UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 333-167667
INNOVATIVE PRODUCT OPPORTUNITIES INC.
(Exact name of registrant as specified in its charter)
| Delaware | 42-1770123 | |||
| (State or Other Jurisdiction of | (I.R.S. Employer | |||
| Incorporation or Organization) | Identification No.) | |||
|
8400 Edinger Ave., Suite 202R Huntington Beach, California |
92647 | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
(347) 789-7131
(Registrant's telephone number, including area code)
27141 Aliso Creek Road, Suite 235, Aliso Viejo, California
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
| 1 |
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 15, 2014, the issuer had 2,723,000,000 shares of its common stock issued and outstanding, par value $0.0001 per share.
| 2 |
INNOVATIVE PRODUCT OPPORTUNITIES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2014
(A Development Stage Enterprise)
TABLE OF CONTENTS
| PART I | PAGE | |
| Item 1. | Financial Statements | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 |
| Item 4. | Controls and Procedures | 14 |
| PART II | ||
| Item 1. | Legal Proceedings | 14 |
| Item 1A. | Risk Factors | 15 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
| Item 3. | Defaults Upon Senior Securities | 15 |
| Item 4. | Mining Safety Disclosures | 15 |
| Item 5. | Other Information | 15 |
| Item 6. | Exhibits | 16 |
| Signatures | 17 |
| 3 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
| Innovative Product Opportunities Inc. | ||||||||||||
| (A Development Stage Enterprise) | ||||||||||||
| BALANCE SHEETS | ||||||||||||
| (Unaudited) | ||||||||||||
| March 31, 2014 | December 31, 2013 | |||||||||||
| ASSETS | ||||||||||||
| Current assets | ||||||||||||
| Cash | $ | 722 | $ | 1,994 | ||||||||
| Total current assets | 722 | 1,994 | ||||||||||
| Property and equipment, net | 549 | 606 | ||||||||||
| Total assets | $ | 1,271 | $ | 2,600 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable and accrued liabilities | $ | 38,993 | $ | 27,297 | ||||||||
| Customer deposit | 65,000 | 65,000 | ||||||||||
| Accrued interest | 967 | 967 | ||||||||||
| Convertible notes, net of unamortized debt discount of $2,308 and $7,500, respectively | 6,792 | 1,600 | ||||||||||
| Notes payable | 104,845 | 91,534 | ||||||||||
| Due to related party | 76,895 | 76,895 | ||||||||||
| Total current liabilities | 293,492 | 263,293 | ||||||||||
| Total liabilities | 293,492 | 263,293 | ||||||||||
| Stockholders’ deficit | ||||||||||||
| Preferred stock; $0.001 par value; 1,000,000 shares authorized, -0- issued and outstanding | — | — | ||||||||||
| Common stock; $0.0001 par value; 3,000,000,000 shares authorized, 2,723,000,000 and 985,000,0000 shares issued and outstanding, respectively | 272,300 | 98,500 | ||||||||||
| Additional paid-in capital | 5,947,200 | 5,773,400 | ||||||||||
| Accumulated deficit during development stage | (6,511,721 | ) | (6,132,593 | ) | ||||||||
| Total stockholders’ deficit | (292,221 | ) | (260,693 | ) | ||||||||
| Total liabilities and stockholders’ deficit | $ | 1,271 | $ | 2,600 | ||||||||
The accompanying footnotes are an integral part of these financial statements.
