10QSB 1 ivp_form10qsb.txt 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 JUNE 30, 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 [ ] 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: 234,996,914 shares of common stock, $.001 par value, were outstanding on June 30, 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 June 30, 2003 (Un-audited) and December 31, 2002 (Audited) Condensed Consolidated Statement of Operations for the Three Months and Six Months Ended June 30, 2003 and June 30, 2002, (Unaudited) Condensed Consolidated Statements of Stockholders' Deficiency for the Six Months ended June 30, 2003 Condensed Consolidated Statements Of Cash Flows For The Six Months Ended June 30, 2003 And 2002 (Unaudited) Notes To Condensed Consolidated Financial Statements As Of June 30, 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 5. Other information ITEM 6. Subsequent Events, Exhibits and Reports on Form 8-K 2 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 3 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONTENTS PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002 PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED) PAGES 3 - 4 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) PAGES 5 - 6 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED) PAGES 7 - 26 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 (UNAUDITED) 4 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS ------
June 30, 2003 December 31, (Unaudited) 2002 ------------ -------------- CURRENT ASSETS Cash $ 754 $ 63,162 Accounts receivable, less allowance for doubtful accounts of $43,970 as of June 30, 2003 and December 31, 2002 44,073 17,165 Inventory - - Prepaid expenses and other current assets 146,843 34,610 ------------ -------------- Total Current Assets 191,670 114,937 ------------ -------------- FIXED ASSETS Plant, property and equipment 195,016 173,246 Accumulated depreciation (117,422) (79,688) ------------ -------------- Total Fixed Assets 77,594 93,558 ------------ -------------- OTHER ASSETS License agreement - software, net of accumulated amortization of $535,209 and $356,806 as of June 30, 2003 and December 31, 2002, respectively 178,404 356,806 Deferred consulting 149,177 - Other assets - 71,816 ------------ -------------- Total Other Assets 327,581 428,622 ------------ -------------- TOTAL ASSETS $ 596,845 $ 637,117 ------------ ============ ============== LIABILITIES AND STOCKHOLDERS' DEFICIENCY ---------------------------------------- CURRENT LIABILITIES Accounts payable $ 680,872 $ 657,402 Accrued liabilities 91,371 169,679 Taxes payable 155,371 32,150 Other current liabilities 2,856 134,088 Accrued interest 11,909 14,974 Due to factor - - Leases payable, current portion 20,154 - Net liabilities of discontinued operations - 1,417,619 Note payable, current portion 689,020 104,020 Common stock to be issued 18,000 3,617,746 Convertible preferred stock to be issued, short-term - 4,779,662 Due to related parties 76,427 369,226 ------------ ------------- Total Current Liabilities 1,745,980 11,296,566 ------------ ------------- LONG-TERM LIABILITIES Convertible debentures - 150,000 Lease payable, long-term 15,855 25,570 Convertible preferred stock to be issued, long-term - 3,584,747 ------------ ------------- Total Long-Term Liabilities 15,855 3,760,317 ------------ ------------- TOTAL LIABILITIES 1,761,835 15,056,883 ----------------- ------------ ------------- STOCKHOLDERS' DEFICIENCY Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding - - Common stock, $0.001 par value, 500,000,000 and 150,000,000 shares authorized, 234,996,914 and 99,449,261 shares issued and outstanding as of June 30, 2003 and December 31, 2002, respectively 234,997 99,449 Additional paid in capital 35,114,270 20,870,864 Accumulated deficit (35,430,951) (35,248,562) Less: treasury stock (11,000,000 shares) (770,000) - Other comprehensive income - exchange gain (103,494) 80,795 Less deferred equity line commitment fees (134,812) (222,312) Less deferred compensation and licensing fee (75,000) - ------------ ------------- Total Stockholders' Deficiency (1,164,990) (14,419,766) ------------ ------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 596,845 $ 637,117 ---------------------------------------------- ============ =============
See accompanying notes to condensed consolidated financial statements 5 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (UNAUDITED)
For The Three For The Three For The Six For The Six Months Ended Months Ended Months Ended Months Ended June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002 ------------------- ------------------- ----------------- --------------- NET SALES $ 82,300 $ 90,000 $ 231,009 $ 90,000 ------------------- ------------------- ----------------- --------------- COST OF SALES Product costs - - 100,931 - Development costs - 1,030 - 1,030 Distribution and other costs including amortization 93,207 549,579 186,189 1,002,113 ------------------- ------------------- ----------------- --------------- Total Cost of Sales 93,207 550,609 287,120 1,003,143 ------------------- ------------------- ----------------- --------------- GROSS PROFIT (LOSS) (10,907) (460,609) (56,111) (913,143) ------------------- ------------------- ----------------- --------------- OPERATING EXPENSES Salaries and wages 157,573 - 235,974 - Stock-based compensation 656,922 - 656,922 - Consulting fees 45,256 330,980 93,930 349,980 Legal and accounting 57,996 165,877 153,874 211,974 Management fees - 52,452 - 89,408 General and administrative expenses 198,470 150,100 392,367 281,886 Financial advisory fees - 150,000 30,708 150,000 Research and development - - 108 - Amortization and depreciation 10,353 6,935 18,722 66,935 ------------------- ------------------- ----------------- --------------- Total Operating Expenses 1,126,570 856,344 1,582,605 1,150,183 ------------------- ------------------- ----------------- --------------- LOSS FROM OPERATIONS (1,137,477) (1,316,953) (1,638,716) (2,063,326) ------------------- ------------------- ----------------- --------------- OTHER INCOME (EXPENSE) Gain on early extinguishment of debt - 96,334 - 96,334 Interest income 1,354 42 6,497 42 Interest expense (148,778) (54,218) (227,130) (66,145) Foreign exchange gain (loss) 1,006 (11,272) 14,074 (11,272) ------------------- ------------------- ----------------- --------------- Total Other Income (Expense) (146,418) 30,886 (206,559) 18,959 ------------------- ------------------- ----------------- --------------- LOSS FROM CONTINUING OPERATIONS (1,283,895) (1,286,067) (1,845,275) (2,044,367) DISCONTINUED OPERATIONS (SEE NOTE 2): Loss from discontinued operations - (211,959) (733,123) (211,959) Gain on sale of discontinued operations 2,396,009 - 2,396,009 - ------------------- ------------------- ----------------- --------------- Total Discontinued Operations 2,396,009 (211,959) 1,662,886 (211,959) ------------------- ------------------- ----------------- --------------- NET INCOME (LOSS) $ 1,112,114 $ (1,498,026) $ (182,389) $ (2,256,326) ----------------- =================== =================== ================= =============== (LOSS) PER COMMON SHARE FROM CONTINUING OPERATIONS - BASIC AND DILUTED $ (0.01) $ (0.01) $ (0.02) $ (0.02) =================== =================== ================= =============== GAIN (LOSS) PER COMMON SHARE FROM DISCONTINUED OPERATIONS - BASIC $ 0.02 $ (0.00) $ 0.02 $ (0.00) =================== =================== ================= =============== GAIN (LOSS) PER COMMON SHARE FROM DISCONTINUED OPERATIONS -DILUTED $ 0.02 $ (0.00) $ 0.01 $ (0.00) =================== =================== ================= =============== NET INCOME (LOSS) PER COMMON SHARE - BASIC $ 0.01 $ (0.01) $ (0.00) $ (0.03) =================== =================== ================= =============== NET INCOME (LOSS) PER COMMON SHARE - DILUTED $ 0.01 $ (0.01) $ (0.00) $ (0.03) =================== =================== ================= =============== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 115,200,027 113,191,285 107,531,237 83,421,414 =================== =================== ================= =============== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED 133,678,287 113,191,285 114,394,419 83,421,414 =================== =================== ================= ===============
See accompanying notes to condensed consolidated financial statements 6 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY FOR THE SIX MONTHS ENDED JUNE 30, 2003 -------------------------------------- (UNAUDITED)
Additional Preferred Stock Common Stock Paid-In Accumulated 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 - - 73,123,249 73,123 1,831,675 - Stock issued for cash - - 12,424,404 12,425 512,575 - Stock issued to former shareholders of Ignition Entertainment, Ltd. 3,500,000 3,500 15,000,000 15,000 11,930,656 - Conversion of preferred stock to common stock (3,500,000) (3,500) 35,000,000 35,000 (31,500) - Stock to be received from the sale of Ignition Entertainment, Ltd. - - - - - - Deferred cost recognized - - - - - - Net loss for the period - - - - - (182,389) Cumulative translation adjustment - - - - - - Comprehensive loss - - - - - - ------------ --------- ------------- -------- ------------ --------------- BALANCE, JUNE 30, 2003 - $ - 234,996,914 $ 234,997 $ 35,114,270 $ (35,430,951) ---------------------- ============ ======== ============= ======== ============ ===============
See accompanying notes to condensed consolidated financial statements 7 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY FOR THE SIX MONTHS ENDED JUNE 30, 2003 -------------------------------------- (UNAUDITED)
Deferred Deferred Compensation Equity and Line Other Treasury Licensing Commitment Comprehensive Stock Fees Fees Income Total ---------- ------------ ------------ ------------- ----------- Balance, December 31, 2002 - $ - $ (222,312) $ 80,795 $ (14,419,766) Stock issued for services and settlements - (75,000) - - 1,829,798 Stock issued for cash - - - - 525,000 Stock issued to former owners of Ignition Entertainment, Ltd. - - - - 11,949,156 Conversion of preferred stock to common stock - - - - - Stock received from the sale of Ignition Entertainment, Ltd. (770,000) - - - (770,000) Deferred cost recognized - - 87,500 - 87,500 Net loss for the period - - - - (182,389) Cumulative translation adjustment - - - (184,289) (184,289) ----------- Comprehensive loss - - - - (366,678) ---------- ------------ ------------ ----------- ----------- BALANCE, JUNE 30, 2003 (770,000) $ (75,000) $ (134,812) $ (103,494) $ (1,164,990) ---------------------- ========== ============ ============ =========== ===========
See accompanying notes to condensed consolidated financial statements 8 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (UNAUDITED)
For The Six For The Months Six Months Ended June Ended June 30, 2003 30, 2002 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (182,389) $ (2,256,326) Adjustments to reconcile net loss to net cash used in operating activities: Gain on sale of discontinued operations (2,396,009) - Amortization and depreciation 18,722 66,935 Amortization of licensing agreements 178,402 905,067 Amortization of consulting agreements and commitment fees 113,323 123,001 Interest expense on beneficial conversion - 64,286 Gain on early extinguishment of debt - (96,334) Decrease in deferred tax asset 71,816 - Stock issued for commitment fees and penalties 22,800 - Stock issued for compensation 618,880 - Stock issued for financing costs 129,500 - Stock issued for services 12,500 517,782 Changes in operating assets and liabilities, net of effects of discontinued operations: Decrease (increase) in accounts receivable (89,973) 159,702 Decrease in inventory 304,783 3,529 Increase in prepaid expenses and other current assets (125,789) (136,678) Increase in other assets - (26,218) Increase (decrease) in accounts payable (83,409) 73,511 Decrease in accrued liabilities (162,333) - Increase in taxes payable 171,214 56,448 Decrease in other current liabilities (69,430) - Decrease in accrued interest (3,065) (26,956) ------------- ------------ Net Cash Used In Operating Activities (1,470,457) (572,251) ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Cash received from acquisition - 1,132,039 Cash paid from sale of discontinued operations (160) - Cash paid for licensing agreement - (713,610) Purchases of fixed assets (10,906) (77,779) ------------- ------------ Net Cash (Used In) Provided By Investing Activities (11,066) 340,650 ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable (690,000) - Proceeds from notes payable 1,174,146 979,801 Proceeds from convertible debentures - 150,000 Proceeds from related parties 174,221 238,363 Proceeds from factors 116,503 12,037 Proceeds from issuance of common stock 525,000 - Payment on leases (4,179) - ------------- ------------ Net Cash Provided By Financing Activities 1,295,691 1,380,201 ------------- ------------ EFFECT OF FOREIGN EXCHANGE RATES (90,499) 27,863 ------------- ------------ NET INCREASE IN CASH FOR THE PERIOD (276,331) 1,176,463 CASH - BEGINNING OF PERIOD 277,085 232 ------------- ------------ CASH - END OF PERIOD $ 754 $ 1,176,695 -------------------- ============= ============
