U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ending September 30, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 0-28607
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INNOVATIVE HOLDINGS & 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. 300,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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Former Name, former address and former fiscal year if changed since last report
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
--- ---
Applicable on to corporate issuers
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date:
Transitional Small Business Disclosure Format
(Check One)
Yes No
<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WITH ACCOUNTANTS' REPORT
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
<PAGE>
TABLE OF CONTENTS
Page
Accountants' Review Report.............................................. 1
Condensed Consolidated Financial Statements
Balance Sheets......................................................... 2
Statements of Operations............................................... 3
Statements of Cash Flows............................................... 4
Notes to Condensed Consolidated
Financial Statements................................................... 5 - 7
<PAGE>
DIROCCO & DOMBROW, P.A.
3601 W. COMMERCIAL BLVD, SUITE #39
FT. LAUDERDALE, FL 33309
(954) 731-8181
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
------------------------------------------------------------
Board of Directors
Innovative Holdings & Technologies, Inc. and Subsidiaries
Orlando, Florida
We have reviewed the accompanying condensed consolidated balance sheets of
Innovative Holdings & Technologies, Inc. and Subsidiaries as of September 30,
2000 and the related condensed consolidated statements of operations for the
three months and nine months ended September 30, 2000 and 1999, and cash flows
for the nine months ended September 30, 2000 and 1999, included in the
accompanying Securities and Exchange Commission Form 10-Q for the period ended
September 30, 2000. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modification that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
4 to the condensed consolidated financial statements, the Company'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 4. The condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheets as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein). In our report dated March 16, 2000,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheet as of
September 30, 2000, is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
October 30, 2000
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<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2000 1999
----------- -----------
(Audited)
<S> <C> <C>
Current assets
Cash $ -- $ 2,011
Prepaid expenses 3,681 3,681
Other receivables 2,657 --
Note receivable 12,358 10,250
----------- -----------
Total current assets 18,696 15,942
Property and equipment 20,053 23,121
License Agreement 320,000 --
Other assets 3,473 4,263
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Total assets $ 362,222 $ 43,326
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued
expenses $ 24,161 $ 25,826
Withholding taxes payable 163,803 163,250
Notes payable 381,700 25,000
Due to affiliate 255,600 43,751
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Total current liabilities 825,264 257,827
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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,
27,124,884 and 23,124,884 issued
and outstanding, respectively 2,713 2,313
Additional paid-in capital 3,280,219 3,080,619
Stock subscriptions receivable (534,000) (334,000)
Deficit (3,211,974) (2,963,433)
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Total stockholders' equity (deficit) (463,042) (214,501)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 362,222 $ 43,326
=========== ===========
</TABLE>
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
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<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Expenses
General and administrative $ 67,212 $ 112,088 $ 242,209 $ 287,509
Research and development -- 15,965 -- 29,954
Interest expense -- 4,048 6,641 4,048
------------ ------------ ------------ ------------
Total expenses 67,212 132,101 248,850 321,511
------------ ------------ ------------ ------------
Operating loss (67,212) (132,101) (248,850) (321,511)
Other Income -- -- 309 1,748
------------ ------------ ------------ ------------
Net loss $ (67,212) $ (132,101) $ (248,541) $ (319,763)
============ ============ ============ ============
Basic loss per share $ (0.003) $ (0.007) $ (0.011) $ (0.018)
============ ============ ============ ============
Weighted Average Common Shares 23,536,194 17,834,051 23,536,194 17,834,051
============ ============ ============ ============
</TABLE>
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
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<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(248,541) $(319,763)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation 3,068 --
(Increase) decrease in:
Prepaid insurance -- (25,000)
Notes receivable (2,108) (3,250)
Other receivable (2,657) --
Other assets 790 (3,472)
Increase (decrease) in:
Accounts payable and accrued expenses (1,665) (7,447)
Withholding taxes payable 553 (163,250)
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Net cash used by operating activities (250,560) (522,182)
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Cash flows from investing activities:
Purchase of license agreement (60,000) --
Purchase of property and equipment -- (19,617)
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Net cash used by investing activities (60,000) (19,617)
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Cash flows from financing activities:
Proceeds from notes payable 96,700 16,700
Proceeds from affiliate 211,849 --
Repayment of note -- (15,000)
Proceeds from issuance of stock -- (616,000)
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Net cash provided by financing activities 308,549 617,700
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Increase (Decrease) in cash (2,011) 75,901
Cash at beginning of period 2,011 4,303
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Cash at end of period $ -- $ 80,204
========= =========
</TABLE>
See accompanying summary of notes to unaudited condensed consolidated financial
statements.