| 4 |
| Innovative Product Opportunities Inc. |
| (A Development Stage Enterprise) |
| STATEMENTS OF OPERATIONS |
| (Unaudited) |
| Three months ended March 31, 2014 | Three months ended March 31, 2013 | From inception (April 3, 2009) through March 31, 2014 | ||||||||||
| Sales | $ | — | $ | — | $ | 21,000 | ||||||
| Cost of sales | — | — | — | |||||||||
| Gross profit | — | — | 21,000 | |||||||||
| Operating expenses | ||||||||||||
| Bad debts | — | — | 21,000 | |||||||||
| General and administrative | 26,333 | 18,171 | 341,522 | |||||||||
| Share-based compensation | 321,100 | — | 5,885,600 | |||||||||
| Total expenses | 347,433 | 18,171 | 6,248,122 | |||||||||
| Loss from operations | (347,433 | ) | (18,171 | ) | (6,227,122 | ) | ||||||
| Other income (loss) | ||||||||||||
| Gain on settlement of accounts receivable | — | — | 336,000 | |||||||||
| Other-than-temporary impairment loss on securities | — | — | (124,950 | ) | ||||||||
| Loss on cancellation of securities | — | — | (211,050 | ) | ||||||||
| Loss on issuance of stock-based compensation | (26,500 | ) | — | (250,000 | ) | |||||||
| Accretion of debt discount | (5,192 | ) | — | (33,192 | ) | |||||||
| Interest | (3 | ) | — | (1,407 | ) | |||||||
| (31,695 | ) | — | (284,599 | ) | ||||||||
| Net loss for the period | $ | (379,128 | ) | $ | (18,171 | ) | $ | (6,511,721 | ) | |||
| Net loss per common share - basic | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
| Weighted average number of common shares outstanding – basic | 2,124,355,556 | 348,000,000 | ||||||||||
The accompanying footnotes are an integral part of these financial statements.
| 5 |
| Innovative Product Opportunities Inc. | ||||||||||||||||
| (A Development Stage Enterprise) | ||||||||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| For the three months ended March 31, 2014 | For the three months ended March 31, 2013 | From Inception (April 3, 2009) through March 31, 2014 | ||||||||||||||
| Cash flows from operating activities | ||||||||||||||||
| Net loss for the period | $ | (379,128 | ) | $ | (18,171 | ) | $ | (6,511,721 | ) | |||||||
| Adjustments to reconcile net loss to cash used in operating activities | ||||||||||||||||
| Depreciation and amortization | 57 | — | 144 | |||||||||||||
| Shares issued to founder | — | — | 2,000 | |||||||||||||
| Stock issued for services | 321,100 | — | 5,885,600 | |||||||||||||
| Loss on issuance of stock-based compensation | 26,500 | — | 250,000 | |||||||||||||
| Accretion of debt discount | 5,192 | — | 33,192 | |||||||||||||
| Change in operating assets and liabilities | ||||||||||||||||
| Increase in customer deposit | — | — | 65,000 | |||||||||||||
| Increase in accounts payable and accrued liabilities | 11,696 | (1,105 | ) | 38,993 | ||||||||||||
| Increase in accrued interest | — | — | 967 | |||||||||||||
| Net cash used in operating activities | (14,583 | ) | (19,276 | ) | (235,825 | ) | ||||||||||
| Cash flows used in investing activities | ||||||||||||||||
| Purchase of equipment | — | — | (693 | ) | ||||||||||||
| Net cash used in investing activities | — | — | (693 | ) | ||||||||||||
| Cash flow from financing activities | ||||||||||||||||
| Advances by related party | — | 1,211 | 343,320 | |||||||||||||
| Repayment of advances by related party | — | (1,134 | ) | (236,425 | ) | |||||||||||
| Proceeds from notes payable | 13,311 | 18,000 | 157,845 | |||||||||||||
| Repayment to notes payable | — | — | (27,500 | ) | ||||||||||||
| Net cash provided by financing activities | 13,311 | 18,077 | 237,240 | |||||||||||||
| Net change in cash | (1,272 | ) | (1,199 | ) | 722 | |||||||||||
| Cash, beginning of the period | 1,994 | 2,268 | — | |||||||||||||
| Cash, end of the period | $ | 722 | 1,069 | $ | 722 | |||||||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||||||||||
| Conversion of due to related party for common stock | $ | — | $ | — | $ | 30,000 | ||||||||||
| Settlement of notes payable for common stock | $ | — | $ | — | $ | 226,600 | ||||||||||
| Conversion of notes payable for common stock | $ | — | $ | — | $ | 26,400 | ||||||||||
| Debt discount recorded in connection with convertible notes | $ | — | $ | — | $ | 25,500 | ||||||||||
| Finance costs recorded in connection with original issue discounts on convertible notes payable | $ | — | $ | — | $ | 10,000 | ||||||||||
The accompanying footnotes are an integral part of these financial statements.
| 6 |
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Innovative Product Opportunities Inc. (the "Company" or "Innovative") was incorporated on April 3, 2009 in the State of Delaware and established a fiscal year end of December 31. The Company is a development stage enterprise organized to provide product development. The Company is currently in the development stage as defined in Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") 915.
