UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 21, 2004
Innova Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-33231 95-4868120
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
17105 San Carlos Blvd., A6151, Ft. Myers Beach, Florida 33931
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (239) 466-0488
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instructions A.2 below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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This Current Report on Form 8-K/A is to report the financial information
that is required to be presented as a result of the acquisition of 100% of the
capital stock of Robotic Workspace Technologies, Inc. (RWT), a Maryland
corporation by the Registrant. On July 21, 2004, the Registrant entered into a
Stock Purchase Agreement with the shareholders of RWT for 100% of the
outstanding capital stock of RWT in exchange for 280,000,000 shares of common
stock of Innova Holdings, Inc.
As a result of the acquisition of 100% of the outstanding capital stock of
RWT by the Registrant, RWT became a wholly-owned subsidiary of the Registrant.
Item 9.01 Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of business acquired.
See Item 9.01(a) attached herewith
(b) Pro Forma financial information.
See Item 9.01(b) attached herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
March 28, 2005
/s/ Walter K. Weisel
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Walter K. Weisel
Chief Executive Officer
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Nature of the Company
Innova Holdings, Inc. (Innova or the "Company") is a software technology company
providing software solutions in the industrial industry, service industry and
consumer markets. The Company's plan of operations is to identify, develop and
acquire technology that is or will become a market leader and to create
opportunities to leverage its software into value-added applications when
combined with other software solutions offered by the Innova group of companies.
Innova's management believes the Company is positioned to become a market leader
for the emerging service and personal robot industry. Innova is empowered by the
expertise, experience, and patented technologies developed by Robotic Workspace
Technologies, Inc. (RWT), a wholly-owned subsidiary, which has served the
industrial market for ten years.
Innova offers a suite of software solutions to the service, personal, and
industrial robotic markets. Its software solutions benefit developers of new
technology and are adaptable to the commercial end-user market as well. Innova
offers its solutions through licensing of its proprietary software and the sale
of its control systems as well as through complete system development and
integration services.
Walter K. Weisel serves as Chairman, Chief Executive Officer, and President of
the Company. With over thirty years experience, Mr. Weisel is recognized as a
pioneer and leader in the robotics industry. An original founding member of the
Robotic Industries Association (RIA), the U.S. robot manufacturers' trade
association, Mr. Weisel served three terms as President. He served on the RIA
Board of Directors and Executive Committee and, as a spokesperson for the
industry, served as an advisor to members of the U.S. Trade Commission and the
U.S. Department of Commerce. Mr. Weisel was a founding member of Robotics
International, a member society dedicated to the advancement of robotic
technology. During his term as President the membership grew to over 16,000
members. Mr. Weisel was awarded the Joseph F. Engelberger Award, which
recognizes the most significant contribution to the advancement of robotics and
automation in the service of mankind. Each year nominations are received from 26
nations worldwide. This award has been presented since 1977.
Mr. Weisel has a long record of advancing technology and growing companies that
develop and commercialize technology. Mr. Weisel served 13 years with Prab
Robots, Inc. as Chief Executive Officer, President, and Chief Operating Officer.
During his tenure, Prab Robots, Inc. was transformed into an international
organization and leader in the fields of industrial robots and automation. While
under his direction, Prab Robots, Inc. was taken public in an Initial Public
Offering, and Unimation, Inc. and several other companies in the U.S. and Europe
were acquired. By 1990, Prab Robots, Inc. was responsible for the largest
installed base of robots in North America and had developed a very successful
robot retrofit business with customers such as General Motors, Ford, and
Chrysler. Mr. Weisel has served as Chairman and Chief Executive Officer of RWT
since its incorporation in 1994, and continues to serve in that capacity as well
as Chairman, Chief Executive Officer and Director of the Company since August
2004.
Business Solutions
Innova, through Robotic Workspace Technologies, Inc. (RWT), delivers its
software through the sale of Control Systems and the licensing of its
Proprietary Software to end-user companies,
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system integrators, manufacturing support providers, software development
companies, and other partners. The proprietary patents, including two pioneer
utility patents issued by the USPTO and several patents pending or awaiting
filing, are owned by RWT and cover all applications pertaining to the interface
of a general use computer and the mobility of robots, regardless of specific
applications.
