United States
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 September 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 (IRS Employer
of 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)
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 November 29, 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
September 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> 1
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(a development stage company)
CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
(Unaudited) *
<S> <C> <C>
ASSETS
Current assets $ - $ -
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Loans payable related party $ 26,357 $ 8,710
------------ ------------
Stockholders' deficit:
Common stock 65,100 65,100
Deficit accumulated during the development stage ( 91,457) ( 73,810)
------------ ------------
Total stockholders' deficit ( 26,357) ( 8,710)
------------ ------------
$ - $ -
============ ============
========== ==========
</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 Sept. 30, To Sept. 30
1999 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Sales, net $ - $ - $ -
General and administrative expenses 8,310 1,159 87,450
------------- ------------ ------------
(8,310) (1,159) (87,450)
Other expense:
Interest expense 214 400 (4,007)
------------- ------------ ------------
Net loss $ (8,524) $ (1,559) $ (91,457)
============= ============ ============
Net loss per share $ 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 Sept. 30, To Sept. 30
1999 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ (8,524) $ (1,559) $ (91,457)
Noncash issuance of debt for expenses 8,524 1,559 26,357
Noncash issuance of founder shares - - 57,250
Noncash compensation - - 2,750
----------- ----------- -----------
Net cash provided by (used for)
for operations - - ( 5,100)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from issuance of common stock - - 5,100
----------- ----------- -----------
Net increase in cash - - -
----------- ----------- -----------
Cash, beginning of period - - -
----------- ----------- -----------
Cash, end of period $ - $ - $ -
=========== =========== ===========
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
nine-month period ended September 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 Financial Accounting
Standards No. 128, "Earnings per Share" ("FASB 128"). 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 - The Company accounts for
start-up costs in accordance with the Accounting Standards
Executive Committee's 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 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
in 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 $91,457 that expires in varying times through the year
2019. No deferred asset has been recorded, as the possibility of
benefitting from the net operating loss is dependent on the Company
achieving profitable operations.
<PAGE> 6
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 end of the
period reported in 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 $26,357. 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.
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 who
controls the Target Business, and the Company's board of
<PAGE> 7
directors has approved this control share transaction. The date
set for closing of this transaction is on or about December 2,
1999, but it is likely to be delayed until about December 12,
1999 in order to comply with applicable state and federal
regulations. No assurance can be made that this transaction will
occur; and if it does, no prediction can be made as to how this
transaction will affect the Company and its shareholders. 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 who
controls the Target Business, and the Company's board of
directors has approved this control share transaction. The date
set for closing of this transaction is on or about December 2,
1999, but it is likely to be delayed until about December 12,
1999 in order to comply with applicable state and federal
regulations. No assurance can be made that this transaction will
occur; and if it does, no prediction can be made as to how this
transaction will affect the Company and its shareholders.
On November 22, 1999, the Company filed an Information
Statement with the U.S. Securities and Exchange Commission
pursuant to Section 14(f) of the Securities Exchange Act of 1934
<PAGE> 8
and Rule 14f-1 thereunder with respect to the above transaction.
On or about November 29, 1999, this Information Statement was
mailed to Company shareholders. The Information statement more
fully describes the transaction, and Company shareholders are
urged to review it in order to more fully understand the
transaction.
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 September 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: November 29, 1999 /s/ John Bylsma
John Bylsma, Director, President,
Secretary & Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in Part I, Item 1. of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,357
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 65,100
<OTHER-SE> (91,457)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214
<INCOME-PRETAX> (8,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,524)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
