10QSB 1 ivp_10qsb.txt QUARTERLY PERIOD ENDED MARCH 31, 2003 UNITED STATES 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 ended March 31, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT IVP TECHNOLOGY CORPORATION (Exact name of small business issuer as specified in its charter) Nevada 65-6998896 ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 2275 Lakeshore Blvd West, Suite 401, Toronto, Ontario M8V 3Y3 Canada (Address of principal executive offices) (416) 255-7578 (Issuer's telephone number) (Former name, former address and former fiscal year, if changed since last report) 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 l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] 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: 101,888,522 shares of common stock, $.001 par value, were outstanding on March 31, 2003 Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x] PART I - FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and December 31, 2002 Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2003 and 2002 (Unaudited) Condensed Consolidated Statements of Stockholders' Deficiency for the Three Months ended March 31, 2003 Condensed Consolidated Statements Of Cash Flows For The Three Months Ended March 31, 2003 and 2002 (Unaudited) Notes To Condensed Consolidated Financial Statements As Of March 31, 2003 (Unaudited) ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - OTHER INFORMATION ITEM 1. Legal Matters ITEM 2. Changes in Securities ITEM 3. Defaults Upon Senior Securities ITEM 4. Submission of Matters to a Vote of Security Holders ITEM 6. Subsequent Events, Exhibits and Reports on Form 8-K i IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONTENTS -------- PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2003 (UNAUDITED) AND DECEMBER 31, 2002 PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (UNAUDITED) PAGE 3 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY FOR THE THREE MONTHS ENDED MARCH 31, 2003 (UNAUDITED) PAGES 4 - 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (UNAUDITED) PAGES 6 - 15 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS ------ March 31, 2003 December CURRENT ASSETS (Unaudited) 31, 2002 ------------ ------------ Cash $ 24,882 $ 277,085 Accounts receivable (less allowance for doubtful accounts of $43,970 as of March 31, 2003 and December 31, 2002 228,005 166,841 Inventory 78,955 383,738 Prepaid expenses and other current assets 162,653 134,098 ------------ ------------ Total Current Assets 494,495 961,762 ------------ ------------ FIXED ASSETS Plant, property and equipment 738,947 701,775 Accumulated depreciation (216,560) (165,543) ------------ ------------ Total Fixed Assets 522,387 536,232 ------------ ------------ OTHER ASSETS License agreement - software, net of accumulated amortization of $446,008 267,605 356,806 Other assets - 71,816 ------------ ------------ Total Other Assets 267,605 428,622 ------------ ------------ TOTAL ASSETS $ 1,284,487 $ 1,926,616 ------------ =========== ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY ---------------------------------------- CURRENT LIABILITIES Accounts payable $ 1,609,071 $ 1,839,825 Accrued liabilities 181,760 387,762 Taxes payable 540,681 420,670 Other current liabilities 8,309 72,286 Accrued interest 10,578 14,974 Due to factor 211,249 94,746 Leases payable, current portion 55,504 42,471 Note payable, current portion 1,068,386 184,240 Common stock to be issued 3,602,746 3,617,746 Convertible preferred stock to be issued, short-term 4,779,662 4,779,662 Due to related parties 984,428 1,151,404 ------------ ------------- Total Current Liabilities 13,052,374 12,605,786 ------------ ------------- LONG-TERM LIABILITIES Convertible debentures - 150,000 Lease payable, long-term 19,159 5,849 Convertible preferred stock to be issued, long-term 3,584,747 3,584,747 ------------ ------------ Total Long-Term Liabilities 3,603,906 3,740,596 ------------ ------------ TOTAL LIABILITIES 16,656,280 16,346,382 ----------------- ------------ ------------ STOCKHOLDERS' DEFICIENCY Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding - - Common stock, $0.001 par value, 150,000,000 shares authorized, 101,888,522 and 99,449,261 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively 101,888 99,449 Additional paid in capital 21,061,225 20,870,864 Accumulated deficit (36,577,898) (35,248,562) Other comprehensive income - exchange gain 221,554 80,795 Less deferred equity line commitment fees (178,562) (222,312) ------------ ------------ Total Stockholders' Deficiency (15,371,793) (14,419,766) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,284,487 $ 1,926,616 ---------------------------------------------- ============ ============
See accompanying notes to condensed consolidated financial statements. 1 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (UNAUDITED)
For The For The Three Three Months Months Ended March Ended March 31, 2003 31, 2002 ------------- ------------- NET SALES $ 1,236,615 $ - ------------- ------------- COST OF SALES Product costs 1,039,628 - Development costs 29,826 16,234 Distribution and other costs including amortization 125,322 512,534 ------------- ------------- Total Cost of Sales 1,194,776 528,768 ------------- ------------- GROSS PROFIT (LOSS) 41,839 (528,768) ------------- ------------- OPERATING EXPENSES Salaries and wages 588,782 - Consulting fees 145,421 19,000 Legal and accounting 106,857 46,097 Management fees - 36,956 General and administrative expenses 355,891 117,180 Financial advisory fees 30,708 - Research and development 108 - Amortization and depreciation 44,256 - ------------- ------------- Total Operating Expenses 1,272,023 219,233 ------------- ------------- LOSS FROM OPERATIONS (1,230,184) (748,001) ------------- ------------- OTHER INCOME (EXPENSE) Interest income 5,364 1,628 Interest expense (120,350) (11,927) Foreign exchange gain 15,834 - ------------- ------------- Total Other Income (Expense) (99,152) (10,299) ------------- ------------- NET LOSS $ (1,329,336) $ (758,300) -------- ============= ============= LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.01) $ (0.02) ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED 99,777,239 49,055,055 ============= =============
See accompanying notes to condensed consolidated financial statements. 2 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY FOR THE THREE MONTHS ENDED MARCH 31, 2003 ----------------------------------------- (UNAUDITED)
Additional Preferred Stock Common Stock Common Stock to be Issued Paid-In Accumulated Shares Amount Shares Amount Shares Amount Capital Deficit ------ ------ ----------- ---------- ---------- ------------- ------------- --------------- Balance December 31, 2002 - $ - 99,449,261 $ 99,449 - $ - $20,870,864 $(35,248,562) Stock issued for services and settlements - - 283,297 283 - - 42,517 - Stock issued for cash - - 2,155,964 2,156 - - 147,844 - Deferred cost recognized - - - - - - - - Net loss for the period - - - - - - - (1,329,336) Cumulative translation adjustment - - - - - - - - ------ ------ -------------- -------- ------- --------- --------------- ---------------- Comprehensive loss - - - - - - - - ------ ------ -------------- -------- ------- --------- --------------- ---------------- - $ - 101,888,522 $101,888 - $ - $21,061,225 (36,577,898) BALANCE, MARCH 31, 2003 ====== ====== ============== ========= ======= ========= =============== ================
Deferred Compensation and Other Commitment Comprehensive Fees Income Total ------------- --------------- --------------- Balance December 31, 2002 $(222,312) $ 80,795 $ (14,419,766) Stock issued for services settlements - - 42,800 Stock issued for cash - - 150,000 Deferred cost recognized 43,750 - 43,750 Net loss for the period - - (1,329,336) Cumulative translation adjustment - 140,759 140,759 --------- ---------------- ------------- Comprehensive loss - - (1,188,577) --------- ---------------- ------------- BALANCE, MARCH 31, 2003 $(178,562) $ 221,554 $ (15,371,793) ========== =============== ============= See accompanying notes to condensed consolidated financial statements. 3 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (UNAUDITED)
For The Three For The Three Months Ended Months Ended March 31, March 31, 2003 2002 ------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (1,329,336) $ (758,300) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 44,256 - Amortization of licensing agreements and software kits 92,982 512,534 Amortization of commitment fees 43,750 - Impairment of deferred tax asset 71,816 - Stock issued for services 5,000 232,779 Stock issued for commitment fees and penalties 22,800 - Changes in operating assets and liabilities, net of effects of acquisitions: Decrease (increase) in accounts receivable (61,164) - Decrease in inventory 304,783 - Decrease (increase) in prepaid expenses and other current assets (28,555) - Increase (decrease) in accounts payable (230,754) (828,220) Increase (decrease) in accrued liabilities (206,002) - Increase in taxes payable 120,011 - Increase (decrease) in other current liabilities (63,977) - Increase (decrease) in accrued interest (4,396) 6,909 ----------- ----------- Net Cash Used In Operating Activities (1,218,786) (834,298) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of fixed assets (1,097) - ----------- ----------- Net Cash Used In Investing Activities (1,097) - ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of notes payable (315,000) - Proceeds from notes payable 1,049,146 856,334 Proceeds from issuance of common stock 150,000 - Payments on amounts due to related parties (166,976) - Proceeds from factors 116,503 - Payment on leases (6,752) - ----------- ----------- Net Cash Provided By Financing Activities 826,921 856,334 ----------- ----------- EFFECT OF FOREIGN EXCHANGE RATES 140,759 - ----------- ----------- NET (DECREASE) INCREASE IN CASH FOR THE PERIOD (252,203) 22,036 CASH - BEGINNING OF PERIOD 277,085 232 ----------- ----------- CASH - END OF PERIOD $ 24,882 $ 22,268 -------------------- =========== ===========
See accompanying notes to condensed consolidated financial statements. 4 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (UNAUDITED)
For The For The Three Three Months Months Ended Ended March 31, March 31, 2003 2002 ----------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 80,996 $ - =========== =========== Cash paid for taxes $ - $ - =========== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Equipment purchased under capital leases $ 33,095 $ - =========== =========== Common stock issued for payment of accrued consulting $ 15,000 $ - expenses =========== ===========
See accompanying notes to condensed consolidated financial statements. 5 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION ------ ----------------------------------------------------------- (A) ORGANIZATION ---------------- The consolidated financial statements of IVP Technology Corporation (formally Mountain Chef, Inc.) and consolidated subsidiaries (the "Company") include the accounts of the parent, IVP Technology Corporation, incorporated in the State of Nevada on February 11, 1994, and its subsidiaries: Ignition Entertainment Ltd. ("Ignition"), a United Kingdom ("UK") company; Springboard Technology Solutions, Inc. ("Springboard"), a Canadian company; and Erebus Corporation, an inactive company. The Company was granted an extra-provincial license by the Province of Ontario on June 20, 1995 to carry on business in Ontario, Canada. Prior to 1998, the Company was involved with various unsuccessful activities relating to the sale of technology products before becoming inactive by the end of 1997. The Company began negotiations with a third party in 1998 to become an exclusive distributor of software and therefore is considered to have re-entered the development stage on January 1, 1998. Activities from inception of development stage included raising capital and negotiations and acquisition of software distribution licenses. On January 1, 2002, the Company began operations and emerged from the development stage. The Company operates two units rather than two divisions. The enterprise unit develops, markets, licenses, installs and services data solutions. The consumer unit develops and publishes interactive software games designed for mobile phones, other handheld devices, web-sites, personal computers and video game consoles. The consumer unit also distributes games, hardware and accessories developed or manufactured by third parties. (B) BASIS OF PRESENTATION ------------------------- The condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as allowed by such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the December 31, 2002 audited consolidated financial statements and the accompanying notes thereto included in the Company's 10-KSB. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. The management of the Company believes that the accompanying unaudited condensed consolidated financial statements contain all adjustments (including normal recurring adjustments) necessary to present fairly the operations and cash flows for the periods presented. All material inter-company accounts have been eliminated in consolidation. 