UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

                                   (Mark One)

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
                                     OF 1934

                      For the Quarter Ended March 31, 2005

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

                       Commission File Number: 000-1084047

                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
        (Exact name of small business issuer as specified in its charter)

              California                                 95-4691878
              -----------                                ----------
  (State or Other Jurisdiction of           (I.R.S. Employer Identification No.)
   Incorporation or Organization)

100 North Tampa Street, Suite 2410, Tampa, FL                   33602
---------------------------------------------                   -----
  (Address of Principal Executive Offices)                    (Zip Code)


                                 (813) 387-3310
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.001
  par value


      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 |_|

There were 55,586,198 shares of common stock,  $0.001 par value,  outstanding as
of May 19, 2005.


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                                   FORM 10-QSB

                          QUARTER ENDED MARCH 31, 2005


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
<S>                                                                                                  <C>
     Condensed Consolidated Balance Sheets as of March 31, 2005 (Unaudited)
       and December 31, 2004..................................................................        3

     Condensed Consolidated Statements of Operations (Unaudited) for the Three
       Months Ended March 31, 2005 and 2004...................................................        4

     Condensed Consolidated Statements of Cash Flow (Unaudited) for the Three
       Months Ended March 31, 2005 and 2004...................................................        6

     Notes to the Condensed Consolidated Financial Statements (Unaudited).....................        7

Item 2.  Management's Discussion and Analysis of Financial Condition and
     Results of Operations....................................................................       12

Item 3.  Controls and Procedures..............................................................       17


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings....................................................................       18

Item 3.  Defaults upon Senior Securities......................................................       19

Item 6.  Exhibits and Reports on Form 8-K.....................................................       19

Signatures    ................................................................................       20

Index to Exhibits.............................................................................       21
</TABLE>



                                       2


<PAGE>


PART I - FINANCIAL INFORMATION
         ---------------------
Item 1.  Financial Statements


<TABLE>
<CAPTION>
                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                                 (Unaudited)
                                                                   March 31,        December 31,
                                                                     2005               2004
                                                               ---------------    ---------------
<S>                                                            <C>                <C>
                        ASSETS
CURRENT ASSETS
    Cash                                                       $       246,025    $       876,472
    Accounts receivable:
    Merchant accounts receivable                                        83,449             87,417
    Notes receivable, net of allowance for doubtful
           accounts of $186,821 and $245,496, respectively             427,349            594,128
    Inventory                                                           10,721              5,471
    Refundable income taxes                                            582,836            582,836
    Prepaid expenses and other current assets                           38,108             53,745
                                                               ---------------    ---------------
        Total current assets                                         1,388,488          2,200,069
                                                               ---------------    ---------------
PROPERTY AND EQUIPMENT, NET                                            120,099            104,424
GOODWILL                                                             1,088,686          1,088,686
INVESTMENT                                                             183,472            178,120
DEPOSITS                                                                39,215             39,215
                                                               ---------------    ---------------
        Total assets                                           $     2,819,961    $     3,610,514
                                                               ===============    ===============

                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued expenses                      $       930,339    $       976,573
    Deferred revenue                                                   131,100            111,492
    Notes payable and current maturities of capital
    lease obligations                                                   63,188             79,300
                                                               ---------------    ---------------
        Total current liabilities                                    1,124,627          1,167,365
                                                               ---------------    ---------------
CAPITAL LEASE OBLIGATIONS                                                1,639              8,249
                                                               ---------------    ---------------
        Total liabilities                                            1,126,266          1,175,614
                                                               ---------------    ---------------

COMMITMENTS AND CONTINGENCIES (NOTE 5)                                      --                 --

STOCKHOLDERS' EQUITY
    Preferred stock, issued and outstanding,  450,000 shares           450,000            450,000
    Common stock - authorized, 100,000,000 shares of
                   $.001 par value; issued and outstanding,
                                                  55,586,198            55,586             55,586
    Additional paid-in capital                                      18,398,495         18,398,495
    Accumulated deficit                                            (17,210,386)       (16,469,181)
                                                               ---------------    ---------------
        Total stockholders' equity                                   1,693,695          2,434,900
                                                               ---------------    ---------------
        Total liabilities and stockholders' equity             $     2,819,961    $     3,610,514
                                                               ===============    ===============
</TABLE>


                             See accompanying notes.

