10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-QSB

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2007

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

Commission File Number: 000-1084047

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(Exact name of small business issuer as specified in its charter)

California (State or Other Jurisdiction of Incorporation or Organization)	95-4691878 (I.R.S. Employer Identification No.)
911 Ranch Road 620 N, Ste. 204, Austin, TX (Address of Principal Executive Offices)	78734 (Zip Code)
(512) 266-2000 (Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:  None
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.001 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o  No x

There were 75,511,841 shares of common stock, $0.001 par value, outstanding as of August 14, 2007.

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

FORM 10-QSB

QUARTER ENDED JUNE 30, 2007

TABLE OF CONTENTS

		Page Number
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheet as of June 30, 2007 (unaudited)	1
	Consolidated Statements of Operations for the three months Ended June 30, 2007 and 2006 and for the period from inception (January 12, 2005) through June 30, 2007 (unaudited)	2
	Consolidated Statements of Cash Flows for the three months Ended June 30, 2007 and 2006 and for the period from inception (January 12, 2005) through June 30, 2007 (unaudited)	3
	Notes to Consolidated Financial Statements (unaudited)	4
Item 2.	Management's Discussion and Analysis or Plan of Operation	13
Item 3.	Controls and Procedures	16
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
Item 5.	Other Information	18
Item 6.	Exhibits	18
SIGNATURES		19

PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

June 30, 2007

(UNAUDITED)

ASSETS
CURRENT ASSETS
Cash	$	156,811
Accounts receivable		19,405
Prepaid expenses and other current assets		2,195
Total current assets		178,411
PROPERTY AND EQUIPMENT, NET		173,979
DEFERRED FINANCING COSTS		114,389
DEPOSITS		15,700
Total assets	$	482,479
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	834,409
Accrued officer salary and expenses		60,500
Deferred gain on sale of fixed assets		10,633
Current portion of capital lease obligation		46,399
Convertible notes and debentures		1,187,865
Derivative financial instruments		1,319,573
Total current liabilities		3,459,379
CAPITAL LEASE OBLIGATION		38,431
Total liabilities		3,497,810
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ (DEFICIT)
Preferred stock, 25,000,000 shares authorized, $1.00 stated value
Series A, 1,500,000 shares authorized, 450,000 shares outstanding		450,000
Common stock - authorized, 300,000,000 shares of $0.001 par
value; issued and outstanding, 73,174,979 shares		73,175
Additional paid-in capital		(181,941	)
Deficit accumulated during the development stage		(3,356,564	)
Total stockholders' (deficit)		(3,015,331	)
Total liabilities and stockholders' (deficit)	$	482,479

See accompanying notes.

1

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

							Since Inception
	For the Three Months						(January 12, 2005)
	Ended June 30,						Through
							June 30,
	2007			2006			2007
REVENUE
High availability	$	31,645		$	-		$	148,463
Business continuity		495			1,572			8,252
REVENUE		32,140			1,572			156,715
COST OF REVENUE
High availability		21,712			12,711			107,468
Business continuity		-			250			-
COST OF REVENUE		21,712			12,961			107,468
GROSS PROFIT		10,428			(11,389	)		49,247
OPERATING EXPENSES
General and administrative		330,500			182,318			2,804,460
Commissions and other selling expenses		-			-			12,500
Total operating expenses		330,500			182,318			2,816,960
(LOSS) FROM OPERATIONS		(320,071	)		(193,706	)		(2,767,713	)
OTHER INCOME (EXPENSE) NET
Other income (expense)		(1,790	)		5,330			48,147
Derivative (expense)		620,163			-			518,485
Interest (expense)		(245,877	)		(2,680	)		(1,162,909	)
Interest income, deposits		2,263			44			7,425
OTHER INCOME (EXPENSE) NET		374,759			2,694			(588,851	)
INCOME (LOSS) BEFORE INCOME TAXES		54,688			(191,012	)		(3,356,564	)
INCOME TAXES		-			-			-
NET INCOME (LOSS)	$	54,688		$	(191,012	)	$	(3,356,564	)
UNDECLARED PREFERRED STOCK DIVIDENDS		(4,500	)		-			(18,000	)
INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS	$	50,188		$	(191,012	)	$	(3,374,564	)
BASIC AND DILUTED (LOSS) PER COMMON SHARE	$	0.00		$	0.00
WEIGHTED AVERAGE NUMBER OF COMMON SHARES USED IN BASIC PER SHARE CULATION		72,846,566			56,067,036
WEIGHTED AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED PER SHARE CULATION		106,139,423			56,067,036

See accompanying notes.