6 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) (C) OPERATIONS OF THE COMPANY ----------------------------- The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has a net loss of $1,329,336, a working capital deficiency of $12,557,879, a negative cash flow from operations of $1,218,786 and a stockholders' deficiency of $15,371,793. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plan is to continue in operation and to continue to attempt to raise additional debt or equity capital until such time the Company is able to generate sufficient operating revenue. In view of these matters, realization of certain of the assets in the accompanying condensed consolidated financial statements is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. Management believes that its ability to raise additional capital provides the opportunity for the Company to continue as a going concern. (D) RECLASSIFICATIONS --------------------- Certain reclassifications have been made to the previously reported statements to conform to the Company's current condensed consolidated financial statement format. (E) LOSS PER COMMON SHARE ------------------------- Basic loss per common share is based on net loss divided by the weighted average number of common shares outstanding. Common stock equivalents were not included in the calculation of diluted loss per share as their effect would be anti-dilutive. (F) BUSINESS SEGMENTS --------------------- The Company applies Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information". However, management has determined that it is not practicable to provide geographic and product segment disclosures for revenues and long-lived assets because the Company sells its products to a large variety of locations in the Americas and Europe, and in many instances, these products are then resold through distributors. (G) REVENUE RECOGNITION ----------------------- Risk and Uncertainties ---------------------- A significant portion of all of the Company's net sales are derived from software publishing and distribution activities, which are subject to increasing competition, rapid technological change and evolving consumer preferences, often resulting in the frequent introduction of new products and short product lifecycles. Accordingly, the Company's profitability and growth prospects depend upon its ability to continually acquire, develop 7 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) and market new, commercially successful software products and obtain adequate financing. If the Company is unable to continue to acquire, develop and market commercially successful software products, its operating results and financial condition could be materially adversely affected in the near future. Revenue Recognition ------------------- Publishing revenue is derived from the sale of internally developed interactive software titles or from the sale of titles licensed from third-party developers. Publishing revenue amounted to $1,087,906 for the quarter ended March 31, 2003. The Company had no publishing revenues during the corresponding quarter of 2002, because it had not yet acquired Ignition Entertainment Limited, a publishing revenue generating subsidiary. Distribution revenue is derived from the sale of third-party interactive software titles, accessories and hardware. Distribution revenue amounted to $103,051 for the quarter ended March 31, 2003. The Company had no distribution revenues during the quarter ended March 31, 2002 as it was still in the development stage. Revenues from Services and Commercial Software sold under licenses were $45,658 in the quarter ended March 31, 2003. The Company had no Services or Commercial Software sales in the corresponding quarter of 2002, because it had not yet acquired Springboard Technology Solutions, a Serves and Commercial Software producing subsidiary. The Company recognizes revenue in accordance with Statement of Position ("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9 "Modification of SOP 97-2 Software Revenue Recognition with respect to Certain Transactions." SOP 97-2 provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. SOP 98-9 deals with the determination of vendor specific objective evidence of fair value in multiple element arrangements, such as maintenance agreements sold in conjunction with software packages. The Company's consumer software transactions generally include only one element, the interactive software game or commercial software under license. The Company recognizes revenue when the price is fixed and determinable; there is persuasive evidence of an arrangement, the fulfillment of its obligations under any such arrangement and determination that collection is probable. Accordingly, revenue is recognized when title and all risks of loss are transferred to the customer, which is generally upon receipt by customer. The Company's payment arrangements with its customers provide primarily 60 day terms and to a limited extent with certain customers 30 or 90 day terms. The Company does not have any multi-element arrangements that would require it to establish VSOE for each element, nor does the Company have any sales activity that requires the contract method of accounting. The Company's distribution arrangements with customers generally do not give customers the right to return products; however, the Company at its discretion may accept product returns for stock balancing or defective products. In addition, the Company sometimes negotiates accommodations to customers, including price discounts, credits and product returns, when demand for specific products falls below expectations. The Company's publishing arrangements generally do not require the Company to accept product returns and provide price protection. The Company establishes a 8 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) reserve for future returns and other allowances based primarily on its return policies, price protection policies and historical return rates. The Company may not have a reliable basis to estimate returns and price protection for certain customers or it may be unable to determine that collection of the receivable is probable. In such circumstances, the Company defers the revenues at the time of the sale and recognizes them when collection of the related receivable becomes probable or cash is received. Revenue from product sales is recognized when title passes to the customer, provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable. The Company provides for estimated product returns at the time of the product shipment, if necessary. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, which establishes guidance in applying generally accepted accounting principles to revenue recognition in financial statements and is effective beginning with the fourth quarter of the year ended December 31, 2000. The Company has determined that its existing revenue recognition practices comply with the requirements of SAB 101 for all periods presented. (H) RECENT ACCOUNTING PRONOUNCEMENTS ------------------------------------ In November 2002, the EITF reached a consensus on Issue 00-21, addressing how to account for arrangements that involve the delivery or performance of multiple products, services, and /or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) the delivered item has value to the customer on a stand-alone basis; (2) there is objective and reliable evidence of the fair value of undelivered items; and (3) delivery of any undelivered items is probable. Arrangement consideration should be allocated among the separate units of accounting based on their relative fair values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified performance conditions. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003 with early adoption permitted. The provisions of this consensus are not expected to have a significant effect on the Company's financial position or operating results. In December 2002, the Financial Accounting Standards Board issued Statement No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an amendment of FASB Statement No. 123," ("SFAS 148"). SFAS 148 amends FASB Statement No. 123, "Accounting for Stock Based Compensation" ("SFAS 123") and provides alternative methods for accounting for a change by registrants to the fair value method of accounting for stock-based compensation. Additionally, SFAS 148 amends the disclosure requirements of SFAS 123 to require disclosure in the significant accounting policy footnote of both annual and interim financial statements of the method of accounting for stock based-compensation and the related pro forma disclosures when the intrinsic value method continues to be used. The statement is effective for fiscal years beginning after December 15, 2002, and disclosures are effective for the first fiscal quarter beginning after December 15, 2002. The adoption of this pronouncement will not have a material effect on the Company's financial position or results of operations. 9 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) NOTE 2 ACCOUNTS RECEIVABLE ------ ------------------- The components of accounts receivable are as follows: March 31, 2003 December 31, (Unaudited) 2002 ------------- -------------- Unrestricted trade receivables $ 59,234 $ 61,135 Restricted trade receivables 212,741 149,676 Allowance for doubtful accounts (43,970) (43,970) ------------- -------------- Accounts receivable, net $ 228,005 $ 166,841 ============= ============== Restricted trade receivables are collateral for the Company's secured borrowing facility that Ignition entered into in April 2002. Unrestricted trade receivables consists primary of vendor receivables for enterprise software and information technology services sold by the Company and its Springboard subsidiary. NOTE 3 PREPAID EXPENSES AND OTHER CURRENT ASSETS ------ ----------------------------------------- Prepaid expenses and other current assets as of March 31, 2003 and December 31, 2002 consist of: March 31, 2003 December 31, (Unaudited) 2002 ------------- -------------- Prepaid expenses $ 31,755 $ 56,820 VAT receivable 80,707 30,090 GST receivable 21,525 18,002 Miscellaneous receivable, unrelated parties 27,100 27,341 Other 1,566 1,845 ------------- -------------- Total $ 162,653 $ 134,098 ============= ============== 10 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) NOTE 4 FIXED ASSETS ------ ------------ As of March 31, 2003 and December 31, 2002, fixed assets consist of: March 31, 2003 December 31, (Unaudited) 2002 ------------- -------------- Computer equipment $ 324,270 $ 291,505 Office equipment and furniture 19,698 19,698 Computer software 78,972 74,565 Software development kits 45,367 45,367 Automobiles 26,777 26,777 Leasehold improvements 243,863 243,863 ------------- -------------- 738,947 701,775 Less accumulated depreciation and amortization (216,560) (165,543) ------------- -------------- $ 522,387 $ 536,232 ============= ============== Depreciation expense for the quarter ended March 31, 2003 and 2002 amounted to $44,256 and $0, respectively. NOTE 5 NOTES PAYABLE ------ ------------- During February 2003, upon the Company's SB-2 Registration becoming effective, the Company received $970,000 proceeds from the issuance of a $1 million promissory note to an investment banking company (the "Investment Banker"), net of a 3% cash fee of $30,000, which yields an effective interest rate of approximately 12% per annum. The promissory note is non-interest bearing and is to be paid in full within 95 calendar days. The Company has the discretion to repay the note either with the cash received from the issuance of stock under the Equity Line of Credit Agreement or with cash received from operations or other financing sources. If this note is not fully paid when due, the outstanding principal balance owed will be payable in full together with interest at the rate of 24% per annum or the highest rate permitted by law, if lower. See Note 6 below for partial repayment of this note. Proceeds received from the issuance of this note were used to repay the convertible debenture and note payable to the Investment Banker. As of December 31, 2002, total outstanding principal and accrued interest payable on the convertible debenture and note payable was $155,487 and $15,000, respectively. 