Our business is a product development firm creating products designed, prototyped and produced in numerous industries including consumer and household goods, office products, furniture, and toys.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements of Innovative Product Opportunities Inc. have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2013 of Innovative Product Opportunities Inc. in our Form 10-K filed on April 15, 2014.
The interim financial statements present the balance sheets, statements of operations and cash flows of Innovative Product Opportunities Inc. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
The interim financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of March 31, 2014 and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the full year.
GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have significant operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company has an accumulated deficit during development stage at March 31, 2014 of $6,511,721. The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement its business plan. There can be no assurance that the Company will be successful in this situation. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might result from this uncertainty. The Company is funding its initial operations by way of loans from its Chief Executive Office and others, and the use of equity to pay some operating expenses. The Company's officers and directors have committed to advancing certain operating costs of the Company.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the 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
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
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REVENUE RECOGNITION
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue or customer deposits. The company accrues for sales returns, bad debts, and other allowances based on its historical experience. Net sales under certain long-term contracts for product design, which may provide for periodic payments, are recognized under the percentage-of-completion method. Estimated cost-at-completion for these contracts are reviewed on a routine periodic basis, and adjustments are made periodically to the estimated cost-at-completion, based on actual costs incurred, progress made, and estimates of the costs required to complete the contractual requirements. When the estimated cost-at-completion exceeds the contract value, the contract is written down to its net realizable value, and the loss resulting from cost overruns is immediately recognized.
To properly match net sales with costs, certain contracts may have revenue recognized in excess of billings (unbilled revenues), and other contracts may have billings in excess of net sales recognized (customer deposits). Under long-term contracts, the prerequisites for billing the customer for periodic payments generally involve the Company's achievement of contractually specific, objective milestones.
Revenue for services contracts will be recognized under a proportional performance model if the following criteria are met (i) the arrangement provides for periodic billings as services are provided (ii) the customer receives value as the services as rendered, not just upon the completion of the services and (iii) the customer need not re-perform services that it has already received if it terminates the service contract early and hires another service provider to complete the service deliverable. If these criteria are not met, the Company will recognize revenue on the service contracts using the completed contract method.
INCOME TAXES
The Company accounts for income taxes in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("FASB ASC") 740, Income Taxes. Under the assets and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
NET LOSS PER SHARE
Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period increased to include the number of additional common shares that would have been outstanding if potentially dilutive securities had been issued. There were no potentially dilutive securities outstanding during the periods presented.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in the Company’s functional currency which is the United States dollars. In accordance with FASB ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the periods presented. Related translation adjustments are reported as a separate component of stockholders' equity (deficit), whereas gains or losses resulting from foreign currency transactions are included in results of operations.
STOCK-BASED COMPENSATION
The Company measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite service period.
The Company also grants awards to non-employees and determines the fair value of such stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is completed.
The Company has not adopted a stock option plan and has not granted any stock options.
| 8 |
COMPREHENSIVE INCOME (LOSS)
The Company has adopted ASC Topic 220 - Comprehensive Income, which establishes standards for reporting and the display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners or distributions to owners. Among other disclosures, Topic 220 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income is displayed in the statement of stockholders' deficit and in the balance sheet as a component of stockholders' deficit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of FASB ASC 820, Fair Value Measurements and Disclosures, and FASB ASC 825, Financial Instruments, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The statement establishes market or observable inputs as the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The statement requires fair value measurements be classified and disclosed in one of the following categories:
Level 1 – Quoted prices in active markets for identical assets and liabilities.
Level 2 – Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 – Significant inputs to the valuation model are unobservable.
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.