See accompanying notes to condensed consolidated financial statements 9 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (UNAUDITED)
For The For The Six Months Six Months Ended Ended June 30, 2003 June 30, 2002 ------------- ------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 36,945 $ - ============= ============ Cash paid for taxes $ - $ - ============= ============ SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Equipment purchased under capital leases $ 33,095 $ - ============= ============ Acquisition of Ignition Entertainment Ltd. $ - $ 1,132,039 ============= ============ Common and preferred stock issued to satisfy common and preferred stock to be issued for the acquisition of Ignition $ 11,949,156 $ - ============= ============ Common stock issued for deferred consulting expenses $ 250,000 $ - ============= ============ Common stock issued for payment of accrued bonuses $ 31,250 $ - ============= ============ Common stock issued for payment of commitment fees $ - $ 350,000 ============= ============ Common stock issued for payment of debt and accrued interest thereon $ - $ 223,773 ============= ============ Common stock issued for payment of amounts due to related parties $ 824,869 $ - ============= ============ Common stock issued for payment of common stock to be issued $ 15,000 $ 50,000 for services ============= ============
See accompanying notes to condensed consolidated financial statements 10 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION ------ ----------------------------------------------------------- (A) ORGANIZATION ---------------- The consolidated financial statements of IVP Technology Corporation d.b.a. ActiveCore Technologies, Inc. (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: Springboard Technology Solutions, Inc. d.b.a. ActiveCore Technologies, Ltd. ("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, enterprise and consumer. 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. 11 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) 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. The consolidated results of operations for the three and six months ended June 30, 2003 and 2002 are not necessarily indicative of the results to be expected for the full year. All material inter-company accounts have been eliminated in consolidation. (C) OPERATIONS OF THE COMPANY - GOING CONCERN --------------------------------------------- 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 $182,389 and a negative cash flow from operations of $1,470,457 for the six months ended June 30, 2003. The Company also has a working capital deficiency of $1,554,310 and a stockholders' deficiency of $1,164,990. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plan to continue in operation is 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) 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. 12 (F) USE OF ESTIMATES -------------------- The preparation of financial statements in conformity with accounting principles generaly accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates and assumptions relate to the recoverability of prepaid royalties and licencing, capitalized software development costs and other intangibles and the adequacy of allowances for returns, and doubtful accounts. Actual amounts could differ significantly from these estimates. (G) FAIR VALUE OF FINANCIAL INSTRUMENTS --------------------------------------- Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate the value. For purposes of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation. The carrying amounts of the Company's financial instruments, including cash, accounts receivable, accounts payable, accrued liabilities, taxes payable and other current laibilties approximate fair value because of their short maturities. The carrying amount of licensing agreements and investments approximate fair value based upon the recoverability of these assets. The carrying amount of the Company's lines of credit approximates fair value because the interest rates of the lines of credit are based on floating rates identified by reference to market rates. The carrying amounts of the Company's loans and notes payable and capital lease obligations approximate the fair value of such instruments based upon management's best estimate of interest rates that would be available to the Company for similar debt obligations. (H) EARNINGS (LOSS) PER SHARE ----------------------------- Basic earnings (loss) per common share is based on net loss divided by the weighted average number of common shares outstanding. For the three and six months ended June 30, 2002, common stock equivalents were not included in the calculation of diluted loss per share as their effect would be anti-dilutive. 13 (I) 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 and $407,326 for the six months ended June 30, 2003 and 2002, respectively. Publishing revenues have been reclassified to gain (loss) from discontinued operations on the accompanying condensed consolidated statement of operations in connection with the sale of Ignition Entertainment, Ltd. (See Note 2). Distribution revenue is derived from the sale of third-party interactive software titles, accessories and hardware. Distribution revenue amounted to $103,051 and $90,000 for the six months ended June 30, 2003 and 2002, respectively. Revenues from Services and Commercial Software sold under licenses were $127,958 and $0 in the six months ended June 30, 2003 and 2002, respectively. The Company had no Services or Commercial Software sales in the corresponding period of 2002, because it had not yet acquired Springboard Technology Solutions, a Services 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 ("VSOE") 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 14 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) 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. (J) 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 15 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) 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. 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. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The changes in SFAS No. 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. This statement is effective for contracts entered into or modified after June 30, 2003 and all of its provisions should be applied prospectively. In May 2003, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 changes the accounting for certain financial instruments with characteristics of both liabilities and equity that, under previous pronouncements, issuers could account for as equity. The new accounting guidance contained in SFAS No. 150 requires that those instruments be classified as liabilities in the balance sheet. 16 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) SFAS No. 150 affects the issuer's accounting for three types of freestanding financial instruments. One type is mandatorily redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets. A second type includes put options and forward purchase contracts, which involves instruments that do or may require the issuer to buy back some of its shares in exchange for cash or other assets. The third type of instruments that are liabilities under this Statement is obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominantly to a variable such as a market index, or varies inversely with the value of the issuers' shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. Most of the provisions of Statement 150 are consistent with the existing definition of liabilities in FASB Concepts Statement No. 6, "Elements of Financial Statements". The remaining provisions of this Statement are consistent with the FASB's proposal to revise that definition to encompass certain obligations that a reporting entity can or must settle by issuing its own shares. This Statement shall be effective for financial instruments entered into or modified after May 31, 2003 and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a non-public entity, as to which the effective date is for fiscal periods beginning after December 15, 2003. The Company believes that the adoption of the above pronouncements will, not have a material effect on the Company's condensed consolidated financial position or results of operations. NOTE 2 DISCONTINUED OPERATIONS ------ ----------------------- Effective April 1, 2003, the Company sold 100% of the issued shares and all assets and liabilities of Ignition Entertainment, Ltd. for the return of 11,000,000 shares of the Company's common stock. The transaction resulted in a gain of $2,396,009, which has been included in the condensed consolidated statements of operations for the three and six months ended June 30, 2003, as a gain on sale of discontinued operations. Upon execution of the sale agreement in June 2003, the Company issued 50,000,000 shares of its common stock to the former shareholders of Ignition Entertainment Ltd. in accordance with the original May 28, 2002 purchase agreement. Based upon the terms of the sale agreement, the Company converted all of the 3,500,000 shares of preferred stock to be issued, into 35,000,000 shares of common stock and accelerated the issuance of 15,000,000 shares of common stock to be issued. The issuance of the 50,000,000 shares of common stock in June 2003 relieved the Company's obligation as of April 1, 2003, to issue $11,949,156 in preferred and common stock under the original May 28, 2003 purchase agreement. The 50,000,000 shares were delivered, in trust, to an independent third party upon the execution of the sale 17 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) agreement and will be distributed to the former owners. Immediately following the issuance of the 50,000,000 shares of the Company's common stock, the former shareholders will return 11,000,000 shares of common stock to the Company as proceeds for the sale of Ignition Entertainment Ltd. The 11,000,000 shares were valued at $770,000 based upon the fair market value of the stock on April 1, 2003, the effective date of the sale agreement (See Note 10). In connection with the sale agreement, the Company will retain rights to certain intellectual property and receive a source code licensing agreement for certain interactive software games developed by Ignition Entertainment Ltd. In addition to the source code licensing agreement, the Company will also receive a distribution agreement to distribute the interactive software games on a worldwide basis for a period of three years, renewable annually thereafter. The Company will pay Ignition Entertainment Ltd. a royalty fee of 30% of all gross revenues, less direct costs, from the sale, distribution or marketing of those game titles. As of June 30, 2003, the Company did not assign any value to the acquired intellectual property due to the uncertainty of obtaining financing to fund the conversion of acquired intellectual property into saleable products. Following is a summary of net liabilities and results of operations of Ignition Entertainment Ltd. as of April 1, 2003 and December 31, 2002 and for the period from January 1, 2003 through April 1, 2003 and for the three and six months ended June 30, 2002: As of As of April 1, December 31, 2003 2002 ------------- ---------------- Cash $ 160 $ 213,923 Accounts receivable, net 212,741 149,676 Inventory 78,955 383,738 Prepaid expenses 113,044 99,488 Property, plant and equipment, net 417,727 442,674 Other assets 24,963 - ------------- ---------------- Total Assets $ 847,590 $ 1,289,499 ------------- ---------------- Accounts payable 1,044,294 1,182,423 Accrued liabilities 134,058 240,833 Due to factor 