provided by the Articles of Incorporation or Bylaws, members of the Board of
Directors or any committee designated by such Board may participate in a meeting
of the Board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
4.6 Quorum and Manner of Acting. A quorum at all meetings of the
Board of Directors shall consist of a majority of the number of directors then
holding office, but a smaller number may adjourn from time to time without
further notice, until a quorum is secured. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the act of a greater number is required by the
Articles of Incorporation or these Bylaws.
4.7 Organization. The Board of Directors shall elect a chairman to
preside at each meeting of the Board of Directors. The Board of Directors shall
elect a Secretary to record the discussions and resolutions of each meeting.
4.8 Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting of unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
<PAGE>
4.9 Informal Action By Directors. Any action required or permitted to
be taken by the Board of Directors, or a committee thereof, at the meeting may
be taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors or all the committee members
entitled to vote with respect to the subject matter thereof.
4.10 Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office,
and shall hold such office until his successor is duly elected and shall
qualify. Any directorship to be filled by reason if an increase in the number of
directors to be filled by reason of an increase in the number of directors shall
be filled by the affirmative vote of a majority of the directors then in office
or by an election at an annual meeting, or a special meeting of shareholders
called for that purpose. A director chosen to fill a position resulting from an
increase in the number of directors shall hold office only until the next
election of directors by the shareholders.
4.11 Compensation. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, each director may
be paid his expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fixed sum for
attendance at each meeting of the Board of Directors or both. No such payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation there for.
4.12 Removal of Directors. Any director or directors of the
corporation may be removed at any time, with or without cause, in the manner
provided in the Colorado Corporation Code.
4.13 Resignations. A director of the corporation may resign at any
time by giving written notice to the Board of Directors, president or Secretary
of the corporation. The resignation shall take effect upon the date of receipt
of such notice, or at any later period of time specified therein. The acceptance
of such resignation shall not be necessary to make it effective, unless the
resignation requires it to be effective as such.
4.14 General Powers. The business and affairs of the corporation
shall be managed by the Board of Directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders. The directors shall pass upon any and all
bills or claims of officers for salaries or other compensation and, it deemed
advisable, shall contract with officers, employees, directors, attorneys,
accountants, and other person to render services to the corporation.
ARTICLE V
OFFICERS
5.1 Term and Compensation. The elective officers of the corporation
shall consist of a least a President, a Secretary and a Treasurer, each of whom
shall be eighteen years or older and who shall be elected by the Board of
Directors at its annual meeting. Unless removed in accordance with procedures
established by law and these Bylaws, the said officers shall serve until the
next succeeding, annual meeting of the Board of Directors and until their
respective successors are elected and shall qualify. Any number of offices, but
not more than two, may be held by the same person at the same time, except that
one person may not simultaneously hold the offices of President and Secretary.
The Board may elect or appoint such other officers and agent as it may deem
advisable, who shall hold office during the pleasure of the Board.
<PAGE>
5.2 Powers. The officers of the corporation shall exercise and
perform the respective powers, duties and functions as are stated below, and as
may be assigned to them by the Board of Directors.
(a) The President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside, when present, at all meeting of the shareholders
and of the Board of Directors unless a different chairman of such meetings is
elected by the Board of Directors.
(b) In the absence or disability of the president, the Vice-President
or Vice--presidents, if any, in order of their rank as fixed by the Board of
Directors, and if not ranked, the Vice--Presidents in the order designated by
the Board of Directors, shall perform all the duties of the President, and when
so acting shall have all the powers of, and be subject to all the restrictions
on the President. Each Vice-President shall have such other powers and perform
such other duties as may from time to time be assigned to him by the President
or the Board of Directors.
(c) The Secretary shall keep accurate minutes of all meetings of the
shareholders and the Board of Directors unless a different Secretary of such
meetings is elected by the Board of Directors. He shall keep, or cause to be
kept a record of the shareholders of the corporation and shall be responsible
for the giving of notice of meetings of the shareholders or the Board of
Directors. The Secretary shall be custodian of the records and of the seal of
the corporation and shall attest the affixing of the seal of the corporation
when so authorized. The Secretary or Assistant Secretary may sign all stock
certificates, as described in Section 2.2 hereof. The Secretary shall perform
all duties commonly incident to his office and such other duties as may from
time to time be assigned to him by the President or the Board of Directors.
