-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FJBEQ+3CUsydkdS4p+f+4Czdmk35A/3fj+UhlQEUvEfj3Kq7vQzJubAyo9Cb2bjT H1MVMmbbPTG7KlNoqh873Q== 0000931731-01-500213.txt : 20010618 0000931731-01-500213.hdr.sgml : 20010618 ACCESSION NUMBER: 0000931731-01-500213 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010416 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010615 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOVATIVE SOFTWARE TECHNOLOGIES INC CENTRAL INDEX KEY: 0001084047 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 954691878 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-27465 FILM NUMBER: 1661662 BUSINESS ADDRESS: STREET 1: 112 N.W. PARKWAY CITY: RIVERSIDE STATE: MO ZIP: 64150 BUSINESS PHONE: 8165848030 8-K/A 1 innosoft8ka.txt U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDED FORM 8-K/(A) -------------------- CURRENT REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event reported: April 16, 2001 Date of Report: June 13, 2001 Innovative Software Technologies, INC. ----------------------------------------------------------------- (Exact name of small business issuer as Specified in its Charter) California (State or Other Jurisdiction of Incorporation) 000-1084047 (Commission File Number) 95-46918978 (IRS Employer Identification No.) 112 Northwest Parkway, Riverside, MO 64150 (Address of Principal Executive Offices) (816) 583-8030 (Registrant's Telephone Number) 827 State Street, Santa Barbara, CA 93101 (Former Name or Former Address, Changed Since Last Report) Item 1. Changes in control of registrant Not applicable. Item 2. Acquisition of Hackett Media, Inc. On April 16, 2001, Innovative Software Technologies, Inc., a California corporation (the "Company" or "Registrant"), consummated the acquisition of all the outstanding common stock of Hackett Media, Inc. ("Seller") having the address of 1900 Alaqua Dr., Longwood, FL 32779 in exchange for 13,077,954 shares of the Company's common stock. Pursuant to the terms and conditions of the Share Exchange Agreement (the "Agreement"), the Company purchased all the assets of Seller. Seller is not affiliated with the Registrant nor with any of the Registrant's subsidiaries. The description of the acquisition transaction set forth herein is qualified in its entirety by reference to the Share Exchange Agreement, which is incorporated herewith as Exhibit 2.1. The acquisition was accounted for using the "purchase" method of accounting. Item 3. Bankruptcy or receivership Not applicable. Item 4. Change in Registrant's Certifying Accountant (a) Change in registrant's certifying accountant Item 5. Other Events Not applicable Item 6. Resignation of Directors Not applicable Item 7. Financial Statements and Exhibits. (a) Financial Statements of business acquired as of and for the years ended December 31, 2000 and 1999. Independent Auditors' Report Balance Sheet as of March 31, 2001 and 2000 (Unaudited) Statements of Income for the Three Months Ended March 31, 2001 and 2000 (Unaudited) Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (Unaudited) Selected Notes to Financial Statements (Unaudited) (b) Pro Forma Financial information Pro forma Consolidated Statement of Operations for the Year Ended December 31, 2000 (Unaudited) Pro forma Consolidated Statement of Operations for the Three Months Ended March 31, 2001 (Unaudited) Pro forma Consolidated Balance Sheet as of March 31, 2001 (Unaudited) (c) Exhibits *2.1 Share Exchange Agreement dated as of April 16, 2001, by and among Hackett Media, Inc. and Innovative Software Solutions, Inc. * Incorporated by reference 2 ITEM 4. Change in Registrant's Certifying Accountant. (a) The firm of Roger G. Castro has served as the independent accountant of Innovative software Technologies, Inc. since inception and has issued an opinion with respect to the audit of the balance sheets of the Company as of December 31, 2000 and the related statements of operations, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2000. On April 16, 2001, the Company advised Roger G. Castro that Grant Thornton LLP will be the Company's independent accountants as a result of the Company's plans to grow in the coming years. The reports of Roger G. Castro on the Company's financial statements for the two years ended December 31, 2000 did not contain any adverse opinion or disclaimer of opinion, or modification or qualification as to uncertainty, audit scope or accounting principles. In connection with its audits for the two most recent years and for the interim period through March 31, 2001, there have been no disagreements between the Company and Roger G. Castro on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Roger G. Castro, would have caused him to make reference thereto in his report on the Company's financial statements for such years. During the two most recent years and through March 31, 2001, there have been no reportable disagreements or events (as defined in Item 304(a)(1)(iv) of Regulation S-B of the Securities and Exchange Commission (the "Commission")). Roger G. Castro confirmed to the Company that their relationship was being ceased as a result of the Company's plans to grow in the coming months and years. The Company has provided Roger G. Castro with a copy of the above statements and has requested that Roger G. Castro furnish it with a letter addressed to the Commission stating whether or not it agrees with the above statements. A copy of such letter dated June 14, 2001 is included in this Report as Exhibit 16. The Company has selected the international accounting firm of Grant Thornton LLP to serve as the Company's new independent accountants. Grant Thornton LLP has not consulted or performed any work for the Company in the last two years. 