211,249 94,746 Taxes payable 436,513 388,520 Translation adjustment 93,790 - Notes payable 129,366 80,220 Due to related parties 424,329 720,376 ------------- ---------------- Total Liabilities 2,473,599 2,707,118 ------------- ---------------- Net Liabilities of Discontinued Operations $ 1,626,009 $ 1,417,619 ============= ================ 18 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) For the For the Period From Three and January 1, Six Months 2003 Through Ended June April 1, 2003 30, 2002 -------------- ------------ Revenues, net $ 1,087,906 $ 407,326 Cost of sales 960,501 382,716 ------------ ------------ Gross profit 127,405 24,610 Operating expenses 815,985 228,741 ------------ ------------ Loss from discontinued operations (688,580) (204,131) ------------ ------------ Other income (expense) (44,543) (7,828) ------------ ------------ Net loss from discontinued operations $ (733,123) $ (211,959) ============ ============ The results of operation for the three and six months ended June 30, 2002 are identical because Ignition Entertainment Ltd. was acquired in May 2002. NOTE 3 ACCOUNTS RECEIVABLE ------ ------------------- The components of accounts receivable are as follows: June 30, December 2003 (Unaudited) 31, 2002 -------------- ------------- Unrestricted trade receivables $ 88,043 $ 61,135 Restricted trade receivables - - Allowance for doubtful accounts (43,970) (43,970) ---------- ---------- Accounts receivable, net $ 44,073 $ 17,165 ========== ========== Restricted trade receivables of $149,676 are collateral for the Company's secured borrowing facility that Ignition entered into in April 2002, which is included in net liabilities of discontinued operations as of December 31, 2002 (See Note 2). Unrestricted trade receivables consists primary of vendor receivables for enterprise software and information technology services sold by the Company and its Springboard subsidiary. NOTE 4 PREPAID EXPENSES AND OTHER CURRENT ASSETS ------ ----------------------------------------- Prepaid expenses and other current assets as of June 30, 2003 and December 31, 2002 consist of: 19 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) June 30, 2003 December (Unaudited) 31, 2002 -------------- ------------- Prepaid expenses $ 20,897 $ 14,763 GST receivable 20,258 18,002 Miscellaneous receivable, unrelated parties 105,417 - Other 271 1,845 -------------- ------------- Total $ 146,843 $ 34,610 ============== ============= NOTE 5 FIXED ASSETS ------ ------------ As of June 30, 2003 and December 31, 2002, fixed assets consist of: June 30, 2003 December (Unaudited) 31, 2002 -------------- ------------- Computer equipment $ 118,802 $ 91,505 Office equipment and furniture 20,631 19,698 Computer software 6,577 13,546 Software development kits 45,367 45,367 Leasehold improvements 3,639 3,130 -------------- ------------- 195,016 173,246 Less accumulated depreciation and amoritization (117,422) (79,688) -------------- ------------- $ 77,594 $ 93,558 ============== ============= Depreciation expense from continuing operations for the three and six months ended June 30, 2003 amounted to $10,353 and $18,722, respectively. Depreciation expense from continuing operations for the three and six months ended June 30, 2002 amounted to $6,935 and $66,935, respectively. NOTE 6 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 20 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) 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 7 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 Bankers. 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. NOTE 7 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 the Equity Line of Credit 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 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 and $5,000 of consulting services for January and February of 2003. These shares were valued at $0.13 per share representing the closing market value on the date of grant. During the six month period ended June 30, 2003, the Company issued 8,932,783 shares of common stock to the Investment Bankers for cash of $400,000 in connection with the Equity Line of Credit (See Note 6). The cash was applied against the $1 million promissory note payable to the Investment Bankers issued in February 2003. As of June 30, 2003, the remaining balance of the note payable to the Investment Banker totaled $600,000. On April 23, 2003, the Company issued 3,491,620 shares of common stock to the Investment Bankers for cash of $125,000 or $.036 per share. On May 28, 2003, the Company amended the Articles of Incorporation to increase the total number of authorized common and preferred stock to 500,000,000 and 50,000,000 shares, respectively. 21 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) On June 24, 2003, the Company issued 17,804,976 shares of common stock to the President of the Company in lieu of cash in order to satisfy shareholder loans, expenses paid on behalf of the Company and accrued salaries included in the amounts due to related parties on the accompanying condensed consolidated balance sheets. These shares were valued at $.025 per share, or an aggregate of $445,124 representing the market value on the date of grant. On June 24, 2003, the Company issued 17,804,976 shares of common stock to a director of the Company in lieu of cash in order to satisfy shareholder loans, expenses paid on behalf of the Company and accrued salaries included in the amounts due to related parties on the accompanying condensed consolidated balance sheets. These shares were valued at $.025 per share, or an aggregate of $445,124 representing the market value on the date of grant. On June 24, 2003, the Company issued 1,250,000 shares of common stock to four employees of the Company for payment of accrued compensation and bonuses. These shares were valued at $.025 per share, or an aggregate of $31,250 representing the market value on the date of grant. On June 24, 2003, the Company issued 3,000,000 shares of common stock to certain directors of the Company for director services for the period from June 2003 to June 2004. These shares were valued at $.025 per share, or an aggregate of $75,000 representing the market value on the date of grant. As of June 30, 2003, the Company has deferred $75,000 included in total stockholders' deficiency as deferred compensation and licensing fee on the accompanying condensed consolidated balance sheets. On June 24, 2003, the Company issued 300,000 shares of common stock to an unrelated consultant having a value of $7,500 for consulting services. These shares were valued based upon the market value on the date of grant. On June 24, 2003, the Company issued 2,000,000 shares of common stock to an unrelated party in connection with an agreement to provide investor relations services. These shares were valued at $.025 per share, or an aggregate of $50,000 representing the market value on the date of grant. As of June 30, 2003, the Company has deferred approximately $33,000 included in deferred consulting expense on the accompanying condensed consolidated balance sheet. On June 24, 2003, the Company issued 5,000,000 shares of common stock to an unrelated consultant as consideration for an agreement to provide consulting services from June 2003 to June 2004. These shares were valued at $.025 per share, or an aggregate of $125,000 on the date of grant. 22 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) On June 24, 2003, the Company issued 50,000,000 shares of common stock to the former shareholders of Ignition Entertainment, Ltd. in accordance with the original May 28, 2002 purchase agreement. The acquisition was made pursuant to the Company agreeing to issue 15,000,000 shares of common stock and 3,500,000 shares of preferred stock convertible into 35,000,000 shares of common stock; collectively valued at $0.23898 per share for a total purchase price of $11,949,155. The issuance of these 50,000,000 shares of common stock relieved $11,949,155 in preferred and common stock to be issued as of April 1, 2003. (See Note 2, Discontinued Operations for details on the acceleration of the issuance of these shares and the sale agreement of Ignition Entertainment Ltd.) On June 24, 2003, the Company issued 5,180,000 shares of common stock to two unrelated parties to obtain financing for the Company. Financing costs included in interest expense for the six months ended June 30, 2003 totaled $129,500 representing the market value on the date of grant. On June 24, 2003, the Company issued 500,000 shares of common stock that were released from escrow to an individual for services rendered from November 2002 to November 2003. The Board of Directors resolved that these shares are considered earned as of June 24, 2003. These shares were valued at $.025 per share, or an aggregate of $13,500 representing the market value on the date of grant. In 2002, the Company issued 50,000,000 shares of common stock to various officers and directors of the Company in accordance with the stock purchase agreement with International Technology Marketing ("ITM"). All shares were held in safekeeping pending the completion of an escrow agreement. As of December 31, 2002, 30,000,000 shares were earned and were released from escrow. The Company has accelerated the issuance of the final 20,000,000 shares from escrow. These 20,000,000 shares were released from escrow as stock-based compensation on June 30, 2003 and were valued at $.027, or an aggregate of $540,000 on the date of sale. NOTE 8 BASIC AND DILUTED EARNINGS (LOSS) PER SHARE ------ ------------------------------------------- Basic and diluted earnings (loss) per share for the three and six months ended June 30, 2003 and 2002 are computed as follows:
For the Three Months For the Six Months Ended June 30, Ended June 30, 2003 2002 2003 2002 ---- ---- ---- ---- BASIC: CONTINUING OPERATIONS- Loss from continuing operations $ (1,283,895) $ (1,286,067) $ (1,845,275) $ (2,044,367) ============= ============== =============== ==============
23 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) Weighted average shares outstanding 115,200,027 113,191,285 107,531,237 83,421,414 ============= ============== =============== ============== Basic (loss) per share from continuing operations (0.01) (0.01) (0.02) (0.02) ============= ============== =============== ============== For the Three Months For the Six Months Ended June 30, Ended June 30, 2003 2002 2003 2002 ---- ---- ---- ---- BASIC: DISCONTINUED OPERATIONS- Loss from discontinued operations $ - $ (211,959) $ (733,123) $ (211,959) Gain on sale of discontinued operations 2,396,009 - 2,396,009 - ------------- -------------- --------------- -------------- 2,396,009 (211,959) 1,662,886 (211,959) ============= ============== =============== ============== Weighted average shares outstanding 115,200,027 113,191,285 107,531,237 83,421,414 ============= ============== =============== ============== Basic gain (loss) per share from discontinued operations 0.02 (0.00) 0.02 (0.00) ============= ============== =============== ============== DILUTED COMPUTATION: CONTINUING OPERATIONS- Loss from continuing operations $ (1,283,895) $ (1,286,067) $ (1,845,275) $ (2,044,367) ------------- -------------- --------------- -------------- DISCONTINUED OPERATIONS- Loss from discontinued operations $ - $ (211,959) $ (733,123) $ (211,959) Gain on sale of discontinued operations $ 2,396,009 - 2,396,009 - ------------- -------------- --------------- -------------- 2,396,009 (211,959) 1,662,886 (211,959) ------------- -------------- --------------- -------------- Adjusted net income (loss) for earnings per share $ 1,112,114 $ (1,498,026) $ (182,389) $ (2,256,326) ============= ============== =============== ============== Weighted average shares outstanding 115,200,027 113,191,285 107,531,237 83,421,414 Plus: Conversion of Cornell notes payable as of the beginning of each quarter 18,478,260 - 6,863,182 - ------------- -------------- --------------- -------------- Diluted weighted average common shares 133,678,287 113,191,285 114,394,419 83,421,414 ============= ============== =============== ============== DILUTIVE PER SHARE AMOUNTS: Loss from continuing operations $ (0.01) $ (0.01) $ (0.02) $ (0.02) ============= ============== =============== ============== Gain (loss) per share from $ 0.02 $ (0.00) $ 0.01 $ (0.00) discontinued operations ============= ============== =============== ============== Net gain (loss) per share $ 0.01 $ (0.01) $ (0.00) $ (0.03) ============= ============== =============== ==============
