The accompanying footnotes are an integral part of these consolidated
financial statements.
NOTES TO FINANCIAL STATEMENTS
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.
On March 1, 2012 the company entered into a license agreement with Szar
International, Inc. (dba Cigar & Spirits Magazine) (-Cigar & Spirits-) and
moved offices to our new California address with Cigar and Spirits. The
agreement grants Innovative the right to market the products of Cigar & Spirits
including but not limited to the sales, promotion, and advertising vehicles of
the Magazine. There are no specific rent terms included in the license agreement
but verbally they have agreed to allow Innovative to use their office on an
on-going basis free of additional charge. On July 8, 2013, Innovative received
written notice that Cigar & Spirits will cancel the license agreement on
August 1, 2013.
Since March 1, 2012, the Company has not earned revenues from rights acquired
under this license agreement.
Restatement:
The Balance sheet, statement of operations and the statement of cash flows for
the three and six months ended June 30, 2012 have been restated to exclude the
operations and cash flows of Cigar & Spirits. On April 11, 2013, the Company
reconsidered its original conclusion and determined that the Company is not
the primary beneficiary of Cigar & Spirits since it does not have (1) the
responsibility to absorb the losses of Cigar & Spirits (2) the ability to
direct the activities of Cigar & Spirits. As such, the original Form 10-Q filed
by the Company for the quarterly periods ended March 31, 2012, June 30, 2012
and September 30, 2012 should not be relied on.
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A summary of the effect of the restatement is as follows:
As Reported Restatement As Restated
============= ============= ============
Balance sheet as of
June 30, 2012
---------------------
Non-controlling interest $ (50,140) $ 50,140 $ -
Statement of Income -
For the Three Months
Ended June 30, 2012
---------------------
Revenue $ 32,789 $ (32,789) $ -
Cost of sales $ 615 $ (615) $ -
General and
administrative expense $ 115,777 $ (59,393) $ 56,384
Stock-based compensation $ 149,333 $ - $ 149,333
Net loss attributed to
non-controlling interest $ 27,219 $ (27,219) $ -
Net loss $ (205,717) $ - $ (205,717)
Net loss per share $ (0.00) $ - $ (0.00)
Statement of Income
- For the Six Months
Ended June 30, 2012
---------------------
Revenue $ 44,644 $ (44,644) $ -
Cost of sales $ 3,678 $ (3,678) $ -
General and
administrative expense $ 163,242 $ (74,558) $ 88,684
Stock-based compensation $ 149,333 $ - $ 149,333
Net loss attributed
to non-controlling interest $ 33,592 $ (33,592) $ -
Net loss $ (238,017) $ - $ (238,017)
Net loss per share $ (0.00) $ - $ (0.00)
Statement of Cash Flows
- For the Six Months Ended
June 30, 2012
Net cash flows used in
operating activities $ (114,278) $ 31,392 $ (82,886)
Net cash provided by
investing activities $ 948 $ (948) $ -
Net cash provided by
financing activities $ 110,503 $ (33,300) $ 77,203
Net change in cash $ (2,827) $ (2,856) $ (5,683)
|
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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, 2012 of Innovative Product Opportunities Inc. in our Form 10-K
filed on April 15, 2013.
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 June 30, 2013 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 June 30, 2013 and
December 31, 2012 of $6,051,678 and $5,928,585, respectively. 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 Officer. 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.
F6
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.
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 (e.g., scheduling, design concepts, source and engage
prototyping, review, adjust and re-design, re-prototype and submit for field
testing, source and engage production modules, post production implementation).
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.
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.
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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 adopted a stock option plan on August 30, 2011, but has not
granted any stock options.
RECENT ACCOUNTING PRONOUNCEMENTS
There have been no recent accounting pronouncements or changes in accounting
pronouncements that impacted the quarter ended June 30, 2013 or which are
expected to impact future periods, that were not already adopted and disclosed
in prior periods.
NOTE 3 - CUSTOMER DEPOSITS
During the quarterly period ended June 30, 2013, the company invoiced and
received cash in the amount of $14,000 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 has not met a
contractually specific milestone in the design project.
The customer deposits were received by two customers who are shareholders and
note holders of the Company. One customer advanced $7,000 in cash holds notes
payable of $45,750 in the Company at June 30, 2013 and is a 0% and 5.7%
shareholder at June 30, 2013 and August 7, 2013, respectively. The second
customer also advanced $7,000 in cash holds notes payable of $42,917 in the
Company at June 30, 2013 and is a 0% and 5.0% shareholder at June 30, 2013
and August 7, 2013, respectively.
NOTE 4 - NOTES PAYABLE
On January 8, 2013, the Company issued a promissory note in the amount of
$6,000. 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. 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. 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. This note is unsecured, bears no interest and is payable on demand
by the note holder.
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On June 18, 2013, the Company amended an unsecured, non-interest bearing
promissory note payable on demand in the amount $1,750 issued to the
Cellular Connection Ltd. The modification of the Note has been accounted
for as debt extinguishment and the issuance of a new debt instrument. Under
the terms of the Side Letter Agreement, the Note has a fixed conversion
price of $0.0001 per share of common stock. In additional, as a result of
the modification the face value of the Note was increased from $1,750 to
$3,500 resulting in a finance charge of $1,750. The note bears interest at
20% per annum and allows for the lender to secure a portion of the Company
assets up to 200% of the face value of the note and mature one year from the
day of their respective issuance. The amendment of the terms of Promissory
Note resulted in a beneficial conversion feature of $3,500 since the closing
price of common stock on June 18, 2013 exceeded the fixed conversion price.
The beneficial conversion feature of $3,500 is included in additional
paid-in capital and was fully amortized and included in interest expense.
On June 18, 2013 the holder of the note converted $3,500 of principal plus
accrued interest into 35,000,000 shares of the Company's common stock.
NOTE 5 - 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 April 30, 2013, the Company received for no consideration 12,000,000 shares
of its common stock for cancellation, the effect of the cancellation of shares
was immaterial thus no retroactive treatment was applied.
On May 8, 2013, the Company issued 40,000,000 shares of common stock valued at
$76,000 as stock-based compensation for business development and consulting
services.
On June 18, 2013, the holder a promissory note converted $3,500 of principal
and interest into 35,000,000 shares of the Company's common stock at a fixed
conversion price of $0.0001 per share.
NOTE 6 - SUBSEQUENT EVENT
On July 2, 2013, the company amended an unsecured, non-interest bearing
promissory note payable on demand in the amount $12,500 issued to the Al Kau.
Under the terms of the Side Letter Agreement, the Note has a fixed conversion
price of $0.0001 per share of common stock. In additional, as a result of the
modification the face value of the Note was increased from $12,500 to $18,000.
The note bears interest at 20% per annum and allows for the lender to secure a
portion of the Company assets up to 200% of the face value of the note and
mature one year from the day of their respective issuance. 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.
On July 8, 2013, Innovative received written notice that Cigar & Spirits will
cancel the license agreement on August 1, 2013 (Note 1)
On August 6, 2013, the Company filed with State of Delaware a Certificate of
Designation to amend the Certificate of Incorporation. The amendment increases
the total number of shares of which the Company share has the authority to
issue to 3,001,000,000 shares consisting of 3,000,000,000 shares of common
stock, par value $0.0001 per share and 1,000,000 shares of preferred stock,
par value $0.001 per share. All share information has been revised to reflect
the increase in the total number of shares.
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