                                       3


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                       For the Three Months
                                                          Ended March 31,
                                                   ----------------------------

                                                       2005            2004
                                                   ------------    ------------
REVENUE
     Services revenue                              $    155,200    $  3,501,942
     Product sales                                      113,219       5,753,120
     Other revenue                                        8,600         394,327
                                                   ------------    ------------
         Total revenue                                  277,019       9,649,389

COST OF REVENUE
     Cost of services revenue                             6,855       1,496,463
     Cost of product sales and other revenue              4,964       3,015,195
                                                   ------------    ------------
         Total cost of revenue                           11,819       4,511,658
                                                   ------------    ------------

GROSS PROFIT                                            265,200       5,137,731
                                                   ------------    ------------

OPERATING EXPENSES
     General and administrative                         857,029       2,923,724
     Commissions and other selling expenses             162,296       1,885,458
                                                   ------------    ------------
         Total operating expenses                     1,019,325       4,809,182
                                                   ------------    ------------
INCOME (LOSS) FROM OPERATIONS                          (754,125)        328,549
                                                   ------------    ------------

OTHER INCOME (EXPENSE) NET                               12,920          65,915
                                                   ------------    ------------

INCOME BEFORE INCOME TAXES                             (741,205)        394,463

INCOME TAXES                                                 --        (155,813)
                                                   ------------    ------------

NET INCOME (LOSS)                                      (741,205)        238,650

UNDECLARED PREFERRED STOCK DIVIDENDS                     (4,500)        (20,790)
                                                   ------------    ------------

INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS    $   (745,705)   $    217,860
                                                   ============    ============

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE   $      (0.01)   $       0.00
                                                   ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN BASIC AND DILUTED PER SHARE CALCULATION      55,586,198      52,897,186
                                                   ============    ============


                             See accompanying notes.

                                       4


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           For the Three Months
                                                               Ended March 31,
                                                        ============================
                                                            2005             2004
                                                        ============    ============
<S>                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                       $   (741,205)   $    238,650
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities
Depreciation and amortization                                  3,990          78,695
Bad debt expense                                             146,763              --
Net change in operating assets and liabilities
Merchant account receivables                                   3,968         (55,972)
Other receivables                                              6,988         (80,007)
Inventory                                                     (5,250)           (311)
Prepaid expenses and other current assets                      8,648        (201,309)
Accounts payable and accrued expenses                        (46,234)      1,000,479
Deferred revenue                                              19,608         246,291
Accrued federal and state income tax                            --           155,813
                                                        ============    ============
Net cash flows from operating activities                    (602,724)      1,382,330
                                                        ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Cash received on notes receivable from financed sales        242,617        (211,733)
Increase in notes receivable from new financed sales        (222,601)             --
Investment                                                    (5,352)             --
Purchase of fixed assets                                     (19,665)        (69,832)
                                                        ------------    ------------
Net cash flows from investing activities                      (5,001)       (281,565)
                                                        ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in notes payable                                    (20,833)             --
Payments on capital lease obligations                         (1,889)        (17,071)
                                                        ------------    ------------
Net cash flows from financing activities                     (22,722)        (17,071)
                                                        ------------    ------------

NET INCREASE (DECREASE) IN CASH                             (630,447)      1,083,694

CASH AT BEGINNING OF PERIOD                                  876,472       3,890,929
                                                        ------------    ------------

CASH AT END OF PERIOD                                   $    246,025    $  4,974,623
                                                        ============    ============

SUPPLEMENTAL CASH FLOW INFORMATION
Property and equipment acquired under capital leases    $         --    $     15,521

                                                        ============    ============
Payments on capital lease obligations                          1,889          17,071
                                                        ============    ============
</TABLE>


                             See accompanying notes.


                                       5


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)   Organization,  Basis  of  Presentation,  and  Certain  Interim  Accounting
      Policies

      (a)   Organization and Description of Business:

            Innovative   Software   Technologies,   Inc.  (the   "Company")  was
            incorporated  in the State of California  in May 1998.  Prior to the
            Company's  disposition of operating  assets of its EPMG  subsidiary,
            discussed  in Note 3, and its  split-off  of its  Triad  subsidiary,
            discussed  in Note 10, the Company  was engaged in the  development,
            marketing  and  delivery  of  business-type   educational  programs,
            generally to  individuals,  throughout the United States of America.
            The Company's  educational  programs combined both self-training and
            coaching by Company  employees.  Following  the  split-off of Triad,
            this business will be reported as a discontinued operation.

      (b)   Basis of Presentation:

            The  accompanying   unaudited   condensed   consolidated   financial
            statements have been prepared in accordance with generally  accepted
            accounting principles for interim financial information and with the
            instructions to Form 10-QSB and Regulation S-B. Accordingly, they do
            not  contain  all of  the  information  and  footnotes  required  by
            generally accepted accounting  principles for complete  consolidated
            financial statements. In the opinion of management, the accompanying
            unaudited condensed  consolidated  financial  statements reflect all
            adjustments   (consisting  only  of  normal  recurring  adjustments)
            considered  necessary  for a  fair  presentation  of  the  Company's
            financial  condition as of March 31, 2005,  and the results of their
            operations  for the three  months ended March 31, 2005 and March 31,
            2004,  and the cash flows for the three  months ended March 31, 2005
            and March 31, 2004. These unaudited condensed consolidated financial
            statements  should be read in conjunction with the Company's audited
            2004 consolidated financial statements, including the notes thereto,
            and  the  other  information  set  forth  therein,  included  in the
            Company's  Annual Report on Form 10-KSB for the year ended  December
            31, 2004.  Operating  results for the three month period ended March
            31, 2005 are not  necessarily  indicative of the  operating  results
            that may be expected for the year ending December 31, 2005.