3 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: June 11, 2001 Innovative Software Technologies, INC. By: /s/ Douglas Hackett ------------------- Douglas Hackett 4 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS HACKETT MEDIA, INC. (a Development Stage Company) December 31, 2000 and 1999 5 CONTENTS -------- Page ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 7 FINANCIAL STATEMENTS BALANCE SHEETS 8 STATEMENTS OF OPERATIONS 9 STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIENCY 10 STATEMENTS OF CASH FLOWS 11 NOTES TO FINANCIAL STATEMENTS 12 6 Report of Independent Certified Public Accountants Stockholder Hackett Media, Inc. We have audited the accompanying balance sheets of Hackett Media, Inc. (a development stage company) as of December 31, 2000 and 1999, and the related statements of operations, changes in stockholder's deficiency, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hackett Media, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. By: /s/ Grant Thornton - ---------------------- Grant Thornton, LLP Philadelphia, Pennsylvania April 27, 2001 7 HACKETT MEDIA, INC. (a Development Stage Company) BALANCE SHEETS December 31, ASSETS ------ 2000 1999 --------- --------- CURRENT ASSETS Cash $ 888 $ 4,043 Investments - available for sale 26,250 -- Inventories -- 10,032 --------- --------- Total current assets 27,138 14,075 --------- --------- PROPERTY AND EQUIPMENT - AT COST Machinery and Equipment 14,258 14,258 Office Furniture and fixtures 3,475 3,475 --------- --------- 17,773 17,773 Less accumulated depreciation 10,989 6,799 --------- --------- 6,744 10,934 --------- --------- $ 33,882 $ 25,009 ========= ========= LIABILITIES AND STOCKHOLDER'S DEFICIENCY ---------------------------------------- CURRENT LIABIITIES Note payable - shareholder $ 264,412 $ 297,347 Accounts Payable -- 9,644 --------- --------- 264,412 306,991 --------- --------- STOCKHOLDER'S DEFICIENCY Common stock - par value $.01 1,000 shares authorized, issued and outstanding, 100 shares 1 1 Additional paid-in capital 45,801 30,999 Accumulated Deficit (276,332) (312,982) --------- --------- (230,530) (281,982) --------- --------- $ 33,882 $ 25,009 ========= ========= The accompanying notes are an integral part of these statements 7 HACKETT MEDIA, INC. (a Development Stage Company) STATEMENTS OF OPERATIONS December 31, 2000 1999 -------- -------- INCOME Consulting fees $ 50,000 $ -- Sales 2,356 1,782 -------- -------- 52,356 1,782 -------- -------- COST OF SALES 1,596 1,055 -------- -------- GROSS PROFIT 50,760 727 -------- -------- Selling expenses 1,040 1,784 General and administrative expenses 13,070 80,144 -------- -------- 14,110 81,928 -------- -------- NET EARNINGS (LOSS) $ 36,650 $(81,201) ======== ======== The accompanying notes are an integral part of these statements. 8
Hackett Media, Inc. (a Development Stage Company) CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY Years ended December 31, 2000 and 1999 Additional Common paid-in Accumulated Stock Capital Deficit Total --------- --------- --------- --------- Balance at January 1, 1999 $ 1 $ 30,999 $ (231,781) $(200,781) Net loss for the year ended December 31, 1999 -- -- (81,201) (81,201) --------- --------- --------- --------- Balance at December 31, 1999 1 30,999 (312,982) (281,982) Net income for the year ended December 31, 2000 -- -- 36,650 36,650 Contributed Capital -- 14,802 -- 14,802 --------- --------- --------- --------- Balance at December 31, 2000 $ 1 $ 45,801 $ (276,332) $(230,530) ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 9
HACKETT MEDIA, INC. (a Development Stage Company) STATEMENTS OF CASH FLOWS Year ended December 31, 2000 1999 -------- -------- Cash Flows From Operating Activities: Net income/(loss) $ 36,650 $(81,201) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities Depreciation and amortization 4,190 3,087 Changes in assets and liabilities Inventories (1,416) (10,032) Accounts payable (9,644) 9,644 -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 29,780 (78,502) -------- -------- Cash Flows From Investing Activities: Additions to Property and Equipment -- (12,072) -------- -------- NET CASH USED IN INVESTING ACTIVITIES -- (12,072) -------- -------- Cash Flows From Financing Activities: (Payments) borrowings on note payable - shareholder (32,935) 94,097 -------- -------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (32,935) 94,097 -------- -------- NET (DECREASE) INCREASE IN CASH (3,155) 3,523 CASH, beginning of year 4,043 520 -------- -------- CASH, end of year $ 888 $ 4,043 ======== ======== Supplemental disclosures of cash flow information Marketable securities obtained in exchange for sale of inventory $ 26,250 $ -- ======== ======== Contributed capital upon sale of inventory $(14,802) $ -- ======== ======== Carrying value of inventory exchanged for marketable securities $(11,448) $ -- ======== ========
The accompanying notes are an integral part of these statements. 10 HACKETT MEDIA, INC. (a Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 and 1999 NOTE A - COMPANY DESCRIPTION Hackett Media, Inc. (a Florida Sub-Chapter S corporation), formed in July 1993, is a financial services aggregator and e-commerce solutions provider. Its two main products consist of The Financial Toolkit 1.0, an integrated financial services package that allows consumers to perform a comprehensive personal finance evaluation, and then creates a competitive bidding environment from a network of financial service providers; and Bizkit 1.0, a turnkey e-commerce solution targeted for at small businesses which provides all the resources necessary to successfully plan, launch, and grow an online presence. Prior to December 31, 2000 the Company was also in the business of selling vintage furniture and fixtures. Subsequent to December 30,2 000, the enterprise became a development stage company engaged in the business described above. Future financial statements of the Company (see Note E) will be presented in accordance with Statement of Financial Accounting Standards No. 7 Accounting and Reporting by Development Stage Company. A summary of the company's significant accounting policies applied in the preparation of the accompanying financial statements follows. NOTE B - SUMMARY OF ACCOUNTING POLICIES 1. Revenue Recognition The Company recognizes revenue in accordance with Statement of Position 97-2, Software Revenue Recognition, which states that revenue is recognized after delivery of the product. 2. Depreciation Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Accelerated methods are used for both book and tax purposes. Machinery and Equipment 3 - 5 years Office Furniture and Fixtures 5 - 7 years 3. Inventories Inventories consist of antique furniture and are valued at the lower of cost or market. Cost is determined by the specific identification method. 