Control Systems
Universal Robot Controller - The Universal Robot Controller(TM) (URC(TM)) is the
physical control or robot control which operates the robot. It includes the
general purpose PC running Windows, RobotScript and other programs as well as
dedicated separate processors for real-time motion control of the robot. The URC
cabinet houses the PC that the Windows(R) operating system resides in with
RobotScript for direct control of a robot or other motion systems such as
medical robotics. It also incorporates the electronic components needed to
control the robot motion and communicate with other PC devices and platforms
including internet connectivity worldwide. In addition, all inputs and outputs
required for auxiliary equipment are controlled by RobotScript and are included
in the URC cabinet.
Universal Automation Controller - The Universal Automation Controller(TM)
(UAC(TM)), which is in the later stages of development and is expected to be
released soon, is a general-purpose motion control system for automated machines
with fewer than 5-6 axis of movement. The UAC provides the power of a
full-featured open PC motion controller and Programmable Logic Controller (PLC)
in one easy to use PC control system. It provides direct motion control for
complex machines and adds "soft PLC" (software control of Input/Output). The
enhanced motion control capabilities provide greater functionality and full
motion control of less sophisticated machinery as well. The UAC is powered by
RWT's RobotScript(R) software.
The UAC provides standard communications and interface ports, providing maximum
flexibility in choosing off-the-shelf user interface and communications
components. The Company believes that the UAC shortens development time, reduces
manufacturing time, and dramatically decreases the time to market of
motion-based machines, and therefore will greatly improve productivity and
reduce costs in all manufacturing environments.
Licensing of Proprietary Software Solutions - Middleware
RobotScript is a universal programming language based on Microsoft's Visual
Basic(R) Scripting Edition (VBScript(R)) software. It provides a robot language
that is simple to use and easy to learn. From a plain text file, robot
programmers can easily control robot motion, coordinate I/O for auxiliary
equipment and communicate with other PC devices for reporting and data sharing.
Because RobotScript operates in the Windows environment, challenges common to
proprietary control schemes, such as networking and file sharing, are
eliminated. RobotScript can access anything on the operating system or network
as well as utilize the Internet for remote monitoring and control of equipment.
The software can also be easily used to create custom applications specific to
customer needs. A software development kit is provided to allow even novice
developers to quickly create a specialized interface for a particular use in
meeting a customer's need.
The proven success of RobotScript has supported the development of a number of
evolutionary, application-specific modules such as arc-welding, vision systems
and automation control.
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Additional modules are also in development for other robotic applications such
as:
o Guidance Systems
o Sensor Systems
o Voice Control Systems
o Tactile Control Systems
o Laser Welding
o Material Handling
o Medical Applications
o Elder Care Control Systems
o Entertainment Control Systems
o Plasma Cutting
o Autonomous Underwater Vehicles
o Home Land Security Systems
o Security Systems
o Pharmaceutical Production
o TIG/MIG Welding
Gatekeeper is a communication module that serves as the bridge between the
RobotScript programming software and the motion control mechanisms. Gatekeeper
implements a standard protocol that directs device drivers to activate the
appropriate motion control of the robot, Input/Output of auxiliary equipment and
other devices operating in real time. It is the core software used as a
foundation for all current and future software modules and languages.
The Innova suite of software will be marketed and sold to the service and
personal robot markets through Service Robots, Inc., a wholly-owned subsidiary
of Innova. Generally, the Innova suite of software solutions is referred to as
Middleware, which is connectivity software that consists of a set of enabling
services that allow multiple processes running on one or more machines to
interact across a network. Middleware is essential to migrating mainframe
applications to client/server applications and to providing for communication
across heterogeneous platforms. This technology evolved to provide for
interoperability in support of the move to client/server architectures.
Protection of Trade Secrets and Patents - Significant Litigation
On December 9, 2004, RWT filed a case in the United States District Court for
the Middle District of Florida against ABB, Inc. and ABB Robotics AB. The action
alleges misappropriation of trade secrets, breach of contract and breach of the
covenant of good faith. The action stems from dealings between the parties in
2002. RWT seeks a trial by jury, an injunction prohibiting
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continued use of RWT's trade secrets, and money damages. It is possible that
ABB,Inc. or ABB Robotics AB will counterclaim, although no counterclaims have
yet been filed. The action is entitled Robotic Workspace Technologies, Inc. v.
ABB,Inc. and ABB Robotics AB, Case No. 2:04-cv-611-FtM-29-SPC.
Our Business From 1992 Through 2004
Innova was previously named Hy Tech Technology Group, Inc. (Hy Tech) and had as
its sole operating activities its wholly-owned operating subsidiary Hy Tech
Computer Systems, Inc. On August 25, 2004, Hy Tech completed the reverse
acquisition into RWT in which RWT was deemed to be the "accounting acquirer."
