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 June 30, 2013
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
DELAWARE 42-1770123
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filed, a non-accelerated filed, or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated filer [ ] Accelerated filer [ ] Non-Accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of August 14, 2013 the Issuer had 500,000,000 shares of common stock issued and outstanding, par value $0.0001 per share.
INNOVATIVE PRODUCT OPPORTUNITIES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2013
(A Development Stage Enterprise)
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1 - Balance Sheets (Unaudited) as of June 30, 2013
and December 31, 2012 ...........................................F1
Statements of Operations (Unaudited) for the three and six months
months ended June 30, 2013 and 2012 and from inception
(April 3, 2009) to June 30, 2013..................................F2
Statements of Cash Flows (Unaudited) for the
six months ended June 30, 2013 and 2012 and from inception
(April 3, 2009) to June 30, 2013.................................F3
Notes to Financial Statements (Unaudited)......................F4-F9
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................4
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.........7
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Item 4T - Controls and Procedures............................................7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings..................................................8 Item 1A - Risk Factors.......................................................8 Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds........8 Item 3 - Defaults Upon Senior Securities....................................8 Item 4 - Mine Safety Disclosures............................................8 Item 5 - Other Information ................................................9 Item 6 - Exhibits...........................................................10 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
BALANCE SHEETS
(Unaudited)
June 30, 2013 December 31, 2012
============= ================
ASSETS
Current assets
Cash $ 995 $ 2,268
____________ _______________
Total current assets 995 2,268
____________ _______________
Total assets $ 995 $ 2,268
============= ================
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LIABILITIES AND STOCKHOLDERS'DEFICIT
Current liabilities
Accounts payable and accrued
liabilities $ 8,783 $ 8,234
Customer deposits 14,000 --
Notes payable 99,395 78,417
Due to related party 76,895 73,602
____________ _______________
Total current liabilities 199,073 160,253
____________ _______________
Total liabilities 199,073 160,253
____________ _______________
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,
411,000,000 and 348,000,0000
shares issued and outstanding as
of June 30, 2013 and
December 31, 2012, respectively 41,100 34,800
Additional paid-in capital 5,812,500 5,735,800
Accumulated deficit during
development stage (6,051,678) (5,928,585)
____________ _______________
Total stockholders' deficit (198,078) (157,985)
____________ _______________
Total liabilities and stockholders' deficit $ 995 $ 2,268
============= ================
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The accompanying footnotes are an integral part of these financial statements.
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
(Unaudited)
For the For the For the For the from inception
three months three months six months six months (April 3, 2009)
ended June 30, ended June 30 ended June 30 ended June 30 through
2013 2012 2013 2012 June 30 2013
(restated-note 1) (restated-note 1)
=============== ============== ============== ============== ================
Sales $ -- $ -- $ -- $ -- $ 21,000
Cost of sales -- -- -- -- --
-------------- ------------- ------------- ------------- ---------------
Gross profit -- -- -- -- 21,000
-------------- ------------- ------------- ------------- ---------------
Operating expenses
Bad debts -- -- -- -- 21,000
General and administrative 23,672 56,384 41,843 88,684 245,828
Stock-based compensation 76,000 149,333 76,000 149,333 5,588,000
-------------- ------------- ------------- ------------- ---------------
Total expenses 99,672 205,717 117,843 238,017 5,854,828
-------------- ------------- ------------- ------------- ---------------
Net operating loss (99,672) (205,717) (117,843) (238,017) (5,833,828)
-------------- ------------- ------------- ------------- ---------------
Other income (expense)
Gain on settlement of
accounts receivable -- -- -- -- 336,000
Other-than-temporary
impairment loss on securities -- -- -- -- (124,950)
Loss on cancellation
of securities -- -- -- -- (211,050)
Interest expense (5,250) (5,250) (217,850)
-------------- ------------- ------------- ------------- ---------------
(5,250) -- (5,250) -- (217,850)
-------------- ------------- ------------- ------------- ---------------
Net loss for the period $ (104,922) $ (205,717) $ (123,093) $ (238,017) $ (6,051,678)
=============== ============== ============== ============== ================
Net loss per common
share - basic $ 0.00 $ 0.00 $ 0.00 $ 0.00
=============== ============== ============== ==============
Weighted average number
of common shares
outstanding - basic 367,868,133 170,417,581 357,988,952 144,208,789
=============== ============== ============== ==============
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The accompanying footnotes are an integral part of these consolidated
financial statements.