4. Investments in Debt and Equity Securities All equity securities are classified as available-for-sale. These securities have been adjusted to fair market value based upon quoted market prices. Unrealized holding gains and losses are reported as a separate component of stockholders' equity. There were no unrealized holding gains and losses as of December 31, 2000 and 1999. Investments consist of 15,000 shares of Ensurge, Inc., a company affiliated through common ownership (see also Note D). 11 HACKETT MEDIA, INC. (a Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 and 1999 5. Income Taxes The Company, with the consent of its stockholder, has elected under the federal and state codes to be an "S" corporation. In lieu of corporation income taxes, the stockholder will be taxed on his proportionate share of the Company's taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements. 6. Advertising and Promotion Costs Advertising and promotion costs are expensed as incurred. 7. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. NOTE C - INVENTORIES The inventories consist of the following: 2000 1999 ---- ---- Antique furniture and fixture $ 0 $ 10,032 NOTE D - RELATED PARTY TRANSACTIONS Note payable to shareholder represents the balance due for advances made to the company. The balance within the note payable account as of December 31, 2000 and 1999 was $262,491 and $297,347, respectively. There is no formal maturity date and no interest associated with the note. The company's shareholder is also the shareholder of an affiliated company, JCL Holdings, Inc (JCL). On December 30, 2000, Hackett Media sold its antiques inventory to JCL for 15,000 shares of Ensurge, Inc. common stock (ENSG) at a fair market value of $1.75 per share. The company provided consulting services for an affiliated company during 2000, Ensurge, Inc (ENSG). The consulting fees earned for the year ended December 31, 2000 totaled $50,000. 12 HACKETT MEDIA, INC. (a Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 and 1999 NOTE E - SUBSEQUENT EVENT Hackett Media, Inc. agreed to be acquired by Innovative Software Technologies, Inc. (Innovative) on April 16, 2001, for 13,077,954 shares of Innovative's common stock. Innovative, a global software company, is a leader in server based content delivery and on-line product distribution and plans to integrate Hackett Media's expertise as a financial services aggregator and e-commerce solutions provider. This transaction will be accounted for as a purchase under Accounting Principal Board Opinion No. 1. Business Contributions. 13
HACKETT MEDIA, INC. (a Development Stage Company) BALANCE SHEET (Unaudited) ASSETS ------ March 31, 2001 2000 -------- --------- CURRENT ASSETS Cash $ 18,190 $ 26,154 Marketable Securities 1,050 -- Inventories -- 10,909 -------- --------- Total current assets 19,240 37,063 -------- --------- PROPERTY AND EQUIPMENT - AT COST Machinery and Equipment 14,258 14,258 Office Furniture and fixtures 3,475 3,475 -------- --------- 17,733 17,733 Less accumulated depreciation 11,619 7,847 -------- --------- 6,114 9,886 -------- --------- $ 25,354 $ 46,949 ======== ========= LIABILITIES AND STOCKHOLDER'S DEFICIENCY ---------------------------------------- CURRENT LIABIITIES Note payable - stockholder 299,915 276,866 Accounts Payable -- 3,991 -------- --------- 299,915 280,857 -------- --------- STOCKHOLDER'S DEFICIENCY Common stock - par value $.01 1,000 shares authorized, issued and outstanding, 100 shares 1 1 Additional paid-in capital 45,801 30,999 Unrealized loss on securities available for sale (25,200) -- Accumulated Deficit (295,163) (264,908) -------- --------- (274,561) (233,908) -------- --------- $ 25,354 $ 46,949 ======== =========
14 HACKETT MEDIA, INC. (a Development Stage Company) STATEMENTS OF INCOME (Unaudited) Three months ended March 31, 2001 2000 -------- -------- INCOME Consulting fees $ -- $ 50,000 Sales -- -- -------- -------- -- 50,000 -------- -------- COST OF SALES -- -- -------- -------- GROSS PROFIT -- 50,000 -------- -------- Selling expenses 1,000 -- General and administrative expenses 17,201 878 -------- -------- 18,201 878 -------- -------- INCOME (LOSS) BEFORE DEPRECIATION (18,201) 49,122 Depreciation 630 1,048 -------- -------- NET (LOSS) INCOME (18,831) 48,074 -------- -------- OTHER COMPREHENSIVE INCOME Unrelated loss on securities Available for sale (25,200) -- -------- -------- COMPREHENSIVE (LOSS) INCOME $(44,031) $(48,074) ======== ======== 15
HACKETT MEDIA, INC. (a Development Stage Company) STATEMENTS OF CASH FLOW (Unaudited) Three months ended March 31, 2001 2000 -------- -------- OPERATING ACTIVITIES Net (loss) income $(18,831) $ 48,074 Adjustments to reconcile net (loss) income to cash (used to) provided by operating activities Depreciation 630 1,048 Changes in assets and liabilities Inventories -- (877) Accounts payable -- (5,653) -------- -------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (18,201) 42,592 -------- -------- FINANCING ACTIVITIES Payments on loans payable (27,075) (20,481) Borrowings from stockholder 62,578 -- -------- -------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 35,503 (20,481) -------- -------- INCREASE IN CASH 17,302 22,111 CASH, beginning 888 4,043 -------- -------- CASH, end $ 18,190 $ 26,154 ======== ========