11 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) NOTE 6 STOCKHOLDERS' DEFICIENCY ------ ------------------------ On February 18, 2003, the Company issued 168,889 shares of common stock to the Investment Banker for payment of penalties for not completing the SB-2 filing by the due date of July 2, 2002 per the terms of the registration rights agreement entered into in connection with a convertible debenture transaction with the Investment Banker. These shares were valued at $0.13 per share or an aggregate of $21,956, representing the closing market value on the date of grant. On February 18, 2003, the Company issued 114,408 share of common stock to a consultant for payment of $15,000 of consulting services accrued at December 31, 2002 as common stock to be issued included in currently liabilities in the accompanying consolidated balance sheet as of December 31, 2002. These share were valued at $0.13 per share representing the closing market value on the date of grant. During March 2003, the Company issued 2,155,964 shares of common stock to the Investment Banker for cash of $150,000 or $.07 per share, in connection with the Equity Line of Credit (See Note 7). The cash was applied against the $1 million promissory note payable to the Investment Banker issued in February 2003. As of March 31, 2003, the remaining balance of the note payable to the Investment Banker totaled $850,000. NOTE 7 AGREEMENTS ------ ---------- (A) Investment Banker Equity Line of Credit Agreement ----------------------------------------------------- In April 2002, the Company entered into an Equity Line of Credit Agreement with the Investment Banker. Under this agreement, the Company may issue and sell to the Investment Banker common stock for a total purchase price of up to $10 million. Subject to certain conditions, the Company will be entitled to commence drawing down on the Equity Line of Credit when the common stock to be issued under the Equity Line of Credit is registered with the Securities and Exchange Commission and the registration statement is declared effective and will continue for two years thereafter. The purchase price for the shares will be equal to 92% of the market price, which is defined as the lowest closing bid price of the common stock during the five trading days following the notice date. The amount of each advance is subject to an aggregate monthly maximum advance amount of $425,000 in any thirty-day period. In no event shall the number of shares issuable to the Investment Banker, which causes them to own in excess of 9.9% of the then outstanding shares of the Company's common stock. The Company paid the Investment Banker a one-time fee equal to $330,000, payable in 3,032,000 shares of common stock. The Investment Banker is entitled to retain 3.0% of each advance. In addition, the Company entered into a placement agent agreement with a placement agent firm, a registered broker-dealer. Pursuant to the placement agent agreement, the Company paid a one-time placement agent fee of 100,000 shares of common stock, which were valued at $0.20 per share, or an aggregate of $20,000, on the date of issuance. The Company agreed to pay an unrelated consultant, a one-time fee of $200,000 for its work in connection with consulting the company on various financial matters. Of the fee, $75,000 was paid in cash with the balance paid in 1,040,000 shares of common stock. The termination date of this agreement is the earliest of: (1) the Investment Banker makes payment of Advances of $10,000,000, (2) any stop order or suspension of the effectiveness of the Registration Statement for 12 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) an aggregate of fifty (50) Trading Days or (3) the Company shall at any time fail materially to comply with the requirements of the agreement and such failure is not cured within thirty (30) days after receipt of written notice from the Investment Banker or (4) the date occurring twenty-four (24) months after the Effective Date. Pursuant to the terms of the Equity Line of Credit Agreement, the Company was required to file with the SEC a registration statement covering the shares to be acquired by the Investment Banker. The 24-month term commences the effective date of the registration statement. During February 2003, the Company completed its registration statement in connection with the Equity Line of Credit Agreement. To induce the Investment Banker to execute and deliver the Equity Line of Credit Agreement, the Company agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations there under, or any similar successor statute (collectively, the "1933 Act"), and applicable state securities laws. During the commitment period, the Company shall not, without the prior written consent of the Investment Banker, issue or sell (i) any Common Stock without consideration or for a consideration per share less than the Bid price on the date of issuance or (ii) issue or sell any warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire Common Stock without consideration or for a consideration per share less than the Bid Price on the date of issuance, provided, however, that the Investment Banker is given ten (10) days prior written notice and nothing in this section shall prohibit the issuance of shares of Common Stock pursuant to existing contracts or commitments, upon exercise of currently outstanding options or convertible securities, or in connection with any acquisition. On each advance date, the Company shall pay to the Investment Banker, directly from the gross proceeds held in escrow, an amount equal to three percent (3%) of the amount of each advance as a commitment fee. The Company has paid the Investment Banker a one-time commitment fee in the amount of 3,032,000 shares of common stock and warrants to purchase 265,000 shares of common stock of which a warrant to purchase 15,000 shares has an exercise price of $0.50 per share and a warrant to purchase 250,000 shares has an exercise price of $0.099 per share. These warrants vest immediately upon issuance. The value of the one-time commitment fee related to the issuance of common stock totaled approximately $350,000, which was computed based upon the market prices of the Company's common stock on the applicable issuance dates. The warrants issued in connection with the Equity Line of Credit Agreement for commitment fees were valued on the date of grant using the Black-Scholes option-pricing model, which computed a value of $6,107. The commitment fees will be expensed ratably over the life of the Equity Line of Credit agreement and are included in stockholders' deficiency in the accompanying consolidated balance sheet as of March 31, 2003 and December 31, 2002. The Company has recognized commitment fees of approximately $43,750 and $133,795, which has been included in general and administrative expenses on the condensed consolidated statement of operations for the period and year ended March 31, 2003 and December 31, 2002, respectively. (B) Development and Distribution Agreement ------------------------------------------ On February 10, 2003, the Company signed a development and distribution agreement with a distribution company for distribution of the Company's games and other applications for mobile phones and other handheld devices to the distribution company's mobile operator channels on a worldwide 13 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2003 (UNAUDITED) basis. Under the terms of the agreement, which sets forth an initial publication schedule consisting of 14 products, the Company may also sublicense and provide games and applications created by other developers to the distribution company for distribution to their mobile operators. Under the terms of the agreement, the Company will receive royalty payments as the developer for each sale of the Company's games and other applications. (C) Hospital Service Agreement ------------------------------ On March 11, 2003, the Company entered into a one-year data integration agreement with a large hospital (the "Customer") in the Toronto area. The Company will make an interfacing resource available to the Customer for a fixed number of days per week to provide general interfacing services as requested by the Customer. This agreement will automatically be renewed for one-year terms unless terminated by either party in accordance with the terms set forth in this agreement. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS OVERVIEW IVP Technology Corporation ("IVP Technology" or the "Company") is an IT services provider and software developer, licensor, publisher, marketer, and distributor. Its two operating divisions provide products and services to certain segments of the consumer software and enterprise IT marketplaces. IVP Technology is a registered Nevada corporation and has been publicly listed on the OTCBB for four years. IVP currently has its headquarters in Toronto, Ontario. For three years prior to new senior management taking over day to day control of the Company, following the November 2001 approval by the shareholders of IVP of the purchase of International Technology Marketing, Inc., IVP was solely focused on distributing an enterprise software product marketed under the "PowerAudit" name. Beginning in December 2001, IVP acquired rights to distribute additional enterprise software products from several other third party vendors. In May 2002, the Company also acquired 100% of the shares of Ignition Entertainment Limited, a UK based company engaged in the development, licensing, publishing, marketing and distribution of platform (X-box, Playstation, GameCube and GameBoy) video games. In July 2002, IVP acquired 100% of the shares of Springboard Technology Solutions Inc., a Toronto based consumer and enterprise software development and IT services company. ENTERPRISE DIVISION IVP's enterprise software division primarily operates through its wholly owned subsidiary, Springboard Technology Solutions Inc., which was acquired on July 1, 2002 to develop, market, license and install data solutions and other applications for mid-size companies, large corporations and government agencies. A number of Springboard's clients are in the health care field thus, in-order to provide focus to this sector, the company created the d.b.a. registered trade name of MDI Solutions ("MDI") to identify products and services specifically for the health care vertical. The MDI Solutions group has developed, and currently markets, two software products specific to the health care vertical namely "MD Link" and "MD Eye". IVP's other enterprise data solution offerings use Vaayu(TM), developed by Springboard Technology, and Classifier(TM), Viper(TM) and iBos(TM), developed by several third party software companies. In addition to its enterprise operations Springboard also has an established consumer software product group which operates under the trade style of SilverBirch Studios. SilverBirch focuses on developing "handheld" applications most recently in the form of on-line games for web portals and mobile games for Java enabled mobile phones or Symbian OS devices. On a world wide basis "SilverBirch Studios" has been established as a Nevada registered trade name for IVP Technology Corporation. ENTERPRISE SOFTWARE PRODUCTS The enterprise software division currently markets data solutions. These solutions are made up of separate software products that can operate on a stand-alone basis or integrate with other enterprise level software. The Company believes that these products provide enterprises with increased economy, efficiency and effectiveness when enterprises are faced with the necessity of obtaining data from the field, wherever that may be, and moving it into processes that take place in the front and back office environment through to business decision making levels. The current enterprise software products represented by the Company are described below. THIRD PARTY VENDOR PRODUCTS CLASSIFIER(TM). On December 28, 2001, we entered into a two-year, non-exclusive licensing agreement to distribute the Classifier(TM) software program, developed by the Innovation Group, Plc. Subsequently, on September 30, 2002 we renegotiated the agreement with the Innovation Group, Plc to add another product, i-Bos(TM) (see product description herein), and relinquished the financial services industry vertical back to the Innovation Group, Plc. In the course of our contract renegotiation we also obtained the right, on a non-exclusive basis, to distribute both the Classifier(TM) and the i-Bos(TM) product in the UK market. Meanwhile we retained the right to sell such software in the United States, Mexican and Canadian markets. Our distribution agreement allows us to earn up to a 100% margin on the wholesale price, provided certain minimum selling prices are met. We anticipate that the distribution agreement will be renewed on December 31, 2003. The Classifier(TM) product is a sophisticated business intelligence solution that provides data analysis benchmarking which can monitor on-going improvements on business activities, such as specific products, lines of business and other information of a business operation. The Classifier(TM) was designed to create and broadcast business intelligence knowledge views direct to 15 decision makers over corporate Intranets and the Internet. The Classifier(TM) turns a database into a website, enabling more people to access data with a web browser. The Classifier(TM) incorporates a high-performance and powerful data analysis server, a web report publishing facility, versatile data transformation features and the ability to connect and extract data from multiple back office data sources. I-BOS(TM). On September 30, 2002, the Company