RECENT ACCOUNTING PRONOUNCEMENTS
There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the quarterly period ended March 31, 2014, or which are expected to impact future periods that were not already adopted and disclosed in prior periods.
NOTE 3 - CUSTOMER DEPOSITS
The company has invoiced and received cash in the amount of $65,000 for a new product design project on behalf of two customers. In accordance with the revenue recognition policy of the Company, all revenue has been deferred since the Company recognize revenue under this service contract using the completed contract method.
The customer deposits were received from two customers who are shareholders and note holders of the Company. One customer, Al Kau, paid invoices totaling $32,500 in cash, holds notes payable of $36,000 and a convertible note of $6,792 (net of debt discount of $2,308) in the Company at March 31, 2014 and is a 7.7% shareholder at March 31, 2014. The second customer, Aaron Shrira, also paid invoices totaling $32,500 in cash, holds notes payable of $42,917 in the Company at March 31, 2014 and is a 0% shareholder at March 31, 2014.
NOTE 4 – CONVERTIBLE NOTES
On July 2, 2013, the Company agreed to amend the term of an unsecured, non-interest bearing promissory note payable on demand with a carrying value $12,500 issued to the Al Kau, Al Kau is a consultant, investor and customer of the Company. Under the terms of the Side Letter Agreement, the issue price of the Note is $12,500 with a face value of $18,000 and the terms of the Note include a fixed conversion price of $0.0001 per share of Company’s common stock and a maturity date of May 10, 2014. The amendment of the terms of the Note resulted in a beneficial conversion feature of $12,500 since the closing price of common stock on July 2, 2013 exceeded the fixed conversion price. The beneficial conversion feature of $12,500 is included in additional paid-in capital. The Note allows for the lender to secure a portion of the Company assets up to 200% of the face value of the note. On July 11, 15 and 16, 2013 the holder of the note converted $8,900 of principal plus accrued interest into 89,000,000 shares of the Company's common stock. The statement of operations included expense of $5,192 for amortization of debt discount for the three months ended March 31, 2014.
| 9 |
NOTE 5 – NOTES PAYABLE
On February 22, 2012, the company issued two promissory notes in the value of $11,250 each for value received. These notes bear no interest and are payable on demand by the note holders. A promissory note of $11,250 issued to Al Kau was amended on September 3, 2012. See Note 4.
On March 6, 2012, the company issued two promissory notes in the value of $2,500 each for value received. These notes bear no interest and are payable on demand by the note holders.
On May 1, 2012, the company issued a promissory note in the value of $12,500 for value received. These notes bear no interest and are payable on demand by the note holder.
On May 10, 2012, the company issued a promissory note in the value of $12,500 for value received. These notes bear no interest and are payable on demand by the note holder.
On May 31, 2012, the company issued a promissory note in the value of $32,000 for value received. In May 2012, a total of $15,000 was paid back. These notes bear no interest and are payable on demand by the note holder.
On July 31, 2012, the company issued a promissory note in the value of $1,750 for value received. These notes bear no interest and are payable on demand by the note holder. The promissory note was amended on June 18, 2013. See Note 4.
On November 5, 2012 the company issues a promissory note in the value of $16,667 for value received. These notes bear no interest and are payable on demand by the note holder.
On December 3, 2012 the company issues a promissory note in the value of $4,500 for value received. These notes bear no interest and are payable on demand by the note holder.
On September 3, 2012, the Company amended the promissory note with a carrying value of $11,250 issued to the Al Kau on February 22, 2012. The promissory note was amended on July 2, 2013. See Note 4 and Note 1 restatement.
On January 8, 2013, the Company issued a promissory note in the amount of $6,000 from Al Kau. This note is unsecured, bears no interest and is payable on demand by the note holder.
On February 2, 2013, the Company issued a promissory note in the amount of $6,000 to Al Kau. This note is unsecured, bears no interest and is payable on demand by the note holder.
