Item 1. "BUSINESS" and Item 6 "MANAGEMENT'S DISCUSSION AND DESCRIPTION OR PLAN OF OPERATION" below.
ITEM 1. DESCRIPTION OF BUSINESS
A. IN GENERAL.
Innovative Software Technologies, Inc.(the "Company"), a California Corporation, was incorporated on September 23, 1996. The Company is a development stage company, engaged in the business of specialty software sales on the Internet. The Company's plan is to develop an Internet web site and offer discount sales of specialty business to business software to businesses, with after market support by local support teams of computer and software technicians and personnel. The Company has hired a web site designer with experience not only web site development but also wholesale buying and retail sales of software. The Company's plan is to become the leading seller of business related software on the Internet.
Government approval is not necessary for the Company's business, and government regulations have no or only a negligible effect on their respective businesses.
The Company has not booked any significant research and development costs and therefor do not expect to pass any of those costs to customers. And has no product development or research and development costs.
On November 26, 1999, the Company effected an 8 to 1 forward split of its capital common stock, increasing the authorized common shares to 160,000,000, and its par value to $0.008.
The Company's mailing address is 827 State Street, Suite 26, Santa Barbara, CA 93101.The telephone number of its principal executive office is (805) 560-1308.
FORWARD LOOKING STATEMENTS
This registration statement contains forward-looking statements. The Company's expectation of results and other forward-looking statements contained in this registration statement involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from those expected are the following: business conditions and general economic conditions; competitive factors, such as pricing and marketing efforts; and the pace and success of product research and development. These and other factors may cause expectations to differ.
THE INDUSTRY
The Internet industry is a young industry, but one of the fastest growing industries in the country. The Company has seen a market niche in providing business to business computer software and hardware sales, coupled with local aftermarket support, as opposed to an Internet sale that never involves the prospect of human contact, if the customer has a problem or a question.
MARKETING
The Company is developing an Internet web site with full e commerce capabilities, which will offer the company's products for sale to the Internet business consumer. The Company will promote its web site and its products by conventional advertising and marketing. With the proceeds of this offering, the Company plans to hire a sales force and offer "multi-level marketing" incentives for sales.
To help achieve its sales goals, the Company plans to implement an aggressive online marketing campaign. The objective will be to name awareness for the Company in the online community and to continually acquire new visitors to its Web site. One of the best ways to attract this target audience is to achieve high visibility in the places where prospective customers are likely to be browsing. The Company's online campaign will target sites that generate high traffic from Internet users who fit the Company's customer profile. In order to create this market presence and increase customer awareness, the Company intends to promote its Web site on the most effective search engines, directories and promotional sites the Internet offers. However, the Company has not yet developed its Web site, and there can be no assurance that it will implement these programs. The programs to establish visibility and increase traffic to the web site include directory submissions to make sure the company is listed in the top five listings on the major search engines such as Yahoo, America Online, Excite, Infoseek, HotBot, AltaVista, and Lycos, when a potential visitor types in key words related to business software sales. Of course, there can be no assurance that the Company can obtain such a status, but it will continually update its submissions to search engines to keep them current and will update its site weekly. The Company will review its site data to optimize its listing. Once the site data has been perfected, the Company's site will be submitted to the top 75 search engines and promotional sites.
While listing a Web site with the search engines and promotional sites is a high priority for the foundation of the Company's Internet program, targeted links with sites of similar interest is another powerful method of obtaining visitors that are interested in the Company's site. The Company will search for sites of similar interest where it is likely to find its target audience to place targeted links. These links will increase targeted traffic to the Company's Web site.
The Company intends to design a professional banner and place it with various sites on a "reciprocal" basis, at no charge to the Company. The Company also plans to purchase online ad banners on highly trafficked Web sites that appeal to the Company's target audience. The Company will work with a nationally recognized media buying firm to research the sites that are regularly visited by prospective customers in order to design and to execute an online advertising campaign on a cost-per-lead or similar direct response basis.
Online communities such as Mailing Lists, Newsgroups, and Online Service Forums tend to be very successful in driving traffic to sites as Internet surfers use these communities to get advice from their peers. The Company will work with a firm to seed messages about its offerings in the various online communities that are visited by its target audience. Companies specializing in Community Discussion Seeding include Word of Net Promotions, Web promote and Agency.