      (c)   Principles of Consolidation:

            The consolidated  financial  statements  include the accounts of the
            Company and its wholly-owned subsidiaries,  EPMG, Inc., Triad Media,
            Inc. (f/k/a Hackett Media, Inc.) and SoftSale,  Inc. All significant
            intercompany  balances  and  transactions  have been  eliminated  in
            consolidation.

      (d)   Income Taxes in Interim Periods:

            Income taxes are accounted for under the asset and liability method.
            Deferred tax assets and  liabilities  are  recognized for the future
            tax consequences  attributable to differences  between the financial
            statement  carrying  amounts of existing  assets and liabilities and
            their  respective  tax  bases  and  operating  loss  and tax  credit
            carryforwards.  For  purposes of interim  financial  reporting,  the
            Company projects its effective income tax rate for the entire fiscal
            year, taking into account all taxing jurisdictions, and applies such
            rate to interim pre-tax income.  Changes in the projected  effective
            tax rate in future quarters, if any, are accounted for prospectively
            in the period of change.


                                       6


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)   Organization,  Basis  of  Presentation,  and  Certain  Interim  Accounting
      Policies (continued)

      (e)   Earnings Per Common Share:

            Basic net income per common  share is computed  by dividing  (i) the
            net  income  (loss),  as  adjusted  for the  effects  of  cumulative
            dividends on the Series A and B Preferred Stock by (ii) the weighted
            average  common shares  outstanding  during the period.  Diluted net
            income  (loss) per share is  computed  similarly  but  includes  the
            effects of dilutive  securities in the  denominator.  Due to the Net
            Losses in the current period, the calculation for diluted income per
            common share in each period is anti-dilutive.  Therefore,  Basic and
            Diluted Net Loss per common share are the same.

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                        March 31,
                                                                    2005          2004
                                                                    ----          ----
<S>                                                              <C>           <C>
               Income (loss) applicable to common stockholders   ($ 745,705)   $   217,860
                                                                 ==========    ===========
               Weighted average common shares outstanding        55,586,198     52,674,733
               Shares convertible from preferred stock                   --      4,291,003
                                                                 ----------    -----------
               Adjusted numerator                                55,586,198     57,188,189
                                                                 ==========    ===========
               Basic income (loss) per common share              ($    0.01)   $      0.00
                                                                 ==========    ===========
               Diluted income (loss) per common share            ($    0.01)   $      0.00
                                                                 ==========    ===========
</TABLE>


(2)   Liquidity and Management's Plans

      The  accompanying  consolidated  financial  statements  have been prepared
      assuming  that  the  Company  will  continue  as a  going  concern  for  a
      reasonable  period.   However,  during  July  2004,  the  Company  certain
      operating assets and liabilities of EPMG, which  represented a significant
      portion of its revenue producing operations to certain shareholders of the
      Company  (See Note 3).  During  April 2005,  the Company  split off Triad,
      further   curtailing   future  operations  (See  Note  8).  The  remaining
      operations  of the  Company  are  minimal.  As a result of the EPMG  asset
      transfer,  the  Company  incurred  a loss of  $3,231,549  and used cash of
      $3,189,958 in its operating  activities during the year ended December 31,
      2004.  The Company  incurred a loss of $741,205  and used cash of $630,447
      during the three  months  ended March 31,  2005.  These  conditions  raise
      substantial  doubt  about the  Company's  ability to  continue  as a going
      concern.

      Management  is  currently   engaged  is  seeking  merger  and  acquisition
      candidates within the technologies industry,  which have revenue producing
      and cash generating operations.  As further discussed in Note 8, on May 6,
      2005,  IST  Integrated  Solutions,  Inc.  completed an  acquisition of the
      assets and operations of Lietz Development, Inc. and Saphire of Tampa Bay,
      Inc. (collectively "Data Tech"), a Tampa, Florida based computer equipment
      reseller, and hosting and network services provider.  While management has
      identified a number of other prospective acquisition targets, there can be
      no assurance that any acquisition  will be completed or that this strategy
      would  be  successful.  In  addition,   management  is  seeking  to  raise
      additional   capital  to  support  its   operations   until  a  successful
      acquisition or  acquisitions  can be completed.  There can be no assurance
      that management will be able to acquire  additional  capital at acceptable
      terms, if at all.


