U.S. Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---- to ----
Commission File number 0-25947
Innovative Technology Systems, Inc.
(Exact name of small business issuer as
specified in its charter)
Florida 65-0386286
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
131 Egret Drive, Jupiter, Florida 33458
(Address of principal executive offices)
(561) 575-3103
(Issuer's telephone number)
(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 __ No _X__
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
As of August 31, 1999, there were 6,100,000 shares of common
stock, no par value, issued and outstanding.
Transitional Small Business Disclosure Format (check one);
Yes __ No _X__
<PAGE>
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
Form 10-QSB Index
June 30, 1999
Page
Part I: Financial Information .............................. 2
Item 1. Financial Statements .......................... 2
Condensed Balance Sheet (Unaudited) .............. 3
Condensed Statement of Operations (Unaudited) .... 4
Condensed Statements of Cash Flow (Unaudited)..... 5
Notes to Financial Statements..................... 6
Item 2. Management's Discussion and Analysis or Plan
of Operation...................................... 7
Part II: Other Information ............................... 8
Item 1. Legal Proceedings .......................... 8
Item 2. Changes in Securities ...................... 8
Item 3. Defaults Upon Senior Securities ............ 8
Item 4. Submission of Matters to a Vote of
Security Holders ........................... 8
Item 5. Other Information .......................... 8
Item 6. Exhibits and Reports on Form 8-K ........... 9
Signatures ................................................. 9
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(a development stage company)
CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
(Unaudited) *
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 438 $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Loans payable related party $ 18,271 $ 8,710
----------- -----------
Stockholders' deficit:
Common stock 65,100 65,100
Deficit accumulated during the
development stage ( 82,933) ( 73,810)
----------- -----------
Total stockholders' deficit ( 17,833) ( 8,710)
----------- -----------
$ 438 $ -
=========== ===========
</TABLE>
* Condensed from audited financial statements.
See accompanying notes
<PAGE> 3
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(a development stage company)
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nov. 13, 1992
(inception)
Quarter Ended June 30 To June 30
1999 1998 1999
---------- --------- ----------
<S> <C> <C> <C>
Sales, net $ - $ - $ -
General and administrative expenses 4,823 923 79,140
---------- ---------- ----------
( 4,823) ( 923) (79,140)
Other income (expense):
Interest expense ( 800) - ( 3,793)
---------- ---------- ----------
Net loss $ ( 5,623) $ ( 923) $ (82,933)
========== ========== ==========
Net loss per share $ 0.00 $ ( 0.00)
========== ==========
Number of shares used in earnings
per share computation 6,100,000 6,100,000
========== ==========
</TABLE>
See accompanying notes
<PAGE> 4
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Nov. 13, 1992
(inception)
Quarter Ended June 30 To June 30
1999 1998 1999
---------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ ( 5,623) $ 923 $ ( 82,933)
Noncash issuance of debt for expenses 6,061 923 18,271
Noncash issuance of founder shares - - 57,250
Noncash compensation - - 2,750
---------- --------- ----------
Net cash provided by (used for)
for operations 438 - ( 4,662)
---------- --------- ----------
Cash flows from financing activities
Proceeds from issuance of common stock - - 5,100
---------- --------- ----------
Net increase in cash 438 - 438
Cash, beginning of period - - -
---------- --------- ----------
Cash, end of period $ 438 $ - $ 438
========== ========= ==========
Supplemental disclosure:
Cash paid for interest $ - $ - $ -
========== ========= ==========
Income taxes paid $ - $ - $ -
========== ========= ==========
</TABLE>
See accompanying notes
<PAGE> 5
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Innovative Technology
Systems, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the six-month period ended June 30, 1999 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1999.
Loss per share - The Company has adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("FASB 128"), effective October 1,
1997. FASB 128 requires presentation of earnings or loss per share on basic
and diluted earnings per share. Loss per share is computed by dividing net
income by the weighted average number of shares outstanding during the period.
There are no potentially dilutive shares outstanding. Restatement of the
prior period for this pronouncement had no effect on the loss per share
amount.
Development stage activities - The Company has been in the development stage
since its inception on November 13, 1992. It has conducted no business other
than organize as a corporation. The accompanying financial statements have
been presented in accordance with generally accepted accounting principles,
which assume the continuity of the Company as a going concern. The Company
has been seeking a merger partner and/or beginning a business that would
generate profits. As of the date of this financial statement, no definitive
arrangement has been made.
Recent accounting pronouncements - In April 1998, the Accounting Standards
Executive Committee released Statement of Position 98-5, "Reporting on the
Costs of State-Up Activities" ("SOP 98-5"). SOP 98-5 requires that start-up
costs, including organizational costs, be expensed as incurred. The Company
has accepted early adoption of SOP 98-5 and expensed all start-up costs.
2. CAPITALIZATION
The Company has authorized the issuance 50,000,000 shares of common stock,
having no par value. The Company's initial common stock was issued November
13, 1992 on a gift transfer basis in blocks of 1,000 shares to a total of 300
individuals, primarily "accredited investors". At the same time, the
organizer of the Company received 5,425,000 shares and 275,000 shares were
issued for $100 and exchange of services. In 1996, 100,000 shares were issued
for $5,000.
3. RELATED PARTY TRANSACTIONS
The Company has no resources and all expenses to maintain itself as a
corporation have been advanced by its President in the form of loans payable.