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
(Unaudited)
From
Inception
(April 3
For the six For the six 2009)
months ended months ended through
June 30, 2012 June 30, 2011 June 30,2012
(restated-Note 1) (restated-Note1)
Cash flows from ------------- ------------- ------------
operating activities
Net loss $ (123,093) $ (238,017) $ (6,051,678)
Adjustments to
reconcile net loss
to net cash used in
operating activities
Shares issued to founder -- -- 2,000
Stock issued for services 76,000 149,333 5,588,000
Stock issued for interest 1,750 -- 1,750
Amortization of beneficial
conversion feature 3,500 -- 216,100
Change in operating assets
and liabilities
Increase in accounts payable
and accrued liabilities 549 5,798 8,783
Increase in customer deposit 14,000 -- 14,000
------------- ------------- ------------
Net cash used in
operating activities (27,294) (82,886) (221,045)
------------- ------------- ------------
Cash flows from
financing activities
Advances from related party 4,427 24,244 343,320
Repayment of advances
to related party (1,134) (16,541) (236,425)
Proceeds from notes payable 22,728 84,500 142,645
Repayment of notes payable -- (15,000) (27,500)
------------- ------------- ------------
Net cash provided by
financing activities 26,021 77,203 222,040
------------- ------------- ------------
Net change in cash (1,273) (5,683) 995
Cash, beginning of the period 2,268 6,642 --
------------- ------------- ------------
Cash, end of the period $ 995 $ 959 $ 995
============= ============= ============
Supplemental disclosure of
non-cash investing and
financing activities
Conversion of due to related
party for common stock $ -- $ -- $ 30,000
============= ============= ============
Conversion of notes payable
for common stock $ 3,500 $ -- $ 3,500
============= ============= ============
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The accompanying footnotes are an integral part of these financial statements.
Innovative Product Opportunities Inc.
(A Development Stage Enterprise)
(Unaudited)
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.
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.
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.
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.
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.
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, 2013, 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, 2013.
BUSINESS OVERVIEW
We were 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 as the Company has not generated significant revenue from its operations and is currently seeking new business opportunities. We expect to incur losses in the foreseeable future due to significant costs associated with our business startup, developing our business and costs associated with on-going operations. Our business is to be a service only product development firm to meet the needs of new and emerging product ideas available for sale today and in the future. Our Certified Engineering Technicians can participate in the creation of products, from hand sketches and design through prototyping and construction. We offer project management to assist our client to produce finished parts ready to market in numerous industries including, but not limited to, consumer and household goods, office products, furniture, and toys. We believe that we will be able to deliver a complete solution to startup and development stage companies.
On March 1, 2012, we entered into a License Agreement with Szar International, Inc. (dba Cigar & Spirits Magazine) ('Cigar & Spirits'). Under the terms of the Agreement, we have the right to market the products of Cigar & Spirits including but not limited to the sales, promotion and advertising vehicles. We have agreed to pay a fee of 1.5% of all sales generated plus a management fee of 1.5% based on the total monies paid for employee salaries, benefits and commissions. The Company is responsible for all expenses that relate to sales generated under the License Agreement. Cigar & Spirits may at any time in its sole discretion, with sixty days prior notice, terminate the agreement and revoke the license granted for any reason whatsoever and upon such termination we will immediately stop using the Cigar & Spirits trade names. 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.
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012 AND FROM INCEPTION (APRIL 3, 2009) THROUGH JUNE 30, 2013.
REVENUES
Our revenue for the three and six months ended June 30, 2013 was $0 and $0, respectively, compared to $0 and $0 for the three and six months ended June 30, 2012. Our revenue from inception (April 3, 2009) through June 30, 2013 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 June 30, 2013 and 2012 and for the cumulative period from Inception (April 3, 2009) through June 30, 2013.