16 HACKETT MEDIA, INC. (a Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) Three Months Ended March 31, 2001 and 2000 NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The Company is a financial services aggregator and e-commerce solutions provider. Prior to December 31, 2000, the Company was also in the business of selling vintage furniture and fixtures. Subsequent to December 30, 2000, the enterprise became a development stage company engaged in the business described above. Future financial statements of the Company (see Note E) will be presented in accordance with Statement of Financial Accounting Standards No. 7 Accounting and Reporting by Development Stage Company. Revenue Recognition The Company recognizes revenue in accordance with Statement of Position 97-2 and SAB 101, Software Revenue Recognition, which states that revenue is recognized after delivery and installation of the product. Annual maintenance or service income is recognized ratably over the term of the contract, generally one year. Property and equipment Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Accelerated methods are used for both book and tax purposes. Machinery and Equipment 3 - 5 years Office furniture and fixtures 5 - 7 years Inventory Inventories consist of antique furniture and are valued at the lower of cost or market. Cost is determined by the specific identification method. Investments in Equity Securities All equity securities are classified as available-for-sale. These securities have been adjusted to their fair market value based upon quoted market prices. Unrealized holding gains and losses are reported as a separate component of Stockholder's equity. Unrealized holding losses amounted to $25,200 and $0 as of March 31, 2001 and 2000, respectively. Investments consist of 15,000 shares of common stock of Ensurge, Inc., a company affiliated through common ownership (See also Note 3 below). Income taxes - S corporation status The Company, with the consent of its stockholder, elected to be an S corporation for federal income tax purposes. In lieu of corporation income taxes, the stockholder of an S corporation is taxed on his proportionate share of the Company's taxable income. Therefore, no provision or liability for federal or state income taxes has been included in the financial statements. 17 HACKETT MEDIA, INC. NOTES TO FINANCIAL STATEMENTS-CONTINUED (Unaudited) Three Months Ended March 31, 2001 and 2000 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Advertising Costs Advertising and promotion costs are expensed as incurred. Advertising costs charged against income for the three months ended March 31, 2001 and 2000 were $1,000 and $0, respectively. NOTE 2 -- INVENTORY The inventories consist of the following: 2001 2000 ---- ---- Antique furniture and fixtures -- 10,909 NOTE 3 - RELATED PARTY TRANSACTIONS Note payable to shareholder represents the balance due for advances made to the company. The balance within the note payable account as of March 31, 2001 and 2000 was $299,915 and $276,866, respectively. There is no formal maturity date and no interest associated with the note. The company's shareholder is also the shareholder of an affiliated company, JCL Holdings, Inc (JCL). On December 30, 2000, Hackett Media sold its inventory to JCL for 15,000 shares of Ensurge, Inc. common stock at a fair market value of $1.75 per share. The Company recorded the shares at a fair market value $26,250. The inventory of $11,448 was transferred to the related party at cost. The difference of $14,802 was recorded as contributed capital. The Company provided consulting services for an affiliated company during 2000, Ensurge, Inc. The consulting fees earned for the three months ended March 31, 2000 totaled $50,000. NOTE 4 -- SUBSEQUENT EVENTS Hackett Media, Inc. agreed to be acquired by Innovative Software Technologies (Innovative) on April 16, 2001 for 13,077,954 shares of Innovative's common stock. Innovative Software Technologies, a global software company, is a leader in server based content delivery and on-line product distribution and plans to integrate Hackett Media's expertise as a financial services aggregator and e-commerce solutions provider. This transaction will be accounted for as a purchase under Accounting Principles Board Opinion No. 16, Business Combinations. 18 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE THREE MONTHS ENDED MARCH 31, 2001 The following unaudited pro forma consolidated statements of operations for the year ended December 31, 2000 and the three months ended March 31, 2001 give effect to (i) the acquisition on April 16, 2001 of all the outstanding common stock of Hackett Media, Inc. in exchange for 13,077,954 shares of Innovative Software Technologies, Inc. common stock. The following unaudited pro forma consolidated statement of operations for the year ended December 31, 2000 and the three months ended March 31, 2001 gives effect to the aforementioned transactions as if the transactions had occurred on January 1, 2000. The following unaudited pro forma financial data may not be indicative of what the results of operations or financial position of Innovative Software Technologies, Inc. would have been, had the transactions to which such data gives effect been completed on the date assumed, nor are such data necessarily indicative of the results of operations or financial position of Innovative Software Technologies, Inc. that may exist in the future. The following unaudited pro forma information should be read in conjunction with the notes thereto, the other pro forma financial statements and notes thereto, and the consolidated financial statements and notes of Innovative Software Solutions, Inc. as of December 31, 2000 and for each of the two years in the period then ended appearing in the Company's Form 10-KSB and the historical financial statements of Hackett Media, Inc. appearing elsewhere in this filing. 19
HACKETT MEDIA, INC. (a Development Stage Company) UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 2000 Innovative Hackett Software Media, Tech. Pro Forma Pro Forma Inc. Inc. Adjustments Consolidated ----------- ----------- ----------- ----------- Net sales $ 52,356 $ -- $ -- $ 52,356 Cost of sales 1,596 -- -- 1,596 ----------- ----------- ----------- ----------- Selling, general and administrative 14,110 -- -- 14,110 ----------- ----------- ----------- ----------- Operating income 36,650 -- -- 36,650 ----------- ----------- ----------- ----------- Other income (expense): Interest expense, net -- -- -- -- Other income -- -- -- -- ----------- ----------- ----------- ----------- Income from operations before income tax expense 36,650 -- -- 36,650 Income tax expense -- -- -- (2) -- ----------- ----------- ----------- ----------- Net income $ 36,650 $ -- $ -- $ 36,650 =========== =========== =========== =========== Net income per common share: -- -- -- $ -- (1) =========== =========== =========== =========== Weighted average number of common shares outstanding -- -- -- 14,531,071 =========== =========== =========== ===========
20