Targeted e-mail announcements with information about the Company's products and services will be sent to individuals who have expressed an interest in receiving information within targeted categories. These individuals have voluntarily signed up to receive these e-mail messages about specific topics and are more likely to read them. Response rates are expected to average between 5% to 10%.These efforts will results in Company Web site visits by these individuals because they have an interest in the Company's products and services and can click-through Hyperlinks created in the Company's e-mail announcement. Each e-mail message will contain a header that specifies that the e-mail was sent to the recipient because they had subscribed to a particular service.
The Company expects to maintain a clean corporate image by practicing "etiquette" when sending e-mail messages. In order to differentiate between e-mail messages that are voluntarily requested and true "spamming" from unwelcome sources, the Company plans to only send targeted e mail to those individuals who have voluntarily requested to receive such announcements, and always give the participants the option to remove themselves from the e mail lists.
The Company intends to announce its products and services on the Web in press relases. Favorable articles or editorial pieces about the Company's Web site can generate tremendous visibility and opportunity to sell its products and services. The Company will e-mail its press releases to targeted publications selected from a database of over 30,000 media resources. Press releases can be distributed within 72 hours.
THE PRODUCTS
The Company offers a full line of business oriented software manufactured by others.
PATENTS
The Company holds no patents for its products. The Company is the registered owner of the Internet domain name, www.software-software-software.com.
COMPETITION
The business of providing retail business to business computer software sales is one of intense competition. Other companies making Internet software sales and other companies have financial resources superior to the Company, so there can be no assurance that the Company's projected income will not be affected by its competition. There are also many other companies with greater financial resources that the Company who offer computer sales on the Internet. However, the Company feels it is able to compete adequately with these other companies, by maintaining and updating its website to insure that it receives recognition from the Internet search engines on an ongoing basis. However, there can be no assurance that companies with greater buying power will be able to undercut the Company's pricing structure.
GOVERNMENT REGULATION
Government approval is not necessary for the Company's business, and government regulations have no effect or a negligible effect on its business.
EMPLOYEES
The Company presently employs two employees, the President, Jeffrey Volpe, who devotes his part time efforts to the Company, and a computer consultant, web site designer and software buyer, who devotes his part time efforts to the Company.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
The Company rents professional offices from its attorney, Kenneth G. Eade, on a month to month basis, pursuant to an oral agreement. The Company has no other property, other than office equipment. The Company owns its domain name to its web site, www.software-software-software.com.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not subject to any litigation.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through the solicitation of proxies or otherwise during the fourth quarter of the fiscal year covered by this report.
PART II - -------
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is not listed or quoted at the present time, and there is no present public market for the Company's common stock. The Company has obtained a market maker who has filed a form 211 with the National Association of Securities Dealers to quote the Company's securities on the NASD OTC Bulletin Board, but there can be no assurance that the Company's stock will be quoted on the NASD OTC Bulletin Board.
The Company has not paid any cash dividends since its inception and does not contemplate paying any in the foreseeable future. It is anticipated that earnings, if any, will be retained for the operation of the Company's business.
PENNY STOCK STATUS
If and when it creates a market for its common stock, the Company's common stock is a "penny stock," as the term is defined by Rule 3a51-1 of the Securities Exchange Act of 1934.This makes it subject to reporting, disclosure and other rules imposed on broker-dealers by the Securities and Exchange Commission requiring brokers and dealers to do the following in connection with transactions in penny stocks:
1.Prior to the t`ransaction, to approve the person's account for transactions in penny stocks by obtaining information from the person regarding his or her financial situation, investment experience and objectives, to reasonably determine based on that information that transactions in penny stocks are suitable for the person, and that the person has sufficient knowledge and experience in financial matters that the person or his or her independent advisor reasonably may be expected to be capable of evaluating the risks of transactions in penny stocks. In addition, the broker or dealer must deliver to the person a written statement setting forth the basis for the determination and advising in highlighted format that it is unlawful for the broker or dealer to effect a transaction in a penny stock unless the broker or dealer has received, prior to the transaction, a written agreement from the person. Further, the broker or dealer must receive a manually signed and dated written agreement from the person in order to effectuate any transactions is a penny stock.