OPERATING EXPENSES
Our general and administrative expense for the three and six months ended June 30, 2013 was $28,922 and $56,384, respectively, compared to $47,093 and $88,684 for the three and six months ended June 30, 2012. 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 June 30, 2013, we issued 40,000,000 shares of common stock of the Company valued at $76,000 for business development and consulting services.
NET INCOME/LOSS
Our net loss for the three and six months ended June 30, 2013 was $104,922 and $123,093 respectively, compared to $205,717 and $238,017 for the three and six months ended June 30, 2012. Our losses during the quarter ended June 30, 2013 and 2012 are due to costs associated with professional fees, our transfer agent investor relations and stock-based compensation.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
As of June 30, 2013, we had total current assets of $995 and total current liabilities of $199,073, resulting in a working capital deficit of $198,078. At June 30, 2013, we had cash of $995. Our cash flows used in operating activities for the six months ended June 30, 2013 was $27,294. 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 June 30, 2013 was $26,021. 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 deficit reported at June 30, 2013 is largely a result of operating expenses for professional fees, our transfer agent, investor relations, stock-based compensation and loss on settlement of debt.
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. 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.
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 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 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 and others. The loans from our Chief Executive Officer 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.'
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, 2013, 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 June 30, 2013 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.
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.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
During the quarter ended June 30, 2013, we did not have any defaults upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
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.
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
inancing activities $ 110,503 $ (33,300) $ 77,203
Net change in cash $ (2,827) $ (2,856) $ (5,683)
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ITEM 6. EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
3.1 Certificate of Incorporation, dated April 3, 2009 (included as
Exhibit 3.1 to the Form S-1 filed June 22, 2010, and incorporated
herein by reference).
3.2 Bylaws, dated April 3, 2009 (included as Exhibit 3.2 to the Form S-1
filed June 22, 2010, and incorporated herein by reference).
3.3 Certificate of Amendment to the Certificate of Incorporation, dated
August 8th, 2013 (filed herewith).
4.1 Specimen Stock Certificate (included as Exhibit 4.1 to the Form S-1
filed June 22, 2010, and incorporated herein by reference).
4.2 Certificate of Designation of Preferences, Rights and Limitations of
Series A Convertible Preferred Stock, dated August 6th, 2013
(filed herewith)
10.1 Innovative Product Opportunities Inc. Trust Agreement (included as
Exhibit 10.1 to the Form S-1 filed June 22, 2010, and incorporated
herein by reference).
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350,as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
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.
Dated: August 14, 2013 By:/s/ Doug Clark
----------------------------
Doug Clark, Principal Executive Officer
President and Chairman of the Board
Dated: August 14, 2013 By:/s/ Robert McLean
----------------------------
Robert McLean, Principal Accounting
Officer
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Doug Clark, certify that:
1. I have reviewed this quarterly report of INNOVATIVE PRODUCTS 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 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 and I have disclosed, based on our 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.
Date: August 14, 2013 /s/ Doug Clark ---------------------------------------- By: Doug Clark Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert MacLean, certify that:
1. I have reviewed this quarterly report of INNOVATIVE PRODUCTS 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 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 and I have disclosed, based on our 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.
Date: August 14, 2013 /s/ Robert MacLean ------------------------------------------ By: Robert MacLean Chief Financial and Accounting Officer |
EXHIBIT 32.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of INNOVATIVE PRODUCTS OPPORTUNITIES INC., a Delaware corporation (the "Company"), does hereby certify, to such officer's knowledge, that:
The quarterly report on Form 10-Q for the quarter ended June 30, 2013 (the
"Form 10-Q") of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the
information contained in the Form 10-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Doug Clark ---------------------------------------- By: Doug Clark Chief Executive Officer /s/ Robert MacLean ---------------------------------------- By: Robert MacLean Chief Financial and Accounting Officer August 14, 2013 |
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE
OF INCORPORATION OF INNOVATIVE PRODUCT OPPORTUNITIES, INC.