HACKETT MEDIA, INC. (a Development Stage Company) UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Three Months Ended March 31, 2001 Innovative Hackett Software Media, Tech. Pro Forma Pro Forma Inc. Inc. Adjustments Consolidated ----------- ----------- ----------- ----------- Net sales $ -- $ -- $ -- $ -- Cost of sales -- -- -- -- Selling, general and administrative 18,831 417 -- (19,248) Operating (loss) income (18,831) (417) -- (19,248) Other income (expense): Interest expense, net -- -- -- -- Other income -- -- -- -- (Loss) from operations before income tax expense (18,831) (417) -- (19,248) Income tax expense -- -- -- (2) -- Loss income $ (18,831) $ (417) $ -- $ (19,248) Net income per common share: -- -- -- $ -- (1) =========== =========== =========== =========== Weighted average number of common shares outstanding -- -- -- 14,531,071 =========== =========== =========== ===========
21 Notes to Unaudited Pro Forma Consolidated Statement of Operations Adjustments The Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2000 has been adjusted to reflect the following: (1) For purpose of determining pro forma earnings per share, the issuance of 13,077,954 shares of unregistered shares of common stock to affect the acquisition of Hackett Media, Inc. was assumed to be outstanding from January 1, 2000 by Innovative Software Technologies, Inc. (2) The Company's pro forma tax provision reflects an effective tax rate of 40% considering federal and state income taxes and the effect of certain non-deductible costs principally related to acquisitions consummated; offset by the pro-forma utilization of available net operating loss carryforwards. 22 The Unaudited Pro Forma Consolidated Statement of Operations for the Three Months Ended March 31, 2001 has been adjusted to reflect the following: (1) For purpose of determining pro forma earnings per share, the issuance of 13,077,954 shares of unregistered shares of common stock to affect the acquisition of Hackett Media, Inc. was assumed to be outstanding from January 1, 2000 by Innovative Software Technologies, Inc. (2) The Company's pro forma tax provision reflects an effective tax rate of 40% considering federal and state income taxes and the effect of certain non-deductible costs principally related to acquisitions consummated; offset by the pro-forma utilization of available net operating loss carryforwards. 23
HACKETT MEDIA, INC. (a Development Stage Company) UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET March 31, 2001 Innovative Hackett Software Media, Tech. Pro Forma Pro Forma Inc. Inc. Adjustments Consolidated --------- --------- --------- --------- ASSETS ------ Current assets: Cash $18,190 -- -- $18,190 Marketable Securities 1,050 -- -- 1.050 --------- --------- --------- --------- Total current assets 19,240 -- -- 19,240 --------- --------- --------- --------- Property and equipment, net 6,114 -- -- 6,114 --------- --------- --------- --------- Total Assets $25,354 $ -- $ -- $25,354 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities Notes payable $ 299,915 $ -- $ -- $ 299,915 --------- --------- --------- --------- Total current liabilities 299,915 -- -- 299,915 --------- --------- --------- --------- Total liabilities 299,915 -- -- 299,915 --------- --------- --------- --------- Commitments and contingencies Stockholders' equity: Common stock 1 484 (1) 4,359 -- -- 3,875 (1) (1) -- Additional paid-in capital 45,801 17,826 (3,874) (1) 59,753 Unrealized loss on available for sale Securities (25,200) -- -- (25,200) Accumulated deficit (295,163) -- -- (295,163) Deficit accumulated during Development Stage -- (18,310) -- (18,310) --------- --------- --------- --------- Total stockholders' equity (274,561) -- -- (274,561) --------- --------- --------- --------- Total liabilities and stockholders' equity $ 25,354 $ -- $ -- $ 25,354 ========= ========= ========= =========
24 Notes to Unaudited Pro Forma Consolidated Balance Sheet Adjustments The unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2001 has been adjusted to reflect the following: (1) On April 16, 2001, Innovative Software Technologies, Inc. ("Innovative") a non-operating public company with common shares outstanding and immaterial net assets, acquired 100% of the outstanding common stock of Hackett Media, Inc. ("Hackett") (the "Acquisition"). The Acquisition resulted in the owners and management of Hackett having effective operating control of the combined entity after the Acquisition, with the existing Innovative investors continuing as only passive investors. Under accounting principles generally accepted in the United States, the Acquisition is considered to be a capital transaction in substance, rather than a business combination. That is, the Acquisition is equivalent to the issuance of stock by Hackett for the net monetary assets of Innovative, accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the Acquisition is identical to that resulting from a reverse acquisition, except that no goodwill or intangible asset is recorded. Under reverse takeover accounting, the post reverse-acquisition comparative historical financial statements of the "legal acquirer" (Innovative Software Technologies), are those of the "legal acquiree" (Hackett) (i.e. the accounting acquirer). Under the terms of the Agreement, all of the outstanding common shares, $0.01 par value, of Hackett was converted into 13,077,954 common shares of Innovative Software Technology, Inc.'s common stock, $0.0003 par value. The common stock exchanged, in addition to the existing Innovative Software Technology, Inc. shares outstanding, collectively resulted in the recapitalization of the Company. The accompanying unaudited pro-forma consolidated financial statements gives effect to this consummated acquisition as if it had occurred on January 1, 2000. 25 EXHIBIT INDEX Exhibit No. 2.1 Share Exchange Agreement Exhibit No. 16 Previous auditor's agreement with Innovative's included financial statements 26 EX-2.1 2 exhibit2no1.txt Exhibit 2.1 SHARE EXCHANGE AGREEMENT THIS SHARE EXCHANGE AGREEMENT (the "Agreement") is entered into and effective as of April 16, 2001 by and between Shane Hackett as the authorized representative of the shareholders of Hackett Media Inc. a Florida corporation (H.M.I.) who are parties to this Agreement (collectively the "SHAREHOLDERS"), and whose name is set forth in the attached Schedule "A", Hackett and Innovative Software Technologies, a California corporation ("the Company"). 