24 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) NOTE 9 EMPLOYEE STOCK OPTIONS ------ ---------------------- Effective January 1, 2003, the Company adopted the disclosure requirements of SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," which amends SFAS No. 123, "Accounting for Stock-Based Compensation" to provide transition methods for a voluntary change to measuring compensation cost in connection with employee options using a fair value based method. The Statement also amends the disclosure requirements of SFAS No. 123 to require prominent disclosures about the method of accounting for compensation cost associated with employee options, as well as the effect of the method used on reported results. The Company adopted the disclosure requirements of SFAS No. 148 and has not changed its method for measuring the compensation cost of share options. The Company continues to use the intrinsic value based method and does not recognize compensation expense for the issuance of employee options with an exercise price equal to or greater than the market price at the time of grant. The Company has not granted any options to employees during the six months ended June 30, 2003 and 2002. As a result, the adoption of SFAS No. 148 had no impact on the Company's results of operations or financial position and no pro forma information will be disclosed for the three and six months ended June 30, 2003 and 2002. NOTE 10 TREASURY STOCK ------- -------------- Treasury stock is shown at cost and consists of 11,000,000 shares of common stock held in trust with an independent third party as of June 30, 2003. The value of the 11,000,000 shares received in connection with the sale of Ignition Entertainment, Ltd. was $770,000, representing the closing market value on the effective date of the sale. NOTE 11 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% 25 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) 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 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. 26 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) On each advance date in 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 Company estimates the fair value of the warrants at the grant date by using the Black-Scholes option pricing model with the following weighted average assumptions used for this grant; no dividend yield for all years; expected volatility of 24.3%; risk-free interest rate of 4.74% and an expected life of five years. 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 June 30, 2003 and December 31, 2002. The Company has recognized commitment fees of approximately $87,500 and $133,795, which has been included in general and administrative expenses on the condensed consolidated statement of operations for the six months and year ended June 30, 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 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. 27 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) (C) HOSPITAL SERVICE AGREEMENT ------------------------------ On March 11, 2003, the Company has 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. (D) LETTER OF INTENT -------------------- On June 24, 2003, the Company entered into a Letter of Intent to acquire a minimum of 5% of the issued share capital of an unrelated company for the equivalent of $300,000 Canadian dollars ("CAD"). As part of the terms and conditions of this proposed purchase, the Company will issue 10,000,000 shares of unregistered common stock in the name of the potential acquiree. The Company will seek to register the 10,000,000 shares at its next available registration opportunity. Per the terms of the Letter of Intent, the shares will be sold in the open market to generate the funds (CAD $300,000) needed to acquire a 5% equity interest. If the sales of these shares does not satisfy the amount of funds required, the Company will pay from other sources, if available. If the sales of the shares exceed the minimum required amount, the Company may increase its interest in the acquiree or have any remaining unsold shares returned for cancellation or rescission. As of August 2003, the Company has not finalized this transaction. NOTE 12 SUBSEQUENT EVENTS ------- ----------------- On July 10, 2003, the Company entered into a Letter of Intent to acquire the source code for a software product known as XML/Connector for the health care vertical from an unrelated company which is a Colorado and Toronto based software development company. As part of the terms and conditions, the Company will pay (CAD) $120,000 in cash in the form of a note payable. On August 1, 2003, the Company issued 500,000 shares of common stock to the acquiree. These shares were valued at $.033 per share representing the closing market value on the date of grant. In late July 2003, the Company and an unrelated U.S. based healthcare software distribution and integration company reached agreement to sell to the Company the personnel and assets of the data management services division of the U.S. company for an undisclosed amount of cash and shares. As of August 2003, this transaction has not been finalized. 28 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) On July 31, 2003, the company announced that its wholly owned subsidiary ActiveCore Technologies Limited had received the first installment of $500,000 of a planned $2,000,000 term loan offering. Under the terms of the agreement, the first installment will accrue a 12% interest rate per annum and is repayable over a five-year term with no payments required in the first 12 months - the payments will be amortized over the remaining 48 months of the term loan. The loan is convertible into common stock of the Company at the rate of 4.5 shares for every 1 dollar of the loan balance due, excluding interest, remaining at the time of conversion. As additional consideration for the loan advance by the lender, the Company issued 500,000 warrants on July 30, 2003 to the lender for the purchase of 500,000 shares of common stock at a purchase price of $0.0312 per share. The fair value assigned to the warrant amounted to $0 and was determined using the Black-Scholes pricing model. The Company estimates the fair value of the warrant at the grant date by using the Black-Scholes option-pricing model with the following weighted average assumptions used for this grant; no dividend yield for all years; expected volatility of 9.3%; risk-free interest rate of 1.12%, and an expected life of 1 year. The warrants expire July 31, 2004. On August 5, 2003, the Company announced that it had acquired the rights to build a cell phone game based on the "Zorro" character and trademark from Zorro Productions Inc. of California. A license agreement was entered into whereby the Company shall pay no royalties on the first $50,000 of net sales and subsequently the Company and the licensor shall share equally a royalty of 50% on net sales. There shall be no minimum royalty. The Company also entered into an agreement with an unrelated company to source additional "name brand" properties for cell phone game production and issued this unrelated company 2,000,000 shares of common stock as a consulting fee. These shares were issued on August 1, 2003 and were valued at $.033 per share, representing the closing market value on the date of grant. In July 2003, the Company entered into a consulting agreement with an unrelated individual to provide services through June 2004. On August 1, 2003, the Company issued 150,000 shares of common stock to this consultant. These shares were valued at $.033 per share, representing the closing market value on the date of grant. On July 14, 2003, the Company entered into a consulting agreement with an unrelated individual to provide services through June 2004. On August 1, 2003, the Company issued 4,000,000 shares of common stock to this consultant as compensation for services to be rendered. These shares were valued at $.033 per share, representing the closing market value on the date of grant. In July 2003, the Company entered into employment agreements with two contractors related to cell phone game development and health care services. On August 1, 2003, each contractor was issued 500,000 shares of common stock as compensation in addition to ongoing salary costs. These shares were valued at $.033 per share, representing the closing market value on the date of grant. 29 IVP TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2003 ------------------- (UNAUDITED) In July 2003, the Company issued 1,562,700 unregistered shares of common stock to an officer of the Company in lieu of cash in order to satisfy shareholder loans, expenses paid on behalf of the Company and accrued expenses. These shares were valued at $.033 per share, representing the closing market value on the date of grant. On August 6, 2003, the Company announced that it had signed a letter of intent to invest in E-communities UK Limited, a manager of 124 city portals in the UK. The Company also announced that it intends to purchase a 15% interest by September 30, 2003, subject to due diligence and Board approval. The purchase price is expected to be equal to 225,000 pounds sterling payable by issuance of the Company's common stock. As of August 2003, the Company has not finalized this agreement. 30 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS OVERVIEW IVP Technology Corporation d.b.a. ActiveCore Technologies ("IVP Technology" or "ActiveCore" or the "Company") is a software developer, licensor, publisher, marketer, and distributor primarily in wireless markets and an IT services and software vendor in the healthcare vertical. Its operating staff provide products and services to certain segments of the wireless consumer software and enterprise IT marketplaces. ActiveCore Technologies is a registered Nevada corporation and has been publicly listed as IVP Technology Corporation (otcbb:TALL) on the over the counter market for four years. ActiveCore 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., ActiveCore was solely focused on distributing an enterprise software product marketed under the "PowerAudit" name. Beginning in December 2001, the company acquired rights to distribute several 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 primarily platform (X-box, Playstation, GameCube and GameBoy) video games. A few weeks later in July 2002, IVP acquired 100% of the shares of Springboard Technology Solutions Inc. since renamed ActiveCore Technologies Limited, a Toronto based consumer and enterprise software development and IT services company. In the second quarter of 2003, with effect for accounting purposes from April 1, 2003, the company divested the operations of its UK based subsidiary to concentrate on games for mobile devices. ENTERPRISE DIVISION IVP's enterprise software division primarily operates through its wholly owned subsidiary, ActiveCore Technologies Limited, formerly Springboard, 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 ActiveCore's clients are in the health care field thus, in-order to provide marketing focus for the health care sector clients, the company created the fictitious 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 ActiveCore, and Classifier(TM), Viper(TM) and iBos(TM), developed by several third party software companies. In addition to its enterprise operations ActiveCore also has an established wireless and web application development 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 ActiveCore Technologies Inc. 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 enterprise software products currently 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 31 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 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, ActiveCore will be entitled to a 15% commission on sales of Viper(TM) through customer opportunities created by ActiveCore. 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. To date no sales of this product have materialized and ActiveCore is reviewing whether it wishes to continue maintaining a knowledge base in this product. 