2.Prior to the transaction, the broker or dealer must disclose to the customer the inside bid quotation for the penny stock and, if there is no inside bid quotation or inside offer quotation, he or she must disclose the offer price for the security transacted for a customer on a principal basis unless exempt from doing so under the rules.
3.Prior to the transaction, the broker or dealer must disclose the aggregate amount of compensation received or to be received by the broker or dealer in connection with the transaction, and the aggregate amount of cash compensation received or to be received by any associated person of the broker dealer, other than a person whose function in solely clerical or ministerial.
4.The broker or dealer who has effected sales of penny stock to a customer, unless exempted by the rules, is required to send to the customer a written statement containing the identity and number of shares or units of each such security and the estimated market value of the security. The imposition of these reporting and disclosure requirements on a broker or dealer make it unlawful for the broker or dealer to effect transactions in penny stocks on behalf of customers. Brokers or dealers may be discouraged from dealing in penny stocks, due to the additional time, responsibility involved, and, as a result, this may have a deleterious effect on the market for the company's stock.
(1) The above quotations reflect inter-dealer prices, without retail mark up, mark down or commission and may not represent actual transactions.
(2) Source of information: Stockmaster Stock Quotation Service (Stockmaster.com) and Freerealtime.com, NASD Bulletin Board.
SECURITY HOLDERS
The approximate number of record holders of shares of the common stock of the Company outstanding as of December 31, 1999 was 28.
DIVIDENDS
No dividends have been declared or paid on the Company's common stock.
ITEM 6.
ITEM 6.MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
PLAN OF OPERATIONS
The Company is engaged in the business of sales of business to business software on the Internet.The Company's plan is to develop an Internet web site and offer discount sales of software to the public, with after market support by local support teams of computer and software technicians and personnel.The Company has financed its operations to date through the sale of its securities.
During the next twelve months, the Company plans to satisfy its cash requirements by additional equity financing. The Company has no current material commitments. The Company intends to undertake a subsequent private placement of its common stock in order to raise future development and operating capital. The Company depends upon capital to be derived from future financing activities such as subsequent offerings of its stock. There can be no assurance that the Company will be successful in raising the capital it requires through the sale of its common stock.The Company believes that its efforts to raise capital will be assisted greatly by obtaining a quotation of its common stock on the NASD OTC Bullwtin Board, but there can be no assurance that it will be successful in obtaining this listing.
The Company has no current material commitments. The Company will seek to raise capital as a cash reserve, but there can be no assurance that the Company will be successful in raising the capital it needs through sales of its common stock.
There is no contemplated product research and development costs the Company will perform for the next twelve months, because the Company employee who is designing and promoting the web site has been prepaid with company stock. There is no expected purchase or sale of any plant or significant equipment, and there is no expected significant changes in the number of employees contemplated.
The Company's plan of operations over the next 12 months includes implementing its marketing plan by developing its web site, and vigorously promoting it to businesses worldwide. The Company will seek to foster long term relationships and word of mouth referrals through customer service.
The Company has no current material commitments. The Company has just recently commenced operations, has no significant revenue, and is dependent upon the raising of capital through placement of its common stock. There can be no assurance that the Company will be successful in raising the capital it requires through the sale of its common stock.
PATENTS
The Company holds no patents for its software.
FORWARD LOOKING STATEMENTS
This registration statement contains forward-looking statements. The Company's expectation of results and other forward-looking statements contained in this registration statement involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from those expected are the following: business conditions and general economic conditions; competitive factors, such as pricing and marketing efforts; and the pace and success of product research and development. These and other factors may cause expectations to differ.
ITEM 7.
ITEM 7. FINANCIAL STATEMENTS
Information with respect to this item is contained in the financial statements appearing on Item 13 of this Report. Such information is incorporated herein by reference.
ITEM 8.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with accountants on accounting and financial disclosure for the two most recent fiscal years.
PART III. ---------
ITEM 9.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors are elected by the shareholders to terms of one year. Officers serve at the pleasure of the Board of Directors, and serve one year terms unless removed by the Board prior to their terms.