                                       7
<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(2)   Liquidity and Management's Plans (continued)

      The Company  currently has cash and other reserves  amounting to $329,474,
      certain  receivables  that are  expected to be  collected  during the year
      ended  December 31, 2005  amounting to $427,349,  net of  allowances,  and
      refundable  income  taxes  of  $582,836.  In the  absence  of a  strategic
      acquisition or funding,  described in the previous  paragraph,  management
      believes that it can curtail  operating  expenses and defer trade payables
      sufficient to maintain the Company's  operations  through the third fiscal
      quarter of the year ended  December  31,  2005.  There can be no assurance
      that the Company can identify and acquire a merger candidate at acceptable
      terms, if at all. In addition,  there can be no assurance that the Company
      will be successful in its acquisition of working capital.

      The  accompanying  consolidated  financial  statements  do not include any
      adjustments  that might become  necessary  should the Company be unable to
      continue as a going concern.

(3)   EPMG Asset Disposition

      On July 2, 2004,  the Company  entered  into a Settlement  Agreement  with
      James R. Garn,  Ethan W. Willis,  and Ethan and Randy, LC (the "Settlement
      Agreement")  pursuant to which the parties  agreed to settle all  disputes
      between  them,  including  all  disputes  relating to the  Company's  2001
      acquisition  from  Garn and  Willis  of the  outstanding  stock of  Energy
      Professional Marketing Group, Inc. ("EPMG").

      Under  the  terms  of the  Settlement  Agreement,  Garn  and  Willis  (the
      "Principals")  have  surrendered  to the  Company  all of their  shares of
      capital stock of the Company, comprising 6,784,762 shares of common stock,
      1,200,500  shares of Series A Preferred Stock, and 80,000 shares of Series
      B Preferred  Stock,  in exchange for certain assets of EPMG.  These assets
      include  EPMG's  rights under  certain  credit card  processing  contracts
      (including  receivables  relating to reserves under those contracts in the
      amount of  approximately  $1,000,000),  substantially  all of the tangible
      fixed assets of EPMG's Utah  facility,  and certain  intangible  assets of
      EPMG, such as specified website domain names,  software, and customer lead
      data.

      The Settlement  Agreement also sets forth certain agreements and covenants
      relating to the relationship  between the parties on a going-forward basis
      and  the  parties'  respective   businesses   activities,   including  the
      following:

            o     The Company and an entity  controlled by the  Principals  have
                  entered into agreements providing for the reciprocal supply of
                  products and customer  leads to each other on a  going-forward
                  basis.

            o     A company  controlled by the  Principals  has agreed to assume
                  all  of  EPMG's  outstanding  service  obligations  to  EPMG's
                  coaching  customers in consideration of the payment of service
                  fees by the Company totaling $425,000.

            o     A newly created company controlled and owned by the Principals
                  has assumed the lease of EPMG's  facility in Provo,  Utah, and
                  substantially  all employees at such facility have transferred
                  their  employment to such newly created  company.  Pursuant to
                  the  Settlement  Agreement,  the Company has released all such
                  employees from their non-compete obligations to the Company.


                                       8


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(3)   EPMG Asset Disposition (continued)

            o     The Company has agreed to refrain from soliciting the services
                  of certain lead  providers for a six-month  period of time and
                  from  marketing to current active  coaching  customers for 120
                  days following the Settlement Agreement.

      Pursuant to the Settlement  Agreement,  the Company,  the Principals,  and
      their respective  affiliates have entered into mutual waivers and releases
      relating  to any and all claims that they may have had against one another
      other at any time through the date of the Settlement Agreement. Subsequent
      to the settlement, EPMG remained a wholly owned subsidiary of the Company.

      The Company recorded the settlement on the effective date. No gain or loss
      arose  from the  settlement  pursuant  to  generally  accepted  accounting
      principles  which  requires a company's  receipt of its own  securities in
      such   transactions   to  be  treated  as   transactions   affecting  only
      stockholders'  equity.  In addition,  the Company had  concluded  that the
      transaction  does not  meet  the  conditions  for  treatment  of EPMG as a
      discontinued  operation due to the fact that continuing agreements between
      the Company,  through its Triad subsidiary,  and EPMG for cross selling of
      each  others  products  and  services  rise to the level of the  Company's
      significant  continuing  involvement  in the  operations  of the  disposed
      component. However, as discussed in Note 8, the Company split-off Triad in
      April 2005.