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. Recently the company obtained an exclusive source code agreement for XML/Connector from Karora Technologies Inc. which will allow ActiveCore to expand the use of Vaayu into the health care vertical where multiple legacy systems may be connected to Vaayu's mobile enablement capabilities. MD LINK. During the last fiscal year the company has also developed 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. This capabilities of this product will also be improved as a result of the acquisition of the XML/Connector source code. 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 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 are typically specialists in working with data networks, often 32 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 Since the divestiture of Ignition Entertainment Limited the Consumer Division has been reduced to two operating tradenames, specifically SilverBirch Studios and Recessgames.com under which ActiveCore develops and markets 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. Effective April 1, 2003 the company divested Ignition and its operations have been recorded as discontinued operations for the current fiscal year. Ignition had been solely concerned with developing for the personal computer and video games platforms market. Through Ignition the company had development license agreements with Microsoft(TM), Nintendo(TM) and Sony(TM) to support its platform game development activities. 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. With the divestiture of Ignition ActiveCore was able to rid itself of this business risk which had risen in 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. With the divestiture of Ignition ActiveCore was able to rid itself of this business risk which had risen in a relatively short time period with the rapid development of the market space and the severe competition for retail shelf space. CURRENT EVENTS Subsequent to the fiscal year end on December 31, 2002 and to the company's last operational review included in the SB2 filing dated February 12, 2003 the company has made significant progress in both its consumer and in its enterprise divisions. CONSUMER DIVISION 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. During the second quarter of 2003 the company delivered 4 cell phone games to Tira which are now in various stages of the distribution cycle including replication for various phone models, acceptance testing by carriers and placement on wireless carrier game portals. ActiveCore's mobile games have been created by SilverBirch Studios, an internal development group. 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". The Recessgames.com portal is scheduled for launch in late 2003. ENTERPRISE DIVISION The enterprise division has made steady progress with particular emphasis on the MDI Solutions group. 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. Due to the SARS outbreak in Toronto the installation of the MD Link product was not completed until the second quarter of 2003. In addition MDI Solutions has executed multiple contracts with four of the Toronto area's largest hospitals and has been awarded a short term contract for services at the Sault Area Hospital. Most of these contracts are for a combination of time, material and retained consulting services and have an initial term ranging from six to twelve 33 months with four automatically renewing for additional periods. The outbreak of SARS in Toronto which resulted in 44 deaths including a number of health care workers was concentrated in health care facilities. The business impact on ActiveCore was substantial as the company was faced with minimal revenues from its service contracts and prolonged collection periods during the later part of the first quarter and the entire second quarter. The financial repercussions of the outbreak have continued into the third quarter however the company believes that the fourth quarter will show improvement as various Toronto based hospitals catch up on integration issues and the movement of Toronto service personnel is again allowed in to US and other region health care facilities. 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. ActiveCore 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 company is also in the process of negotiating the acquisition of a health care services group from a US based company which primarily operates along the eastern US. The Company expects that this acquisition, if completed, will begin to add revenues in the third quarter. If completed the services group will operate under the MDI trade name. 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 and substantial growth in the enterprise division in the future. ACQUISITIONS AND REORGANIZATIONS IVP Technology maintains an 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. At its annual general meeting of shareholders in Miami on May 28, 2003 ActiveCore shareholders gave consent to an increase in the authorized common shares from 150,000,000 to 500,000,000 shares. The increase in the number of authorized common shares was necessary to complete the issuance of shares to the original shareholders of Ignition and to provide sufficient room in its share structure to complete acquisitions using shares and for other equity and debt capital raising activities. It is management's belief that acquisitions and reorganizations ought to be undertaken when such activities are perceived to be accretive i.e. the cost of share dilution is offset by earnings in the future. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2003 COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 2002 REVENUES. During the three months ended June 30, 2003, we generated $82,300 in revenue in comparison to revenue of $90,000 in the corresponding period ended June 30, 2002. From a revenue source perspective in the second quarter of fiscal year 2003, $82,300 of revenue was generated by ActiveCore Technologies Limited from services work and product installation chiefly by the company's MDI group. The company accounted for the divestiture of Ignition Entertainment as discontinued operations with effect from April 1, 2003 therefore no revenue from Ignition UK was included in the results for the three months ended June 30, 2003. IVP Technology acquired Ignition on May 28, 2002 and did not acquire Springboard, now ActiveCore Technologies Limited, until July 1, 2002 consequently the revenue recorded in the second quarter of fiscal year 2002 was entirely generated by Ignition Entertainment Limited in the UK. During the second quarter of 2003 revenue from the MDI group was down substantially from what was expected as a result of the SARS outbreak in Toronto which constrained revenue earning opportunities within the existing hospital contracts and in terms of expanding our operations to other health care units in the US and Canada. COST OF SALES. Cost of sales was $93,207 for the three months ended June 30, 2003 versus $550,609 in the three months ended June 30, 2002. The principal cost of sales items in the second quarter 2003 consisted of amortization of the Classifier software license of $89,202 while the principal cost of sales in the second quarter ended June 30, 2002 was video game production costs in the Ignition operation in addition to the amortization of the classifier license. The company recorded amortization of prepaid licences of $92,982 related to IVP's Classifier(TM) and I-Bos(TM) distribution and license agreement in both the second quarter of 2003 and 2002. The result of the cost of sales components elaborated above led to a negative gross margin of $10,907 in the three months ended June 30, 2003 versus a negative gross margin of $460,609 in the three months ended June 30, 2003. 34 OPERATING EXPENSES. Total operating expenses for the three months ended June 30, 2003 were $1,126,570 versus $856,344 in the three months ended June 30, 2002. These expenses resulted in losses from operations of $1,137,477 in the most recent quarter and $1,316,953 in the quarter ended June 30, 2002. The largest components of second quarter fiscal year 2003 operating expenses were related to stock based compensation, salaries and wages and other general and administration expenses. These expenses are discussed below. ActiveCore's Canadian operations accounted for $157,573 in wages and salary costs which represented the cost of developers, data management staff, administration and sales and marketing staff. Salaries and wages include costs of all group insurance and various government programs. In the period ended June 30, 2002 there were no wage and salary costs incurred for operations as Ignition's figures have been removed and shown as discontinued operations and that subsidiary's US operation Ignition USA was not in place at the time. Stock based compensation of $656,922 in the second quarter ended June 30, 2003 includes $540,000 due to the acceleration of release of 20,000,000 shares that were formerly part of the acquisition terms of ITM in September 2001. In the quarter ended June 30 2002 there was no stock based compensation paid. Under the original ITM purchase agreement stock was to be released to the managers of ITM as sales revenue targets were met - at the time the original agreement was made it was anticipated by both the former directors of IVP and the owners of ITM that the stock issued in exchange for ITM acquisition would have been valued as at the date of the agreement and accounted for as a large goodwill value on the balance sheet. However during the company's prolonged SB 2 approval process it was determined that the common stock needed to be accounted for as at the quarter end in the each of the quarters where the original sales revenue targets were achieved. In practice this meant that regardless of how successful the company was in achieving increased sales, and regardless of how well the share price responded to the increased revenue, the company was likely to record large losses based on the valuation of the share releases at the time the revenues were recognized. In addition the recording of higher share compensation values was acting as a disincentive for management since management were likely to be taxed on the increased value of the stock received as it was being recognized as income rather than a one time capital gain over the original purchase price of the equity purchase in ITM. The other stock based compensation amounts consist of payments of $63,500 related to director's fees for the current year and $125,000 related to payment to a consultant for the next twelve months. No costs related to Ignition were recorded in the quarter as Ignition was divested with effect from April 1, 2003. In the second quarter of 2002 no stock based compensation was recorded as the managers of the company had not yet met the first milestone payment on the ITM compensation shares. General and Administrative expenses were $198,470 in the quarter ended June 30, 2003 versus $150,100 in the quarter ended June 30, 2002. In the most current quarter the largest component of G & A was write down of commitment fees on the equity line of credit and the cost associated with the retention of Hawk Associates as the company's new Investor Relations firm. Hawk has been retained at a rate of $7,000 per month in addition to a one time 2,000,000 unregistered stock grant. Consulting fees for the three months ending June 30, 2003 were $45,256 versus $330,980 in the quarter ended June 30, 2002. The fees in the second quarter ended June 30, 2003 reflect the cost of management's accrued salaries whereas, in the second quarter ended June 30, 2002, the costs reflected the value of various financial and marketing consultants who were assisting the company in making it ready for the SB2 filing and expanding its product set and sales opportunities. Legal and accounting expenses were $57,996 in the three months ended June 30, 2003 versus $165,877 in the three month period ended June 30, 2002. The decrease between the periods was primarily due to reduced audit fees as a result of the groundwork that had been laid during the company's extended SB 2 process. Likewise the Company had lower legal fees due to the end of the SB 2 process. Management fees and financial advisory fees in the period ended June 30, 2003 were nil versus $52,452 and $150,000 respectively in the quarter ended June 30, 2002. The financial advisory charges were directly related to the costs of retaining Danson Associates to assist in bringing the company up to SEC standards in accounting and finance, the contract with Danson Associates expired at the end of February 2003. In the quarter ended June 30, 2003 the company incurred deprecation charges of $10,353 versus $6,935 in the quarter ended June 30, 2002. These charges were related to primarily computer equipment in use in the company's offices. 