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EX-32 - CERTIFICATION OF OFFICERS - Innovative Product Opportunities Inc.IPRU09302012_10qex321.txt
EX-31 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - Innovative Product Opportunities Inc.IPRU09302012_10qex312.txt
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EX-31 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Innovative Product Opportunities Inc.IPRU09302012_10qex311.txt

                                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 September 30, 2012

                                      OR

 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                 ACT OF 1934

           For the transition period from _________ to __________

                     Commission File Number: 333-167667

                    INNOVATIVE PRODUCT OPPORTUNITIES INC.
                         ---------------------------
              (Exact name of registrant as specified in its charter)

            DELAWARE                                  42-1770123
      ----------------------                         --------------
   (State or other jurisdiction of                 (IRS Employer
     incorporation or organization)               Identification No.)


           28 Argonaut, Suite 140, Aliso Viejo, California 92656
       ---------------------------------------------------------
                  (Address of principal executive offices)

                              (347) 789-7131
                          ---------------------
           (Registrant's telephone number, including area code)

                              Not Applicable
                          ---------------------
(Former name, former address and former fiscal year, if changed since last
 report)


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 November 14,2012 the Issuer had 348,000,000 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 SEPTEMBER 30, 2012 (A Development Stage Enterprise) TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1 - Consolidated Balance Sheets (Unaudited) as of September 30, 2012 and December 31, 2011 ............................................F1 Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2012 and 2011 and from inception (April 3, 2009) to September 30, 2012..............................F2 Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2012 and 2011 and from inception (April 3, 2009) to September 30, 2012.............................F3 Notes to Consolidated 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 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 ................................................. 8 Item 6 - Exhibits........................................................... 9
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Innovative Product Opportunities Inc. (A Development Stage Enterprise) CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2012 2011 ----------- --------- ASSETS Current assets Cash $4,871 $6,642 Accounts receivable 2,428 -- ----------- --------- Total current assets 7,299 6,642 ----------- --------- Total assets $7,299 $6,642 =========== ========= LIABILITIES AND STOCKHOLDERS'DEFICIT Current liabilities Accounts payable and accrued liabilities $25,048 $ 621 Notes payable 143,225 -- Due to related party 73,602 61,649 ----------- --------- Total current liabilities 241,875 62,270 ----------- --------- Total liabilities 241,875 62,270 ----------- --------- Stockholders' deficit Preferred stock; $0.001 par value; 1,000,000 shares authorized, -0- issued and outstanding -- -- Common stock; $0.0001 par value; 500,000,000 shares authorized, 208,000,000 and 118,000,0000 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively 20,800 11,800 Additional paid-in capital 5,523,200 5,335,200 Accumulated deficit during development stage (5,695,653) (5,402,628) ----------- --------- Total Innovative Product Opportunities, Inc. stockholders' deficit (151,653) (55,628) Non-controlling interest (82,923) -- ----------- --------- Total stockholders' deficit (234,576) (55,628) ----------- --------- Total liabilities and stockholders' deficit $ 7,299 $ 6,642 =========== ========= The accompanying footnotes are an integral part of these consolidated financial statements. F1
Innovative Product Opportunities Inc. (A Development Stage Enterprise) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the For the For the For the from inception three months three months nine months nine months (April 3, 2009) ended September 30, ended September 30 ended September 30, ended September 30 through 2012 2011 2012 2011 September30 2012 =============== ============== ============== ============== ================ Sales $ 58,902 $ -- $ 103,546 $ -- $ 124,546 Cost of sales 14,295 -- 17,973 -- 17,973 -------------- ------------- ------------- ------------- --------------- Gross profit 44,607 -- 85,573 -- 106,573 -------------- ------------- ------------- ------------- --------------- Operating expenses Bad debts -- -- -- 21,000 21,000 General and administrative 84,730 17,211 247,973 62,418 335,601 Stock-based compensation 47,668 -- 197,000 -- 5,512,000 -------------- ------------- ------------- ------------- --------------- Total expenses 132,398 17,211 444,973 83,418 5,868,601 -------------- ------------- ------------- ------------- --------------- Net operating loss (87,791) (17,211) (359,400) (83,418) (5,762,028) -------------- ------------- ------------- ------------- --------------- Other income (expense) Gain on settlement of accounts receivable -- -- -- -- 336,000 Other-than-temporary impairment loss on securities -- -- -- -- (124,950) Loss on cancelation of securities -- -- -- -- (211,050) -------------- ------------- ------------- ------------- --------------- -- -- -- -- -- -------------- ------------- ------------- ------------- --------------- Net loss for the period (87,791) (17,211) (359,400) (83,418) (5,762,028) Net loss attributable to non-controlling interest 32,783 -- 66,375 -- 66,375 -------------- ------------- ------------- ------------- --------------- Net loss attributable to Innovative Product Opportunities Inc. $ (55,008) $ (17,211) $(293,025) $ (83,418) $(5,695,653) =============== ============== ============== ============== ================ Net loss attributed to Innovative Product Opportunities Inc. per common share - basic $ 0.00 $ 0.00 $ 0.00 $ 0.00 =============== ============== ============== ============== Weighted average number of common shares outstanding - basic 208,000,000 66,000,000 165,627,739 52,483,516 =============== ============== ============== ============== The accompanying footnotes are an integral part of these financial statements. F2
Innovative Product Opportunities Inc. (A Development Stage Enterprise) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) From Inception For the nine For the nine (April 3,2009) months ended months ended through September 30, 2012 September 30, 2011 September 30,2012 Cash flows from ------------- ------------- ------------ operating activities Net loss $ (359,400) $ (83,418) $(5,762,028) Adjustments to reconcile net loss to cash used in operating activities Shares issued to founder -- -- 2,000 Stock issued for services 97,000 5,000 5,512,000 Change in operating assets and liabilities -- (Increase)decrease in accounts receivable (2,428) 21,000 (2,428) Increase in accounts payable and accrued liabilities 24,427 1,349 25,048 Net cash used in operating activities (140,401) (56,069) (225,408) ------------- ------------- ------------ Cash flow from investing activities Cash received from Szar International, Inc. 696 -- 696 Proceeds from issuance of common shares by Szar International, Inc. 252 -- 252 ------------- ------------- ------------ Net cash provided by investing activities 948 -- 948 ------------- ------------- ------------ Cash flow from financing activities advances by related party 28,494 71,649 335,143 Repayment of advances to related party (16,541) (20,000) (231,541) Advance on notes payable 125,729 -- 125,729 ------------- ------------- ------------ Net cash provided by financing activities 137,682 51,649 229,331 ------------- ------------- ------------ Net change in cash (1,771) (4,420) 4,871 Cash, beginning of the period 6,642 15,775 -- ------------- ------------- ------------ Cash, end of the period $ 4,871 $ 11,355 $ 4,871 ============= ============= ============ Supplemental disclosure of non-cash investing and financing activities Conversion of due to related party for common stock $ -- $ 30,000 $ 30,000 ============= ============= ============ Notes payable on acquisition of Szar International, Inc. $ 15,050 $ -- $ 15,050 ============= ============= ============ Due to related party on acquisition of Szar I nternational, Inc. $ 2,446 $ -- $ 2,446 ============= ============= ============ The accompanying footnotes are an integral part of these consolidated financial statements. F3
Innovative Product Opportunities Inc. (A Development Stage Enterprise) (Unaudited) NOTES TO CONSOLIDATED 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. The Company has not generated significant revenue from its operations and is currently seeking new business opportunities. 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 is no specific rent terms included in the license agreement, but verbally they have agreed to allow IPRU to use their office on an on-going basis free of additional charge. The Company has determined that Cigar & Spirits is a Variable Interest Entity and that Innovative Products Opportunities Inc. is the primary beneficiary. As such, Cigar & Spirits has been consolidated into the Company's financial statements. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited consolidated 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 consolidated financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2011 of Innovative Product Opportunities Inc. in our Form 10-K filed on March 30, 2012 and subsequently amended on April 2, 2012. The interim consolidated 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 September 30, 2012 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. F4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) GOING CONCERN The Company's consolidated 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 September 30, 2012 and December 31, 2011 of $(5,695,653) and $(5,402,628), 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. CONSOLIDATION The consolidated financial statements include the accounts of the Company and its variable interest entity ("VIE") in which the Company is the primary beneficiary. The Company has adopted the accounting standards for non-controlling interests and reclassified the equity attributable to its non-controlling interests as a component of equity in the accompanying consolidated balance sheets. All significant intercompany balances and transactions have been eliminated in consolidation. Management's determination of the appropriate accounting method with respect to the Company's variable interests is based on accounting standards for VIEs issued by the Financial Accounting Standards Board ("FASB") . The Company consolidates any VIEs in which it is the primary beneficiary and discloses significant variable interests in VIEs of which it is not the primary beneficiary, if any. 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. F5