(4)   Accounts Payable and Accrued Expenses

      Accounts payable and accrued expenses consist of the following as of March
      31, 2005 and December 31, 2004:

<TABLE>
<CAPTION>

                                                     March 31, 2005    December 31, 2004
                                                     --------------    -----------------
<S>                                                      <C>              <C>
         Accrued wages and other                         $646,344         $710,133

         Reserves for returns and refunds                  95,872           88,212

         Accounts payable                                  67,563           57,668

         Interest and penalties on late tax payments      120,560          120,560
                                                         --------         --------
                                                         $930,339         $976,573
                                                         ========         ========
</TABLE>

(5)   Other Stockholders' Equity

      (a)   Convertible Preferred Stock:

            The Company has 25,000,000  shares of preferred stock authorized and
            has  designated  1,500,000  shares as $1.00  stated  value  Series A
            Preferred  and  3,000,000  shares  as $1.00  stated  value  Series B
            Preferred.  Series A and  Series  B  Preferred  Stock  (collectively
            "Preferred Stock") have the same terms and conditions. The Preferred
            Stock is (i) entitled to  cumulative  dividends at a rate of 4.0% of
            the  liquidation  value ($1.00 per share),  (ii)  convertible at any
            time  into  common  stock  at a rate of 95% of the  average  closing
            market price of the common stock for five days preceding  conversion
            (6,232,687 common shares as of March 31, 2005),  (iii) redeemable at
            any time by the  Company for $1.00 per share,  (iv)  entitled to one
            vote per share.  As of March 31,  2005,  450,000  shares of Series A
            Preferred Stock are outstanding.


                                       9
<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(5)   Other Stockholders' Equity (continued)

      (b)   Stock-Based Compensation:

            During the periods ended March 31, 2005,  and 2004,  the Company did
            not issue any of its common or preferred stock as  compensation.  In
            addition,  the Company has no stock options  outstanding  from other
            periods.  Accordingly, pro forma net income (loss) and pro forma net
            income (loss) per common share, assuming the fair value approach was
            used to value stock options or other  similar  forms of  stock-based
            compensation, are the same.

(6)   Related Party Transactions

      During the three month period ended March 31, 2005,  there were no related
      party transactions. (See Note 8)

(7)   Commitments and Contingencies

      (a)   Leases:

            Future minimum lease payments under  noncancelable  operating leases
            (with  initial  terms in  excess of one  year)  and  future  minimum
            capital lease payments are as follows:

<TABLE>
<CAPTION>

                                                     Capital               Operating
              Year ending December 31:                Leases                Leases
                                                  -------------------------------------------
<S>                                                               <C>                    <C>
              2005                                      $       5,666          $      83,613

              2006                                              6,399                 85,316

              2007                                              1,049                 50,628

              2008                                                  -                 50,628

              After 2008                                            -                 61,338
                                                  -------------------------------------------
              Total noncancelable lease payments                               $     331,524
                                                               13,114
                                                                       ======================
              Less amount representing interest
                                                                1,227
                                                  --------------------
                                                        $      11,887
                                                  ====================

              Principal amount due in one year          $       6,579
              Principal amount due after one year               5,308
                                                  --------------------
                                                        $      11,887
                                                  ====================
</TABLE>

            Rent expense under all  operating  leases for the three months ended
            March 31, 2005 and 2004 was $28,185 and $198,877, respectively.

      (b)   SEC Investigation:

            On June 24, 2004, the Securities  and Exchange  Commission  issued a
            formal order of  investigation  authorizing  subpoenas for documents
            and  testimony  in  connection  with the  investigation  of  certain
            securities  matters.  On April 8, 2005,  the  Independent  Committee
            appointed by the Board of Directors of the Company  delivered to the
            SEC its report based on its internal investigation.  The Company has
            and  intends  to  continue  to fully  cooperate  with the SEC in its
            investigation.


                                       10


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(7)   Commitments and Contingencies (continued)

      (c)   Litigation:

            Subsequent  to  the  transfer  of  certain   operating   assets  and
            liabilities of EPMG, as discussed  above,  the former  principals of
            EPMG,  under the new name of Prosper,  Inc.  filed a complaint  that
            seeks a refund to the  benefit of Prosper of certain  reserve  funds
            amounting to $580,000 that are due to former vendors. Under the EPMG
            Settlement Agreement,  we agreed to pay certain reserves potentially
            owing to third-party vendors upon specified conditions.  The lawsuit
            alleges that we have breached the obligation to pay these  reserves,
            but we contest  that the  conditions  for these  payments  have been
            satisfied and/or contest the amounts and payees of the payments that
            are alleged to be owed by us.

            Although we believe that these allegations do not have any merit, if
            Prosper,  Inc.  were to  prevail  in its  complaint  there  would be
            serious negative financial  consequences  resulting from utilization
            of  our  cash  reserves.  Moreover,  such  an  action  could  divert
            management's time and efforts away from the business of the Company.