Innovative Product Opportunities, Inc. filed a Certificate of Incorporation with the Secretary of State of Delaware on April 3, 2009, and a Certificate of Designation on August 6, 2013. Following is an amendment to the Certificate of Incorporation:
It is hereby certified that:
1. The name of the corporation (the "Corporation") is Innovative Product Opportunities, Inc.
2. The Certificate of Incorporation is hereby amended by replacing Article
FOURTH to read:
"FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is: three billion and one million (3,001,000,000)
shares, consisting of a class of three billion (3,000,000,000) shares of
Common Stock, par value of $0.0001 per share and a class of one million
(1 ,000,000) shares of Preferred Stock, par value of $0.001 per share.
The Preferred Stock authorized by this Certificate of Incorporation shall be issued in series.
The Board of Directors is authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series. The Board of Directors shall have the authority to determine the number of shares that will comprise each series. For each series, the Board of Directors shall determine, by resolution or resolutions adopted prior to the issuance of any share thereof, the designations, powers, preferences, limitations and relative or other rights thereof, including but not limited to the following relative rights and preferences, as to which there may be variations among different series:
(a) The rate and manner of payment of dividends, if any;
(b) Whether shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption;
(c) The amount payable for shares in the event of liquidation, dissolution or other winding up of the Corporation;
(d) Sinking fund provisions, if any, for the redemption or purchase of shares;
(e) The terms and conditions, if any, on which shares may be converted or exchanged; (f) Voting rights, if any; and
(g) Any other rights and preferences of such shares, to the full extent now or hereafter permitted, by the General Corporation Law of the State of Delaware.
3. That thereafter, pursuant to resolution of Its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
4. This Certificate of Amendment of the Certificate of Incorporation was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware,
In Witness Whereof, Said corporation has caused this certificate to be signed this 8th day of August, 2013
By: /s/ Doug Clark
Title: Chief Executive Officer and Chairman of the Board
Name: Doug Clark
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EXHIBIT to 10Q
Innovative Product Opportunities, Inc.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, Doug Clark hereby certifies that:
1. He is the President of Innovative Product Opportunities, Inc., a Delaware corporation (the "Corporation").
2. The Corporation is authorized to issue 1,000,000 shares of preferred stock.
3. The following resolutions were duly adopted by the Board of Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of 1,000,000 shares, $0.001 par value, issuable from time to time in one or more series;
WHEREAS, the Board of Directors of the Corporation is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any Series and the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of 200,000 shares of the preferred stock which the corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:
TERMS OF PREFERRED STOCK
Section 1. Designation, Amount and Par Value. The series of preferred stock shall be designated as Series A Convertible Preferred Stock (the "Preferred Stock") and the number of shares so designated shall be 200,000. Each share of Preferred Stock shall have a par value of $0.01 per share.
Section 2. Voting Rights.
a) Subject to the provision for adjustment hereinafter set forth,
each share of Preferred Stock shall entitle the Holder thereof
to the number of votes as shall be equal to the aggregate number
of shares of Common Stock into which such Holder's shares of
Preferred Stock are convertible, multiplied by 100. As used
herein, "Common Stock" means the Corporation's common stock,
par value $0.0001 per share, and stock of any other class of
securities into which such securities may hereafter have been
reclassified or changed into.
b) Except as otherwise provided herein, by law, or in any other
Certificate of Designation creating a series of preferred stock
or any similar stock, the Holders of shares of Preferred Stock,
the holders of shares of Common Stock and any other capital stock
of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
stockholders of the Corporation.
Section 3. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a "Liquidation"), the Holders shall be entitled to receive out of the assets of the Corporation, whether such assets are capital or surplus, for each share of Preferred Stock an amount equal to the Holder's pro rata share of the assets and funds of the Corporation to be distributed, assuming their conversion of Preferred Stock to Common Stock and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Section 4. Conversion. Holders of Preferred Stock shall have the following rights with respect to the conversion of the Preferred Stock into shares of Common Stock:
a) Conversions at Option of Holder. Subject to and in compliance with the provisions of this Section 4, any shares of Preferred Stock may, at the option of the Holder, be converted into fully paid and non-assessable shares of Common Stock. The number of shares of Common Stock to which a Holder of Preferred Stock shall be entitled upon a conversion shall be the product obtained by multiplying the number of shares of Preferred Stock being converted by 1000. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a "Notice of Conversion"). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Notice of Conversion to the Corporation (the "Conversion Date"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. To effect conversions, as the case may be, of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing such shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby are so converted, in which case the Holder shall deliver the certificate representing such shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be cancelled and may not be reissued.