obtained the non-exclusive right to market the Innovation Group, Plc's i-Bos(TM) product (Innovative Business Operating System) in North America and the United Kingdom to all verticals except financial services. I-Bos(TM) is an application development environment for business analysts. It is process and rule centric and allows analysts to build complete business applications for specific vertical markets without any programming knowledge in a language that is understood by that business sector. i-Bos(TM) is currently used primarily in financial services arenas, however it can be used in any process driven organization such as government, health care or any other organization where it is important that certain steps be taken prior to other operations being performed VIPER(TM). On February 20, 2002, the Company entered into an agreement with Smart Focus Limited, to resell its Viper(TM) suite of products which consists of Viper Analyze(TM) and Viper Visualize(TM), Viper Data Mining(TM), Viper CRM(TM), Viper Campaign Planner(TM) and Viper Smart Campaigner(TM). Pursuant to the license, IVP Technology will be entitled to a 15% commission on sales of Viper(TM) through customer opportunities created by IVP Technology. Smart Focus Limited will make sales representatives available to assist in sales presentations. The Company believes that Viper(TM) is a powerful, fast and easy-to-use analysis and visualization application designed for corporate marketing departments and those decision makers concerned with gross data from voluminous rows of customer information. Viper(TM) harnesses customer and transactional data from any touch-point or channel across any organization to create, build and maintain customer insight and customer intelligence. Viper(TM) is designed to empower enterprises to better understand, predict, manage and influence customer behavior. INTERNALLY DEVELOPED PRODUCTS VAAYU(TM). Vaayu(TM) is a platform-independent software product that mobile-enables existing Enterprise Applications within an organization, allowing staff and field workers to remotely access internal data and systems through a variety of handheld and wireless devices, including Palm OS devices, RIM devices, handheld computers and other mobile devices. MD LINK. During the last fiscal year the Company has also developed in for its medical data integration business a software product that connects independent data systems within a healthcare organization, enabling connectivity and information sharing with stand-alone or legacy applications through industry protocols such as HL7 and XML. MD EYE. MD Eye is a software product that monitors the runtime status of systems and interfaces within an interfacing environment, keeping watch over critical elements such as disk space usage, processor utilization, network connectivity, queue sizes and other IT system critical elements. This product is used in many of MDI Solutions services contracts to assist in monitoring systems and to automatically call for human intervention. ENTERPRISE SERVICES The primary services provided by the Enterprise Division, solely performed under the Springboard Technology Solutions subsidiary, are performed by staff that are on call or operate under contract as outsourced IT personnel in both the health care market and in the network solutions market. Network solutions staff work under the Springboard Technology banner and are typically specialists in working with data networks, typically in high value professional office environments. Specialists in particular medical data structures are employed under the MDI Solutions banner for the health care market. CONSUMER DIVISION The Consumer Division operates through both Ignition Entertainment Limited in the UK, through IVP Technology d.b.a. as Ignition USA for platform games and d.b.a. SilverBirch Studios in North America, Asia and Europe for mobile and on-line games. On May 28, 2002, the Company acquired Ignition Entertainment Limited, a company organized in late 2001 under the laws of England and Wales, specializing in the design, development, licensing, publishing and distribution of personal computer and game console software and accessories. Ignition has been solely concerned with developing for the personal computer and video games platforms market. The Company has development license agreements with 16 Microsoft(TM), Nintendo(TM) and Sony(TM) to support its development activities. The three major platform manufacturers will not accept game products created for mass distribution under their respective brand names unless they are built using development kits obtained from the platform manufacturers. These agreements permit IVP Technology to develop software for these platforms with a non-exclusive, non-transferable license to use these platforms to develop games for platform use. The development of high quality platform video games is an expensive and time consuming process entailing long lead times and has substantial risk associated with picking the correct genres of games, correct timing for releases and is subject to retail acceptance in the market. Games are published pursuant to a written agreement with the manufacturers of the various game platforms for specific geographic territories. The products currently being distributed are a combination of products purchased or subsequently developed by the Company as a result of the Ignition Entertainment Limited acquisition. Several more large scale games are nearing the end of their development cycle. Currently, Ignition Entertainment Limited has the following software titles in distribution in Europe and North America for the Nintendo Gameboy Advance(TM) platform and will shortly be releasing five of these same titles for the Sony Playstation(TM) platform: WORLD TENNIS STARS DEMON DRIVER MONSTER BASS FISHING STRIKE FORCE HYDRA ANIMAL SNAP INTERNATIONAL KARATE PLUS PINBALL TYCOON STADIUM GAMES SUPER DROP ZONE During the first quarter of 2003 IVP Technology signed a development and distribution agreement with Tira Wireless Inc. (www.tirawireless.com), for non-exclusive distribution of IVP's games and other applications for mobile phones and other handheld devices through to Tira's Mobile Operator/Carrier channels on a world wide basis. Tira distributes games and applications through AT&T Wireless, Nokia, Mobilkom Austria, End2End, Telecom1, Vodaphone, Vizzavi Portugal, Jamba and O2 which span the globe in terms of service to mobile subscribers. In addition to using Tira Wireless as a distributor and publisher, IVP has also executed a software distribution agreement with Handango, Inc. which firm distributes a wide range of mobile applications through its on-line web store. Handango is the leading publisher and platform for mobile software. Handango markets more than 25,000 applications from more than 8,000 Handango Software Partners through an extensive global distribution network of online, retail, and enterprise channels reaching more than five million mobile users each month. Handango provides its partners with worldwide distribution, marketing support, on-time payment processing, e-commerce services, product launch assistance and business development expertise. IVP's initial publication and release schedule for Java(TM) games consists of 14 entertainment products which have been created specifically for mobile phone platforms. IVP's mobile games have been created by SilverBirch Studios, an internal development group within Springboard Technology Solutions. In addition to developing mobile applications the SilverBirch group is currently completing work on a mobile phone game website "vortal" for a school age demographic segment to be initiated and marketed under the trade name "Recessgames.com". In the first quarter Ignition Entertainment Limited executed several exclusive GBA distribution agreements with COKeM in North America, Virgin in Spain, Gamesworld in the Benelux, and SG Diffusion in France. Ignition's GBA titles are also being sold through UK retail giant Sainsbury's as well as EB and Prism in the UK. ENTERPRISE DIVISION The enterprise division has made steady progress with particular emphasis on the MDI Solutions group under the Springboard Technology Solutions Inc. subsidiary. In February 2003 the group received its first order for the MD Link product as an HL7 integration solution from Guelph General Hospital for current and future system interfaces within their facility. The installation of the MD Link product was completed in the second quarter of 2003 hence no revenue from this sale has been included in company financial results for the first quarter. In addition MDI Solutions has executed multiple contracts with four of the Toronto area's largest hospitals. These contracts are for a combination of time, 17 material and retained consulting services and have an initial term ranging from six to twelve months with four automatically renewing for additional periods. The key health centers which are serviced by MDI under these contracts are Mount Sinai, a 462 bed hospital and critical care facility, located in downtown Toronto; St. Joseph's Health Centre, a 350 bed community service facility located in West Toronto; York Central Hospital, a 430 bed community hospital located in Toronto's North West region; and The Rouge Valley Health System, a two site 411 bed hospital health center, located in Toronto's Eastern region. The four health centers are amongst the ten largest hospitals in the Toronto area. Springboard Technology has hired additional staff to service the anticipated growth in service contracts and is investing in marketing and sales personnel to obtain greater penetration in both the US and Canadian health care markets. The anticipated growth of the MDI Solutions Group and the enterprise division is expected to provide a rising level of recurring revenue to IVP. We anticipate that there will be continuing growth in the enterprise division in the future. ACQUISITIONS AND REORGANIZATIONS IVP Technology maintains and active interest in acquisitions and the reorganization of its component parts to better service clients of both its consumer and enterprise divisions. Investment in its existing operations augmented by growth through acquisitions is a key goal of company management as is the effective use of capital to drive acceptable returns on investment. IVP management will be recommending to its shareholders at the forthcoming Annual General Meeting that the number of authorized common shares be increased to provide sufficient room in its share structure to complete acquisitions using shares as well as to provide room for equity and debt capital raising. It is management's belief that acquisitions and reorganizations ought to be undertaken when such activities are accretive i.e. the cost of share dilution is offset by earnings in the future. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2002 REVENUES. During the three months ended March 31, 2003, we generated $1,236,615 in revenue in comparison to revenue of nil in the corresponding period ended March 31, 2002. From a revenue source perspective in the first quarter of fiscal year 2003, $1,088,000 of revenue was generated by Ignition Entertainment Limited from the sale of video game entertainment products, $103,051 was generated by IVP at the parent company level also from the sale of consumer software and games and $45,659 resulted from the sale of data solution products and services through Springboard. IVP Technology acquired Ignition on May 28, 2002 and acquired Springboard on July 1, 2002. Accordingly, IVP Technology had no revenue from either source in the comparable period in 2002. We expect that the percentage of revenue produced by Springboard will rise from this level as our medical data integration business increases in future quarters. COST OF SALES. Cost of sales was $1,194,776 for the three months ended March 31, 2003 versus $528,768 in the three months ended March 31. 2002. The principal cost of sales items in the first quarter 2003 consisted of video entertainment product costs. IVP's d.b.a Ignition USA spent $10,305 on publisher's fees, Springboard $128,552 on labor and $2,436 on third party software purchases, while Ignition spent $898,335 on components of video game sales. In addition, the company recorded amortization of prepaid licences of $92,982 related to IVP's Classifier(TM) and I-Bos(TM) distribution and license agreement while distribution costs for Ignition products were $31,676 and Ignition product development costs of $29,826 were incurred and allocated towards the cost of product sold during the quarter. In the three month period ended March 31, 2002 the Company recognized cost of sales of $528,768 related to the amortization of the PowerAudit and Classifier distribution agreements. The result of the cost of sales components elaborated above led to a positive gross margin of $41,839 in the period ended March 31, 2003 versus a negative gross margin of $528,768 in the three months ended March 31, 2002. OPERATING EXPENSES. Total operating expenses for the three months ended March 31, 2003 were $1,272,023 versus $219,233 in the three months ended March 31, 2002. The largest components of first quarter fiscal year 2003 operating expenses were related to salaries and wages and other general and administration expenses. IVP's Chicago office accounted for $41,922 of salary expense, Springboard $36,478 and the operation in the UK $510,381. Salaries and wages include costs of all group insurance and various government programs. The company has a high wage cost base in its UK operation in relation to salaries in the US and Canadian operations. The Company has been implementing cost saving 18 tactics in the UK operation in an effort to bring down costs. In the period ended March 31, 2002 the company expensed $nil in salary and wages. General and Administrative expenses reflect a similar cost differential between the various operations with the UK operation accounting for $161,991 of G&A expenses; Springboard $23,446, the Ignition USA sales operation in Chicago $12,014, and the head office of IVP accounting for $155,899 of which the two largest items were a write-off of commitment fees of $52,339 and a write-off of future income tax asset of $76,938 - the remaining items consisted of general overhead items such as investor relations fees and travel and lodging. In the three months ended March 31 2002, $117,180 was expensed to General and Administrative expenses. Consulting fees for the three months ending March 31, 2003 were $145,421 which was a large increase over the three months ended March 31, 2002 due to the following: fees for Brian MacDonald and Peter Hamilton at the IVP parent company level of $31,780, fees for Geno Villella and Kevin Birch at the Springboard level of $15,891 and fees at the Ignition Entertainment level for management contracts of $96,747. In the three months ended March 31, 2002 only payments to the original management group of IVP was included in consulting fees for a total of $19,000. Legal and accounting expenses were $106,857 in the three months ended March 31, 2003 versus $46,097 in the period ended March 31, 2002. The increase between the periods was primarily due to additional audit fees related to increased operations and legal fees related to the completion of the Company's SB-2 Registration Statement in February 2003. Legal fees of $48,492 and accounting fees of $45,233 were paid at the IVP level during the first three months of the year, while Springboard incurred $1,584 in legal fees and Ignition Entertainment incurred $10,978 in legal and accounting fees. In the period ended March 31, 2002 the $46,097 in fees were primarily related to clean up of the company's financial statements and other legal expenses. Financial advisory fees were $30,708 in the period March 31, 2003 versus $nil in the period ended March 31, 2002. The charges were directly related to the costs of retaining Danson Partners to assist in bringing the company up to SEC standards in accounting and finance, the contract with Danson Partners expired at the end of February 2003. Amortization and depreciation in the first three months ended March 31, 2002 was $44,256 versus nil in the period ended March 31, 2002. Amortization in the first quarter of 2003 consisted primarily of fixed asset depreciation. OTHER INCOME/EXPENSES Interest income from cash on deposit was $5,364 in the quarter ended March 31, 2003 versus $1,628 in the quarter ended March 31, 2002. Interest expense was much higher in the period ended March 31, 2003 at $120,350 than in the comparative period ended March 31, 2002 which was $11,927. In the first quarter the parent company incurred financing charges of $60,000 related to the Cornell Capital Equity Line of Credit made up of $30,000 from the 3% funding fee for cash advances from Cornell and $30,000 which represented an interest penalty due to Cornell as a result of not successfully getting the SB 2 approved within 90 days of contract execution in May 2002.. As well the Company incurred $7,558 of bank interest, $2,070 in accrued interest on the Berra note and $41,998 in finance charges for its Ignition subsidiary. The company recorded a foreign exchange gain of $15,834 for the three months ended March 31, 2003 as a result of the decline of the US dollar in relation to both the UK Pound and the Canadian Dollar. There was no corresponding gain or loss in the comparative fiscal period as the company was not carrying on operations in other countries during the period. NET LOSS. As a result of the items specified above, the Company incurred a net loss of $1,329,336 or 0.01 cent per share versus a loss of $758,300 or 0.02 cents per share in the first quarter of 2002. LIQUIDITY AND CAPITAL RESOURCES Prior to December 31, 2001 the Company financed its operations through a combination of convertible securities and the private placement of shares. In the fiscal year ended December 31, 2002 the Company entered into several financing arrangements. These included an equity line of credit with Cornell Capital Partners LP for $10,000,000 and factoring and letter of credit facilities with DcD Group to assist in providing working capital for Ignition Entertainment Limited. Our primary need for cash is to fund our ongoing operations, chiefly Ignition Entertainment Limited, and to defray the cost of remaining a public company until such time that the sale of our products and services generates sufficient net revenue to fund operations and grow the Company. 19 As March 31, 2003, our need for cash included satisfying $4,669,966 of current liabilities which consisted of accounts payable of $1,609,071, $181,760 of accrued liabilities, taxes payable of $540,681, and other current liabilities of $8,309, accrued interest of $10,578, amounts payable to DcD factors of $211,249 the current portion of leases payable of 55,504, amounts payable to related parties of $984,428 and notes payable of $1,068,386. Excluded from these figures is debt of $8,382,408 which is payable by the issuance of stock to the former shareholders of Ignition Entertainment Limited and to DCD group for financing provided to Ignition Entertainment. These shares will be placed in escrow following acceptance of a resolution of the shareholders to increase the number of authorized shares of the company. In addition, the Company entered into a promissory note in the first quarter of 2003 for $221,824, which evidences the cash portion owed to a software licensor. The note will be repaid in nine equal installments of $25,203, commencing on June 1, 2003. The Company has long-term debt of $3,603,906, of which $3,584,747 will be satisfied by the issuance of stock also to the former shareholders of Ignition Entertainment Limited. The balance consists of the long term portion of leases payable of $19,159. Our independent accountants have issued a going concern opinion on our financial statements that raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional bank or non-bank term and operating credit, convertible debt, equity capital or access capital under the equity line and implement our business plan to market and sell our various enterprise software and services and our various consumer software titles through our wholly owned subsidiaries. Ignition Entertainment Limited has secured a 1,000,000 British pound revolving credit facility with UK based Revelate Limited for the purpose of allowing Ignition Entertainment Limited to purchase goods and services from third party vendors. Under the terms of the revolving credit facility, Ignition Entertainment Limited may contract for the importation of software products and services to the extent of 60% of the projected resale price of items purchased as a result of the credit facility. The credit facility may be accessed by demonstrating firm orders for goods to be delivered and sold. The Company has not borrowed any funds under the revolving credit facility. Ignition Entertainment Limited also has arranged a loan secured by its accounts receivable and other tangible and intangible assets with DcD Factors, Plc. Under the terms of the secured loan, Ignition Entertainment Limited will be able borrow up to 75% of its eligible accounts receivable. As of March 31, 2003 Ignition Entertainment Limited had $211,249 outstanding with DcD Factors, Plc. At March 31, 2003 the Company had cash on hand of $24,882. In addition, as at the fiscal year end, certain shareholders have also supported the Company to the extent of $984,428 and while there is no legal commitment for them to do so the company believes that certain shareholders will continue to support the Company in a similar manner. These advances are shown in long term liabilities and they have no fixed terms for repayment. During February 2003, upon the Company's SB-2 Registration becoming effective, the Company received $970,000 proceeds from the issuance of a $1 million promissory note to the Investment Banker, net of a 3% cash fee of $30,000, which yields an effective interest rate of approximately 12% per annum. The promissory note is non-interest bearing and is to be paid in full within 95 calendar days. The Company has the discretion to repay the note either through cash received from the issuance of stock under the Equity Line of Credit Agreement or by cash from other sources. In connection with the note, the Company has agreed to escrow 10 requests for advances under the Equity Line of Credit Agreement in the amount not less than $100,000. The request will be held in escrow by an independent law firm, who will release such requests to the Investment Banker every 7 calendar days commencing on March 3, 2003 unless otherwise agreed between the Company and Cornell Capital. If this note is not fully paid when due, the outstanding principal balance owed will be payable in full together with interest at the rate of 24% per annum or the highest rate permitted by law, if lower. See below for partial repayment of this note. In April 2002, IVP Technology entered into an Equity Line of Credit Agreement with Cornell Capital Partners, L.P. Under this agreement, IVP Technology may issue and sell to Cornell Capital Partners common stock for a total purchase price of up to $10 million. Subject to certain conditions, IVP Technology will be entitled to commence drawing down on the Equity Line of Credit when the common stock to be issued under the Equity Line of Credit. On February 14, 2003 a Registration Statement on Form SB-2 that was filed by the Company was declared effective by the SEC. Under the terms of the Equity Line of Credit the Company may provide notice to Cornell and Cornell will purchase from the company shares equal to 92% of the market price, which is defined as the lowest closing bid price of the common stock during the five trading days following the notice date. The amount of each advance is subject to an aggregate maximum advance amount of $425,000 in any thirty-day period. Cornell Capital is entitled to retain 3.0% of each advance. In April 2002, IVP Technology paid Cornell a one-time fee equal to $330,000, paid in the form of 3,032,000 shares of common stock. In addition, IVP Technology entered into a placement agent agreement with Westrock Advisors, Inc., a registered broker-dealer. Pursuant to the placement agent agreement, IVP Technology paid a one-time placement agent fee of 100,000 shares of common stock, which were valued at $0.20 per share, or an aggregate of $20,000, on the date of issuance. IVP Technology agreed to pay Danson Partners, LLC, a consultant, a one-time fee of $200,000 for its work in connection with consulting the Company on various financial matters. Of the fee, $75,000 was paid in cash with the balance paid in 1,040,000 shares of common stock. To the end of March 2003, the Company has received under the Equity Line of Credit $150,000 in exchange for 2,155,964 shares of common stock. Except for the Equity 20 Line of Credit, the Company has no commitments for equity capital although the company continues to explore other funding alternatives in an effort to broaden its capital sources. The Company anticipates that its cash needs over the next 12 months will consist of general working capital needs of $5,000,000, which would include the satisfaction of current liabilities of $3,099,055. As of March 31, 2003 the company had a working capital deficiency of $12,557,879. The Company anticipates that its cash needs over the next 12 months will come primarily from a combination of operating credit lines, term loans, which may or may not be secured by assets, or contain conversion features which may lead to additional shares being issued, or the sale of equity under the Equity Line of Credit. Draw downs on the Equity Line of Credit may cause the share price to decline in value unless buyers are present to take up the supply of new shares entering the market. If the company is unable to obtain additional funding through our Equity Line of Credit facility or from other sources of debt and equity capital, then the failure to obtain this funding will have a material adverse effect on our business and this may force us to re-organize, reduce our investment in, or otherwise divest of one or more of our operations, or to reduce the cost of all operations to a lower level of expenditure which may have the effect of reducing our expected revenues and potentially net income in 2003 and 2004. CAPITAL RESOURCES Pursuant to the Equity Line of Credit, the Company may periodically sell shares of common stock to Cornell Capital to raise capital to fund its working capital needs. The periodic sale of shares is known as an advance. The Company may request an advance every 5 trading days. A closing will be held 7 trading days after such written notice at which time the Company will deliver shares of common stock and Cornell Capital Partners, L.P. will pay the advance amount, less the 3% retention. The Company may request advances under the Equity Line of Credit once the underlying shares are registered with the Securities and Exchange Commission. Thereafter, the company may continue to request advances until Cornell Capital has advanced $10.0 million or two years after the effective date of the registration statement, whichever occurs first. The amount of each advance is subject to an aggregate maximum advance amount of $425,000 in any thirty-day period. The amount available under the Equity Line of Credit is not dependent on the price or volume of our common stock. The Company registered 30,000,000 shares of common stock in connection with the Equity Line of Credit and upon conversion of the debentures. The Company cannot predict the actual number of shares of common stock that will be issued pursuant to the Equity Line of Credit, in part, because the purchase price of the shares will fluctuate based on prevailing market conditions and the company has not determined the total amount of advances the Company intends to draw. Nonetheless, if the Company issued all 30,000,000 shares of common stock at a recent price of $0.04 per share (which assumes that no shares would need to be issued upon conversion of debentures), then the Company would receive $1,200,000 under the Equity Line of Credit (after deducting a 3% retention payable to Cornell). This is $8,800,000 less than is available under the Equity Line of Credit. The Company's stock price would have to rise substantially for us to have access to the full amount available under the Equity Line of Credit. These shares would represent 20% of our outstanding common stock upon issuance. Accordingly, the Company would need to register additional shares of common stock in order to fully utilize the $10 million available under the Equity Line of Credit at the current price of $0.04 per share. In addition, the Company would be required to obtain the approval of our shareholders to increase the number of authorized shares of common stock. Pursuant to our Articles of Incorporation, the Company is authorized to issue up to 150,000,000 shares of common stock. At a recent price of $0.04 per share, the Company would be required to issue 250,000,000 shares of common stock in order to fully utilize the $10.0 million available. The Company would be required to obtain a vote of at least a majority of the outstanding shares in order to increase our authorized shares of common stock for this purpose. Our inability to obtain such approval would prohibit us from increasing our authorized shares of common stock and from issuing any additional shares under the Equity Line of Credit or to otherwise raise capital from the sale of capital stock. In April 2002, IVP Technology raised $150,000 of gross proceeds from the issuance of convertible debentures. These debentures accrue interest at a rate of 5% per year and mature two years from the issuance date. The debentures are convertible at the holder's option any time up to maturity at a conversion price equal to the lower of (i) 120% of the closing bid price of the common stock as of the closing date (ii) 80% of the average closing bid price of the common stock for the 4 lowest trading days of the 5 trading days immediately preceding the conversion date. At maturity, IVP Technology has the option to either pay the holder the outstanding principal balance and accrued interest or to convert the debentures into shares of common stock at a conversion price equal to the lower of (i) 120% of the closing bid price of the common stock as of the closing date or (ii) 80% of the average closing bid price of the common stock for the 4 lowest trading days of the 5 trading days immediately preceding the conversion date. IVP Technology has the right to redeem the debentures upon 30 days notice for 120% of the amount redeemed. Upon such redemption, IVP Technology will issue 21 the investor a warrant to purchase 10,000 shares of common stock at an exercise price of $0.50 per share for every $100,000 of debentures that are redeemed. As is further disclosed in the Company's financial statements the Company redeemed this convertible debenture and accrued interest in February 2003. On January 31, 2002, the Company entered into an interim financing agreement for 600,000 British pounds, (U.S.$856,334) on an unsecured basis with the European based venture capital and merchant banking firm DcD Holdings Limited. The loan bears an interest rate equal to the HSBC Bank base rate, minus 5% if that figure is positive, and interest is payable monthly. The loan was due on April 30, 2002. On May 1, 2002, the Company converted the loan, plus accrued interest into 4,000,000 shares of our common stock. CONSOLIDATED STATEMENT OF CASH FLOWS Cash on the balance sheet of IVP Technology Corporation decreased from $277,085 in December 2002 to $24,882 on March 31, 2003. While there was a net loss from operations of $1,329,336 in the three months ended March 31, 2003, there were net non-cash expense adjustments of $280,604. In the period ended March 31, 2002 the non-cash adjustments were $745,313 consisting of amortization of a portion of the Classifier license agreement and stock issued for services. NET CASH USED IN OPERATING ACTIVITIES Net cash used in operating activities was $1,218,786 for the three months ended March 31, 2003 and $834,298 for the three months ended March 31, 2002. The use of cash in operating activities was principally the result of net losses during both reporting periods although in 2002 cash was primarily used to maintain a public listing and to service the Classifier and Orchestral PowerAudit distribution agreements while in 2003 the Company was carrying on an active business. The company did not have active operations during the quarter ended March 31, 2002. In the three months ended March 31, 2003 cash used in operating activities consisted of a number of changes in operating items such as accounts receivable, inventory and other operating items as reflected in the statement of cash flows. NET CASH USED IN INVESTING ACTIVITIES Net cash used in investing activities was $1,097 related to an increase in fixed assets in the quarter ended March 31, 2003. NET CASH PROVIDED BY FINANCING ACTIVITIES During the three months ended March 31,2003 the Company raised cash of $1,315,649 from investing activities and repaid a note payable, the convertible debenture from Cornell Capital and made a reduction on certain items payable to employees or shareholders together with lease payments of $6,752 to yield a net 826,921 in cash from financing activities. In the same period in 2002 the Company completed one transaction which consisted of borrowing $856,334 from DCD group which was subsequently converted to shares in May 2002. CRITICAL ACCOUNTING POLICIES The consolidated financial statements of IVP Technology Corporation (formally Mountain Chef, Inc.) and consolidated subsidiaries (the "Company") include the accounts of the parent, IVP Technology Corporation, incorporated in the State of Nevada on February 11, 1994, and its subsidiaries: Ignition Entertainment Ltd. ("Ignition"), a United Kingdom ("UK") company; Springboard Technology Solutions, Inc. ("Springboard"), a Canadian company; and Erebus Corporation, an inactive company. The Company was granted an extra-provincial license by the Province of Ontario on June 20, 1995 to carry on business in Ontario, Canada. Prior to 1998, the Company was involved with various unsuccessful activities relating to the sale of technology products before becoming inactive by the end of 1997. The Company began negotiations with a third party in 1998 to become an exclusive distributor of software and therefore is considered to have re-entered the development stage on January 1, 1998. Activities from inception of development stage included raising capital and negotiations and acquisition of software distribution licenses. On January 1, 2002, the Company began operations and emerged from the development stage. The Company operates two divisions, enterprise and consumer. The enterprise division develops, markets, licenses, installs and services data solutions. The consumer division develops and publishes interactive software games designed for mobile phones, other handheld devices, web-sites, personal computers and video game consoles. The consumer division also distributes games, hardware and accessories developed or manufactured by third parties. 22 REVENUE RECOGNITION RISK AND UNCERTAINTIES A significant portion of all of the Company's net sales are derived from software publishing and distribution activities, which are subject to increasing competition, rapid technological change and evolving consumer preferences, often resulting in the frequent introduction of new products and short product lifecycles. Accordingly, the Company's profitability and growth prospects depend upon its ability to continually acquire, develop and market new, commercially successful software products and obtain adequate financing. If the Company is unable to continue to acquire, develop and market commercially successful software products, its operating results and financial condition could be materially adversely affected in the near future. REVENUE RECOGNITION Publishing revenue is derived from the sale of internally developed interactive software titles or from the sale of titles licensed from third-party developers. Publishing revenue amounted to $1,087,906 for the quarter ended March 31, 2003. The Company had no publishing revenues during the corresponding quarter of 2002, because it had not yet acquired Ignition Entertainment Limited, a publishing revenue generating subsidiary. Distribution revenue is derived from the sale of third-party interactive software titles, accessories and hardware. Distribution revenue amounted to $103,051 for the quarter ended March 31, 2003. The Company had no distribution revenues during the quarter ended March 31, 2002 as it was still in the development stage. Revenues from Services and Commercial Software sold under licenses were $45,658 in the quarter ended March 31, 2003. The Company had no Services or Commercial Software sales in the corresponding quarter of 2002, because it had not yet acquired Springboard Technology Solutions, a Serves and Commercial Software producing subsidiary. The Company recognizes revenue in accordance with Statement of Position ("SOP") 97-2 "Software Revenue Recognition", as amended by SOP 98-9 "Modification of SOP 97-2 Software Revenue Recognition with respect to Certain Transactions." SOP 97-2 provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. SOP 98-9 deals with the determination of vendor specific objective evidence of fair value in multiple element arrangements, such as maintenance agreements sold in conjunction with software packages. The Company's consumer software transactions generally include only one element, the interactive software game or commercial software under license. The Company recognizes revenue when the price is fixed and determinable; there is persuasive evidence of an arrangement, the fulfillment of its obligations under any such arrangement and determination that collection is probable. Accordingly, revenue is recognized when title and all risks of loss are transferred to the customer, which is generally upon receipt by customer. The Company's payment arrangements with its customers provide primarily 60 day terms and to a limited extent with certain customers 30 or 90 day terms. The Company does not have any multi-element arrangements that would require it to establish VSOE for each element, nor does the Company have any sales activity that requires the contract method of accounting. The Company's distribution arrangements with customers generally do not give customers the right to return products; however, the Company at its discretion may accept product returns for stock balancing or defective products. In addition, the Company sometimes negotiates accommodations to customers, including price discounts, credits and product returns, when demand for specific products falls below expectations. The Company's publishing arrangements generally do not require the Company to accept product returns and provide price protection. The Company establishes a reserve for future returns and other allowances based primarily on its return policies, price protection policies and historical return rates. The Company may not have a reliable basis to estimate returns and price protection for certain customers or it may be unable to determine that collection of the receivable is probable. In such circumstances, the Company defers the revenues at the time of the sale and recognizes them when collection of the related receivable becomes probable or cash is received. Revenue from product sales is recognized when title passes to the customer, provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an arrangement exists; the sales price is fixed or determinable; and collectability is deemed probable. The Company provides for estimated product returns at the time of the product shipment, if necessary. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, which establishes guidance in applying generally accepted accounting principles to revenue recognition in financial statements and is effective beginning with the fourth quarter of the year ended December 31, 2000. The Company has determined that its existing revenue recognition practices comply with the requirements of SAB 101 for all periods presented. 23 RECENT ACCOUNTING PRONOUNCEMENTS In November 2002, the EITF reached a consensus on Issue 00-21, addressing how to account for arrangements that involve the delivery or performance of multiple products, services, and /or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) the delivered item has value to the customer on a stand-alone basis; (2) there is objective and reliable evidence of the fair value of undelivered items; and (3) delivery of any undelivered items is probable. Arrangement consideration should be allocated among the separate units of accounting based on their relative fair values, with the amount allocated to the delivered item being limited to the amount that is not contingent on the delivery of additional items or meeting other specified performance conditions. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003 with early adoption permitted. The provisions of this consensus are not expected to have a significant effect on the Company's financial position or operating results. In December 2002, the Financial Accounting Standards Board issued Statement No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an amendment of FASB Statement No. 123," ("SFAS 148"). SFAS 148 amends FASB Statement No. 123, "Accounting for Stock Based Compensation" ("SFAS 123") and provides alternative methods for accounting for a change by registrants to the fair value method of accounting for stock-based compensation. Additionally, SFAS 148 amends the disclosure requirements of SFAS 123 to require disclosure in the significant accounting policy footnote of both annual and interim financial statements of the method of accounting for stock based-compensation and the related pro forma disclosures when the intrinsic value method continues to be used. The statement is effective for fiscal years beginning after December 15, 2002, and disclosures are effective for the first fiscal quarter beginning after December 15, 2002. The adoption of this pronouncement will not have a material effect on the Company's financial position or results of operations. 24 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES RECENT SALES OF UNREGISTERED SECURITIES During February 2003, upon the Company's SB-2 Registration becoming effective, the Company received $970,000 proceeds from the issuance of a $1 million promissory note to an investment banking company (the "Investment Banker"), net of a 3% cash fee of $30,000, which yields an effective interest rate of approximately 12% per annum. The promissory note is non-interest bearing and is to be paid in full within 95 calendar days. The Company has the discretion to repay the note either with the cash received from the issuance of stock under the Equity Line of Credit Agreement or with cash received from operations or other financing sources. If this note is not fully paid when due, the outstanding principal balance owed will be payable in full together with interest at the rate of 24% per annum or the highest rate permitted by law, if lower. See Note 6 below for partial repayment of this note. On February 18, 2003, the Company issued 168,889 shares of common stock to the Investment Banker for payment of penalties for not completing the SB-2 filing by the due date of July 2, 2002 per the terms of the registration rights agreement executed in connection with the convertible debentures Agreement. These shares were valued at $0.13 per share or an aggregate of $21,956, representing the closing market value on the date of issue. On February 18, 2003, the Company issued 114,408 shares of common stock to a consultant for payment of $15,000 of consulting services accrued at December 31, 2002 as common stock. These shares were valued at $0.13 per share representing the closing market value on the date of grant. On September 30, 2002, the former shareholders of ITM earned 20,000,000 contingent shares having a value of $3,800,000. These shares are to be released out of escrow. On July 1, 2002, IVP Technology acquired all the outstanding shares of Springboard Technology Solutions, Inc. for consideration of 2,000 common shares on the basis of a one for one exchange. The shares were valued at $260 corresponding to the date that the Company's Board of Directors approved the transaction. On June 28, 2002, IVP Technology issued 2,410,916 shares of common stock to Rainbow Investments pursuant to the terms of our March 17, 2000 debt conversion agreement. On June 28, 2002, IVP Technology issued 23,370 shares of common stock to Danson Partners, LLC having a value of $5,000 for consulting services rendered. On May 28, 2002, IVP Technology acquired Ignition Entertainment Limited. IVP Technology is obligated to issue 15,000,000 shares of common stock and 3,500,000 shares of preferred stock as payment to Ignition Entertainment Limited over a period of two years from the date of the acquisition. Additionally, the management team of Ignition Entertainment Limited may earn up to 1,500,000 shares of preferred stock if certain revenue and net income goals are met at specific time periods. These shares will be held in escrow and disbursed by the escrow agent according to the escrow agreement. 25 In May 2002, IVP Technology entered into an agreement with Vanessa Land for marketing and advisory services connected with product marketing in the European Economic Community and North America. In relation with this agreement, IVP Technology issued 5,000,000 shares of common stock to Ms. Land. These shares were registered on a Form S-8 filed on May 3, 2002. These shares were valued at $.05 per share, or an aggregate of $250,000, on the date of issuance. On May 1, 2002, IVP Technology agreed to issue 4,000,000 shares of common stock having a value of $760,000 in full settlement of its obligation to DcD Holdings Limited. IVP Technology issued these shares on or about August 6, 2002. In April 2002, IVP Technology raised $150,000 of gross proceeds from the issuance of convertible debentures. These debentures accrued interest at a rate of 5% per year and were to mature two years from the issuance date. The convertible debentures and all accrued interest were paid in February, 2003. On April 26, 2002, IVP Technology issued 62,027 shares of common stock to Danson Partners, LLC having a value of $5,000 for consulting services rendered. On or about March 25, 2002, IVP Technology issued 100,000 shares of common stock to Barry Gross that was earned pursuant to a consulting contract signed in 2000. These shares were valued at $0.09 per share, or an aggregate of $9,000, on the date of issuance. On or about March 25, 2002, IVP Technology issued 14,000,000 shares of common stock to Brian MacDonald to be held in escrow pending achievement of the performance clauses related to the September 17, 2001 agreement with International Technology Marketing. On or about March 25, 2002, IVP Technology issued 14,000,000 shares of common stock to Peter Hamilton to be held in escrow pending achievement of the performance clauses related to the September 17, 2001 agreement with International Technology Marketing. 26 On or about March 25, 2002, IVP Technology issued 14,000,000 shares of common stock to Kevin Birch to be held in escrow pending achievement of the performance clauses related to the September 17, 2001 agreement with International Technology Marketing. On or about March 25, 2002, IVP Technology issued 4,000,000 shares of common stock to Geno Villella to be held in escrow pending achievement of the performance clauses related to the September 17, 2001 agreement with International Technology Marketing. On or about March 25, 2002, IVP Technology issued 4,000,000 shares of common stock to Sherry Bullock to be held in escrow pending achievement of the performance clauses related to the September 17, 2001 agreement with International Technology Marketing. Subsequently, Ms. Bullock left employment with IVP Technology and has accepted a partial payment of 800,000 shares and the remainder of her performance based shares will be reallocated to the remaining members of International Technology Marketing. On or about March 25, 2002, IVP Technology issued 500,000 shares of common stock to John Maxwell in lieu of compensation for services performed in 2001 as President of IVP Technology. These shares were valued at $0.05 per share, or an aggregate of $25,000, on the date of issuance. On or about March 25, 2002, IVP Technology issued 500,000 shares of common stock to John Trainor in lieu of compensation for services performed in 2001 as Secretary of IVP Technology. These shares were valued at $0.05 per share, or an aggregate of $25,000, on the date of issuance. On or about March 25, 2002, IVP Technology issued 2,375,600 shares of common stock valued at $.05 per share to Thomas Chown for the conversion of $118,780 of debts owed by the corporation for services performed in 2001. On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common stock to Buford Industries as conversion of a fee of $50,000 earned for introducing IVP Technology to International Technology Marketing. These shares were valued at $0.05 per share, or an aggregate of $50,000, on the date of issuance. On or about March 25, 2002, IVP Technology issued 50,000 shares of common stock to Ruffa and Ruffa, P.A. for payment of interest on outstanding legal bills for the year 2001 - 2002. These shares were valued at $0.10 per share, or an aggregate of $5,000, on the date of issuance. On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common stock to J. Stephen Smith to be held in escrow for services as a board member for the period from 2001 to 2003 to be accrued at the rate of 500,000 per year. On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common stock to Michael Sidrow to be held in escrow for services as a board member for the period from 2001 to 2003 to be accrued at the rate of 500,000 per year. In June 2002, these shares were rescinded as a result of Mr. Sidrow's resignation from the board of directors. On or about March 25, 2002, IVP Technology issued 1,000,000 shares of common stock to Robert King to be held in escrow for services as a board member for the period from 2001 to 2003 to be accrued at the rate of 500,000 per year. In June 2002, these shares were rescinded as a result of Mr. King's resignation from the board of directors. With respect to the sale of unregistered securities referenced above, all transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated under the 1933 Act. In each instance, the purchaser had access to sufficient information regarding IVP Technology so as to make an informed investment decision. More specifically, IVP Technology had a reasonable basis to believe that each purchaser was an "accredited investor" as defined in Regulation D of the 1933 Act and otherwise had the requisite sophistication to make an investment in IVP Technology's securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 27 OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit No. Description Location ----------- ----------- -------- 2.1 Agreement and Plan of Incorporated by reference to Reorganization dated March 21, Exhibit 4.1 to IVP Technology's 2000 between IVP Technology Form 8-K12G3 filed on April 19, Corporation and Erebus Corporation 2000 3.1 Certificate of Amendment of Incorporated by reference to Articles of Incorporation Exhibit 3.1 to IVP Technology's Form 10-KSB filed on April 15, 2002 3.2 Bylaws Incorporated by reference to Exhibit 3.2 to IVP Technology's Amendment No. 2 to the Form SB-2 filed on November 14, 2002 4.4 Description of Securities Incorporated by reference to Exhibit 4.4 to IVP Technology's Form S-8 filed on July 23, 2001 10.4 Second Amending Agreement to Incorporated by reference to Software Distribution Agreement Exhibit 10.4 to IVP Technology's dated as of May 31, 2000 between Form 10-QSB filed on September 24, the Registrant and Orchestral 2000 Corporation 10.5 Service