1. RECITALS This Agreement is entered into with reference to and in contemplation of the following facts, circumstances and representations: 1.1. The SHAREHOLDERS are the owners of all of the ownership or membership interests in (the "H.M.I. Shares"). 1.2. The company desires to issue a total of 13,077,954 shares of its common stock (the "Company Shares") to the SHAREHOLDERS in exchange for the H.M.I. Shares. 1.3. The SHAREHOLDERS desire to exchange the H.M.I. Shares for the Shares in accordance with the terms and conditions of the Agreement. 1.4. H.M.I. desires that this transaction be consummated. 2. EXCHANGE AND ISSUANCE OF SHARES 2.1. Exchange of the Shares: The Company shall exchange and deliver to the SHAREHOLDERS, a total of 13,077,954 restricted shares of the Company common stock in accordance with the allocation set forth in the attached Schedule "A". 2.2. Exchange of H.M.I. Shares: At the closing, the SHAREHOLDERS shall exchange and deliver to the Company the 1,000 H.M.I. Shares which represent all of the ownership interests in H.M.I. 2.3. Nature of the Shares: The SHAREHOLDERS shall be issued the Company Shares, which unless otherwise contractually restricted, shall be subject to a one (1) year holding period before the Company Shares are eligible for sale in the U.S. public market. The sale of the Company Shares will be further limited by the resale provisions of SEC Rule 144. 2.4. Restricted nature of the Company Shares: Notwithstanding the one (1) year holding period for the Company Shares, a SHAREHOLDER who becomes an "affiliate" or "control person" of the Company will be subject to certain limitations with respect to the sale of it's the Company shares. Accordingly, as a result of such a designation, the sale of the Company Shares will be limited by SEC Rule 144. 2.5. Private Sale Acknowledgment: The parties acknowledge and agree that the exchange and issuance of the Company Shares is being undertaken as a private sale pursuant to Section 4 (2) of the Securities Act of 1933, as amended and is not being transacted via a broker-dealer and/or in the public market place. 2.6. Status of Present Share ownership and Contemplated Share Issuance by the Company: The parties hereto acknowledge and agree that the Company will issue the 13,077,954 Company Shares. Accordingly and upon the Closing of the share exchange contemplation by this Agreement, that the following will be resulting share ownership of the Company: Name No Shares %Ownership Original Company Shareholders 1,453,106 10% H.M.I. Shareholders 13,077,954 90% Totals 14,531,060 100% 1 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The COMPANY represents and warrants to the SHAREHOLDERS and H.M.I. as follows: 3.1. Organization: The Company is a corporation duly incorporated and validly existing under the laws of the State of California and is in good standing with respect to all of its regulatory filings. 3.2. Capitalization: The authorized capital of the Company consists of 20,000,000 common shares with a no par value with the exception of the common shares described in Paragraph 2.6, no common shares will have been validly authorized and issued by the COMPANY prior to the Closing of the contemplated share exchange. 3.3. Financial Statements: The Company has furnished to the SHAREHOLDERS and H.M.I. unaudited financial statements for the period ending 31 December 2000. That at the Closing the financial affairs of the Company will be materially the same as represented in the financial statements for the period ending 31 December 2000. 3.4. Books and Records: All material transactions of the Company have been promptly and properly recorded or filed in or with its books and records and the Minute Book of the Company contains records of all meetings and proceedings of the shareholders and directors thereof. 3.5. Legal Compliance: To the best of its knowledge, the Company is not in breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which the Company is subject or which apply to it or any of its assets. 3.6. Tax Returns: All tax returns and reports of the Company required by law to be filled prior to the date hereof have been filed and are substantially true, complete and correct and all taxes and governmental charges have been paid. 3.7. Adverse Financial Events: The Company has not experienced nor is it aware of any occurrence or event, which has had or might reasonably be expected to have a material adverse effect on its financial condition. 3.8. Disputes, Claims and Investigations: there are no disputes, claims, actions, suits, judgements, investigations or proceedings outstanding or pending or to the knowledge of the Company threatened against or affecting the Company at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau or agency. 3.9. Employee Liabilities: The Company has no known liability to former employees or any liability to any governmental authorities with respect to current or former employees. 3.10. Conflicts or Agreement Violations: the execution, delivery and performance of this Agreement will not conflict with or be in violation of the articles or by-laws of the Company or of any agreement to which the Company is party and will not give any person or company a right to terminate or cancel any agreement or right enjoyed by the Company and will not result in the creation or imposition of any lien, encumbrance or restriction of any nature whatsoever in favor of a third party upon or against the assets of he Company. 3.11. Validly Issued and Authorized the Company Shares: That the Shares will be validly authorized and issued by the Company, they will be fully paid and non-assessable and they will be issued in full compliance with all federal and state securities laws. 3.12. Restrictive Legend: That the Company Shares will have a restrictive legend imposed thereon identifying them as "Restricted Shares" which are subject to the conditions and limitations of SEC Rule 144 with respect to their sale in the U.S. public market place. 