(d) An Assistant Secretary may, at the request of the Secretary, or in
the absence of disability of the Secretary, perform all of the duties of the
Secretary. He shall perform such other duties as may be assigned to him by the
President or by the Secretary.
(e) The Treasurer, subject to the order of the Board of Directors,
shall have the care and custody of the money, funds, valuable papers and
documents of the corporation. He shall keep accurate books of accounts of the
corporation's transactions, which shall be the property of the corporation, and
shall render financial reports and statements of condition of the corporation
when so requested by the Board of Directors or President. The Treasurer shall
perform all duties commonly incident to his office and such other duties as may
from time to time be assigned to him by the President or the Board of Directors.
In the absence or disability of the President and Vice-President or
Vice-Presidents, the Treasurer shall perform the duties of the President.
(f) An Assistant Treasurer may, at the request of the Treasurer, or in
the absence or disability of the Treasurer, perform all of the duties of the
Treasurer. He shall perform such other duties as may be assigned to him by the
President or by the Treasurer.
5.3 Compensation. All officers of the corporation may receive
salaries or other compensation if so ordered and fixed by the Board of
Directors. The Board of Directors shall have authority to fix salaries in
advance for stated periods or render the same retroactive as the Board may deem
advisable.
5.4 Delegation of Duties. In the event of absence or inability of any
of officer to act, the Board of Directors may delegate the powers or duties of
such officer to any other officer, director or person whom it may select.
<PAGE>
5.5 Bonds. If the Board of Directors by resolution shall so require,
any officer or agent of the corporation shall give bond to the corporation in
such amount and with such surety as the Board of Directors may deem sufficient,
conditioned upon the faithful performance of their respective duties and
offices.
5.6 Any officer or agent may be removed by the Board of Directors or
by the executive committee, if any, whenever in its judgment the best interest
of the corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not, of itself, create contract rights.
ARTICLE VI
FINANCE
6.1 Reserve Funds. The Board of Directors, in its uncontrolled
discretion, may set aside from time to time, out of the net profits or earned
surplus of the corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the corporation, and for any other purpose.
6.2 Banking. The funds of the corporation sha1l be deposited in the
name of the corporation in such bank or banks or trust company or trust
companies, as the Board of Directors shall designate, and may be drawn out only
on checks signed in the name of the corporation by such person or persons as the
Board of Directors, by appropriate resolution, may direct. Notes and commercial
paper, when authorized by the Board, shall be signed in the name of the
corporation by such officer or officers or agent or agents as shall thereunto be
authorized from time to time.
ARTICLE VII
DIVIDENDS
Subject to the provisions of the Articles of Incorporation and the laws
of the State of Colorado, the Board of Directors may declare dividends whenever,
and in such amounts, as in the Board's opinion the condition of the affairs of
the corporation shall render such advisable.
ARTICLE VIII
CONTRACTS, LOANS AND CHECKS
8.1 Execution of Contracts. Except as otherwise provided by statute
or by these Bylaws, the Board of Directors may authorize any officer or agent of
the corporation to enter into any contract, or execute and deliver any
instrument in the name of, and on behalf the corporation. Such authority may be
general or confined to specific instances and, unless so authorized, no officer,
agent or employee shall have any power to bind the corporation for any purpose,
except as may be necessary to enable the corporation to carry on its normal and
ordinary course of business.
8.2 Loans. No loans shall be contracted on behalf of the corporation
and no negotiable paper shall be issued in its name unless authorized by the
Board of Directors. When so authorized, any officer or agent of the corporation
may effect loans and advances it at any time for the corporation from any bank,
trust company or institution, firm, corporation or individual. An agent so
authorized may make and deliver promissory notes or other evidence of
indebtedness of the corporation and may mortgage, pledge, hypothecate or
transfer any real or personal property held by the corporation as security for
the payment of such loans. Such authority, in the Board of Directors'
discretion, may be general or confined to specific instances.