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<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Interim Information
In the opinion of the management of Innovative Holdings & Technologies, Inc. and
Subsidiaries, Inc. (the Company), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of September 30, 2000, and
the results of its operations and cash flows for the nine months ended September
30, 2000 and 1999. Interim results are not necessarily indicative of results for
a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-Q, and do not contain certain information included in the
Company's audited consolidated financial statements and notes for the year ended
December 31, 1999.
2. Financial Statements
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
balances have been eliminated.
3. Supplemental Disclosures of Cash Flow Information
Nine months ended September 30,
-------------------------------
2000 1999
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Operating Activities:
Interest paid $ - $4,048
====== ======
4. Going Concern
As shown in the accompanying financial statements, the Company incurred net
losses of $248,541 for the nine months ended September 30, 2000. The Company's
current liabilities exceeded its current assets by $806,568 at September 30,
2000. The ability of the Company to continue as a going concern is dependent on
the development and marketing of products to be offered by its subsidiaries. The
Company will offer additional shares of its common stock to raise capital and
obtain financing on an as needed basis.
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<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Stock Options
On January March 10, 1998, the Company entered into a stock option agreement in
which the Company grants the option to shareholders and consultants to purchase
up to 21,000,000 shares of common stock for an exercise price of $0.05 per share
at any time through March 9, 2003.
The following is a summary of stock option plan activity for the nine months
ended September 30, 2000.
Number of options outstanding on April 1, 2000 21,000,000
Number of options exercised by shareholder in 2000 (4,000,000)
----------
Number of options outstanding on September 30, 2000 17,000,000
==========
Number of options exercisable at September 30, 2000 17,000,000
==========
Weighted average exercise price per share
outstanding and exercisable $ 0.05
==========
Weighted average remaining contractual life of
options outstanding and exercisable 2.9
==========
No options were forfeited or expired in 2000 and 1999.
The calculation of the fair values of the options, under the minimum value
method, assumes that no corporate dividends will be issued prior to the exercise
of the options, and that the options will be exercised immediately prior to the
exercise expiration date. The risk free interest rate used in the calculation
was based on the zero coupon government issue rate of approximately 6 percent.
At September 30, 2000, the Company has a stock based compensation plan, which is
described above. The Company applies APB Opinion 25 and related Interpretations
in accounting for its plan. No compensation cost has been recognized for its
stock option plan. Had compensation cost for the Company's stock-based
compensation plan been determined based on the fair market value at the grant
date for awards under those plans consistent with the method of FASB Statement
123, the Company's net income and earnings per share at September 30, 2000 and
December 31, 1999 and 1998 would have been reduced to the pro forma amounts
indicated below:
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<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Stock Options, (Continued)
December 31,
September 30, -----------------------
2000 1999 1998
------------- ---- ----
As reported $(248,541) $(612,732) $(465,545)
Net loss Pro forma $(308,541) $(672,732) $(525,545)
Basic loss As reported $( 0.011) $( 0.033) $( 0.024)
per share Pro forma $( 0.013) $( 0.038) $( 0.028)
6. Related Party Transactions
On May 26, 2000 a Nevada Corporation, US Tech Materials Corporation, Inc. was
formed. This is a subsidiary of Innovative Holdings & Technologies, Inc.
US Tech Materials Corporation, Inc. purchased a license agreement from Ashland
Patents and Technology, relating to polyether amide resins, subject to certain
terms and agreements for $320,000.