Simultaneously, Hy Tech sold its Hy-Tech Computer Systems, Inc. subsidiary and
discontinued its computer systems sales and services business. In connection
with these transactions, Hy-Tech changed its name to Innova Holdings, Inc.
Hy Tech Computer Systems, Inc. (HTCS) was formed in 1992 in Fort Myers, Florida
as a supplier to the information technology business. In January 31, 2003, HTCS
completed a reverse acquisition into SRM Networks, an Internet service provider
and web hosting business, in which HTCS was deemed the "accounting acquirer".
HTCS discontinued SRM Network's Internet business. In connection with the
transaction, SRM Networks, Inc. changed its name to Hy-Tech Technology Group,
Inc.
From 1992 through 2002, HTCS was a leading custom systems builder and authorized
distributor of the world's leading computer system and components. The products
sold by HTCS were "Hy-Tech" branded computer systems - desktops, notebooks and
servers, computer components and peripherals, computer storage products;
computer operating systems and office software; Compaq computer systems -
desktop and servers; computer service; and computer warranty work. At the end of
2003, as a result of substantial losses, the management of HTCS concluded that
the then existing business was not viable, and initiated the changes necessary
to closing its stores, laying off employees and transferring all business to
e-commerce. Negotiations were initiated to acquire RWT and to divest the old
HTCS business, which was accomplished in August 2004. As a result, Innova is no
longer actively selling any of the HTCS products.
On August 25, 2004, Innova issued 280,000,000 shares of common stock for 100% of
the outstanding stock of RWT. For financial reporting purposes this transaction
was treated as an acquisition of Innova and a recapitalization of RWT using the
purchase method of accounting. RWT's historical financial statements replace
Innova's in the accompanying financial statements.
RWT started operations in 1994 with the intent to develop a PC based coordinated
motion controller for industrial robots. Up to that point in time, virtually
everyone in the industry doubted if a PC based controller, using an open
architecture system and based on Microsoft's platform, could ever be developed
and accepted as a standard in the industry. RWT dedicated significant resources
and time, over $6 million and six years, to successfully develop such a
controller and was awarded two pioneer utility patents by the USPTO. RWT
successfully established itself as a provider of a Universal Robot Controller to
the industrial market, and in particular to the automobile industry, the key
market for RWT products. In November 2000, after 10 months of due diligence
verifying source code and the operations of the Universal Robot Controller at
Ford and other production facilities, the Ford Motor Company invested $3.0
million in RWT and planned a substantial order for
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RWT's Universal Robot Controllers. Also, Ford received the first rights to RWT's
development and up to 80% of RWT's production capacity. The Ford Vice President
for Body Assembly, Stamping and Structures joined the RWT Board of Directors. In
June 2001, a joint international press conference announcing the Ford investment
in RWT was held at the 32nd International Robotics Conference and Exposition.
Additionally, RWT successfully sold and installed 10 Universal Robot Controllers
in non-automotive manufacturing environments. However, the business of RWT was
drastically and adversely affected by the economic recession and the impact on
the automobile industry after the September 11, 2001 attacks in the US. After
the September 11, 2001 attacks, Ford cancelled their orders due to large losses
they were incurring. The resulting continued downturn in the economy and RWT's
inability to raise additional capital resulted in the termination of all its
employees, except the Chief Executive Officer and several contract employees.
RWT substantially shut down its operations during December 2002.
RWT today is building back its business and plans to re-emerge as a provider of
the Universal Robot Controller for the broad industrial markets including
automotive, aerospace, research and development, defense, electronics and other
components of the industrial markets. Additionally, it is in the final stages of
developing its Universal Automation Controller that is targeted to the very
broad manufacturing markets globally. And RWT is offering its RobotScript
software and related application modules including Gatekeeper software under
licensing agreements, which are targeted to the service and personal robot
market.
7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Robotic Workspace Technologies, Inc.
Ft Myers Beach, Florida
We have audited the accompanying balance sheet of Robotic Workspace
Technologies, Inc. as of December 31, 2003 and the related statements of
operations, stockholders' deficit, and cash flows for each of the two years then
ended. These financial statements are the responsibility of Robotic Workspace
Technologies, Inc.'s management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Robotic Workspace Technologies,
Inc. as of December 31, 2003 and the results of its operations and its cash
flows for each of the two years then ended, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, Robotic Workspace Technologies, Inc. incurred losses of
$203,829 and $1,878,842 for the years ended December 31, 2003 and 2002,
respectively. Robotic Workspace Technologies, Inc. will require additional
working capital to develop its business until it either (1) achieves a level of
revenues adequate to generate sufficient cash flows from operations; or (2)
obtains additional financing necessary to support its working capital
requirements. These conditions raise substantial doubt about Robotic Workspace
Technologies, Inc.'s ability to continue as a going concern. Management's plans
in regard to this matter are also described in Note 2. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
Lopez, Blevins, Bork & Associates, LLP
Houston, Texas
February 7, 2005
8
ROBOTIC WORKSPACE TECHNOLOGIES, INC.