<PAGE>
8.3 Checks. Checks, notes, drafts and demands for money or other
evidence of indebtedness issued in the name of the corporation shall be signed
by such person or persons as designated by the Board of Directors and in the
manner the Board of Directors prescribes.
8.4 Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be the ~~ear adopted by
resolution of the Board of Directors.
ARTICLE X
CORPORATE SEAL
The Board of Directors Shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
4nd the state of incorporation and the words "CORPORATE SEAL".
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by a majority of the Directors present at any meeting of the Board of
Directors of the corporation at which a quorum is present.
ARTICLE XII
EXECUTIVE COMMITTEE
12.1 Appointment. The Board of Directors by resolution adopted by a
majority of the full Board, may designate two or more of its members to
constitute an executive committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
12.2 Authority. The executive committee, when the Board of Directors
is not in session shall have and may exercise all of the authority of the Board
of Directors except to the extent, if any, that such authority shall be limited
by the resolution appointing the executive committee and except also that the
executive committee shall not have the authority of the Board of Directors in
reference to amending the Articles of Incorporation, adopting a plan of merger
or consolidation, recommending to the shareholders the sale, lease or other
disposition of all or substantially all of the property and assets of the
corporation otherwise than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, or amending the Bylaws of the corporation. 12.3 Tenure and
Qualifications. Each member of the executive committee shall hold office until
the next regular annual meeting of the Board of Directors following his
designation.
12.4 Meetings. Regular meetings of the executive committee may be
held without notice at such time and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one days notice stating the
place, date and hour of the meeting, which notice may be written or oral, and if
mailed, shall be deemed to be delivered when deposited in the United States mail
addressed to the member of the executive committee at his business address. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
<PAGE>
12.5 Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
12.6 Informal Action by Executive Committee. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting for the action so taken,
shall be signed by all of the members of the committee entitled to vote with
respect to the subject matter thereof.
12.7 Vacancies. Any vacancy in the executive committee may be filled
by a resolution adopted by a majority of the full Board of Directors.
12.8 Resignations and Removal. Any member of the executive committee
may be removed at any time with or without cause by resolution adopted by a
majority of the full Board of directors. Any member of the executive committee
may resign from the executive committee at any time by giving written notice to
the President or Secretary of the corporation, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
12.9 Procedure. The executive committee sha1l elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
ARTICLE XIII
EMERGENCY BYLAWS
The Emergency Bylaws provided for in this Article shall be operative
during any emergency in the conduct of the business of the corporation resulting
from an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding articles of the Bylaw;
or in the Articles of Incorporation of the corporation or in the Colorado
Corporation Code. To the extent not inconsistent with the provisions of this
Article, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon its termination the Emergency Bylaws shall cease
to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer
or director of the corporation. Notice of the time and place of the meeting
shall be given by the parson calling the meeting to such of the directors as it
may be feasible to reach by any available means of communication. Such notice
shall be given at such time in advance of the meeting as circumstances permit in
the judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum shall
consist of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such
emergency, may, effective in the emergency, change the principal office or
designate several alternative principal offices or regional offices, or
authorize the officers so to do.
<PAGE>
(d) The Board of Directors, either before or during any such
emergency, may provide, and from time to time modify, lines of succession in the
event that during such an emergency any or all officers or agent. of the
corporation shall for any reason be rendered incapable of discharging their
duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by
further action of the Board et Directors or by action of the shareholders, but
ne such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these Emergency Bylaws may make any further or
different provision that may be practical and necessary for the circumstances of
the emergency.
CERTIFICATE
I hereby certify that the foregoing Bylaws, consisting of 29 pages,
including this page, constitute the Bylaws of Celesta Corporation adopted by the
Board of Directors of the corporation as of the 9th day of January, 1987.
/s/
----------------------
Secretary
ATTEST:
/s/ William A. Jones
- ----------------------
William A. Jones
President
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