3.13. Validly Issued and Authorized Outstanding Shares of The Company: That all of the issued and outstanding common shares of the Company are validly issued, authorized and issued, fully paid, and non-assessable, and that the outstanding shares have been so issued in full compliance with all federal and state securities laws. 3.14. Corporate Authority: The officers or representatives of the Company executing this Agreement represent that they have been authorized to execute this Agreement pursuant to a resolution of the Board of Directors of the Company. 2 4. REPRESENTATIONS OF SHAREHOLDERS AND H.M.I. The Shareholders and H.M.I. collectively and individually hereby represent and warrant to the Company as follows: 4.1. Share Ownership: That the SHAREHOLDERS are the owners, beneficially and of record, of 1,000 H.M.I. Shares and said shares are free and clear of all liens, encumbrances, claims, charges and restrictions. 4.2. Transferability of H.M.I. Shares: That the SHAREHOLDERS have full power to transfer the H.M.I. Shares to the Company without obtaining the consent or approval of any other person or governmental authority. 4.3. Validly Issued and Authorized Shares: That the H.M.I. Shares are validly authorized and issued, fully paid, and nonassessable, and the H.M.I. Shares have been so issued in full compliance with all securities laws of the State of Florida. 4.4. Organization: H.M.I. is a corporation duly incorporated and validly existing under the laws of the State of Florida and is in good standing with respect to all of its regulatory filings. 4.5. Capitalization: That the H.M.I. Shares represent one hundred percent (100%) of the ownership or membership interest in H.M.I. and that such interest were validly issued and are fully paid on non-assessable interest. 4.6. Financial Statements: H.M.I. will furnished to H.M.I. the company audited financial statements for the three 3 year period ending December 31, 2000. That at the closing the financial affairs of H.M.I. will be materially the same as represented in these same financial statements. 4.7. Books and Records: All material transactions of H.M.I. have been promptly and properly recorded or filed in or with its books and records and the Minute Book of H.M.I. contains records of all meetings and proceedings of the members and directors thereof. 4.8. Legal Compliance: H.M.I. is not in breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which H.M.I. is subject or which apply to it or any of its assets. 4.9. Tax Returns: All tax returns and reports of H.M.I. required by law to be filed prior to the date hereof have been filed and are true, complete and correct and all taxes and governmental charges have been paid. 4.10. Adverse Financial Events: H.M.I. has not experienced nor is it aware of any occurrence or event which had or might reasonably be expected to have a material adverse effect on its financial condition. 4.11. Disputes, Claims and Investigations: There are no disputes, claims, actions, suits judgements, investigations or proceedings outstanding or pending or to the knowledge of H.M.I. threatened against or affecting H.M.I. at law or in equity or before or by any federal, municipal or other governmental department, commission, board, bureau or agency. 4.12. Employee Liabilities: H.M.I. has no liability to former employees or any liability to any government authorities with respect to current or former employees. 4.13. No Conflicts or Agreement Violations: The execution, delivery and performance of this Agreement will not conflict with or be in violation of the Articles of Incorporation of H.M.I. or of any agreement to which H.M.I. is a party and will not give any person or company a right to terminate or cancel any agreement or right enjoyed by H.M.I. and will not result in the creation or imposition of any lien, encumbrance or restriction of any nature whatsoever in favor of a third party upon or against the assets of H.M.I. 4.15. No Liens: That H.M.I. has not received a notice of any assignment, lien, encumbrance, claim or charge against the H.M.I. shares. 4.16. Corporate Authority: The officers or representatives of H.M.I. executing this agreement represent that they have been authorized to execute this Agreement pursuant to a resolution of the Board of Directors of H.M.I. 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS ALONE The SHAREHOLDERS alone further represent and warrant to the Company as follows with respect to the Company Shares: 5.1 Financially Responsible: That they are financially responsible, able to meet their obligations and acknowledge that this investment will be speculative. 3 5.1. Investment Experience: That they have had experience in the business of investments in one or more of the following: (i) investment experience with securities such as stocks and bonds; (ii) ownership of interest in partnerships, new ventures and start-up companies; (iii) experience in business and financial dealings; and that they can protect their own interest in an investment of this nature and they do not have an "Investor Representative", as that term is defined in Regulation D of the Securities Act of 1933 and do not need such and Investor Representative. 5.2. Investment Risk: That they are capable of bearing the high degree of economic risks and burdens of this investment, including but not limited to the possibility of complete loss of all their investment capital and the lack of a liquid market, such that they may not be able to liquidate readily the investment whenever desired or at the then current asking price. 5.3. Access to Information: That they have had access to the information regarding the financial condition of the Company and they were able to request copies of such information, ask questions of and receive answers from the Company regarding such information and any other information he desires concerning the Company shares, and all such questions have been answered to his full satisfaction. 5.4. Private Transaction: That at no time was he presented with or solicited by any leaflet, public promotional meeting, circular, newspaper or magazine article, radio or television advertisement or any other form of general advertising 5.5. Investment Intent: The Company Shares are not being purchased with a view to or for the resale or distribution thereof and they have no present plans to enter into any contract, undertaking, agreement or arrangement for such resale or distribution. 