BALANCE SHEET
December 31, 2003
ASSETS
Current assets
Cash $ 5,116
------------
Total current assets 5,116
Property and equipment, net 3,156
------------
TOTAL ASSETS $ 8,272
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt $ 18,419
Line of credit 225,000
Accounts payable 425,577
Accrued expenses 325,612
Advances - Officer and shareholder 7,500
------------
Total current liabilities 1,002,108
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Long-term debt 1,400,647
Commitments
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 10,000,000 shares authorized,
no shares issued and outstanding --
Common stock, $.001 par value, 900,000,000 shares authorized,
192,645,050 shares issued and outstanding 192,645
Additional paid-in capital 3,276,621
Accumulated deficit (5,863,749)
------------
Total Stockholders' Deficit (2,394,483)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFCIT $ 8,272
============
See accompanying summary of accounting policies
and notes to financial statements.
9
ROBOTIC WORKSPACE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 2003 and 2002
December 31,
2003 2002
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Revenues $ -- $ 159,356
Cost of revenues -- 238,903
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Gross profit (loss) -- (79,547)
------------- -------------
Operating expenses:
Selling, general and administrative 172,765 1,378,497
Depreciation and amortization 626 52,586
Impairment charges -- 271,798
Gain on sale of assets (42,658) --
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Total operating expenses 130,733 1,702,881
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Loss from operations (130,733) (1,782,428)
Interest expense 73,096 96,414
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Net loss $ (203,829) $ (1,878,842)
============= =============
Net loss per share:
Basic and diluted $ (0.00) $ (0.01)
Weighted averaged shares outstanding:
Basic and diluted 192,645,050 192,645,050
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ROBOTIC WORKSPACE TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 2003 and 2002
Common stock Additional
--------------------------- paid-in Accumulated
Shares Amount capital deficit Total
------------ ------------ ------------ ------------ ------------
Balance,
December 31, 2001 192,645,050 $ 192,645 $ 3,276,621 $ (3,781,078) $ (311,812)
Net loss -- -- -- (1,878,842) (1,878,842)
------------ ------------ ------------ ------------ ------------
Balance,
December 31, 2002 192,645,050 192,645 3,276,621 (5,659,920) (2,190,654)
Net loss -- -- -- (203,829) (203,829)
------------ ------------ ------------ ------------ ------------
Balance,
December 31, 2003 192,645,050 $ 192,645 $ 3,276,621 $ (5,863,749) $ (2,394,483)
============ ============ ============ ============ ============
See accompanying summary of accounting policies
and notes to financial statements.
11
ROBOTIC WORKSPACE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2003 and 2002
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (203,829) $ (1,878,842)
Adjustments to reconcile net loss to cash used in
operating activities:
Impairment charges -- 271,798
Gain on sale of assets (42,658) --
Depreciation and amortization 626 52,586
Changes in assets and liabilities:
Accounts receivable -- 300
Inventories -- 131,312
Prepaid assets and other -- 13,211
Accounts payable (13,134) 246,827
Accrued expenses 212,901 31,098
------------ ------------
CASH FLOWS USED IN OPERATING ACTIVITIES (46,094) (1,131,710)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of assets 42,658 --
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances - officers 7,500 --
Line of credit, net -- 10,000
Payments on long-term debt (11,928) (282,500)
Proceeds from long-term debt 11,500 1,399,775
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CASH FROM FINANCING ACTIVITIES 7,072 1,127,275
------------ ------------
NET INCREASE (DECREASE) IN CASH 3,636 (4,435)
Cash, beginning of period 1,480 5,915
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Cash, end of period $ 5,116 $ 1,480
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 10,403 $ 55,977
============ ============
Income taxes paid $ -- $ --
============ ============
See accompanying summary of accounting policies
and notes to financial statements.