Bureau Arrangement Incorporated by reference to Agreement dated September 28, 2000 Exhibit 10.5 to IVP Technology's between the Registrant and Form 10-QSB filed on November 14, E-RESPONSES.COM 2000 10.6 Stock Purchase Agreement dated Incorporated by reference to September 17, 2001 among the Exhibit 10.6 to IVP Technology's Registrant, International Form 10-KSB filed on April 15, 2002 Technology Marketing, Inc., Brian MacDonald, Peter Hamilton, Kevin Birch, Sherry Bullock, and Geno Villella 10.7 Agreement dated May 15, 2000 Incorporated by reference to between the Registrant and Rainbow Exhibit 10.7 to IVP Technology's Investments International Limited Form 10-KSB filed on April 15, 2002 10.8 Employment Agreement dated August Incorporated by reference to 30, 2001 between International Exhibit 10.8 to IVP Technology's Technology Marketing, Inc. and Form 10-KSB filed on April 15, 2002 Brian J. MacDonald 10.9 Agreement dated February 12, 2002 Incorporated by reference to between the Registrant and Exhibit 10.9 to IVP Technology's SmartFOCUS Limited Form 10-KSB filed on April 15, 2002 10.10 Warrant Agreement dated May 15, Incorporated by reference to 2000 between the Registrant and Exhibit 10.10 to IVP Technology's Rainbow Investments International Form 10-KSB filed on April 15, 2002 Limited 28 Exhibit No. Description Location ----------- ----------- -------- 10.11 Convertible Promissory Note dated Incorporated by reference to May 2000 between the Registrant Exhibit 10.11 to IVP Technology's and Rainbow Investments Form 10-KSB filed on April 15, 2002 International Limited 10.12 Software Distribution Agreement Incorporated by reference to dated December 28, 2001 between Exhibit 10.12 to IVP Technology's the Registrant and TIG Acquisition Form 10-KSB filed on April 15, 2002 Corporation 10.13 Loan Agreement dated January 16, Incorporated by reference to 2002 between the Registrant and Exhibit 10.13 to IVP Technology's DCD Holdings Limited Form 10-KSB filed on April 15, 2002 10.14 Agreement for the Provision of Incorporated by reference to Marketing Services dated May 3, Exhibit 10.1 to IVP Technology's 2002 between the Registrant and Form S-8 filed with the SEC on May Vanessa Land 3, 2002 10.15 Reserved 10.16 Employment Agreement dated August Incorporated by reference to 30, 2001 between International Exhibit 10.16 to IVP Technology's Technology Marketing, Inc. and Form 10-KSB filed on April 15, 2002 Geno Villella 10.17 Employment Agreement dated August Incorporated by reference to 30, 2001 between International Exhibit 10.17 to IVP Technology's Technology Marketing, Inc. and Form 10-KSB filed on April 15, 2002 Kevin Birch 10.18 Employment Agreement dated August Incorporated by reference to 30, 2001 between International Exhibit 10.18 to IVP Technology's Technology Marketing, Inc. and Form 10-KSB filed on April 15, 2002 Peter J. Hamilton 10.19 Employment Agreement dated August Incorporated by reference to 30, 2001 between International Exhibit 10.19 to IVP Technology's Technology Marketing, Inc. and Form 10-KSB filed on April 15, 2002 Sherry Bullock 10.20 Loan and Security Agreement dated Incorporated by reference to July 30, 2001 among the Exhibit 10.20 to IVP Technology's Registrant, Clarino Investments Form 10-KSB filed on April 15, 2002 International Ltd., and Berra Holdings Ltd. 10.21 Consulting and Advisory Extension Incorporated by reference to the Agreement dated February 14, 2001 Exhibit to IVP Technology's Form between the Registrant and Barry 10-QSB filed on May 21, 2001 Gross D/B/A Gross Capital Associates 10.22 Letter Agreement dated June 28, Incorporated by reference to 2001, between the Registrant and Exhibit 4.1 to IVP Technology's Andris Gravitis Form S-8 filed on July 23, 2001 10.23 Letter Agreement dated June 28, Incorporated by reference to 2001, between the Registrant and Exhibit 4.2 to IVP Technology's Thomas Chown. Form S-8 filed on July 23, 2001 10.24 Letter Agreement dated May 30, Incorporated by reference to 2001, between the Registrant and Exhibit 4.3 to IVP Technology's Ruffa & Ruffa, P.C. for Form S-8 filed on July 23, 2001 Modification of Retainer Agreement 10.25 Consulting Agreement dated Incorporated by reference to September 1, 2000 between the Exhibit 13.1 to IVP Technology's Registrant and Barry Gross d/b/a Form 10-KSB filed on July 5, 2001 Gross Capital Associates 29 Exhibit No. Description Location ----------- ----------- -------- 10.26 Consulting and Advisory Agreement Incorporated by reference to dated September 25, 2000 between Exhibit 13.2 to IVP Technology's the Registrant and Koplan Form 10-KSB filed on July 5, 2001 Consulting Corporation 10.27 Warrant Agreement dated April 3, Incorporated by reference to 2002 between the Registrant and Exhibit 10.27 to IVP Technology's Cornell Capital Partners LP Form 10-KSB filed on April 15, 2002 10.28 Equity Line of Credit Agreement Incorporated by reference to dated April 3, 2002 between the Exhibit 10.28 to IVP Technology's Registrant and Cornell Capital Form 10-KSB filed on April 15, 2002 Partners LP 10.29 Registration Rights Agreement Incorporated by reference to dated April 3, 2002 between the Exhibit 10.29 to IVP Technology's Registrant and Cornell Capital Form 10-KSB filed on April 15, 2002 Partners, LP 10.30 Escrow Agreement dated April 3, Incorporated by reference to 2002 among the Registrant, Cornell Exhibit 10.30 to IVP Technology's Capital Partners, LP, Butler Form 10-KSB filed on April 15, 2002 Gonzalez, and First Union National Bank 10.31 Securities Purchase Agreement Incorporated by reference to dated April 3, 2002 among the Exhibit 10.31 to IVP Technology's Registrant and the Buyers Form 10-KSB filed on April 15, 2002 10.32 Escrow Agreement dated April 3, Incorporated by reference to 2002 among the Registrant, the Exhibit 10.32 to IVP Technology's Buyers, and First Union National Form 10-KSB filed on April 15, 2002 Bank 10.33 Debenture Agreement Dated April 3, Incorporated by reference to 2002 between the Registrant and Exhibit 10.33 to IVP Technology's Cornell Capital Partners LP Form 10-KSB filed on April 15, 2002 10.34 Investor Registration Rights Incorporated by reference to Agreement dated April 3, 2002 Exhibit 10.34 to IVP Technology's between the Registrant and the Form 10-KSB filed on April 15, 2002 Investors 10.35 Placement Agent Agreement dated Incorporated by reference to April 3, 2002 among the Exhibit 10.35 to IVP Technology's Registrant, Westrock Advisors, Form 10-KSB filed on April 15, 2002 Inc. and Cornell Capital Partners LP 10.36 Letter Agreement dated February Incorporated by reference to 20, 2002 between the Registrant Exhibit 10.36 to IVP Technology's and Buford Industries Inc. Form 10-KSB filed on April 15, 2002 10.37 Letter Confirmation Agreement Incorporated by reference to dated July 21, 2001 between the Exhibit 10.37 to IVP Technology's Registrant and Buford Industries Form 10-KSB filed on April 15, 2002 Inc. 10.38 Consulting Agreement dated March Incorporated by reference to 1, 2002 between the Registrant and Exhibit 10.38 to IVP Technology's Danson Partners LLC Form 10-KSB filed on April 15, 2002 10.39 Term Sheet between the Registrant Incorporated by reference to and Cornell Capital Partners, LP Exhibit 10.39 to IVP Technology's Increasing the Commitment under Form SB-2 filed on May 15, 2002 the Equity Line of Credit to $10 million 30 Exhibit No. Description Location ----------- ----------- -------- 10.40 Consulting Agreement dated Incorporated by reference to February 12, 2002 between the Exhibit 10.40 to IVP Technology's Registrant and Danson Partners LLC Form SB-2 filed on May 15, 2002 10.41 Escrow Agreement dated as of May Incorporated by reference to 15, 2002 among the Registrant, Exhibit 10.41 to IVP Technology's Brian MacDonald, Peter Hamilton, Form SB-2 filed on May 15, 2002 Kevin Birch, Sherry Bullock, and Gino Villella 10.42 Termination letter dated June 13, Incorporated by reference to 2002 between the Registrant and Exhibit 10.42 to IVP Technology's Orchestral Corporation Form 10-QSB filed on August 19, 2002 10.43 Acquisition Agreement dated as of Incorporated by reference to May 28, 2002 regarding the Exhibit 10.43 to IVP Technology's purchase of Ignition Entertainment Form 10-QSB filed on August 19, 2002 10.44 Consulting Agreement dated as of Incorporated by reference to June 1, 2002 Ignition Exhibit 10.44 to IVP Technology's Entertainment Limited and Form 10-QSB filed on August 19, Montpelier Limited 2002 10.45 Amendment to Equity Line of Credit Incorporated by reference to Agreement dated May 2002 between Exhibit 10.45 to IVP Technology's IVP Technology and Cornell Capital Amendment No. 2 to the Form SB-2 Partners. filed on November 14, 2002 10.46 Letter of Credit Facility dated as Incorporated by reference to of April 10, 2002 between Revelate Exhibit 10.46 to IVP Technology's Limited and Ignition Entertainment Amendment No. 2 to the Form SB-2 Limited filed on November 14, 2002 10.47 Debenture dated as of June 14, Incorporated by reference to 2002 between Revelate Limited and Exhibit 10.47 to IVP Technology's Ignition Entertainment Limited Amendment No. 2 to the Form SB-2 filed on November 14, 2002 10.48 Standard Conditions for Purchase Incorporated by reference to of Debts dated May 23, 2002 Exhibit 10.48 to IVP Technology's between DCD Factors PLC and Amendment No. 2 to the Form SB-2 Ignition Entertainment Limited filed on November 14, 2002 10.49 All Assets Debenture dated as of Incorporated by reference to May 23, 2002 between DCD Factors Exhibit 10.49 to IVP Technology's PLC and Ignition Entertainment Amendment No. 2 to the Form SB-2 Limited filed on November 14, 2002 10.50 Memorandum of Agreement dated as Incorporated by reference to of July 1, 2002 between Exhibit 10.50 to IVP Technology's Springboard Technology Solutions Amendment No. 2 to the Form SB-2 Inc. and IVP Technology filed on November 14, 2002 10.51 Heads of Agreement dated as of Incorporated by reference to December 28, 2001 and amended on Exhibit 10.51 to IVP Technology's September 30, 2002 between TiG Amendment No. 2 to the Form SB-2 Acquisition Corporation and IVP filed on November 14, 2002 Technology 10.52 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.1 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 Mount Sinai Hospital entered into March 11, 2003 (Contract No. MDI02008) 31 Exhibit No. Description Location ----------- ----------- -------- 10.53 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.2 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 Mount Sinai Hospital entered into March 11, 2003 (Contract No. MDI02009) 10.54 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.3 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 Rouge Valley Health System entered into September 12, 2002 (Contract No. MDI02003) 10.55 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.4 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 Rouge Valley Health System entered into September 12, 2002 (Contract No. MDI02004) 10.56 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.5 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 York Central Hospital entered into September 13, 2002 (Contract No. MDI02006) 10.57 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.6 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 York Central Hospital entered into September 13, 2002 (Contract No. MDI02007) 10.58 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.7 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 St. Joseph's Medical Centre entered into March 18, 2003 (Contract No. MDI03001) 10.59 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.8 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 St. Joseph's Medical Centre entered into March 18, 2003 (Contract No. MDI03002-Expires March 31, 2004) 10.60 MDI Solutions Services Agreement Incorporated by reference to (Interface Development Retainer Exhibit 10.9 to IVP Technology's Services) between Medical Data Form 8-K filed with the SEC on Integration Solutions group and April 1, 2003 St. Joseph's Medical Centre entered into March 18, 2003 (Contract No. MDI03002-Expires June 11, 2004)
32 (b) Reports on Form 8-K. None 33 SIGNATURES Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: IVP TECHNOLOGY CORPORATION /s/ Brian MacDonald May 23, 2003 ---------------------------------------- By: Brian MacDonald President, Chief Executive Officer and Acting Chief Financial Officer 34 OFFICER'S CERTIFICATE PURSUANT TO SECTION 302 CERTIFICATION I, Brian MacDonald, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of IVP Technology Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 23, 2003 By: /s/ Brian MacDonald ------------------------------ Brian MacDonald President, Chief Executive Officer and Acting Chief Financial Officer 35 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of IVP Technology Corporation (the "Company") on Form 10-QSB for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Date: May 23, 2003 By: /s/ Brian MacDonald ------------------------------ Brian MacDonald President, Chief Executive Officer and Acting Chief Financial Officer 36