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) INCOME TAXES The Company accounts for income taxes in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("FASB ASC") 740, Income Taxes. Under the assets and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. NET LOSS PER SHARE Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period increased to include the number of additional common shares that would have been outstanding if potentially dilutive securities had been issued. There were no potentially dilutive securities outstanding during the periods presented. 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. F6
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the requirements of FASB ASC 820, Fair Value Measurements and Disclosures, and FASB ASC 825, Financial Instruments, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The statement establishes market or observable inputs as the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The statement requires fair value measurements be classified and disclosed in one of the following categories: Level 1 - Quoted prices in active markets for identical assets and liabilities. Level 2 - Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 - Significant inputs to the valuation model are unobservable. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The fair values of financial instruments, other than Investment securities, are classified as current assets or liabilities and approximate their carrying value due to the short-term maturity of the instruments. RECENT ACCOUNTING PRONOUNCEMENTS There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the quarter ended September 30, 2012 or which are expected to impact future periods, that were not already adopted and disclosed in prior periods. 3. VARIABLE INTEREST ENTITY Following is a description of our financial interests in a variable interest entity that we consider significant, those for which we have determined that we are the primary beneficiary of the entity and, therefore, have consolidated the entity into our financial statements. Szar International, Inc. (dba Cigar & Spirits Magazine) (-Cigar & Spirits-) - On March 1, 2012, we entered into a License Agreement with 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. F7
3. VARIABLE INTEREST ENTITY (continued) We have determined that we are the primary beneficiary of Cigar & Spirits as our interest in the entity is subject to variability based on results from operations and changes in the fair value. After February 29, 2012, all operations of Cigar & Spirits are included in the License Agreement. The results of operations for Cigar & Spirits have been included in the financial statements of the Company. The Company did not pay consideration to enter into the License Agreement. The acquisition has been accounted for using the purchase method on March 1, 2012 as follows: Cash $ 696 Due to related party (2,446) Notes payable (15,050) Non-controlling interest 16,800 --------- $ - ========= At September 30, 2012 our consolidated balance sheet includes current assets of $7,231 and current liabilities of $90,154 related to our interests in Cigar & Spirits. Our statement of operations includes sales of $103,546, cost of sales of $17,973 and selling, general and administrative expenses of $151,948 related to our interest in Cigar & Spirits for the period from March 1, 2012 to September 30, 2012. Additionally during the period from March 1, 2012 to September 30, 2012, the Company received $252 in proceeds from issuance of common shares by Szar International, Inc. NOTE 4 - NOTES PAYABLE On February 22, 2012, the company issued two promissory notes in the value of $11,250 each for value received. These notes bear no interest and are payable on demand by the note holders. On March 6, 2012, the company issued two promissory notes in the value of $2,500 each for value received. These notes bear no interest and are payable on demand by the note holders. On May 1, 2012, the company issued a promissory note in the value of $12,500 for value received. These notes bear no interest and are payable on demand by the note holder. On May 10, 2012, the company issued a promissory note in the value of $12,500 for value received. These notes bear no interest and are payable on demand by the note holder. On May 31, 2012, the company issued a promissory note in the value of $32,000 for value received. In May 2012, a total of $15,000 was paid back. These notes bear no interest and are payable on demand by the note holder. On July 31, 2012, the company issued a promissory note in the value of $1,750 for value received. These notes bear no interest and are payable on demand by the note holder. F8
NOTE 4 - NOTES PAYABLE (continued) During the period from April 1, 2012 to September 30, 2012, Cigar & Spirits received advances of $56,925. The balances are non-interest bearing, unsecured and have no specified terms of repayment. As of September 30, 2012 and December 31, 2011 notes payable totaling $143,225 and $0, respectively, were outstanding. The balances are non-interest bearing, unsecured and have no specified terms of repayment. NOTE 5 - RELATED PARTY TRANSACTIONS As of September 30, 2012 and December 31, 2011 advances of $73,602 and $61,649, respectively, were due to the Company's Chief Executive Officer and majority shareholder. The balances are non-interest bearing, unsecured and have no specified terms of repayment. NOTE 6 - STOCKHOLDERS' EQUITY The Company is authorized to issue an aggregate of 500,000,000 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 16, 2012, the Company issued 60,000,000 shares of common stock valued at $143,000 with $95,333 expensed during the three months ended June 30, 2012 and $47,667 expensed during the three months ended September 30, 2012 as compensation for business development, consulting, design and technical services. The services are valued based on the closing price of the Company's common stock on the date of the agreement exchanged for the services. On June 21, 2012, the Company issued 30,000,000 shares of common stock valued at $54,000 as compensation for business development and consulting services. The services are valued based on the closing price of $0.0018 per share for the shares of common stock exchanged for the services. During the nine months ended September 30, 2012, the Company expensed $197,000 for compensation for business development, consulting, design and technical services. NOTE 7 - SUBSEQUENT EVENTS From October 10, 2012 to October 18, 2012, the Company issued 140,000,000 shares of common stock valued at $226,600 ($0.0016 per share) for payment of principal totaling $14,000 on outstanding notes payable resulting in a loss on settlement of debt of $212,600. F9
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 March 30, 2012 and subsequently amended on April 2, 2012, 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 March 30, 2012 and subsequently amended on April 2, 2012. 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. 4
RESULTS OF OPERATIONS COMPARISON OF RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 AND FROM INCEPTION (APRIL 3, 2009) THROUGH SEPTEMBER 30, 2012. REVENUES Our revenue for the three and nine months ended September 30, 2012 was $58,902 and $103,546, respectively, compared to $0 and $0 for the three and nine months ended September 30, 2011. Our revenue from inception (April 3, 2009) through September 30, 2012 was $124,546. The increase in revenues was a result of the License Agreement with Szar International, Inc. (dba Cigar & Spirits Magazine) (-Cigar & Spirits-) on March 1, 2012. As a result of the License Agreement, the Company has determined that it is the primary beneficiary of Cigar & Spirits, a Variable Interest Entity, and Cigar & Spirits has been fully consolidated in our financial statements. COSTS OF GOODS SOLD Our cost of sales for the three and nine months ended September 30, 2012 was $14,295 and $17,973, respectively, compared to $0 and $0 for the three and nine months ended September 30, 2011. Our cost of goods sold from inception (April 3, 2009) through September 30, 2012 was $17,973. The increase in cost of sales was directly related to the sales associated with the License Agreement with Cigar & Spirits. GENERAL AND ADMINISTRATIVE EXPENSES Our general and administrative expense for the three and nine months ended September 30, 2012 was $84,730 and $247,973, respectively, compared to $17,211 and $62,418 for the three and nine months ended September 30, 2011. The expenses can be primarily attributed to our need to pay for professional fees and our transfer agent and for the operations of Cigar & Spirits. The increase in general and administration expenses was primarily the result of the additional expenses incurred through Cigar & Spirits. During the nine months ended September 30, 2012, we issued 90,000,000 shares of common stock of the Company valued at $197,000 for business development, consulting, design and technical services. In addition, we incurred bad debt expense of $21,000 during nine month period ended September 30, 2011. NET INCOME/LOSS Our net loss for the three and nine months ended September 30, 2012 was $87,791 and $359,400, respectively, compared to $17,211 and $83,418 for the three and nine months ended September 30, 2011. Our losses during the periods ended September 30, 2012 is due to costs associated with professional fees, our transfer agent and the operation of Cigar and Spirits as described above. 5
LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY As of September 30, 2012, we had total current assets of $7,299 and total current liabilities of $241,875, resulting in a working capital deficit of $234,576. As of September 30, 2012, we had cash of $4,871. Our cash flows from operating activities for the nine months ended September 30, 2012 resulted in cash used of $140,401. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. Our cash flow from investing activities for the nine months end September 30, 2012 was $948 and our cash flow from financing activities for the nine months ended September 30, 2012 was $137,682. The Company has an accumulated deficit during development stage at September 30, 2012 and December 31, 2011 of $(5,695,653) and $(5,402,628), respectively. These conditions led to our auditor reporting substantial doubt about our ability to continue as a going concern. 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. 6
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 DISCLOSURE CONTROLS AND PROCEDURES Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are not effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met. 7
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2012 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 September 30, 2012, we did not have any defaults upon senior securities. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. 8
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). 4.1 Specimen Stock Certificate (included as Exhibit 4.1 to the Form S-1 filed June 22, 2010, and incorporated herein by reference). 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. 9
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: November 14, 2012 By:/s/ Doug Clark ---------------------------- Doug Clark, Principal Executive Officer President and Chairman of the Board Dated: November 14, 2012 By:/s/ Robert McLean ---------------------------- Robert McLean, Principal Accounting Officer 10