2

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended June 30,						Since Inception (January 12, 2005)Through June 30,
	2007			2006*			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	54,688		$	(191,012	)	$	(3,356,564	)
Adjustments to reconcile net (loss) to
net cash flows from operating activities
Depreciation and amortization		2,115			5,877			47,958
Stock and options based compensation		-			-			655,883
Notes payable issued for expenses paid by affiliates and third parties		-			-			258,605
Services paid in stock		22,989			-			119,821
Amortization of convertible debt discount		146,676			-			883,031
Derivative loss (income)		(620,163	)		-			(518,485	)
Amortization of deferred financing costs		21,833			-			117,810
Net change in operating assets and liabilities
Accounts receivable		(10,410	)		(939	)		(19,405	)
Prepaid expenses and other current assets		4,950			(15,749	)		8,605
Deposits		19,557			33,909			(14,700	)
Accounts payable and accrued expenses		101,874			(11,881	)		78,378
Net cash flows from operating activities		(255,891	)		(179,796	)		(1,739,063	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(19,260	)		(37,573	)		(192,587	)
Proceeds from sale lease-back of property and equipment		-			-			125,000
Increase in deferred financing costs		-			-			(156,200	)
Net cash flows from investing activities		(19,260	)		(37,573	)		(223,787	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		-			346,343			427,969
Repayments of notes payable		-			-			(30,000	)
Principal payments under capital lease		(8,686	)		-			(13,957	)
Proceeds from convertible debt		-			-			1,663,500
Stock issued for cash		-			-			21,000
Cash acquired in the reverse acquisition of Innovative		-			51,149			51,149
Net cash flows from financing activities		(8,686	)		397,492			2,119,661
-
NET INCREASE (DECREASE) IN CASH		(283,837	)		180,123			156,811
CASH AT BEGINNING OF PERIOD		440,648			6,270			-
CASH AT END OF PERIOD	$	156,811		$	186,393		$	156,811

* Reclassified to conform to the 2007 presentation.

See accompanying notes.

3

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1)Basis of Presentation and Reporting

The accompanying unaudited consolidated financial statements have been prepared in accordance accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not contain all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial condition as of June 30, 2007, and the results of its operations for the three months ended June 30, 2007, and June 30, 2006, and the cash flows for the three months ended June 30, 2007, and June 31, 2006. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited 2007 consolidated financial statements, including the notes thereto, and the other information set forth therein, included in the Company's Annual Report on Form 10-KSB for the year ended March 31, 2007. Operating results for the three-month period ended June 30, 2007, are not necessarily indicative of the operating results that may be expected for the year ending March 31, 2008.

On June 26, 2006, Innovative Software Technologies, Inc., a California corporation (“Innovative”), completed the acquisition of AcXess, Inc., a Florida corporation (“AcXess”), in a stock exchange transaction (the “Transaction”) pursuant to a Stock Exchange Agreement by and between Innovative, AcXess, the Shareholders of AcXess, and Anthony F. Zalenski, acting as the Shareholder’s Agent (the “Exchange Agreement”). As a result of the Transaction, AcXess became a wholly owned subsidiary of Innovative. Following FAS 141, as governing and operating control of the combined entity was under Mr. Zalenski, AcXess is deemed to be the purchaser in the Transaction for financial reporting purposes. Therefore, reverse acquisition accounting applies whereby AcXess is deemed to have issued its common stock for the net assets or liabilities of Innovative accompanied by a recapitalization of AcXess. For accounting purposes, AcXess is treated as the continuing reporting entity. The fiscal year end of AcXess is March 31.

The accompanying unaudited consolidated financial statements present the accounts of Innovative and its wholly owned subsidiaries, AcXess, Inc., and EPMG, Inc. (collectively, the “Company”). All intercompany balances and significant transactions have been eliminated.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has incurred a loss of $3,356,564 from inception (January 12, 2005) through June 30, 2007, and has a working capital deficiency and stockholder deficit of $3,280,968 and $3,015,331, respectively, at June 30, 2007. The Company currently has minimal revenue generating operations and expects to incur substantial operating expenses in order to expand its business. As a result, the Company expects to incur operating losses for the foreseeable future. In addition, the Company is in default on its convertible notes and through June 25, 2007, incurred liquidated damages of approximately $62,000 in connection with its convertible debentures (see Note 6). The accompanying financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

Management intends to continue to finance operations through fundraising activities as well as to seek potential acquisitions that have positive cash flows; however, there can be no assurance of successful fundraising or acquisition activity in the future.

(2)Earnings Per Share

The Company calculates net income (loss) per share as required by Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding during periods when anti-dilutive common stock equivalents are not considered in the computation.

4

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(3)Deferred Financing Costs

The Company capitalizes financing costs as incurred and amortizes these costs to interest expense over the life of the underlying instruments.

(4)Stockholders’ (Deficit)

The shares of stock issued in the following transactions were valued at the closing market price on the date of issue.

On June 5, 2007, the Company issued 459,778 shares of its common stock with a fair market value of $22,989 for legal expenses.

(5)Commitments, Concentrations and Contingencies

(a)Leases:

In February 2007 the Company entered into a $500,000 Master Lease Line for Equipment Purchases (the “Master Lease Agreement”). At that time, the Company sold property and equipment for $125,000 and leased them back under the Master Lease Agreement. The Company recognized a gain on the sale of those assets of $10,633 which was deferred and will be recognized over the 24 month term of the lease.