(8)   Subsequent Events

      (a)   Triad Media, Inc. Sale

      Effective  April 20,  2005,  the  Company  entered  into a stock  purchase
      agreement with Douglas Shane Hackett, the Company's former Chief Executive
      Officer, for the sale to Mr. Hackett of all common shares of the Company's
      subsidiary  Triad  Media,   Inc.  in  exchange  for  4,935,015  shares  of
      Innovative  Software common stock from Mr. Hackett.  Since the transaction
      involves the Company's receipt of its own common stock in exchange for the
      subsidiary  common stock, the Company will record this transaction  during
      its second fiscal  quarter in 2005 as an equity  transaction  on the basis
      that   receipts  of  a  company's   own  equity  is  generally  a  capital
      transaction.

      In  addition,  Triad  Media  possesses  the  continuing  relationship  and
      involvement  with EPMG following the EPMG asset  disposition  described in
      Note 3. As a result of this transaction,  the Company is no longer engaged
      in the development,  marketing and delivery of  business-type  educational
      programs and has no continuing  involvement with EPMG or Triad.  Financial
      statements  issued  subsequent  to the stock  purchase  agreement  will be
      restated  to  reflect  EPMG  and  Triad  Media,  Inc.  as  a  discontinued
      operation.

      The  following  unaudited pro forma  statement of operations  reflects the
      EPMG asset  disposition and the Triad sale as if the transactions had been
      effected  on  January  1, 2004 and  January  1,  2005,  respectively.  The
      following  unaudited  pro forma  balance  sheet  reflects  the EPMG  asset
      disposition and Triad split-off as if the  transactions  had been effected
      on March 31,  2005.  Unaudited  pro  forma  financial  information  is not
      necessarily  indicative of the operations that would have resulted had the
      transactions been effected on the respective dates.


                                       11


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(8)   Subsequent Events (continued)

<TABLE>
<CAPTION>
                                  2004 Consolidated    2004 Annual Income Statements for           2004
                                      Annual Income       Discontinued Operations               Pro Forma          Pro Forma Annual
                              Statement As Reported    Triad Media, Inc.      EPMG, Inc.        Adjustments         Income Statement
                                    ---------------    ---------------    ---------------    ---------------       ---------------
<S>                                 <C>                <C>                <C>                <C>               <C> <C>
Revenue                             $    17,341,520    $       413,443    $    16,928,077    $   (17,341,520)  1   $            --
Cost of Sales                             8,708,050             94,677          8,613,374         (8,708,050)  1                --
                                    ---------------    ---------------    ---------------    ---------------       ---------------
Gross Profit                              8,633,470            318,767          8,314,703         (8,633,470)                   --
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Operating Expenses:
      General and Administrative          8,218,831          2,285,038          3,085,503         (5,370,541)  1         2,848,290
      Selling                             4,047,152            676,296          3,368,656         (4,044,952)  1             2,200
      Writedown of Goodwill                      --                 --                 --         (1,088,686)  2         1,088,686
                                    ---------------    ---------------    ---------------    ---------------       ---------------
      Total Operating Expenses           12,265,982          2,961,334          6,454,159        (10,504,179)            3,939,176
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Other Income (Expense)                      151,127                 --             73,113            (73,113)  1            78,013
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Income (Loss) from Continuing
       Operations                   $    (3,481,386)   $    (2,642,568)   $     1,933,658    $     1,797,596       $    (3,861,162)
                                    ===============    ===============    ===============    ===============       ===============

                                  2005 Consolidated      2005 Q1 Income Statements for                                   2005
                                 Q1 Income Statement        Discontinued Operations             Pro Forma            Pro Forma Q1
                                      As Reported     Triad Media, Inc.       EPMG, Inc.       Adjustments         Income Statement
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Revenue                             $       277,019    $       270,414    $            --    $      (270,414)  1   $         6,605
Cost of Sales                                11,819             11,469                 --            (11,469)  1               350
                                    ---------------    ---------------    ---------------    ---------------       ---------------
Gross Profit                                265,200            258,945                 --           (258,945)                6,255
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Operating Expenses:
      General and Administrative            857,029            341,241                 --           (341,241)  1           515,787
      Selling                               162,296            162,296                 --           (162,296)  1                --
      Writedown of Goodwill                      --                 --                 --                 --   2                --
                                    ---------------    ---------------    ---------------    ---------------       ---------------
      Total Operating Expenses            1,019,325            503,537                 --           (503,537)              515,787
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Other Income (Expense)                       12,920              1,765                 --             (1,765)  1            11,156
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Income (Loss) from Continuing
      Operations                    $      (741,205)   $      (242,828)   $            --    $       242,828       $      (498,377)
                                    ===============    ===============    ===============    ===============       ===============

                                     March 31, 2005      March 31, 2005 Balance Sheets for                          March 31, 2005
                         Consolidated Balance Sheet         Discontinued Operations             Pro Forma             Pro Forma
                                       As Reported    Triad Media, Inc.      EPMG, Inc.        Adjustments          Balance Sheet
                                    ---------------    ---------------    ---------------    ---------------       ---------------