4. INCOME TAXES
The Company has no provision for taxes as they have a net operating loss of
approximately $83,000 that expires at various times through the year 2019. No
deferred asset has been recorded as the possibility of benefiting from the
net operating loss is dependent on the Company achieving profitable
operations.
<PAGE> 6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation
This Quarterly Report on Form 10-QSB contains forward looking
statements. For this purpose, any statements contained in it that
are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," and "expects," and
similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could
cause the Company's actual results to differ materially from those
indicated by such forward-looking statements. These factors
include those set forth in the Company's Form 10-SB registration
statement under the caption "Description of Business."
The following discussion for the Company's results of
operations and financial condition should be read in conjunction
with the Company's condensed consolidated unaudited Financial
Statements listed in Part I, Item 1 and the Notes thereto appearing
elsewhere in this Form 10-QSB, and the Company's audited Financial
Statements listed in Item 13 and the Notes thereto appearing in the
Company's Form 10-SB.
Innovative Technology Systems, Inc. (the "Company") is
presently a development stage company conducting virtually no
business operation, other than its efforts to effect a merger,
exchange of capital stock, asset acquisition or other similar
business combination (a "Business Combination") with an operating
or development stage business ("Target Business") which desires to
employ the Company to become a reporting corporation under the
Securities Exchange Act of 1934. To date, the Company has neither
engaged in any operations nor generated any revenue. It receives no
cash flow. The Company cannot predict to what extent its liquidity
and capital resources will be diminished prior to the consummation
of a Business Combination or whether its capital will be further
depleted by the operating losses, if any, of the Target Business
which the Company effectuates a Business Combination with. No
purchase or sale of significant equipment or significant changes in
the Company's number of employees are expected prior to the
consummation of a Business Combination.
Presently, the Company is not in a position to meet its cash
requirements for the remainder of its fiscal year or for the next
12 months. The Company does not generate any cash revenue or
receive any type of cash flow. From inception to the date of this
Form 10-QSB Quarterly Report, Mr. Bylsma, the Company's sole
officer and director, has made loans to the Company on a need be
basis in the form of promissory notes in the approximate amount of
$22,624. The promissory notes bear simple interest at prime plus
2%. In 1996, the balance due on the promissory notes was reduced
by $5,000 pursuant to a sale of the Company's Common Stock. The
Company's operating costs, which includes professional fees and
costs related to a Business Combination, are likely to approximate
$10,000 to $20,000 during the next 12 months. It is likely that
a Business Combination might not occur during the next 12 months.
In the event the Company cannot meet its operating costs prior to
the effectuation of a Business Combination, the Company may cease
operations and a Business Combination may not occur.
<PAGE> 7
The Company has identified a Target Business to effectuate a
Business Combination with, and Mr. Bylsma, the Company's sole
officer, director and affiliate shareholder, along with certain
other shareholders have entered into a binding agreement for the
sale of their own shares of Company stock to a third party, and the
Company's board of directors has approved this control share
transaction. However; the date set for closing of the transaction
has since past, and the Company is of the opinion that the entire
transaction, as contemplated, may not occur. Mr. Bylsma is
presently negotiating an amended structure to the transaction with
the same Target Business, however, no assurance can be made that
the parties can reach an agreement, if an agreement is reached,
when the Business Combination will occur, and how it will affect
the Company and its shareholders. Further, there can be no
assurance that this or any other transaction will be consummated.
As a result, the Company is unable predict its cash requirements
subsequent to any Business Combination.
Subsequent to the occurrence of a Business Combination, the
Company may be required to raise capital through the sale or
issuance of additional securities in order to ensure that the
Company can meet its operating costs for the remainder of its
fiscal year. No commitments of any kind to provide additional funds
to the Company subsequent to a Business Combination have been made
by management, other shareholders or any other third person.
Accordingly, there can be no assurance that additional funds will
be available to the Company to allow it to cover its expenses
subsequent to a Business Combination. If the Company cannot meet
its operating costs subsequent to a Business Combination, unless
the Company can obtain additional capital, the Company may cease
operations.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Change in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
The Company has identified a Target Business to effectuate a
Business Combination with, and Mr. Bylsma, the Company's sole
officer, director and affiliate shareholder, along with certain
other shareholders have entered into a binding agreement for the
sale of their own shares of Company stock to a third party, and the
Company's board of directors has approved this control share
transaction. However; the date set for closing of the transaction
has since past, and the Company is of the opinion that the entire
transaction, as contemplated, may not occur. Mr. Bylsma is
presently negotiating an amended structure to the transaction with
<PAGE> 8
the same Target Business, however, no assurance can be made that
the parties can reach an agreement, if an agreement is reached,
when the Business Combination will occur, and how it will affect
the Company and its shareholders. Further, there can be no
assurance that this or any other transaction will be consummated.
Item 6. Exhibits and Reports on Form 8-K
(a) Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
ended June 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INNOVATIVE TECHNOLOGY SYSTEMS, INC.,
Registrant
Date: August 31, 1999 /s/ John Bylsma
John Bylsma,
Director, President,
Secretary & Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Financial
Statements and Notes thereto incorporated in Part I, Item 1. of this Form 10QSB
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 438
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 438
<CURRENT-LIABILITIES> 18,271
<BONDS> 0
0
0
<COMMON> 65,100
<OTHER-SE> (82,933)
<TOTAL-LIABILITY-AND-EQUITY> (17,833)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,823
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 800
<INCOME-PRETAX> (5,623)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,623)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