The Master Lease Agreement calls for draws of a minimum of $100,000, a minimum term of 18 months and a maximum term of 36 months, and leasing factors based on term as follows:

18 Months - 0.06476

24 Months - 0.05090

30 Months - 0.04263

36 Months - 0.03716

The lease entered into in February 2007 has a lease factor of 0.0509 resulting in monthly payments of $6,363. The Company accounted for this lease as a capital lease.

In connection with the Master Lease Agreement, the Company agreed to issue five year warrants to the lender to purchase 1,350,000 shares of the Company’s common stock at an exercise price of $0.18 per share. Ten percent (135,000) of the warrants vested upon execution of the Master Lease Agreement. The remaining 90% of the warrants vest as on a pro rata basis as the lender provides funding under the Master Lease Agreement. As such 303,750 warrants vested upon execution of the sale lease-back described above. The total number of warrants, 438,750, was valued using the Black-Scholes method and applied to the capital lease obligation in accordance with APB 14. This resulted in a decrease in capital lease obligation of $37,726 and a corresponding increase in additional paid-in capital.

Rent expense under all operating leases for the three month periods ended June 30, 2007, and 2006, was $17,550 and $25,050 respectively. As of July 1, 2007, our principal executive offices are located at 911 Ranch Road 620 North, Austin, Texas 78734. This office consists of approximately 340 square feet which we rent for $900 per month. The term of the lease is month to month with a 60 day notice period.

5

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(b)Litigation:

Kansas City Explorers

The Company is a defendant in a lawsuit in the Circuit Court of Platte County, Missouri, “Kansas City Explorers vs. Innovative Software” Case no. 04CV82050 in which the claimant is seeking money for advertising which it alleges is still due, and have alleged damages of $50,028. The claimant has been court ordered to produce answers to certain discovery requests of the Company which they have failed to produce. Management intends to aggressively defend the claim based upon the lack of contract between the parties, lack of proof of damages, as well as minimal proof of advertising services actually performed for Company products and services, and other legal and equitable defenses.

Bernard F. Mathaisel

On June 14, 2007 the Company was served with a complaint from Bernard F. Mathaisel for breach of contract relating to an alleged consulting agreement with the Company and breach of contract alleging failure to repay a Note due him in the principal amount of $55,000. The Company disputes certain items in the complaint and intends to defend itself.

(6)Convertible Notes and Derivative Instrument Liabilities

Derivative financial instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

The Company reviews the terms of convertible debt and equity instruments issued to determine whether there are embedded derivative instruments, including the embedded conversion option, that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. The Company may also issue options or warrants to non-employees in connection with consulting or other services they provide.

Certain instruments, including convertible debt and equity instruments and the freestanding options and warrants issued in connection with those convertible instruments, may be subject to registration rights agreements, which impose penalties for failure to register the underlying common stock by a defined date. If the convertible debt or equity instruments are not considered to be "conventional", then the existence of the potential cash penalties under the related registration rights agreement requires that the embedded conversion option be accounted for as a derivative instrument liability. Similarly, the potential cash penalties under the related registration rights agreement may require us to account for the freestanding options and warrants as derivative instrument liabilities, rather than as equity. In addition, when the ability to physical or net-share settle the conversion option or the exercise of the freestanding options or warrants is deemed to be not within the control of the Company, the embedded conversion option or freestanding options or warrants may be required to be accounted for as a derivative instrument liability.

Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, the Company uses the Black-Scholes option pricing model to value the derivative instruments.

6

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

When freestanding options or warrants are issued in connection with the issuance of convertible debt or equity instruments and will be accounted for as derivative instrument liabilities (rather than as equity), the total proceeds received are first allocated to the fair value of those freestanding instruments. When the freestanding options or warrants are to be accounted for as equity instruments, the proceeds are allocated between the convertible instrument and those derivative equity instruments, based on their relative fair values. When the convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount.

To the extent that the fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value.

The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income, usually using the effective interest method. When the instrument is convertible preferred stock, the dividends payable are recognized as they accrue and, together with the periodic amortization of the discount, are charged directly to retained earnings.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed periodically, including at the end of each reporting period. If re-classification is required, the fair value of the derivative instrument, as of the determination date, is re-classified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. As of June 30, 2007 $1,319,573 of derivative financial instruments have been classified as current liabilities.

In January 2006 the Board of Directors of the Company approved the raising of up to $1,000,000 via the issuance of promissory notes (the “Notes”) to accredited investors. These notes have a term of six months, an interest rate of 12% per annum, and are convertible into shares of common stock of the Company at a 30% discount to a future Qualified Financing (as therein described). In addition, each of the Notes is issued with warrants to purchase Company common stock at a strike price of $0.05 per share. The number of warrants granted is determined by multiplying the face value of each note issued by four. In October the Board of Directors of the Company approved an increase in the amount to be raised under this financing to $1,500,000. A total of $1,107,500 had been raised as of November 10, 2006, when the Company closed the round. As of June 30, 2007, the Company was in default on all Notes totaling a principal amount of $1,107,500. In the event of a default resulting from the Company's non-payment of principal or interest when due, a holder of the Notes may declare all unpaid principal and accrued interest due and payable immediately. The Company was served a complaint from one investor demanding repayment of $55,000 under one of the Notes (see Note 5). No notice has been received from any other holder of the Notes and the Company is currently in the process of renegotiating the terms of the Notes; however there can be no assurance that such negotiations will be successful.

On December 22, 2006, the Company entered into a securities purchase agreement with an accredited investor (the “Investor”) for the sale of $1,000,000 Convertible Debentures (the “Debentures”). In connection with the Agreement, the Investor received (i) a warrant to purchase 8,928,571 shares of common stock (“Long-Term Warrants”) exercisable at $0.30 and (ii) a warrant to purchase 1,785,714 shares of common stock (“Short Term Warrants”) exercisable at $0.143 per share. The Long Term Warrants and the Short Term Warrants are exercisable for a period four years from the date of issuance and the earlier of (i) December 22, 2007 and (ii) the date a registration statement(s) covering the resale of all Registrable Securities (as defined in the Registration Rights Agreement) is declared effective by the SEC (the “Initial Exercise Date”) and on or prior to the close of business on the four month anniversary of the Initial Exercise Date, respectively. The Company incurred approximately $62,000 in interest expense relating to the Debentures due to the “Liquidating Damages” clause specified in the Purchase Agreement as a registration statement covering the Registrable Securities was declared effective by the SEC on June 25, 2007, 93 days after the agreed upon date in the Purchase Agreement, March 23, 2007.

7

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The default on the Notes discussed above is an “Event of Default” in accordance with the terms of the Debenture and, therefore, the Debenture holder may declare all principal and interest due and payable immediately; however, the Company has received no notice from the Debenture holder demanding such repayment.

The Debentures bear interest at 4% until June 22, 2007 and 9% thereafter, payable in arrears and mature three years from the date of issuance. Accrued interest is payable in cash semi-annually, beginning on July 1, 2007. The Company has not made the interest payment of $21,271 due on July 1, 2007 and intends to negotiate a settlement with the Debenture holder; however there can be no assurance that such negotiation will be successful.

Warrants have been accounted for as derivative instrument liabilities (see below) in accordance with EITF 00-19, "Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In, a Company's Own Common Stock" (“EITF 00-19”). Accordingly, the initial fair values of the warrants, amounting to an aggregate of $82,239 relating to the issuance of the Notes, and $964,286 relating to the issuance of the Debentures, were recorded as a derivative instrument liability. The fair value of the warrants was determined using the Black-Scholes valuation model, based on the market price of the common stock on the dates the warrants were issued, an expected dividend yield of 0%, a risk-free interest rate based on constant maturity rates published by the U.S. Federal Reserve, applicable to the life of the warrants, expected volatility of 114% (based on analysis of historical stock prices of the Company and its selected peers), and the five year and four year life of the warrants relating to the Notes and Debentures, respectively. The Company is required to re-measure the fair value of the warrants at each reporting period.

Because the conversion price of the Notes is not fixed, they are not “conventional convertible debt” as that term is used in EITF 00-19. Accordingly, the Company is required to bifurcate and account separately for the embedded conversion options, together with any other derivative instruments embedded in the Notes. The Debentures are a hybrid instrument that embodies several derivative features. The instrument is not afforded the “conventional” convertible exemption because of certain full-ratchet anti-dilution protections afforded the investors. Further, certain derivative features did not meet the conditions for equity classification set forth in EITF 00-19. As a result, the Company has combined all embedded derivatives into one compound derivative financial instrument for financial accounting and reporting.

The freestanding warrants issued with the Debentures are also hybrid instruments that embody derivative features. While bifurcation of the embedded derivatives was not required, the warrants did not otherwise meet all of the conditions for equity classification set forth in EITF 00-19. As a result, the Company has recorded the warrants as derivative liabilities at fair value.

The conversion option related to each of the Notes was bifurcated from the Note and accounted for separately as a derivative instrument liability (see below). The bifurcated embedded derivative instruments, including the embedded conversion options which were valued using the Flexible Monte Carlo Simulation methodology, were recorded at their initial fair value of an aggregate of $801,911.

The discount from the face amount of the Notes represented by the value assigned to the warrants and bifurcated derivative instruments is being amortized over the period to the due date of each of the Notes, using the effective interest method. Amortization related to the Notes for the period ended June 30, 2007, was $139,622.

8

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A summary of the Notes and derivative instrument liabilities at June 30, 2007, is as follows:

Convertible Notes; 12% per annum; due December 15, 2006, though April 24, 2007	$	1,107,500
Plus: unamortized premium related to warrants and bifurcated embedded derivative instruments		58,537
Total carrying value at June 30, 2007	$	1,166,037

The conversion option related to the Debentures was bifurcated from the Debentures and accounted for separately as a derivative instrument liability (see below). The bifurcated embedded derivative instruments, including the embedded conversion option which was valued using the Flexible Monte Carlo Simulation methodology, was recorded at its initial fair value of an aggregate of $553,466.

The discount from the face amount of the Debentures represented by the value assigned to the warrants and bifurcated derivative instruments is being amortized over the period to the due date of the Debentures, using the effective interest method. Amortization related to the Debentures for the period ended June 30, 2007, was $7,054.

A summary of the Debentures and related derivative instrument liabilities at June 30, 2007, is as follows:

Debenture; 4% per annum (increasing to 9% per annum in July 2007); due December 22, 2009	$	1,000,000
Less: unamortized discount related to warrants and bifurcated embedded derivative instruments		( 978,172	)
Total carrying value at June 30, 2007	$	21,828

The total carrying value of the Notes and Debentures at June 30, 2007 was $1,187,865.

Derivative financial instrument liabilities

The Company uses the Black-Scholes valuation model to value the warrants and the embedded conversion option components of any bifurcated embedded derivative instruments that are recorded as derivative liabilities.

In valuing the warrants and the embedded conversion option components of the bifurcated embedded derivative instruments, at the time they were issued and at June 30, 2007, the Company used the market price of our common stock on the date of valuation, an expected dividend yield of 0% and the remaining period to the expiration date of the warrants or repayment date of the Notes. All warrants and conversion options can be exercised by the holder at any time.

Because of the limited historical trading period of the Company’s common stock, the expected volatility of the Company’s common stock over the remaining life of the conversion options and warrants has been estimated at 114% (based on analysis of historical stock prices of the Company and its selected peers). The risk-free rates of return used were based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the conversion options or warrants.

9

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

At June 30, 2007, the following derivative liabilities related to common stock warrants and embedded derivative instruments were outstanding as a result of the issuance of the Notes:

				Exercise		Value		Value
				Price Per		Issue		June 30,
Issue Dates	Expiry Dates			Share		Date		2007
May 22, through		May 22, through	1,600,000
October 26, 2006		October 26, 2011	warrants	$	0.05	$	82,239	$	124,086
Fair value of freestanding derivative instrument liabilities for warrants								$	124,086
May 22, through		May 22, through
October 26, 2006		October 26, 2011				$	801,911	$	580,119
Fair value of bifurcated embedded derivative instrument
liabilities associated with the above convertible notes								$	580,119
Total derivative financial instruments								$	704,205

The following table reflects the number of common shares into which the aforementioned derivatives resulting from the issuance of Notes are indexed at June 30, 2007:

Embedded derivative instruments	52,738,095
Freestanding derivatives (warrants)	4,430,000
	57,168,095

10

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

At June 30, 2007, the following derivative liabilities related to common stock warrants and embedded derivative instruments were outstanding as a result of the issuance of the Debentures:

				Exercise		Value		Value
				Price Per		Issue		June 30,
Issue Dates	Expiry Dates			Share		Date		2007
December 22, 2006		October 26, 2011	10,714,285	$	0.05	$	964,286	$	321,429
			warrants
Fair value of freestanding derivative instrument liabilities for warrants								$	321,429
December 22, 2006		December 22, 2009				$	553,466	$	293,939
Fair value of bifurcated embedded derivative instrument
liabilities associated with the above convertible notes								$	293,939
Total derivative financial instruments								$	615,368

The following table reflects the number of common shares into which the aforementioned derivatives resulting from the issuance of the Debentures are indexed at June 30, 2007:

Embedded derivative instruments	10,170,566
Freestanding derivatives (warrants)	10,714,285
	20,884,852

The total value of Derivative Financial Instruments at June 30, 2007 was $1,319,573.

(8) Subsequent Events

On July 27, 2007, the Company issued 336,862 shares of its common stock with a fair market value of $6,737 for legal expenses.

AcXess Agreement

On July 24, 2007, the Company entered into a securities purchase agreement (the “Agreement”) with AcXess, Inc., its wholly owned subsidiary, (“AcXess”), Thomas Elowson, President of AcXess, (“Elowson”), Raymond Leitz, Chief Technical Officer of AcXess, (“Leitz”), and Helge Solberg, Chief Architect of AcXess, (“Solberg”), (collectively, Elowson, Leitz, and Solberg the “Buyers”) wherein (i) AcXess redeemed shares from the Company in return for the issuance of a promissory note to the benefit of the Company (the “Note”) and the signing of a licensing agreement with the Company, (the “Licensing Agreement”) and (ii) the Buyers exchanged stock of the Company held by them (the “Stock”) in exchange for stock in AcXess and Elowson canceled options for stock in the Company held by him (the “Options”) in exchange for stock in AcXess. As a result of this Agreement the Company will own approximately 21% of the outstanding shares of AcXess. This Agreement will become effective upon approval by the Company’s shareholders. AcXess has 4,500,000 shares of common stock outstanding.

11

INNOVATIVE SOFTWARE TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Note is in the principal amount of $1,000,000, has a term of two years, and an interest rate of 10%, interest to accrue until maturity. The Note is subject to a security agreement (the “Security Agreement”) which collateralizes the Note with all assets of AcXess and has an acceleration clause for any material default. AcXess redeemed 1,000,000 shares of its common stock from the Company with the issuance of the Note.

The Licensing Agreement grants the Company a non-exclusive worldwide right and license under the Patents and any Improvements, as defined therein, to make, have made, use, sell and otherwise commercialize Licensed Products, with restricted rights on the part of the Company to grant sublicenses. In addition, the Licensing Agreement grants the Company “Best Pricing” on its current and future products and services. AcXess redeemed 1,500,000 shares of its common stock from the Company with the execution of the Licensing Agreement.

The Buyers exchanged 4,477,292 shares of common stock of the Company for 537,275 shares of common stock of AcXess held by the Company.

Elowson received 478,268 shares of common stock of AcXess held by the Company in exchange for the cancellation of his options to purchase 5,978,349 shares of common stock of the Company. These options were fully vested, had a strike price of $0.13 per share and an expiration of August 9, 2016.

Following shareholder approval of the Agreement the Company will hold 984,457 shares of AcXess common stock, 21.9% of the total outstanding shares of common stock of AcXess, 4,500,000 shares.

Gruen-Kennedy Resignation

On August 2, 2007, Traver Gruen-Kennedy resigned as member of the Board of Directors of the Company, effective immediately. There was no disagreement or dispute between Mr. Gruen-Kennedy and the Company which led to his resignation.

Amended Articles of Incorporation

On August 3, 2007, the Company’s Articles of Incorporation were restated pursuant to a Restated Articles of Incorporation filed with the Secretary of State of the State of California to increase the number of shares of Common Stock authorized from 100,000,000 shares to 300,000,000 shares.

On August 9, 2007, the Company sold 2,000,000 shares of its common stock to an accredited investor at a price of $0.05 per share. The Company also issued a warrant to the investor to purchase 2,000,000 shares of its common stock at an exercise price of $0.05 per share. The warrant has an expiration of 2 years from the date of issue. There were no registration rights granted with the issuance of the shares or the warrant.

12

Item 2. Management's Discussion and Analysis or Plan of Operation

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion includes statements that are forward looking in nature. The accuracy of such statements depends on a variety of factors that may affect the business and operations of the Company. Certain of these factors are discussed under “Business - Factors Influencing Future Results and Accuracy of Forward-Looking Statements” included in Part 1 of this report. When used in this discussion, the words “expect(s)”, “feel(s)”, “believe(s)”, “will”, “may”, “anticipate(s)” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, and actual results could differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, and are urged to carefully review and consider the various disclosures elsewhere in this Form 10-QSB.

Overview

The following discussion summarizes information about our accounting policies and practices and information about our operations in a comparative manner for the three months ended June 30, 2007, and 2006. Our management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere herein.

Acquisition of AcXess, Inc.

On June 26, 2006, the Company completed the acquisition of AcXess, Inc., a Florida corporation (“AcXess”), in a stock exchange transaction (the “Transaction”) pursuant to a Stock Exchange Agreement by and between Innovative, AcXess, the Shareholders of AcXess, and Anthony F. Zalenski, acting as the Shareholder’s Agent (the “Exchange Agreement”). As a result of the Transaction, AcXess became a wholly owned subsidiary of the Company. Following FAS 141, as governing and operating control of the combined entity was under Mr. Zalenski, AcXess is deemed to be the purchaser in the Transaction for financial reporting purposes. Therefore, reverse acquisition accounting applies whereby AcXess is deemed to have issued its common stock for the net assets or liabilities of Innovative accompanied by a recapitalization of AcXess. For accounting purposes, AcXess is treated as the continuing reporting entity.

AcXess was formed to provide Business Continuity (“BC”) products and services to the Small and Medium Enterprise (“SME”) market. “Business Continuity” products and services are an advanced form of disaster recovery solutions for electronic data backup wherein the data and/or applications are available upon failure through means of connectivity to remote server locations. Management believes that the North American SME market for BC services (defined as companies with 50 to 5,000 employees) is underserved and that various technologies have matured to a point where the SME market can now be supplied robust BC services which were previously only available to large corporations and at substantial cost.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the Company's financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company’s critical accounting policies are discussed in its annual report on Form 10-KSB for the year ended March 31, 2007.

13

Results of Operations

Three months ended June 30, 2007, compared to the three months ended June 30, 2006.

Revenues

Revenues for the three months ended June 30, 2007, and 2006 were $32,140 and $1,572, respectively.

Cost of Sales and Margins

Cost of sales for the three months ended June 30, 2007, and 2006 were $21,712 and $12,961, respectively. The change in the cost of sales over the two periods is primarily due to an increase in charges from our network service provider reflecting increased bandwidth usage.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2007, and 2006 were $330,500 and $182,318, respectively. General and administrative expenses consisted primarily of salaries and wages, professional fees, rent, travel expenses, payroll taxes, telephone expenses and other general and administrative expenses. The increase in general and administrative expenses is due primarily to the increase in number of employees and concomitant salaries and wages, increased professional fees due to increased accounting, legal and consulting requirements, and increased marketing and travel expenses due to attending trade shows.

Other Income

Other income, for the three months ended June 30, 2007, and 2006 was $374,759 and $2,694, respectively. Other income for the period ended June 30, 2007 comprise primarily of derivative and interest income offset by interest expense and other expense (see Note 6 in the Notes to the Financial Statements). Other income for the period ended June 30, 2006 was interest and other income offset by interest expense.

Net Income (Loss)

Our net income for the three months ended June 30, 2007, amounted to $54,688, and resulted from a loss from operations of $320,071 offset by other income of $374,759. Our net loss for the three months ended June 30, 2006 was $191,012 and resulted from a loss from operations of $193,706 offset by other income of $2,694.

Liquidity and Capital Resources

The June 30, 2007, financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has incurred a loss of $3,356,564 from inception (January 12, 2005) through June 30, 2007, and has a working capital deficiency and stockholder deficit of $3,280,968 and $3,015,331, respectively, at June 30, 2007. The Company currently has minimal revenue generating operations and expects to incur substantial operating expenses in order to expand its business. As a result, the Company expects to incur operating losses for the foreseeable future. In addition, the Company is in default on its convertible notes and through June 25, 2007, incurred liquidated damages of approximately $62,000 in connection with its convertible debentures (see Note 6). The accompanying financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

Management intends to continue to finance operations through fundraising activities as well as to seek potential acquisitions that have positive cash flows; however there can be no assurance of successful fundraising or acquisition activity in the future.

In January 2006, our Board of Directors approved the raising of up to $1,000,000 via the issuance of promissory notes to accredited investors. These notes have a term of six months, are convertible into shares of our common stock at a 30% discount to a future Qualified Financing (as therein described), and have 20% warrant coverage at a strike price of $0.05 and an expiration of 5 years from the date of issuance. In October our board of directors approved an increase in the limit of funding under these terms to $1,500,000. A total of $1,107,500 had been raised as of November 10, 2006, when the Company closed the round.

14

On December 22, 2006, the Company entered into a securities purchase agreement with an accredited investor (the “Investor”) for the sale of $1,000,000 Convertible Debentures (the “Debentures”). In connection with the Agreement, the Investor received (i) a warrant to purchase 8,928,571 shares of common stock (“Long-Term Warrants”) exercisable at $0.30 and (ii) a warrant to purchase 1,785,714 shares of common stock (“Short Term Warrants”) exercisable at $0.143 per share. The Long Term Warrants and the Short Term Warrants are exercisable for a period four years from the date of issuance and the earlier of (i) December 22, 2007 and (ii) the date a registration statement(s) covering the resale of all Registrable Securities (as defined in the Registration Rights Agreement) is declared effective by the SEC (the “Initial Exercise Date”) and on or prior to the close of business on the four month anniversary of the Initial Exercise Date, respectively. The Company incurred approximately $62,000 in interest expense relating to the Debentures due to the “Liquidating Damages” clause specified in the Purchase Agreement as a registration statement covering the Registrable Securities was declared effective by the SEC on June 25, 2007, 93 days after the agreed upon date in the Purchase Agreement, March 23, 2007.

The default on the Notes discussed above is an “Event of Default” in accordance with the terms of the Debenture and, therefore, the Debenture holder may declare all principal and interest due and payable immediately; however, the Company has received no notice from the Debenture holder demanding such repayment.

The Debentures bear interest at 4% until June 22, 2007 and 9% thereafter, payable in arrears and mature three years from the date of issuance. Accrued interest is payable in cash semi-annually, beginning on July 1, 2007. The Company has not made the interest payment of $21,271 due on July 1, 2007 and intends to negotiate an extension with the Investor; however there can be no assurance that such negotiation will be successful.

In February 2007 we entered into a master leasing arrangement with Gulf Pointe Capital, LLC for equipment purchases up to a total of $500,000 (see Contractual Obligations below).

At June 30, 2007, we had current liabilities of $3,459,379.

We have no material commitments for capital expenditures. Capital expenditures for the three months ended June 30, 2007 and 2006, amounted to $19,260 and $37,573, respectively.

Off Balance-Sheet Arrangements

We have no material off-balance sheet arrangements as of June 30, 2007.

Contractual Obligations

In February 2007 the Company entered into a $500,000 Master Lease Line for Equipment Purchases (the “Master Lease Agreement”). At that time, the Company sold property and equipment for $125,000 and leased them back under the Master Lease Agreement. The Company recognized a gain on the sale of those assets of $10,633 which was deferred and will be recognized over the 24 month term of the lease.

The Master Lease Agreement calls for draws of a minimum of $100,000, a minimum term of 18 months and a maximum term of 36 months, and leasing factors based on term as follows:

18 Months - 0.06476

24 Months - 0.05090

30 Months - 0.04263

36 Months - 0.03716

15

The lease entered into in February 2007 has a lease factor of 0.0509 resulting in monthly payments of $6,363. The Company accounted for this lease as a capital lease.