b) Mechanics of Conversion
i. Delivery of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the "Share Delivery Date"), the Corporation shall deliver or cause to be delivered to the Holder a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of shares of Preferred Stock. "Trading Day" shall mean a day in which the Common Stock is traded on a Trading Market. "Trading Market" means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the American Stock Exchange, the New York Stock Exchange, the OTC Bulletin Board or the Pink Sheets, LLC.
ii. Fractional Shares. Upon a conversion hereunder, the Corporation shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share. If the Corporation elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.
c) Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Common Stock issuable upon the conversion of the Preferred Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, reverse split or otherwise, each Holder of Preferred Stock shall have the right, but not the obligation, thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, reverse split or other change by Holders of the maximum number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.
d) Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the date of issuance of the Preferred Stock, there is a capital reorganization of the Common Stock (other than a transaction provided for elsewhere in this Section 4), as a part of such capital reorganization, provision shall be made so that the Holders of the Preferred Stock shall thereafter be entitled to receive upon conversion of the Preferred Stock the number of shares of stock or other securities or property of the Corporation to which a Holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof.
Section 5. Reacquired Shares. Any shares of Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
Section 6. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including,
without limitation, any Notice of Conversion, shall be in writing
and delivered personally, sent by email to ipoinc.net@gmail.com,
sent by a nationally recognized overnight courier service,
addressed to the Corporation, at 28 Argonaut STE 140, Aliso Viejo,
California, USA 92656, Attn: Chief Executive Officer or such other
address or facsimile number as the Corporation may specify for
such purposes by notice to the Holders delivered in accordance
with this Section. Any and all notices or other communications
or deliveries to be provided by the Corporation hereunder shall
be in writing and delivered personally, by email, sent by a
nationally recognized overnight courier service addressed to each
Holder at the email or physical address of such
Holder appearing on the books of the Corporation, or if no such
email or address appears, at the principal
place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via email at the
email address specified in this Section prior to
5:30 p.m. (Eastern Standard time), (ii) the date after the date of
transmission, if such notice or communication is delivered via
email at the email address specified in this
Section later than 5:30 p.m. (Eastern Standard time) on any date
and earlier than 11:59 p.m. (Eastern Standard time) on such date,
(iii) the second Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required
to be given. "Business Day" shall mean a day which is not a
(i) Saturday, (ii) Sunday or (iii) a national holiday observed
in either the United States or Canada.
b) Lost or Mutilated Preferred Stock Certificate. If a Holder's Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Corporation.
c) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, USA, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Certificate of Designation (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the State of Delaware, Country of United states of America (the "Delaware State Courts") Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware State Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or such Delaware State Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
d) Waiver. Any waiver by the Corporation or the Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation. The failure of the Corporation or the Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation. Any waiver must be in writing.
e) Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.
f) Next Business Day. Whenever any obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
g) Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
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RESOLVED, FURTHER, that any officer or director of the Corporation be and they hereby are authorized and directed to prepare and file a Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this 6th day of August 2013.
/s/ Doug Clark
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Name: Doug Clark
Title: Chief Executive Officer
and President
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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.0001 per share (the "Common Stock"), of Innovative Product
Opportunities, Inc., a Delaware corporation (the "Corporation"), according to
the conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Corporation in
accordance therewith.
No fee will be charged to the Holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion: ___________________________________________________
Number of shares of Preferred Stock owned prior to Conversion: _______________
Number of shares of Preferred Stock to be Converted: _________________________
Number of shares of Common Stock to be Issued: _______________________________
Number of shares of Preferred Stock subsequent to Conversion: ________________
[HOLDER]By:___________________________________
Name:
Title: