Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 2009, for Innovative Acquisitions Corp. (the "Company"). The Company is a Delaware corporation organized in April 2007 as a "blank check" or shell company with no specific business plan other than to seek a business combination, merger, or acquisition. It has no active operations, no employees other than management, and no revenue. The filing identifies the Company as a "smaller reporting company" and a "shell company."
Key Financial Metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(16,836) | $(14,083) |
| Total Assets (Cash) | $2,408 | $73 |
| Total Liabilities (Accounts Payable) | $2,270 | $2,249 |
| Working Capital | $138 | $(2,176) |
| Cash Flow from Operations | $(16,815) | $(11,834) |
| Cash Flow from Financing | $19,150 | $10,500 |
| Shares Outstanding | 3,000,000 | 3,000,000 |
Note: The Company has no debt other than accounts payable. Margins are not applicable due to zero revenue.
Material Changes vs. Prior Period
- Liquidity Improvement: Cash on hand increased significantly from $73 in 2008 to $2,408 in 2009, driven by capital contributions of $19,150 from existing stockholders.
- Increased Operating Costs: Net loss increased by approximately 19.5% year-over-year, rising from $14,083 to $16,836. Expenses consist entirely of legal, accounting, and audit fees required for regulatory compliance.
- Working Capital: The Company moved from a working capital deficit of $(2,176) in 2008 to a positive working capital of $138 in 2009.
Outlook, Risks, and Management Commentary
Going Concern Uncertainty: The independent auditors have issued a report raising "substantial doubt" about the Company's ability to continue as a going concern. The Company has no revenue, has incurred cumulative losses of $46,012 since inception, and relies entirely on capital contributions from shareholders to fund operations.
Future Operations: Management plans to continue searching for a target company for acquisition or merger. The Company anticipates incurring costs related to filing Exchange Act reports and investigating potential targets. There is no assurance that a business combination will be achieved.
Risks:
- Capital Dependency: The Company is dependent on related parties for continued funding. If funding is unavailable, the Company may not be able to implement its plan of operations.
- Shell Company Status: As a shell company with nominal assets, the Company faces regulatory restrictions and may not be able to develop a market for its securities until a business combination is concluded.
- Target Selection: Any target business selected may be financially unstable or in early stages of development, carrying inherent risks.
Investor Verification Checklist
- Capital Adequacy: Verify if the $2,408 cash balance is sufficient to cover filing and search costs for the next 12 months without additional shareholder contributions.
- Shareholder Support: Confirm the willingness of the three directors (who own 100% of the stock) to continue providing capital contributions to sustain the shell.
- Target Identification: Investigate if any specific acquisition targets have been identified or if negotiations are underway, as the filing states no transaction is imminent.
- Related Party Transactions: Review the $19,150 in capital contributions to ensure they are not structured as loans that could create future debt obligations.
- Regulatory Compliance: Monitor the Company's ability to maintain its status as a reporting company given its minimal assets and lack of operations.