In connection with the Master Lease Agreement, the Company agreed to issue five year warrants to the lender to purchase 1,350,000 shares of the Company’s common stock at an exercise price of $0.18 per share. Ten percent (135,000) of the warrants vested upon execution of the Master Lease Agreement. The remaining 90% of the warrants vest as on a pro rata basis as the lender provides funding under the Master Lease Agreement. As such 303,750 warrants vested upon execution of the sale lease-back described above. The total number of warrants, 438,750, was valued using the Black-Scholes method and applied to the capital lease obligation in accordance with APB 14. This resulted in a decrease in capital lease obligation of $37,726 and a corresponding increase in additional paid-in capital.

Item 3. Controls and Procedures

As of June 30, 2007, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There was no change in our internal controls over financial reporting that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting during the quarter covered by this Report.

16

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Except as disclosed below we are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse affect on business, financial condition, operating results, or cash flows.

Kansas City Explorers

The Company is a defendant in a lawsuit in the Circuit Court of Platte County, Missouri, “Kansas City Explorers vs. Innovative Software” Case no. 04CV82050 in which the claimant is seeking money for advertising which it alleges is still due, and have alleged damages of $50,028. The claimant has been court ordered to produce answers to certain discovery requests of the Company which they have failed to produce. Management intends to aggressively defend the claim based upon the lack of contract between the parties, lack of proof of damages, as well as minimal proof of advertising services actually performed for Company products and services, and other legal and equitable defenses.

Bernard F. Mathaisel

On June 14, 2007 the Company was served with a complaint from Bernard F. Mathaisel for breach of contract relating to an alleged consulting agreement with the Company and breach of contract alleging failure to repay a Note due him in the principal amount of $55,000. The Company disputes certain items in the complaint and intends to defend itself.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 9, 2007, the Company sold 2,000,000 shares of its common stock to an accredited investor at a price of $0.05 per share. Proceeds will be used for general corporate purposes.

The shares of stock issued in the following transactions were valued at the closing market price on the date of issue.

On June 5, 2007, the Company issued 459,778 shares of its common stock with a fair market value of $22,989 for legal expenses.

On July 27, 2007, the Company issued 336,862 shares of its common stock with a fair market value of $6,737 for legal expenses.

Item 3. Defaults Upon Senior Securities

As of August 14, 2007, the Company was in default on nineteen convertible promissory notes totaling a principal amount of $1,107,500 as the term of these notes had passed. In the event of a default resulting from the Company's non-payment of principal or interest when due, the note holder may declare all unpaid principal and accrued interest due and payable immediately. The Company was served a complaint from one investor demanding repayment of $55,000 under one of the Notes (see Legal Proceedings above). The Company has received no notice from any note holder and is currently in the process of renegotiating the terms of its convertible promissory notes; however there can be no assurance that such negotiations will be successful.

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable

17

Item 5. Other Information

On August 3, 2007, the Company’s Articles of Incorporation were restated pursuant to a Restated Articles of Incorporation filed with the Secretary of State of the State of California to increase the number of shares of Common Stock authorized from 100,000,000 shares to 300,000,000 shares.

A copy of the Restated Articles of Incorporation, as filed with the Secretary of State of the State of California, is attached as Exhibit 3.1 to this Quarterly Report on Form 10-QSB, and is incorporated herein by reference.

Item 6. Exhibits.

Exhibits included or incorporated by reference herein are set forth in the attached Exhibit Index.

18

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Innovative Software Technologies, Inc.
Date: August 14, 2007		/s/ Philip D. Ellett
		Philip D. Ellett Chief Executive Officer

Date: August 14, 2007	/s/ Christopher J. Floyd
	Christopher J. Floyd Chief Financial Officer, Vice President of Finance, and Secretary

19

 INDEX TO EXHIBITS

Exhibit Number	Description
3.1	Restated Articles of Incorporation of Innovative Software Technologies, Inc.
31.1	Certification of Chief Executive Officer of Innovative Software Technologies, Inc. pursuant to Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer of Innovative Software Technologies, Inc. pursuant to Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer of Innovative Software Technologies, Inc. pursuant to 18 U.S.C. 1350.
32.2	Certification of Chief Financial Officer of Innovative Software Technologies, Inc. pursuant to 18 U.S.C. 1350.

20

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Philip D. Ellett, Chief Executive Officer of Innovative Software Technologies, Inc. certify that:

1. I have reviewed this Quarterly Report on Form 10-QSB of Innovative Software Technologies, Inc. (the “small business issuer”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: August 14, 2007	/s/ Philip D. Ellett
	Philip D. Ellett  Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Christopher J. Floyd, Chief Financial Officer of Innovative Software Technologies, Inc. certify that:

1. I have reviewed this Quarterly Report on Form 10-QSB of Innovative Software Technologies, Inc. (the “small business issuer”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: August 14, 2007	/s/ Christopher J. Floyd
	Christopher J. Floyd  Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. Sec. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Innovative Software Technologies, Inc (the “Company”) on Form 10-QSB for the period ending June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip D. Ellett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/  Philip D. Ellett  

Philip D. Ellett

Chief Executive Officer

August 14, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. Sec. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Innovative Software Technologies, Inc. (the “Company”) on Form 10-QSB for the period ending June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Floyd, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Christopher J. Floyd  

Christopher J. Floyd

Chief Financial Officer

August 14, 2007