On September 30, 2000, certain terms of the agreement were not met by the
contract dates, resulting in two amendments extending the deadline to meet the
terms of the contract to November 13, 2000. This deadline has passed and the
terms of the contract have not been met. Discussions between Innovative and
Ashland Patents and Technology are continuing.
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<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Condensed Consolidated Financial Data" and the Company's Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in this
document.
Overview
Since its inception in 1987, the Company's purpose is to conduct offerings of
its securities to raise capital to acquire businesses in various industries. For
the period from January 9, 1987 (inception) to September 30, 1990, the Company
incurred a total net loss of $181,638. During this period, the Company devoted
substantially all of its efforts to establish and organize a television
cablecast facility. However, by the end of 1990 the operations of the Company
ceased.
From December 1990 through October 1997, the Company did not operate any
businesses and was inactive.
In November 1997, the Company changed its name to Innovative Holdings &
Technologies, Inc. The Company considers its role to be an incubator of high
technology companies and began its search for suitable business acquisitions. In
the second quarter of 1998, the Company signed an agreement to acquire BioCam
Company, Inc. (BioCam), a developer of telemetry technology in the amount of
$1,000,000. This was paid for by issuance of convertible preferred stock and
restricted common stock. The Company began supporting the operations of BioCam
financially and funded approximately $350,000, in 1998. By the end of 1998, the
principals of BioCam rescinded on their agreement with the Company and the
relationship was terminated.
On January 8, 1999, the Company incorporated Xtreme Telemetry Systems, Inc.
(Xtreme) and is its soles stockholder. Xtreme is continuing the development of 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, 1999. The products under development were completed in January,
2000.
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.
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<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, (Continued)
Results of Operations, continued
The nine months ended September 30,
-----------------------------------
2000 1999
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Revenues 0.0% 0.0%
-------------- --------------
Expenses:
General and Administrative 97.3% 89.4%
Research and Development - 9.3%
Interest Expense 2.7% 1.3%
-------------- --------------
Total Expenses 100% 100%
-------------- --------------
Net Loss 100% 100%
============== ==============
Revenues
--------
The Company had no revenues for the nine months ended September 30, 2000 and
1999.
General and Administrative
--------------------------
General and administrative expenses have decreased from $287,509 in 1999 to
$242,209 in 2000. The decrease in these expenses resulted from consolidation of
operating activities and stream lining of expenditures.
Research and Development
------------------------
Research and development expenses decreased from $29,954 in 1999 to $0 in 2000.
Research and development expenses are not recurring expenses.
Interest Expense
----------------
Interest expense is due from personal loans made to the company. The amounts
from 1999 to 2000 have not varied considerably.
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<PAGE>
INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, (Continued)
Liquidity and Capital Resources
The Company requires capital principally for the financing of operations and the
development and marketing of its subsidiaries products. To date, the company has
financed its operations primarily through the sale its of equity securities and
by obtaining financing. During the nine month period ended September 30, 1999,
the Company generated $616,000 from the issuance of its stock.
The Company had negative working capital as of September 30, 2000 of $806,568
compared to $241,885 as of December 31, 1999.
As stated in the Company's Consolidated Financial Statements, the Company's
ability to continue as a going concern is dependent upon issuance of stock and
obtaining debt financing. The Company is pursuing equity financing through a
private placement dated July 17, 2000. There can be no assurance the additional
financing will be attained or that the operations will be profitable. Such
inability would have a material adverse effect on the Company's business,
operating results and financial condition.
The Company currently has no specific commitments with regard to capital
expenditures with the exceptions of purchasing computer equipment and sensors.
The Company's future capital requirements will, depend on its ability to acquire
complementary 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.
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 "Accounting for Costs of Computer Software Developed
or Obtained for Internal Use." SOP 98-1 is effective for financial statements
for years beginning after December 15, 1998. SOP 98-1 provides guidance over
accounting for computer software developed or obtained for internal use,
including the requirement to capitalize and amortize specific costs. The
adoption of this standard did not have a material effect on its capitalization
policy.
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