On February 22, 2013, the Company issued a promissory note in the amount of $6,000 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
On June 6, 2013, the Company issued a promissory note in the amount of $4,728 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
On December 16, 2013, the Company issued a promissory note in the amount of $1,889 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
On January 17, 2014, the Company issued a promissory note in the amount of $2,743 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
On January 20, 2014, the Company issued a promissory note in the amount of $2,737 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
On January 31, 2014, the Company issued a promissory note in the amount of $2,684 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
On February 20, 2014, the Company issued a promissory note in the amount of $1,822 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
On March 25, 2014, the Company issued a promissory note in the amount of $1,325 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
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On March 28, 2014, the Company issued a promissory note in the amount of $2,000 to The Cellular Connection Limited. This note is unsecured, bears no interest and is payable on demand by the note holder.
As of March 31, 2014 and December 31, 2013 notes payable totaling $104,845 and $91,534, respectively, were outstanding. The balances are non-interest bearing, unsecured and have no specified terms of repayment.
NOTE 6 – DUE TO RELATED PARTY
As of March 31, 2014 and December 31, 2013 advances of $76,895 were due to the Company's Chief Executive Officer. The balance are non-interest bearing, unsecured and have no specified terms of repayment.
NOTE 7 - STOCKHOLDERS’ EQUITY
The Company is authorized to issue an aggregate of 3,000,000,000 common shares with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.001 per share. No preferred shares have been issued.
On January 1, 2014, the Company agreed to issue 210,000,000 shares of common stock valued at $42,000 to Doug Clark, the Chief Executive Officer of the Company, as stock-based compensation. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
On January 1, 2014, the Company agreed to issue 265,000,000 shares of common stock valued at $53,000 to Nadav Elituv as stock-based compensation for software development services related to interactive displays. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
On January 1, 2014, the Company agreed to issue 210,000,000 shares of common stock valued at $42,000 to Al Kau, consultant, investor and customer of the Company, as stock-based compensation for development, implementation and maintenance of sound business strategies including identification of suitable merger and acquisition candidates. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
On January 1, 2014, the Company agreed to issue 210,000,000 shares of common stock valued at $42,000 to Aaron Shrira, consultant, investor and customer of the Company, as stock-based compensation for introducing us to potential customers. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
On January 1, 2014, the Company agreed to issue 192,000,000 shares of common stock valued at $38,400 to William Reil as stock-based compensation for development, implementation and maintenance of sound business strategies including identification of suitable merger and acquisition candidates. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
On January 1, 2014, the Company agreed to issue 193,000,000 shares of common stock valued at $38,600 to Robert McLean, the Chief Financial Officer of the Company, as stock-based compensation. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
On January 1, 2014, the Company agreed to issue 193,000,000 shares of common stock valued at $38,600 to Grant Stummer, a director of the Company, as stock-based compensation. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
On January 28, 2014, the Company was agreed to issue 265,000,000 shares of common stock valued at $53,000 to Stuart Turk as stock-based compensation development, implementation and maintenance of sound business strategies including identification of suitable merger and acquisition candidates. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services.
NOTE 8 – SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to March 31, 2014 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains "forward-looking statements" that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our Form 10-K filed on April 15, 2014, and other filings we make with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.
The following discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with our audited financial statements and related notes thereto included elsewhere in this report, and in our Form 10-K filed on April 15, 2014.
BUSINESS OVERVIEW
We incorporated on April 3, 2009 as Innovative Product Opportunities Inc. under the laws of the State of Delaware. We are currently in the development stage. We expect to incur losses in the foreseeable future due to significant costs associated with our business start-up, developing our business and costs associated with on-going operations. Our business is to be a product development participating in the creation of products, from hand sketches and design through prototyping and construction.
MANAGEMENT'S STRATEGIC VISION
Our business is a product development firm creating products designed, prototyped and produced in numerous industries including consumer and household goods, office products, furniture, and toys.
As we secure funds, we plan to attract new clients and assist them in their product development, advertising and publishing. We do not know when we will sell our first product or be profitable in publishing and as a result, when, if ever, we will generate profits. In addition to increasing our product design and publishing/advertising offerings, we intend to introduce distribution channels and increase our products for sale and magazine advertising. This strategic vision will evolve as necessitated by the clients we are able to attract. Moving from a quarterly publication to a bi-monthly publication may also have increased costs and result in poor performance.