12
ROBOTIC WORKSPACE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Nature of the Company
Robotic Workspace Technologies, Inc. (RWT) is a software technology company
providing software solutions to the industrial robotics industry, service
robotics industry and the personal robotics industry. RWT delivers its software
through the sale of Control Systems and the licensing of its Proprietary
Software to end-user companies, system integrators, manufacturing support
providers, software development companies, and other partners. RWT also offers
complete system development and system integration services. The proprietary
patents, including two pioneer utility patents issued by the USPTO and several
patents pending, are owned by RWT and cover all applications pertaining to the
interface of a general use computer and the mobility of robots, regardless of
specific applications. RWT's software solutions benefit developers of new
technology in the service, personal and industrial markets. The control systems
include the Universal Robot Controller and the Universal Automation Controller.
Software available for licensing includes RobotScript, a universal programming
language based on Microsoft's Visual Basic(R) software (VBScript(R)).
RobotScript incorporates Gatekeeper which is software that serves as a bridge
between RobotScript programming software and the Windows operating system.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the balance sheet. Actual results could differ from
those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash and all highly liquid financial
instruments with purchased maturities of three months or less.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price is fixed or determinable and
collectibility is probable.
Product sales are recognized by the Company generally at the time product is
shipped. Shipping and handling costs are included in cost of goods sold.
Allowance for Doubtful Accounts - Earnings are charged with a provision for
doubtful accounts based on past experience, current factors, and management's
judgment about collectibility. Accounts deemed uncollectible are applied against
the allowance for doubtful accounts.
13
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Major
renewals and improvements are capitalized; minor replacements, maintenance and
repairs are charged to current operations. Depreciation is computed by applying
the straight-line method over the estimated useful lives which are generally
three to seven years.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset
and liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized. Additionally,
taxes are calculated and expensed in accordance with applicable tax code.
Basic Loss Per Share
The Company is required to provide basic and dilutive earnings (loss) per common
share information.
The basic net loss per common share is computed by dividing the net loss
applicable to common stockholders by the weighted average number of common
shares outstanding.
Diluted net loss per common share is computed by dividing the net loss
applicable to common stockholders, adjusted on an "as if converted" basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities. For the periods ended December 2002 and 2003, potential dilutive
securities had an anti-dilutive effect and were not included in the calculation
of diluted net loss per common share.
Recent Accounting Pronouncements:
In January 2003, the Financial Accounting Standards Board ("FASB") issued
interpretation No. 46 ("FIN 46") "Consolidation of Variable Interest Entities."
Until this interpretation, a company generally included another entity in its
consolidated financial statements only if it controlled the entity through
voting interests. FIN 46 requires a variable interest entity, as defined, to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns. Certain provisions of FIN 46 became
effective during the quarter ended March 31, 2004, the adoption of which did not
have a material impact on the financial position, cash flows or results of
operations of the Company.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004) "Share-Based
Payment" ("SFAS No. 123R"). SFAS No. 123R addresses all forms of share-based
payment ("SBP") awards, including shares issued under certain employee stock
14
purchase plans, stock options, restricted stock and stock appreciation rights.
SFAS No. 123R will require the Company to expense SBP awards with compensation
cost for SBP transactions measured at fair value. The FASB originally stated a
preference for a lattice model because it believed that a lattice model more
fully captures the unique characteristics of employee stock options in the
estimate of fair value, as compared to the Black-Scholes model which the Company
currently uses for its footnote disclosure. The FASB decided to remove its
explicit preference for a lattice model and not require a particular valuation
methodology. SFAS No. 123R requires us to adopt the new accounting provisions
beginning in our third quarter of 2005. Although the Company is in the process
of evaluating the impact of applying the various provisions of SFAS No. 123R, we
expect that this statement will have a material impact on our consolidated
results of operations.
In April 2004, the Emerging Issues Task Force ("EITF") issued Statement No.
03-06 "Participating Securities and the Two-Class Method Under FASB Statement
No. 128, Earnings Per Share" ("EITF 03-06"). EITF 03-06 addresses a number of
questions regarding the computation of earnings per share by companies that have
issued securities other than common stock that contractually entitle the holder
to participate in dividends and earnings of the company when, and if, it
declares dividends on its common stock. The issue also provides further guidance
in applying the two-class method of calculating earnings per share, clarifying
what constitutes a participating security and how to apply the two-class method
of computing earnings per share once it is determined that a security is
participating, including how to allocate undistributed earnings to such a
security. EITF 03-06 became effective during the quarter ended June 30, 2004,
the adoption of which did not have an impact on the calculation of earnings per
share of the Company.