The Executive Officers of the Company and its subsidiaries, and their ages, are as follows:
Name Age Position --------------------- Jeffrey Volpe 43 President, Director
Agata Gotova 28 Secretary, Treasurer, Director
Jeffrey Volpe. Mr. Volpe is the President, Chief Executive Officer, and Director of the Company. He is also the President and Chief Executive Officer of Mercury Software. He is also the Secretary of Russian-caviar.com, Russian Imports.com, and FirsTelevision.com. Mr. Volpe has over twelve years' experience in computer programming, hardware and software. Mr. Volpe has extensive experience in web site design, , PERL and CGI scripting, development of software macros for legal support services, as well as legal research and support.
Agata Gotova. Ms. Gotova is the current Secretary, Chief Financial Officer and Director of the Company. She is also the President and Director of Russian- caviar.com, Russian Imports.com, and FirsTelevision.com. She is also the Secretary of Cinecam Corporation. For the past five years, she has been engaged in the import and export business, specializing in trade with Russia and the former Soviet Republics. For a period of four years prior to 1997, Ms. Gotova resided and did business in Paris, France. She speaks French, English and Russian fluently. Ms. Gotova was educated at the University, Minister of International Affairs, Moscow, and Sorbonne University, Paris.
FAMILY RELATIONSHIPS.
There are no family relationships among directors, executive officers or other persons nominated or chosen by the Company to become officers or executive officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
The Company is not aware of any material legal proceedings involving any director, director nominee, promoter or control person including criminal convictions, pending criminal matters, pending or concluded administrative or civil proceedings limiting one's participation in the securities or banking industries, or findings of securities or commodities law violations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC").Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that, during the fiscal year ended March 31, 1999, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.
ITEM 10.
ITEM 10. EXECUTIVE COMPENSATION.
The Company has made no provisions for cash compensation to its officers and directors. The only non-cash compensation paid to officers and directors was the $2,000 compensation paid to the President in 1999, and the only non-cash compensation paid by the Company is reflected in section in Item 7 below. No salaries are being paid at the present time, and will not be paid unless and until there is available cash flow from operations to pay salaries. There were no grants of options or SAR grants given to any executive officers during the last fiscal year. The following table sets forth the cash and non-cash compensation paid by the Company to its Chief Executive Officer and all other executive officers for services rendered up to the period ended December 31, 1999.
Annual Compensation - ------------------- Name and Position Salary Bonus Annual Deferred Salary
Jeffrey Volpe, President $2000.00 0 0
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The Company has no long-term incentive plans or awards to report for last fiscal year other than that which has already been reported.
COMPENSATION OF DIRECTORS
The members of the Company's Board of Directors are reimbursed for actual expenses incurred in attending Board meetings.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL ARRANGEMENTS
There are no written contracts or agreements. Employee compensation is set by the members of the Board of Directors.
ITEM 11.
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of the shares of Common Stock of the Company as of the date of this disclosure(1), by (I) each person who is known by the Company to be the beneficial owner of more than five percent (5%) of the issued and outstanding shares of common stock, (ii) each of the Company's directors and executive officers, and (iii) all directors and executive officers as a group.
Name and Address Number of Shares Percentage Owned ---------------- ---------------- ---------------- Agata Gotova (2) 5,640,000 61.77% 827 State Street Santa Barbara, CA 93101
Jeffrey Volpe 800,000 8.76% P.O. Box 2132 Ventura, CA 93002
Richard Tearle 600,000 6.57% 1216 State Street #305 Santa Barbara, CA 93101
Officers and Directors 7,040,000 77.11% as a Group - ------------ (1) Table is based on current outstanding shares of 9,129,320. (2) Agata Gotova is the wife of the Company's attorney, Kenneth G. Eade.
ITEM 12.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's founders, or promoters, are Agata Gotova and Jeffrey Volpe. The Company rents its offices from its attorney, Kenneth G. Eade, on a month to month basis on an arms length basis for an insignificant amount of monthly rental.
On March 1, 1999, the Company issued 100,000 shares to Jeffrey Volpe in exchange for services, and 900,000 shares to Agata Gotova in exchange for organizational costs. These shares were issued without registration pursuant to an exemption from registration contained within Section 4(2) of the Securities Act of 1933, to sophisticated investors who had full access to company financial and other information.
On April 6, 1999, the Company issued 102,100 shares of common stock in a Regulation D Rule 504 offering to 22 individuals, in exchange for $2200.00 in gross offering proceeds.
There have been no other transactions since the beginning of fiscal year 1998, or any currently proposed transactions, or series of similar transactions, to which the Company was or is to be a party, in which the amount involved exceeds $60,000, and in which any of the officers, or directors, or holders of over 5% of the Company's stock have or will have any direct or indirect material interest. The Company does not currently have any policy toward entering into any future transactions with related parties.
ITEM 13.
ITEM 13. INDEX TO EXHIBITS AND REPORTS ON FORM 8-K
(a)Financial Statements (included in Part II of this Report):
Report of Independent Certified Public Accountant Financial Statements Balance Sheets Statement of Loss And Accumulated Deficit Statements of Cash Flows Statements of Stockholder's Equity Notes to Consolidated Financial Statements
(b) Reports on Form 8-K: Not Applicable (c) Exhibits
Exhibit No. Description - ------------ ----------- Item 13. FINANCIAL STATEMENTS
Report of Independent Certified Public Accountant dated February 29, 2000 Financial Statements Balance Sheets Statement of Loss and Accumulated Deficit Statements of Stockholder's Equity Statements of Cash Flows Notes to Financial Statements
REPORT OF INDEPENDENT AUDITOR
To the Shareholders and Board of Directors Innovative Software Technologies, Inc.
I have audited the accompanying balance sheets of Innovative Software Technologies, Inc. (A Development Stage Company) as of December 31, 1999 and December 31, 1998 and the related statements of income, stockholders' equity, and cash flows for the year ended December 31, 1999 and the year then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for our opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Innovative Software Technologies, Inc. (A Development Stage Company) at December 31, 1999 and December 31, 1998, and the results of operations and cash flows for the year then ended, in conformity with generally accepted accounting principles.
Oxnard, California /s/ Roger G. Castro February 29, 2000
[CAPTION] Innovative Software Technologies, Inc. (A Development Stage Company) BALANCE SHEET AS OF DECEMBER 31, 1999 AND DECEMBER 31, 1998
December 31 December 31 1999 1998 ASSETS Current Assets: Cash $ 1,000 $ 1,000
Total Current Assets -------- -------- 1,000 1,000 -------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
Stockholders' Equity:
Common stocks, $.008 par value Authorized shares - 20,000,000 Issued and outstanding shares 9,149,320 9,149 9,149 Paid in capital 9,144 9,144 Deficit accumulated during development stage ( 17,893) ( 17,502) --------- --------- Total Stockholders' Equity 400 791 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,000 $1,000
<[CAPTION> Innovative Software Technologies, Inc. (A Development Stage Company) STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE YEAR ENDED DECEMBER 31, 1998 AND FROM MAY 27, 1998 (INCEPTION) THROUGH DECEMBER 31, 1999
Cumulative During Development December 31 December 31 Stage 1999 1998
Income Sales $-0- -0- -0- ------- ------ --------
Total Income - - - ------- ------ -------- Expenses:
Administrative Expenses (17,983) (391) (17,502) -------- ------- ---------
Total Expenses (17,983) (391) (17,502) -------- ------- --------- Net loss (17,983) (391) (17,502) ======== ======== =========
[CAPTION] Innovative Software Technologies, Inc. (A Development Stage Company) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED December 31, 1998 AND FOR THE YEAR ENDED DECEMBER 31, 1998 AND FROM MAY 27, 1998 (INCEPTION) THROUGH DECEMBER 31, 1999
Cumulative During Development December 31 December 31 Stage 1999 1998 ------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
$ -0- -0- -0- ------- ---------- ---------- Net Loss$ (17,983) $ (391) $ (17,502) Accounts payable 991 391 600 Stocks issued for services 15,702 15,702 ---------- ---------- NET CASH USED BY OPERATING ACTIVITIES ( 1,200) 237 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Stocks issued for cash 2,200 2,200 ------- ---------- ---------- NET CASH FROM FINANCING ACTIVITIES 215,012 7,500 ------- ---------- ---------- INCREASE (DECREASE) IN CASH 1,000 1,000 ------- ---------- ---------- BEGINNING CASH -0- 1,000 - ------- ---------- ---------- ENDING CASH $ 1,000 $ 1,000 $1,000 ========= ========== ==========
[CAPTION] Innovative Software Technologies, Inc. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY FROM MAY 27, 1998 (INCEPTION) THROUGH DECEMBER 31, 1999