Current Assets                      $     1,388,488    $       341,852    $            --    $      (341,852)  1   $     1,046,636
Fixed Assets, net                           120,099             76,196                 --            (76,196)  1            43,904
Goodwill                                  1,088,686                 --                 --         (1,088,686)  2                --
Other Assets                                222,687              4,057                 --             (4,057)  1           218,631
                                    ---------------    ---------------    ---------------    ---------------       ---------------
      Total Assets                  $     2,819,961    $       422,105    $            --    $    (1,510,791)      $     1,309,170
                                    ===============    ===============    ===============    ===============       ===============

Current Liabilities -
        Continuing Operations       $     1,124,627    $            --    $            --                 --   1,3 $       499,754
Current Liabilities -
        Discontinued Operations                  --            312,034            624,873                 --   1,3         624,873
Long-term Liabilities                         1,639              1,639                 --             (1,639)  1                --
Other capital                            18,904,081          2,238,907         (4,780,187)          (570,847)  1        18,333,234
Retained Earnings                       (17,210,386)        (2,130,476)         4,155,313           (938,305)  2       (18,148,691)
                                    ---------------    ---------------    ---------------    ---------------       ---------------
     Total Liabilities and Equity   $     2,819,961    $       422,105    $            --    $    (1,510,791)      $     1,309,170
                                    ===============    ===============    ===============    ===============       ===============
</TABLE>

Notes:

      1.    These  adjustments  reflect  the   reclassification  of  operations,
            assets,  and  liabilities  related  to  the  discontinuation  of the
            education and coaching business. Upon the disposal of Triad pursuant
            to the Stock  Purchase  Agreement,  the Company will account for its
            education and coaching business as a discontinued operation. No gain



                                       12


<PAGE>


                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(8)   Subsequent Events (continued)

            or loss  arose  from the  disposal  of Triad in April  2005,  or the
            disposal  of  EPMG  during  2004,  pursuant  to  generally  accepted
            accounting  principles which requires a company's receipt of its own
            securities  in  such  transactions  to be  treated  as  transactions
            affecting  only  stockholders'  equity.
      2.    Adjustment  to  write-off  goodwill  relating to the  education  and
            coaching business to operating expenses.
      3.    Adjustment to reclassify retained liabilities to current liabilities
            of discontinued operations.  The retention of these liabilities,  in
            management's view, does not constitute continuing involvement in the
            disposed companies' operations.


      (b)   Data Tech Acquisition

      On May 6, 2005, IST Integrated Solutions,  Inc. (a wholly-owed subsidiary)
      completed  an   acquisition   of  the  assets  and   operations  of  Lietz
      Development,  Inc. and Saphire of Tampa Bay, Inc.  (collectively dba "Data
      Tech"), a Tampa,  Florida based computer equipment  reseller,  and hosting
      and  network   services   provider.   The  purchase   price   amounted  to
      approximately  $358,000 of  consideration,  comprising  the  assumption of
      $250,000 in debt and the issuance of 1,350,000  shares of our common stock
      (valued at the closing market price of the shares on May 6, 2005).

      The purchase of Data Tech will be  accounting  for as a purchase  business
      combination,  which will involve the  allocation of the purchase  price to
      the assets and liabilities acquired, or assumed, based upon fair values on
      the purchase date.



                                       13


<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations


The following discussion includes statements that are forward looking in nature.
The accuracy of such statements  depends on a variety of factors that may affect
the  business  and  operations  of the  Company.  Certain of these  factors  are
discussed under "Business - Factors  Influencing  Future Results and Accuracy of
Forward-Looking Statements" included in Part 1 of this report. When used in this
discussion,  the words  "expect(s)",  "feel(s)",  "believe(s)",  "will",  "may",
"anticipate(s)" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties,  and
actual  results  could  differ  materially  from those  projected.  Readers  are
cautioned not to place undue reliance on these forward-looking  statements,  and
are urged to carefully review and consider the various disclosures  elsewhere in
this Form 10-QSB.

Overview

Innovative  Software   Technologies,   Inc.  (the  "Company")  is  a  California
corporation that has  historically  been engaged in the business of development,
marketing and delivery of Internet websites,  database management programs,  and
business  educational   programs,   generally  to  individuals.   The  following
discussion  summarizes  information about our accounting  policies and practices
and  information  about our  operations  in a  comparative  manner for the three
months ended March 31, 2005 and 2004. Our  management's  discussion and analysis
of financial  condition and results of operations  should be read in conjunction
with our  consolidated  financial  statements and related notes thereto included
elsewhere herein.