In July 2004, the EITF issued a draft abstract for EITF Issue No. 04-08, "The
Effect of Contingently Convertible Debt on Diluted Earnings per Share" ("EITF
04-08"). EITF 04-08 reflects the Task Force's tentative conclusion that
contingently convertible debt should be included in diluted earnings per share
computations regardless of whether the market price trigger has been met. If
adopted, the consensus reached by the Task Force in this Issue will be effective
for reporting periods ending after December 15, 2004. Prior period earnings per
share amounts presented for comparative purposes would be required to be
restated to conform to this consensus and the Company would be required to
include the shares issuable upon the conversion of the Notes in the diluted
earnings per share computation for all periods during which the Notes are
outstanding.
Stock-Based Compensation
The Company accounts for its stock-based compensation plans under Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees. The pro forma information below is based on provisions of Statement
of Financial Accounting Standard ("FAS") No. 123, Accounting for Stock-Based
Compensation, as amended by FAS 148, Accounting for Stock-Based
Compensation-Transition and Disclosure, issued in December 2002.
15
2003 2002
------------ ------------
Net loss, as reported $ (203,829) $ (1,878,842)
Add: Intrinsic value expense recorded -- --
Deduct: total stock-based employee
compensation expense determined under
fair value based method -- --
------------ ------------
Pro forma net loss $ (203,829) $ (1,878,842)
============ ============
Earnings per share:
Basic and diluted - as reported (.00) (.01)
Basic and diluted - pro forma (.00) (.01)
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 2002: no dividend yield and expected volatility
of .001%, risk-free interest rate of 2.50%, and expected lives of 10 years.
There were no grants in 2003.
NOTE 2 - FINANCIAL CONDITION AND GOING CONCERN
Robotic Workspace Technologies, Inc. has incurred losses for the years ended
December 31, 2003 and 2002 of $203,829 and $1,878,842, respectively. Because of
these losses, the Company will require additional working capital to develop its
business operations.
Robotic Workspace Technologies, Inc. intends to raise additional working capital
through private placements, public offerings and/or bank financing. During 2004,
Robotic Workspace Technologies, Inc. raised approximately $377,000 from the sale
of preferred stock, $15,000 from the sale of convertible notes which were
subsequently converted into common stock, and $165,000 from debt which was used
to pay down a bank line of credit, see Note 9 - Subsequent Events.
There are no assurances that Robotic Workspace Technologies, Inc. will be able
to either (1) achieve a level of revenues adequate to generate sufficient cash
flow from operations; or (2) obtain additional financing through either private
placements, public offerings and/or bank financing necessary to support Robotic
Workspace Technologies, Inc.'s working capital requirements. To the extent that
funds generated from operations and any private placements, public offerings
and/or bank financing are insufficient, Robotic Workspace Technologies, Inc.
will have to raise additional working capital. No assurance can be given that
additional financing will be available, or if available, will be on terms
acceptable to Robotic Workspace Technologies, Inc.
These conditions raise substantial doubt about Robotic Workspace Technologies,
Inc.'s ability to continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might be necessary should Robotic Workspace Technologies, Inc. be unable to
continue as a going concern.
16
NOTE 3 - IMPAIRMENT
During December 2002, the Company temporarily shut down its operations. The
business of RWT was drastically and adversely affected by the economic recession
and the impact on the automobile industry, the key market for RWT products,
after the September 11, 2001 attacks in the United States of America. Prior to
that, RWT had successfully established itself as a provider to the industrial
market. In November 2000, after 10 months of due diligence verifying source code
and the operations of the Universal Robot Controller at Ford and other
facilities, the Ford Motor Company invested $3.0 million in RWT and planned a
substantial order for RWT's Universal Robot Controllers. Also, Ford received the
first rights to RWT's development and up to 80% of RWT's production capacity.
The Ford Vice President for Body Assembly, Stamping and Structures joined the
RWT Board of Directors.
In June 2001, a joint international press conference announcing the Ford
investment in RWT was held at the 32nd International Robotics Conference and
Exposition. After the September 11, 2001 attacks, Ford cancelled their orders
due to large losses they were incurring. The resulting continued downturn in the
economy and the Company's inability to raise additional capital resulted in the
termination of all its employees, except the Chief Executive Officer and several
contract employees. Also, in an attempt to support the Company during this
period, the Company sold all of its computers, robots and test equipment as well
as other equipment and inventory, and realized an impairment charge of $271,798
for the year ended December 31, 2002.
NOTE 4 - CAPITAL STOCK
The total number of shares of stock of all classes which the Company shall have
the authority to issue is Nine Hundred Ten Million (910,000,000), of which Ten
Million (10,000,000) shall be shares of Preferred Stock with a par value of
$.001 per share ("Preferred Stock"), and Nine Hundred Million (900,000,000)
shall be shares of Common Stock with a par value of $.001 per share ("Common
Stock").
Stock Options:
No compensation cost has been recognized for grants under the stock option plans
since all grants pursuant to these plans have been made at the current estimated
fair values of the Company's common stock at the grant date. There were no
options issued for the year ended December 31, 2003. There were 3,744,133
options issued for the year ended December 31, 2002.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in fiscal 2002: zero dividend yield, expected
volatility of .001%, risk-free interest rate of 2.50% and expected lives of 10
years.
17
The options granted have an exercise price of $.008 per share and vest over
three years. The maximum term of the options is ten years.
The following table summarizes stock option activity:
Outstanding, December 31, 2001 9,681,353
Granted 3,744,133
Canceled --
Exercised --
------------
Outstanding, December 31, 2002 13,425,486
Granted --
Canceled --
Exercised --
------------
Outstanding, December 31, 2003 13,425,486
============
Weighted-average grant-date fair
value of options, granted during
the year $ --
============
Weighted-average remaining, years
of contractual life 6.93
============
NOTE 5 - LINE OF CREDIT
On July 22, 2002, the Company entered into a revolving line of credit of
$225,000 with Fifth Third Bank, Florida, secured by the assets of the Company.
The annual interest rate on unpaid principal is the prime rate plus 2%, due in
monthly installments. Principal and interest were due on July 22, 2003. The line
of credit was paid in January 2005, see subsequent events Note 9.
NOTE 6 - NOTES PAYABLE
On April 17, 2002, the Company borrowed $989,100 under a note agreement with the
Small Business Administration. This loan is secured by the equipment and
machinery assets of the Company and by the personal residence and other assets
of the Company's Chairman and CEO, a principal shareholder and founder of RWT.
The balance outstanding as of December 31, 2003 was $989,100 The annual interest
rate on unpaid principle is 4%, due and payable in monthly installments of
$4,813 beginning September 17, 2002, continuing until April 17, 2032.
In 2002, the company entered into convertible debt notes totaling $429,966.
Terms were 8% per annum, without payment. Accrued interest earned during the
term was to be paid upon maturity on January 31, 2007. The notes were
convertible into Class B Convertible Preferred Stock upon certain future events
that did not materialize, including raising $5 million in additional equity. In
March 2004, the notes plus accrued interest were converted into 61,820,488
18
common shares of Innova Holdings, Inc. The shares were originally converted into
RWT common stock at $.50 a share and then converted into shares of Innova
Holdings, Inc. at 61.37929356 to 1, the effective share exchange ratio for the
merger between RWT and Innova.
Future maturities of these notes as of December 31, 2003 were as follows:
Years Ending December 31,
2004 $ 18,419
2005 19,281
2006 20,067
2007 450,850
2008 21,633
Thereafter 888,816
-----------------
1,419,066
Less: current portion (448,385)
-----------------
$ 970,681
=================
NOTE 7 - INCOME TAXES
The Company has incurred net losses and therefore has no tax liability. The net
deferred tax asset generated by the loss carry-forward has been fully reserved.
The valuation allowance increased by $347,800 in 2003. The cumulative operating
loss carry-forward is approximately $7,360,160 and $7,012,360 at December 31,
2003 and 2002, respectively, and will expire in the years 2020 through 2023.
NOTE 8 - COMMITMENTS
Lease Agreements
Rental expense for the operating leases for the years ended December 31, 2003
and 2002 was $21,879 and $121,853, respectively.
The Company leases office space at 11595 Kelly Road, Ft. Myers, Florida as its
primary operations. The office space lease is with Sunset Concepts, LLC, with
monthly payments of $1,343. The lease commenced in May 2004 and expires in
August 2005. The office lease is cancelable with 30 days notice.
There are no future minimum lease payments under non-cancelable operating leases
(with initial or remaining lease terms in excess of one year) as of December 31,
2003.
NOTE 9 - SUBSEQUENT EVENTS (Unaudited)
In March 2004, $444,965 of convertible notes plus accrued interest were
converted into 61,820,488 shares of common stock.
19
In September 2004, the Company authorized $525,000 of Series B Preferred Stock,
convertible into the Company's common stock at the lesser of $.005 per share or
75% of the average closing bid prices over the 20 trading days immediately
preceding the date of conversion. At December 31, 2004 approximately $377,000 of
the Series B Preferred Stock had been sold; none of the Series B Preferred Stock
has been converted into common stock.
In November 2004, a principal shareholder loaned the Company $165,000 to pay
down the line of credit with Fifth Third Bank. The loan has the same terms as
the Fifth Third Bank line of credit, except that it remains unsecured until such
time as the Fifth Third Bank line of credit is fully paid, including principal
and accrued interest, and is due upon demand. In January 2005, the Fifth Third
Bank line of credit was paid off.
On August 25, 2004, Innova Holdings, Inc., a public corporation, issued
280,000,000 shares of common stock for 100% of the outstanding stock of Robotic
Workspace Technology, Inc ("RWT"). For financial reporting purposes this
transaction was treated as an acquisition of Innova and a recapitalization of
RWT using the purchase method of accounting. RWT's historical financial
statements replace Innova's in the accompanying financial statements.
20
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma balance sheet has been derived from the balance sheet of
Innova Holdings, Inc. ("Innova") (Formerly Hy-Tech Technology Group, Inc.) at
December 31, 2003 and adjusts such information to give effect to the acquisition
of Robotic Workspace Technology, Inc. ("RWT"), as if the acquisition had
occurred at December 31, 2003. The pro forma balance sheet is presented for
informational purposes only and does not purport to be indicative of the
financial condition that would have resulted if the acquisition had been
consummated at December 31, 2003. The pro forma balance sheet should be read in
conjunction with the notes thereto and RWT's financial statements and related
notes thereto contained elsewhere in this filing.
On August 25, 2004, Innova, a publicly traded company on the OTC Bulletin Board,
closed on a Stock Purchase Agreement with RWT. For accounting purposes, this
transaction was treated as an acquisition of Innova and a recapitalization of
RWT. RWT is the accounting acquirer and the results of its operations carryover.
Accordingly, the operations of Innova are not carried over and will be adjusted
to $0. However, there are liabilities of Innova which remain totaling $230,000
of notes payable.
The financial statements are presented based on this recapitalization, whereby
Innova has 192,645,050 common shares outstanding as of December 31, 2003.
21
INNOVA HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 2003
(Unaudited)
RWT Innova Pro Forma Pro
12/31/03 2/29/04 Adjustments Forma
------------ ------------ ------------ ------------
ASSETS
Current assets:
Cash $ 5,116 $ -- $ 5,116
Accounts receivable, net -- 45,431 (45,431) --
Inventories -- 56,868 (56,868) --
Prepaid assets and other -- 12,351 (12,351) --
------------ ------------ ------------
Total current assets 5,116 114,650 5,116
Property and equipment, net 3,156 10,524 (10,524) 3,156
------------ ------------ ------------
$ 8,272 $ 125,174 $ 8,272
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 18,419 $ 93,626 (93,626) $ 18,419
Line of credit 225,000 -- -- 225,000
Accounts payable 425,577 2,100,513 (2,100,513) 425,577
Accrued expenses 325,612 391,263 (391,263) 325,612
Advances - Officer and shareholder 7,500 -- -- 7,500
------------ ------------ ------------
Total current liabilities 1,002,108 2,585,402 1,002,108
------------ ------------ ------------
Long-term debt 1,400,647 733,300 (503,300) 1,630,647
Stockholders' deficit:
Common stock 192,645 83,444 (83,444) 192,645
Additional paid in capital 3,276,621 3,982,942 (3,982,942) 3,046,621
Accumulated deficit (5,863,749) (7,259,914) 7,259,914 (5,863,749)
------------ ------------ ------------ ------------
(2,394,483) (3,193,528) (2,624,483)
------------ ------------ ------------
Total liabilities and stockholders'
Deficit $ 8,272 $ 125,174 $ 8,272
============ ============ ============
22
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The pro forma presentation and adjustments reflect the following items:
o In August 2004, the Registrant assumed certain liabilities
consisting of notes payable totaling $230,000 in exchange for
280,000,000 shares of the Registrant's common stock.
o Innova Holdings, Inc sold its wholly owned subsidiary and RWT will
only assume certain notes payable of the parent company Innova
Holdings, Inc. Innova Holdings, Inc. spun off its subsidiary and all
of its operations in connection with the acquisition of RWT,
accordingly all of the operations of the subsidiary have been
eliminated in the pro forma balance sheet.
o After the reorganization and stock purchase there were 371,296,897
shares of common stock outstanding of the combined entity.
23