5.6. Due Diligence: That the SHAREHOLDERS shall have completed a due diligence review of the affairs of the Company and are satisfied with the results. 6. CLOSING, ESCROW HOLDER AND CONDITIONS TO CLOSING 6.1. Exchange Closing: The closing of the share exchange as contemplated by this Agreement (the "Closing") shall take place in Los Angeles, California, at such time and place as may be agreed among by the parties, but in no event later than April 15, 2001, unless otherwise extended in writing by the parties. The parties appoint J.A. Davies as the Escrow holder. 6.2. Closing: Prior to the Closing the following will be required: 1. Delivery of H.M.I. Shares: The SHAREHOLDERS shall deliver to the Escrow Holder the certificate or certificates representing the H.M.I. Shares registered in the name of the SHAREHOLDERS duly endorsed for transfer accompanied by duly executed assignments of the H.M.I. Shares to the Company. 2. Delivery of the Company Shares: The Company shall deliver to the Escrow Holder a total of 13,077,954 of the Company Shares registered in the names of the SHAREHOLDERS as set forth in Schedule "A." 3. Delivery of Certificates of Good Standing: Each party shall deliver to the Escrow Holder a current Certificate of Good Standing issued by the Florida Secretary of State and California Secretary of State. 4. Requisite Corporate Resolutions: Each party shall deliver to the Escrow Holder certified copies of resolutions for their respective Boards of Directors authorizing the subject transaction. 5. Satisfactory Completion of Due Diligence: Each party shall deliver to the Escrow holder written notice that is has completed its due diligence investigation and is satisfied with the results of such investigation. 6. Documents: Both parties shall deliver to the Escrow Holder such other documents as are required by the terms and conditions of the Agreement. 7. Appointment of Directors: The Company shall deliver to the Escrow Holder certified resolutions of the The Company Board of Directors for the following actions (1) the appointment of Shane Hackett as the President of the Company; and (2) the appointment of Shawn M. Thomas as Secretary of the Company. a. Close of Transaction: The subject transaction shall `close' upon the satisfaction of the above conditions. 4 b. Notices: All notices given pursuant to the Agreement must be in writing and may be given by (1) personal delivery, or (2) registered or certified mail, return receipt requested, or (3) via facsimile transmission to the Escrow Holder and the parties as set forth below. Any party hereto may by notice so given change its address for any future notices: ESCROW HOLDER J.A. DAVIES Suite 151 9114 Adams Avenue Huntington Beach CA 92646 SHAREHOLDERS SHANE HACKETT AND H.M.I. 1900 Alaqua Drive Longwood, FL. 32779 The Company 1900 Alaqua Drive Longwood, FL. 32779 7. COOPERATION,ARBITRATION, INTERPRETATION, MODIFICATION AND ATTORNEY FEES 7.1 Cooperation of parties: The parties further agree that they will do all things necessary to accomplish and facilitate the purpose of this Agreement and that they will sign and execute any and all documents necessary to bring about and perfect the purposes of this Agreement. 7.2 Arbitration: The parties hereby submit all controversies, claims and matters of difference arising out of this Agreement to arbitration in Los Angeles, California according to the rules and practices of the American Arbitration Association from time to time in force. The submission and agreement to arbitrate shall be specifically enforceable. The Agreement shall, further be governed by the laws of the State of California. 7.3 Interpretation of Agreement: The Parties agree that should any provision of this Agreement be found to be ambiguous in any way, such ambiguity shall not be resolved by construing such provisions or any part of or the entire Agreement in favour of or against any party herein, but rather by construing the terms of the Agreement fairly and reasonably in accordance with their generally accepted meaning. 7.4 Modification of Agreement: This Agreement may be amended or modified in any way at any time by an instrument in writing stating the manner in which it is amended or modified and signed by each of the parties hereto. Any such writing amending or modifying this Agreement shall be attached to and kept with this Agreement. 7.5 Attorney Fees: If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of the Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled. 7.6 Entire Agreement: This Agreement constitutes the entire Agreement and understanding of the parties hereto with respect to the matters herein set forth, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement are merged herein and are superseded and canceled by this Agreement. 7.7 Counterparts: This Agreement may be signed in one or more counterparts. 7.8 Facsimile Transmission Signatures: A signature received pursuant to a facsimile transmission shall be sufficient to bind a party to this Agreement. 5 SHAREHOLDERS OF THE COMPANY Dated: __________________ BY: _______________________ ------------------------------- Their Authorized Representative HACKETT MEDIA INC Date: __________________ BY: _______________________ SHANE HACKETT PRESIDENT as Representative of the H.M.I. Shareholders. ESCROW AGENT Date: ___________________ BY: _______________________ J.A. DAVIES 6 EX-16 3 exhibit16.txt Exhibit 16 13 June 2001 RE: Innovative Software Technology (I.S.O.F) 8K Filing 16th April 2001 To Whom It May Concern: Please accept this letter as my approval of the figures listed in Innovative Software Technology 8K filing of 16 April 2001. The figures contained in this filing are the audited statement of operations for year end December 31, 2000 and the un audited statement of operations and balance sheet for three months ended 31 March 2001. Should any party require further confirmation on this matter please do not hesitate to contact me. Yours sincerely, /s/ Roger Castro ------------ Roger Castro C.P.A. -----END PRIVACY-ENHANCED MESSAGE-----