35 OTHER INCOME/EXPENSES In the quarter ended June 30, 2002 the company realized a gain of $96,334 on the early extinguishment of debt related to the short term loan from DCD Group. In the quarter ended June 30, 2003 there was no corresponding event. Interest income from cash on deposit was $1,354 in the quarter ended June 30, 2003 versus $42 in the quarter ended June 30, 2002. Interest expense was much higher in the period ended June 30, 2003 at $148,778 than in the comparative period ended June 30, 2002 which was $54,218. In the current quarter the company incurred imputed interest charges related to the Equity Line of Credit and interest costs on the Berra term loan whereas in the quarter ended June 30, 2002 the interest expense was related to several term loans including the Berra note and a convertible debenture obtained from an unrelated party. The company recorded a foreign exchange gain of $1,006 for the three months ended June 30, 2003 as a result of the decline of the US dollar in relation to the Canadian Dollar. In the quarter ended June 30, 2002 the company had a foreign exchange loss of $11,272 in respect of the decline of the Canadian dollar versus the US dollar. NET LOSS FROM CONTINUING OPERATIONS. As a result of the items specified above, the Company incurred a net loss of $1,283,895 or 0.01 cent per share versus a loss of $1,286,067 or 0.02 cents per share in the second quarter of 2002. NET INCOME (LOSS) DISCONTINUED OPERATIONS The company recorded a net gain on discontinued operation from the sale of Ignition Entertainment Limited of $2,396,009 in the quarter ended June 30, 2003 versus a loss on discontinued operations of $211,959 for the quarter ended June 30, 2002. As a result of the divestiture of Ignition the company earned net income of $1,112,114 for the quarter ended June 30, 2003 versus a net loss of $1,498,026 in the quarter ended June 30, 2002. This resulted in a earnings per share of 1 cent per diluted share for the quarter ended June 30, 2003 versus a loss of 1 cent per share in the quarter ended June 30, 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. This latter arrangement has been cancelled as at the quarter ended June 30, 2003. In the third quarter of 2003, the company obtained the first $500,000 tranche of a planned $2,000,000 term debt offering. With the divestiture of Ignition our need for cash to fund operations has been reduced substantially with most of the need to repay extended payables and to fund day to day operations until our product sales and service revenues are sufficient to meet operating costs and the costs of remaining a public company. As of June 30, 2003, our need for cash included satisfying $1,745,980 of current liabilities which consisted of accounts payable of $680,872, $91,371 of accrued liabilities, taxes payable of $155,371, and other current liabilities of $2,856, accrued interest of $11,909, the current portion of leases payable of $20,154, amounts payable to related parties of $76,427 and notes payable of $689,020. which includes an outstanding amounts to Berra, Cornell and 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. As indicated in the liquidity section above the company subsequent to the quarter ended June 30, 2003 entered in to $500,000 term loan. In the quarter ended June 30, 2003 the only long term debt was the extended portion of leases payable of $15,855. The Company substantially reduced its short term and long term debt from the fiscal period ended December 31, 2002 through the issuance of the common shares that were due to the original shareholders of Ignition Entertainment and also from the conversion of shareholders loans, accrued expenses and unpaid salaries to several directors and officers. In the quarter ended June 30, 2003 Mr. MacDonald and Mr. Hamilton converted debts of $445,319.40 each into 17,804,976 restricted common shares each. 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, 36 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. At June 30, 2003 the Company had cash on hand of $754 versus $63,162 at the fiscal year end. In addition, as at the quarter end, certain shareholders have also supported the company to the extent of $76,427 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 short 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 Bankers, 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 an SB2 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 Partners 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 June 2003, the Company has received under the Equity Line of Credit $525,000 in exchange for 12,424,404 shares of common stock. Except for the Equity 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 $2,000,000, which would include the satisfaction of current liabilities of $1,745,980. As of June 30, 2003 the company had a working capital deficiency of $1,554,310. 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 Cornell 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. 37 CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS The following chart sets forth IVP's contractual obligations and commercial commitments and the time frames for which such commitments and obligations come due.
PAYMENTS DUE BY PERIOD TOTAL LESS THAN AFTER CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS 5 YEARS Current Obligations $ 1,649,399 $ 1,649,399 $ -- $ -- $ -- Convertible Debenture -- -- -- -- -- Leases Payable 36,009 20,154 15,855 -- -- Due to Related Parties 76,427 76,427 -- -- -- Operating Leases -- -- -- -- -- Montpelier Consulting Agreement -- -- -- -- -- Officer Contracts -- -- -- -- -- Software Licensing Contracts -- -- -- -- -- ---------- ---------- --------- --------- ------- Total Contractual Cash Obligations $1,761,835 $1,745,980 $ 15,855 $ -- $ -- ========== ========== ========= ========= =======
CAPITAL RESOURCES Pursuant to the Equity Line of Credit, the company may periodically sell shares of common stock to Cornell Capital Partners, L.P. 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 Partners 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 $0.19 per share. 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. 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 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 38 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 (pound)600,000, (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 $63,162 in December 2002 to $754 on June 30, 2003. While there was a net loss on operations of $182,389 in the six months ended June 30, 2003, there were net non-cash expense adjustments of $(1,288,066). In the period ended June 30, 2002, the non-cash adjustments were $1,580,737 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 $1,470,457 for the six months ended June 30, 2003 and $572,251 for the six months ended June 30, 2003. 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. NET CASH USED IN INVESTING ACTIVITIES Net cash used by investing activities was $11,066 related to an increase in fixed assets in the six months ended June 30, 2003. NET CASH PROVIDED BY FINANCING ACTIVITIES During the six months ended June 30, 2003 the company raised cash of $1,295,691 from financing activities and repaid a notes payable, the convertible debenture from Cornell Capital and made a reduction on certain items payable to employees or shareholders together with lease payments to yield a net decrease in cash of 276,331 cash. 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 ORGANIZATION The consolidated financial statements of IVP Technology Corporation d.b.a. ActiveCore Technologies, Inc. (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: Springboard Technology Solutions, Inc. d.b.a. ActiveCore Technologies, Ltd. ("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, enterprise and consumer. 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. 39 OPERATIONS OF THE COMPANY - GOING CONCERN 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 $182,389 and a negative cash flow from operations of $1,470,457 for the six months ended June 30, 2003. The Company also has a working capital deficiency of $1,554,310 and a stockholders' deficiency of $1,164,990. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plan to continue in operation is 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. 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 and $407,326 for the six months ended June 30, 2003 and 2002, respectively. Publishing revenues have been reclassified to gain (loss) from discontinued operations on the accompanying condensed consolidated statement of operations in connection with the sale of Ignition Entertainment, Ltd. (See Note 2). Distribution revenue is derived from the sale of third-party interactive software titles, accessories and hardware. Distribution revenue amounted to $103,051 and $90,000 for the six months ended June 30, 2003 and 2002, respectively. Revenues from Services and Commercial Software sold under licenses were $127,958 and $0 in the six months ended June 30, 2003 and 2002, respectively. The Company had no Services or Commercial Software sales in the corresponding period of 2002, because it had not yet acquired Springboard Technology Solutions, a Services 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 ("VSOE") 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. 40 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. 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. 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. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The changes in SFAS No. 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. This statement is effective for contracts entered into or modified after June 30, 2003 and all of its provisions should be applied prospectively. In May 2003, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 changes the accounting for certain financial instruments with characteristics of both liabilities and equity that, under previous pronouncements, issuers could account for as equity. The new accounting guidance contained in SFAS No. 150 requires that those instruments be classified as liabilities in the balance sheet. SFAS No. 150 affects the issuer's accounting for three types of freestanding financial instruments. One type is mandatorily redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets. A second type includes put options and forward purchase contracts, which involves instruments that do or may require the issuer to buy back some of its shares in exchange for cash or other assets. The third type of instruments that are liabilities under this Statement is obligations that can be settled with 41 shares, the monetary value of which is fixed, tied solely or predominantly to a variable such as a market index, or varies inversely with the value of the issuers' shares. SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. Most of the provisions of Statement 150 are consistent with the existing definition of liabilities in FASB Concepts Statement No. 6, "Elements of Financial Statements". The remaining provisions of this Statement are consistent with the FASB's proposal to revise that definition to encompass certain obligations that a reporting entity can or must settle by issuing its own shares. This Statement shall be effective for financial instruments entered into or modified after May 31, 2003 and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a non-public entity, as to which the effective date is for fiscal periods beginning after December 15, 2003. The Company believes that the adoption of the above pronouncements will, not have a material effect on the Company's condensed consolidated financial position or results of operations. 42 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES RECENT SALES OF UNREGISTERED SECURITIES The Company made the following issuances of unregistered securities since January 1, 2003. On August 5, 2003, the Company announced that it had acquired the rights to build a cell phone game based on the "Zorro" character and trademark from Zorro Productions Inc. of California. A license agreement was entered into whereby the Company shall pay no royalties on the first $50,000 of net sales and subsequently the Company and the licensor shall share equally a royalty of 50% on net sales. There shall be no minimum royalty. The Company also entered into an agreement with an unrelated company to source additional "name brand" properties for cell phone game production and issued this unrelated company 2,000,000 shares of common stock as a consulting fee. These shares were issued on August 1, 2003 and were valued at $.033 per share, representing the closing market value on the date of grant. On July 31, 2003, the company announced that its wholly owned subsidiary ActiveCore Technologies Limited had received the first installment of $500,000 of a planned $2,000,000 term loan offering. Under the terms of the agreement, the first installment will accrue a 12% interest rate per annum and is repayable over a five-year term with no payments required in the first 12 months - the payments will be amortized over the remaining 48 months of the term loan. The loan is convertible into common stock of the Company at the rate of 4.5 shares for every 1 dollar of the loan balance due, excluding interest, remaining at the time of conversion. As additional consideration for the loan advance by the lender, the Company issued 500,000 warrants on July 30, 2003 to the lender for the purchase of 500,000 shares of common stock at a purchase price of $0.0312 per share. The fair value assigned to the warrant amounted to $0 and was determined using the Black-Scholes pricing model. The Company estimates the fair value of the warrant at the grant date by using the Black-Scholes option-pricing model with the following weighted average assumptions used for this grant; no dividend yield for all years; expected volatility of 9.3%; risk-free interest rate of 1.12%, and an expected life of 1 year. The warrants expire July 31, 2004. On July 14, 2003, the Company entered into a consulting agreement with an unrelated individual to provide services through June 2004. On August 1, 2003, the Company issued 4,000,000 shares of common stock to this consultant as compensation for services to be rendered. These shares were valued at $.033 per share, representing the closing market value on the date of grant. On July 10, 2003, the Company entered into a Letter of Intent to acquire the source code for a software product known as XML/Connector for the health care vertical from an unrelated company which is a Colorado and Toronto based software development company. As part of the terms and conditions, the Company will pay (CAD) $120,000 in cash in the form of a note payable. On August 1, 2003, the Company issued 500,000 shares of common stock to the acquiree. These shares were valued at $.033 per share representing the closing market value on the date of grant. In July 2003, the Company entered into a consulting agreement with an unrelated individual to provide services through June 2004. On August 1, 2003, the Company issued 150,000 shares of common stock to this consultant. These shares were valued at $.033 per share, representing the closing market value on the date of grant. In July 2003, the Company entered into employment agreements with two contractors related to cell phone game development and health care services. On August 1, 2003, each contractor was issued 500,000 shares of common stock as compensation in addition to ongoing salary costs. These shares were valued at $.033 per share, representing the closing market value on the date of grant. In July 2003, the Company issued 1,562,700 unregistered shares of common stock to an officer of the Company in lieu of cash in order to satisfy shareholder loans, expenses paid on behalf of the Company and accrued expenses. These shares were valued at $.033 per share, representing the closing market value on the date of grant. 43 During the six month period ended June 30, 2003, the Company issued 8,932,783 shares of common stock to the Investment Bankers for cash of $400,000 in connection with the Equity Line of Credit (See Note 6). The cash was applied against the $1 million promissory note payable to the Investment Bankers issued in February 2003. As of June 30, 2003, the remaining balance of the note payable to the Investment Banker totaled $600,000. On June 24, 2003, the Company issued 17,804,976 shares of common stock to the President of the Company in lieu of cash in order to satisfy shareholder loans, expenses paid on behalf of the Company and accrued salaries included in the amounts due to related parties on the accompanying condensed consolidated balance sheets. These shares were valued at $.025 per share, or an aggregate of $445,124 representing the market value on the date of grant. On June 24, 2003, the Company issued 17,804,976 shares of common stock to a director of the Company in lieu of cash in order to satisfy shareholder loans, expenses paid on behalf of the Company and accrued salaries included in the amounts due to related parties on the accompanying condensed consolidated balance sheets. These shares were valued at $.025 per share, or an aggregate of $445,124 representing the market value on the date of grant. On June 24, 2003, the Company issued 1,250,000 shares of common stock to four employees of the Company for payment of accrued compensation and bonuses. These shares were valued at $.025 per share, or an aggregate of $31,250 representing the market value on the date of grant. On June 24, 2003, the Company issued 3,000,000 shares of common stock to certain directors of the Company for director services for the period from June 2003 to June 2004. These shares were valued at $.025 per share, or an aggregate of $75,000 representing the market value on the date of grant. As of June 30, 2003, the Company has deferred $75,000 included in total stockholders' deficiency as deferred compensation and licensing fee on the accompanying condensed consolidated balance sheets. On June 24, 2003, the Company issued 300,000 shares of common stock to an unrelated consultant having a value of $7,500 for consulting services. These shares were valued based upon the market value on the date of grant. On June 24, 2003, the Company issued 2,000,000 shares of common stock to an unrelated party in connection with an agreement to provide investor relations services. These shares were valued at $.025 per share, or an aggregate of $50,000 representing the market value on the date of grant. As of June 30, 2003, the Company has deferred approximately $33,000 included in deferred consulting expense on the accompanying condensed consolidated balance sheet. On June 24, 2003, the Company issued 5,000,000 shares of common stock to an unrelated consultant as consideration for an agreement to provide consulting services from June 2003 to June 2004. These shares were valued at $.025 per share, or an aggregate of $125,000 on the date of grant. On June 24, 2003, the Company issued 50,000,000 shares of common stock to the former shareholders of Ignition Entertainment, Ltd. in accordance with the original May 28, 2002 purchase agreement. The acquisition was made pursuant to the Company agreeing to issue 15,000,000 shares of common stock and 3,500,000 shares of preferred stock convertible into 35,000,000 shares of common stock; collectively valued at $0.23898 per share for a total purchase price of $11,949,155. The issuance of these 50,000,000 shares of common stock relieved $11,949,155 in preferred and common stock to be issued as of April 1, 2003. (See Note 2, Discontinued Operations for details on the acceleration of the issuance of these shares and the sale agreement of Ignition Entertainment Ltd.) On June 24, 2003, the Company issued 5,180,000 shares of common stock to two unrelated parties to obtain financing for the Company. Financing costs included in interest expense for the six months ended June 30, 2003 totaled $129,500 representing the market value on the date of grant. On June 24, 2003, the Company issued 500,000 shares of common stock that were released from escrow to an individual for services rendered from November 2002 to November 2003. The Board of Directors resolved that these shares are considered earned as of June 24, 2003. These shares were valued at $.025 per share, or an aggregate of $13,500 representing the market value on the date of grant. On May 28, 2003, the Company amended the Articles of Incorporation to increase the total number of authorized common and preferred stock to 500,000,000 and 50,000,000 shares, respectively. 44 On April 23, 2003, the Company issued 3,491,620 shares of common stock to the Investment Bankers for cash of $125,000 or $.036 per share. In 2002, the Company issued 50,000,000 shares of common stock to various officers and directors of the Company in accordance with the stock purchase agreement with International Technology Marketing ("ITM"). All shares were held in safekeeping pending the completion of an escrow agreement. As of December 31, 2002, 30,000,000 shares were earned and were released from escrow. The Company has accelerated the issuance of the final 20,000,000 shares from escrow. These 20,000,000 shares were released from escrow as stock-based compensation on June 30, 2003 and were valued at $.027, or an aggregate of $540,000 on the date of sale. 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 Equity Line of Credit 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 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 Bankers for cash of $150,000 or $.07 per share, in connection with the Equity Line of Credit. 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 On May 28, 2003, the Company held its 2002 annual shareholders meeting. At the meeting, Brian MacDonald, Peter Hamilton and J. Stephen Smith were elected to the board of directors. In addition, the shareholders voted to increase the Company's authorized common stock to 500,000,000 shares. In connection with the re-election of the directors, there were 73,111,302 shares voted in favor of the directors, no votes against and 130,830 abstentions. In connection with the increase in authorized common stock, there were 71,390,374 shares voted in favor, 1,847,758 votes against and 4,000 abstentions. ITEM 5. OTHER INFORMATION Not applicable. 45
ITEM 6. SUBSEQUENT EVENTS, EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS. 2.1 Agreement and Plan of Reorganization dated March 21, Incorporated by reference to Exhibit 4.1 to 2000 between IVP Technology Corporation and Erebus IVP Technology's Form 8-K12G3 filed on Corporation April 19, 2000 3.1 Certificate of Amendment of Articles of Incorporation Incorporated by reference to 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 3.3 Certificate of Amendment of Articles of Incorporation Provided herewith 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 Software Distribution Incorporated by reference to Exhibit 10.4 to Agreement dated as of May 31, 2000 between the IVP Technology's Form 10-QSB filed on Registrant and Orchestral Corporation September 24, 2000 10.5 Service Bureau Arrangement Agreement dated September Incorporated by reference to Exhibit 10.5 to 28, 2000 between the Registrant and E-RESPONSES.COM IVP Technology's Form 10-QSB filed on November 14, 2000 10.6 Stock Purchase Agreement dated September 17, 2001 Incorporated by reference to Exhibit 10.6 to among the Registrant, International Technology IVP Technology's Form 10-KSB filed on Marketing, Inc., Brian MacDonald, Peter Hamilton, April 15, 2002 Kevin Birch, Sherry Bullock, and Geno Villella 10.7 Agreement dated May 15, 2000 between the Registrant Incorporated by reference to Exhibit 10.7 to and Rainbow Investments International Limited IVP Technology's Form 10-KSB filed on April 15, 2002 10.8 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.8 to International Technology Marketing, Inc. and Brian J. IVP Technology's Form 10-KSB filed on MacDonald April 15, 2002 10.9 Agreement dated February 12, 2002 between the Incorporated by reference to Exhibit 10.9 to Registrant and SmartFOCUS Limited IVP Technology's Form 10-KSB filed on April 15, 2002 10.10 Warrant Agreement dated May 15, 2000 between the Incorporated by reference to Exhibit 10.10 to Registrant and Rainbow Investments International IVP Technology's Form 10-KSB filed on Limited April 15, 2002 10.11 Convertible Promissory Note dated May 2000 between Incorporated by reference to Exhibit 10.11 to the Registrant and Rainbow Investments International IVP Technology's Form 10-KSB filed on Limited April 15, 2002 46 10.12 Software Distribution