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 AND FROM INCEPTION (APRIL 3, 2009) THROUGH MARCH 31, 2014.
REVENUES
Our revenue for the three months ended March 31, 2014 and 2013 was $0. Our revenue from inception (April 3, 2009) through March 31, 2014 was $21,000. We earned $21,000 of revenue from a contract for design consultation in 2010. This amount was originally booked as accounts receivable and since it was not collected within a reasonable period, an allowance was booked in the subsequent period. We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer and shareholders.
COSTS OF GOODS SOLD
We did not incur cost of sales for the three months ended March 31, 2014 and 2013 and for the cumulative period from Inception (April 3, 2009) through March 31, 2014.
OPERATING EXPENSES
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Our general and administrative expense for the three months ended March 31, 2014 and 2013 was $26,333 and $18,171, respectively. The expenses can be primarily attributed to our need to pay for professional fees, our transfer agent and investment relations. During the three months ended March 31, 2014, we issued 1,738,000,000 shares of common stock of the Company valued at $347,600 for consulting services.
OTHER INCOME (EXPENSE)
Interest expense for the three months ended March 31, 2014 and 2013 was $5,195 and $0 respectively. Interest expense is a result of amortization of debt discounts on convertible notes.
NET INCOME/LOSS
Our net loss for the three months ended March 31, 2014 and 2013 was $379,128 and $18,171, respectively. Our losses during the quarter ended March 31, 2014 and 2013 are due to costs associated with professional fees, our transfer agent, investor relations and stock-based compensation.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
As of March 31, 2014, we had total current assets of $722 and total current liabilities of $293,492, resulting in a working capital deficit of $292,770. At March 31, 2014, we had cash of $722. Our cash flows used in operating activities for the three months ended March 31, 2014 was $14,583. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. Our cash flow from financing activities for the three months ended March 31, 2014 was $13,311. Our cash flows used in investing activities for the three months ended March 31, 2014 was $0. The Company has an accumulated deficit during development stage at March 31, 2014 of $6,511,721. The deficit reported at March 31, 2014 is largely a result of operating expenses for professional fees, our transfer agent, investor relations, stock-based compensation and loss on settlement of debt.
Over the next 12 months we expect to expend approximately $50,000 in cash for legal, accounting and related services and an additional $150,000 in cash to implement our business plan. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.
We expect to be able to secure capital through advances from our Chief Executive Officer, note holders, shareholders and others in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely.
The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for developing products and services, or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We are currently funding our operations by way of cash advances from our Chief Executive Officer, note holders, shareholders and others. We hope to be able to compensate our independent contractors with stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. We expect that we will be required to raise an additional $200,000 in cash by issuing new debt or equity for operating costs in order to implement our business plan in the next twelve months. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer, note holders, shareholders and others. The loans from our Chief Executive Officer, note holders, shareholders and others are unsecured and non-interest bearing and have no set terms of repayment. Our common stock started trading over the counter and has been quoted on the Over-The Counter Bulletin Board since February 17, 2011. The stock currently trades under the symbol “IPRU.OB.”
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OFF-BALANCE SHEET TRANSACTIONS
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a Smaller Reporting Company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
ITEM 4T. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2014, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2014 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against our Company or our officers and directors in their capacity as such that could have a material impact on our operations or finances.
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ITEM 1A. RISK FACTORS
A smaller reporting company is not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On January 1, 2014, the Company agreed to issue 210,000,000 shares of common stock valued at $42,000 to Doug Clark, the Chief Executive Officer of the Company, as stock-based compensation.
On January 1, 2014, the Company agreed to issue 265,000,000 shares of common stock valued at $53,000 to Nadav Elituv as stock-based compensation for software development services related to interactive displays.
On January 1, 2014, the Company agreed to issue 210,000,000 shares of common stock valued at $42,000 to Al Kau, consultant, investor and customer of the Company, as stock-based compensation for development, implementation and maintenance of sound business strategies including identification of suitable merger and acquisition candidates.
On January 1, 2014, the Company agreed to issue 210,000,000 shares of common stock valued at $42,000 to Aaron Shrira, consultant, investor and customer of the Company, as stock-based compensation for introducing us to potential customers.
On January 1, 2014, the Company agreed to issue 192,000,000 shares of common stock valued at $38,400 to William Reil as stock-based compensation for development, implementation and maintenance of sound business strategies including identification of suitable merger and acquisition candidates.
On January 1, 2014, the Company agreed to issue 193,000,000 shares of common stock valued at $38,600 to Robert McLean, the Chief Financial Officer of the Company, as stock-based compensation.
On January 1, 2014, the Company agreed to issue 193,000,000 shares of common stock valued at $38,600 to Grant Stummer, a director of the Company, as stock-based compensation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
During the quarter ended March 31, 2014, we did not have any defaults upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
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ITEM 6. EXHIBITS
| Incorporated by reference | ||||||
| Exhibit | Exhibit Description | Filed herewith | Form | Period ending | Exhibit | Filing date |
| 3.1 | Certificate of Incorporation, dated April 3, 2009 | S-1 | 3.1 | 6/22/2010 | ||
| 3.2 | Bylaws, dated April 3, 2009 | S-1 | 3.2 | 6/22/2010 | ||
| 3.3 | Certificate of Amendment to the Certificate of Incorporation, dated August 8, 2013 | 10-Q | 3.3 | 8/14/2013 | ||
| 4.1 | Specimen Stock Certificate | S-1 | 4.1 | 6/22/2010 | ||
| 4.2 | Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, dated August 6, 2013 | 10-Q | 4.2 | 8/14/2013 | ||
| 10.1 | Innovative Product Opportunities Inc. Trust Agreement | S-1 | 10.1 | 6/22/2010 | ||
| 31 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 32 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 101.INS* | XBRL Instance Document | X | ||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | X | ||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | X | ||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Definition | X | ||||
* In accordance with Regulation S-T, the XBRL-related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith and not “filed.”
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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 PRODUCTS OPPORTUNITIES INC. | |
| May 15, 2014 |
By: /s/ Doug Clark Doug Clark, President (Principal Executive Officer) and Chairman of the Board of Directors |
| May 15, 2013 |
By: /s/ Robert McLean Robert McLean, Chief Financial Officer (Principal Financial Officer) |
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EXHIBIT 31.1
INNOVATIVE PRODUCT OPPORTUNITIES, INC.
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Doug Clark, certify that:
1. I have reviewed this Form 10-Q of INNOVATIVE PRODUCT OPPORTUNITIES, INC.;
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 registrant as of, and for, the periods presented in this report;
4. The registrant’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 registrant 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 registrant, 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant'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
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting.
Dated: May 15, 2014
By: /s/ Doug Clark
Doug Clark
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
INNOVATIVE PRODUCT OPPORTUNITIES, INC.
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Robert MacLean, certify that:
1. I have reviewed this Form 10-Q of INNOVATIVE PRODUCT OPPORTUNITIES, INC.;
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 registrant as of, and for, the periods presented in this report;
4. The registrant’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 registrant 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 registrant, 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant'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
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting.
Dated: May 15, 2014
By: /s/ Robert MacLean
Robert MacLean
Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32.1
INNOVATIVE PRODUCT OPPORTUNITIES, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of INNOVATIVE PRODUCT OPPORTUNITIES, INC. (the Registrant) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Doug Clark, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Doug Clark and will be retained by INNOVATIVE PRODUCT OPPORTUNITIES, INC. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: May 15, 2014
By: /s/ Doug Clark
Doug Clark
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
INNOVATIVE PRODUCT OPPORTUNITIES, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of INNOVATIVE PRODUCT OPPORTUNITIES, INC. (the Registrant) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert MacLean, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Robert MacLean and will be retained by INNOVATIVE PRODUCT OPPORTUNITIES, INC. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: May 15, 2014
By: /s/ Robert MacLean
Robert MacLean
Chief Financial Officer
(Principal Financial Officer)