Agreement dated December 28, Incorporated by reference to Exhibit 10.12 to 2001 between the Registrant and TIG Acquisition IVP Technology's Form 10-KSB filed on Corporation April 15, 2002 10.13 Loan Agreement dated January 16, 2002 between the Incorporated by reference to Exhibit 10.13 to Registrant and DCD Holdings Limited IVP Technology's Form 10-KSB filed on April 15, 2002 10.14 Agreement for the Provision of Marketing Services Incorporated by reference to Exhibit 10.1 to dated May 3, 2002 between the Registrant and Vanessa IVP Technology's Form S-8 filed with the SEC Land on May 3, 2002 10.15 Reserved 10.16 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.16 to International Technology Marketing, Inc. and Geno IVP Technology's Form 10-KSB filed on Villella April 15, 2002 10.17 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.17 to International Technology Marketing, Inc. and Kevin IVP Technology's Form 10-KSB filed on Birch April 15, 2002 10.18 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.18 to International Technology Marketing, Inc. and Peter J. IVP Technology's Form 10-KSB filed on Hamilton April 15, 2002 10.19 Employment Agreement dated August 30, 2001 between Incorporated by reference to Exhibit 10.19 to International Technology Marketing, Inc. and Sherry IVP Technology's Form 10-KSB filed on Bullock April 15, 2002 10.20 Loan and Security Agreement dated July 30, 2001 among Incorporated by reference to Exhibit 10.20 to the Registrant, Clarino Investments International IVP Technology's Form 10-KSB filed on Ltd., and Berra Holdings Ltd. April 15, 2002 10.21 Consulting and Advisory Extension Agreement dated Incorporated by reference to the Exhibit to February 14, 2001 between the Registrant and Barry IVP Technology's Form 10-QSB filed on May 21, Gross D/B/A Gross Capital Associates 2001 10.22 Letter Agreement dated June 28, 2001, between the Incorporated by reference to Exhibit 4.1 to Registrant and Andris Gravitis IVP Technology's Form S-8 filed on July 23, 2001 10.23 Letter Agreement dated June 28, 2001, between the Incorporated by reference to Exhibit 4.2 to Registrant and Thomas Chown IVP Technology's Form S-8 filed on July 23, 2001 10.24 Letter Agreement dated May 30, 2001, between the Incorporated by reference to Exhibit 4.3 to Registrant and Ruffa & Ruffa, P.C. for Modification IVP Technology's Form S-8 filed on July 23, of Retainer Agreement 2001 10.25 Consulting Agreement dated September 1, 2000 between Incorporated by reference to Exhibit 13.1 to the Registrant and Barry Gross d/b/a Gross Capital IVP Technology's Form 10-KSB filed on July 5, Associates 2001 10.26 Consulting and Advisory Agreement dated September 25, Incorporated by reference to Exhibit 13.2 to 2000 between the Registrant and Koplan Consulting IVP Technology's Form 10-KSB filed on July 5, Corporation 2001 47 10.27 Warrant Agreement dated April 3, 2002 between the Incorporated by reference to Exhibit 10.27 to Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on April 15, 2002 10.28 Equity Line of Credit Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.28 to between the Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on April 15, 2002 10.29 Registration Rights Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.29 to between the Registrant and Cornell Capital Partners, IVP Technology's Form 10-KSB filed on LP April 15, 2002 10.30 Escrow Agreement dated April 3, 2002 among the Incorporated by reference to Exhibit 10.30 to Registrant, Cornell Capital Partners, LP, Butler IVP Technology's Form 10-KSB filed on Gonzalez, and First Union National Bank April 15, 2002 10.31 Securities Purchase Agreement dated April 3, 2002 Incorporated by reference to Exhibit 10.31 to among the Registrant and the Buyers IVP Technology's Form 10-KSB filed on April 15, 2002 10.32 Escrow Agreement dated April 3, 2002 among the Incorporated by reference to Exhibit 10.32 to Registrant, the Buyers, and First Union National Bank IVP Technology's Form 10-KSB filed on April 15, 2002 10.33 Debenture Agreement Dated April 3, 2002 between the Incorporated by reference to Exhibit 10.33 to Registrant and Cornell Capital Partners LP IVP Technology's Form 10-KSB filed on April 15, 2002 10.34 Investor Registration Rights Agreement dated April 3, Incorporated by reference to Exhibit 10.34 to 2002 between the Registrant and the Investors IVP Technology's Form 10-KSB filed on April 15, 2002 10.35 Placement Agent Agreement dated April 3, 2002 among Incorporated by reference to Exhibit 10.35 to the Registrant, Westrock Advisors, Inc. and Cornell IVP Technology's Form 10-KSB filed on Capital Partners LP April 15, 2002 10.36 Letter Agreement dated February 20, 2002 between the Incorporated by reference to Exhibit 10.36 to Registrant and Buford Industries Inc. IVP Technology's Form 10-KSB filed on April 15, 2002 10.37 Letter Confirmation Agreement dated July 21, 2001 Incorporated by reference to Exhibit 10.37 to between the Registrant and Buford Industries Inc. IVP Technology's Form 10-KSB filed on April 15, 2002 10.38 Consulting Agreement dated March 1, 2002 between the Incorporated by reference to Exhibit 10.38 to Registrant and Danson Partners LLC IVP Technology's Form 10-KSB filed on April 15, 2002 10.39 Term Sheet between the Registrant and Cornell Capital Incorporated by reference to Exhibit 10.39 to Partners, LP Increasing the Commitment under the IVP Technology's Form SB-2 filed on May 15, Equity Line of Credit to $10 million 2002 10.40 Consulting Agreement dated February 12, 2002 between Incorporated by reference to Exhibit 10.40 to the Registrant and Danson Partners LLC IVP Technology's Form SB-2 filed on May 15, 2002 48 10.41 Escrow Agreement dated as of May 15, 2002 among the Incorporated by reference to Exhibit 10.41 to Registrant, Brian MacDonald, Peter Hamilton, Kevin IVP Technology's Form SB-2 filed on May 15, Birch, Sherry Bullock, and Gino Villella 2002 10.42 Termination letter dated June 13, 2002 between the Incorporated by reference to Exhibit 10.42 to Registrant and Orchestral Corporation IVP Technology's Form 10-QSB filed on August 19, 2002 10.43 Acquisition Agreement dated as of May 28, 2002 Incorporated by reference to Exhibit 10.43 to regarding the purchase of Ignition Entertainment IVP Technology's Form 10-QSB filed on August 19, 2002 10.44 Consulting Agreement dated as of June 1, 2002 Incorporated by reference to Exhibit 10.44 to Ignition Entertainment Limited and Montpelier IVP Technology's Form 10-QSB filed on August Limited 19, 2002 10.45 Amendment to Equity Line of Credit Agreement dated Incorporated by reference to Exhibit 10.45 to May 2002 between IVP Technology and Cornell Capital IVP Technology's Amendment No. 2 to the Form Partners SB-2 filed on November 14, 2002 10.46 Letter of Credit Facility dated as of April 10, 2002 Incorporated by reference to Exhibit 10.46 to between Revelate Limited and Ignition Entertainment IVP Technology's Amendment No. 2 to the Form Limited SB-2 filed on November 14, 2002 10.47 Debenture dated as of June 14, 2002 between Revelate Incorporated by reference to Exhibit 10.47 to Limited and Ignition Entertainment Limited IVP Technology's Amendment No. 2 to the Form SB-2 filed on November 14, 2002 10.48 Standard Conditions for Purchase of Debts dated May Incorporated by reference to Exhibit 10.48 to 23, 2002 between DCD Factors PLC and Ignition IVP Technology's Amendment No. 2 to the Form Entertainment Limited SB-2 filed on November 14, 2002 10.49 All Assets Debenture dated as of May 23, 2002 between Incorporated by reference to Exhibit 10.49 to DCD Factors PLC and Ignition Entertainment Limited IVP Technology's Amendment No. 2 to the Form SB-2 filed on November 14, 2002 10.50 Memorandum of Agreement dated as of July 1, 2002 Incorporated by reference to Exhibit 10.50 to between Springboard Technology Solutions Inc. and IVP IVP Technology's Amendment No. 2 to the Form Technology SB-2 filed on November 14, 2002 10.51 Heads of Agreement dated as of December 28, 2001 and Incorporated by reference to Exhibit 10.51 to amended on September 30, 2002 between TiG Acquisition IVP Technology's Amendment No. 2 to the Form Corporation and IVP Technology SB-2 filed on November 14, 2002 10.52 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.1 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and Mount Sinai Hospital on April 1, 2003 entered into March 11, 2003 (Contract No. MDI02008) 10.53 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.2 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and Mount Sinai Hospital on April 1, 2003 entered into March 11, 2003 (Contract No. MDI02009) 49 10.54 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.3 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and Rouge Valley Health on April 1, 2003 System entered into September 12, 2002 (Contract No. MDI02003) 10.55 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.4 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and Rouge Valley Health on April 1, 2003 System entered into September 12, 2002 (Contract No. MDI02004) 10.56 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.5 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and York Central Hospital on April 1, 2003 entered into September 13, 2002 (Contract No. MDI02006) 10.57 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.6 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and York Central Hospital on April 1, 2003 entered into September 13, 2002 (Contract No. MDI02007) 10.58 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.7 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and St. Joseph's Medical on April 1, 2003 Centre entered into March 18, 2003 (Contract No. MDI03001) 10.59 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.8 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and St. Joseph's Medical on April 1, 2003 Centre entered into March 18, 2003 (Contract No. MDI03002-Expires March 31, 2004) 10.60 MDI Solutions Services Agreement (Interface Incorporated by reference to Exhibit 10.9 to Development Retainer Services) between Medical Data IVP Technology's Form 8-K filed with the SEC Integration Solutions group and St. Joseph's Medical on April 1, 2003 Centre entered into March 18, 2003 (Contract No. MDI03002-Expires June 11, 2004) 10.61 Intentionally omitted Intentionally omitted 10.62 Developer and Distribution Agreement dated as of Incorporated by reference to Exhibit 10.1 to February 10, 2003 between the Company and Tira the Company's Form 8-K filed with the SEC on Wireless, Inc. February 27, 2003. 10.63 Letter of Intent dated as of July 10, 2003 Provided herewith between the Company and Karora 10.64 Promissory Note dated as of July 30, 2003 Provided herewith 10.65 Warrant Certificate dated as of July 30, 2003 Provided herewith 10.66 Conversion Privilege of Lender Provided herewith 10.67 General Security Agreement dated as of July 30, Provided herewith 2003 10.68 Guarantee Agreement dated as of July 30, 2003 Provided herewith 10.69 Consulting Agreement dated as of June 3, 2003 Provided herewith between the Company and Rodger J. Cowwan 10.70 Agreement dated as of May 1, 2003 between the Provided herewith Company and Hawk Associates, Inc. 10.71 Letter of Intent dated as of June 16, 2003 Provided herewith between the Company and ePocket Inc. 10.72 Consulting Agreement dated as of July 14, 2003 Provided herewith between the Company and Gerald Campbell 10.73 Letter of Intent dated as of June 16, 2003 Provided herewith between the Company and SCI Healthcare Group, Inc. 10.74 Merchandising License Agreement dated as of Provided herewith July 21, 2003 between the Company and Zorro Productions, Inc. 50 31.1 Certification re: Section 302 Provided herewith 32.1 Certification re: Section 906 Provided herewith
(B) REPORTS ON FORM 8-K. On August 8, 2003, the Company announced that it had entered into a Letter of Intent with E Communities UK Limited. On June 3, 2003, the Company announced that it intended to sell Ignition Entertainment. On April 1, 2003, the Company announced that its Medical Data Integration Solutions Group entered into service agreements with four Toronto hospitals. On February 27, 2003, the Company announced it entered into an agreement with Tira Wireless. 51 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 August 27, 2003 ----------------------------------------------------- By: Brian MacDonald President, Chief Executive Officer and Acting Chief Financial Officer 52