Discontinuance of Business

Historically,  we have been engaged primarily in the development,  marketing and
delivery  of Internet  websites,  database  management  programs,  and  business
educational programs, generally to individuals,  throughout the United States of
America  through our EPMG and Triad  subsidiaries.  In July 2004, we transferred
certain  operating assets and liabilities of EPMG back to the former  principals
of EPMG  (from whom we  acquired  the stock of EPMG in  [insert  date])  under a
settlement agreement with such former principals. However, the transfer of these
assets and liabilities did not result in a discontinuation of this business.  In
April 2005, our board of directors  determined to discontinue  this business and
undertake a strategy of growth  through  acquisition  of private  companies  and
internal  product and  services  development  focused on small and medium  sized
businesses  ("SMB") and the medical  market,  and  accordingly  we split-off our
Triad  subsidiary  (f/k/a  Hackett  Media,  Inc.) in April  2005.  As a  result,
effective  April 20, 2005, we are no longer engaged in this business and have no
continuing involvement with EPMG or Triad. Accordingly, our financial statements
subsequent to the stock purchase  agreement related to Triad will be restated to
reflect EPMG and Triad as discontinued operations. These two former subsidiaries
represented  substantially all of our operations during the 2005 fiscal year and
the three-month period ended March 31, 2005.

New Strategy

In  furtherance  of our new strategy,  we have  identified  several  acquisition
candidates  that  provide a  variety  of  complimentary  products  and  services
including:

      o     Internet email and website hosting


                                       14


<PAGE>


      o     Secure email and hosting for HIPPA compliant service
      o     Network services including hardware and software reselling
      o     Internally   developed   software   applications   for  the  medical
            marketplace
      o     Medical based product reselling
      o     HIPPA consulting
      o     Graphics and web based industry targeted software

In the first  quarter of 2005 we formed two new  subsidiaries,  "IST  Integrated
Solutions,  Inc."  ("IST  Integrated")  and  "IST  Medical  Group,  Inc."  ("IST
Medical").  IST  Integrated's  mission  is to  provide  a  complementary  set of
information  technology based products and services to the SMB marketplace.  IST
Medical's mission is to provide products and services to address the information
needs of healthcare providers through the development of integrated clinical and
administrative  solutions.  IST Integrated and IST Medical will also function as
acquisition vehicles. In addition, our SoftSale, Inc. subsidiary,  a distributor
of software products,  will continue to be a distributor for third party as well
as internally developed products.

Acquisition of Data Tech

On May 6, 2005, IST Integrated  Solutions,  Inc. completed an acquisition of the
assets and operations of Lietz Development, Inc. and Sapphire of Tampa Bay, Inc.
(collectively  dba "Data  Tech"),  a Tampa,  Florida  based  computer  equipment
reseller, and hosting and network services provider. The purchase price amounted
to  approximately  $358,000  of  consideration,  comprising  the  assumption  of
$250,000  in debt and the  issuance  of  1,350,000  shares of our  common  stock
(valued at the closing market price of the shares on May 6, 2005).

The  purchase  of  Data  Tech  will  be  accounted  for as a  purchase  business
combination,  which will involve the  allocation  of the  purchase  price to the
assets and  liabilities  acquired,  or  assumed,  based upon fair  values on the
purchase date.


Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
are based upon the Company's consolidated financial statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America. The preparation of these financial statements requires
us to make  estimates and judgments  that affect the reported  amounts of assets
and  liabilities,  revenues and expenses,  and related  disclosure of contingent
assets and liabilities at the date of the Company's financial statements. Actual
results  may  differ  from  these  estimates  under  different   assumptions  or
conditions.

Critical  accounting  policies  are  defined  as those  that are  reflective  of
significant  judgments and  uncertainties,  and potentially result in materially
different  results  under  different  assumptions  and  conditions.  The Company
believes that its critical accounting policies include those described below.

Allowance for Doubtful Accounts
--------------------------------

Our gross notes receivable  amounted to $614,170 as of March 31, 2005 and relate
to product financing arrangements entered into with our clients. These notes are
unsecured,  bear  interest  at 15% and have terms  ranging  between one and five


                                       15
<PAGE>


years. As of March 31, 2005, we have recorded reserves of $186,821 for estimated
uncollectible amounts.

The  allowance  for  doubtful  accounts  is based upon our best  estimate of the
amount of probable credit losses in the existing notes based upon our historical
loss rates  experienced  on such  financing  arrangements.  A note is considered
impaired  pursuant  to  Financial  Accounting  Standards  Board  Statement  114,
Accounting by Creditors for  Impairment of a Loan.  Pursuant to Statement 114, a
note is impaired if it is probable  that we will not collect all  principal  and
interest  contractually  due. The  impairment  is measured  based on the present
value of expected future cash flows discounted at the note's effective  interest
rate.  We do not  accrue  interest  when a note  is  considered  impaired.  When
ultimate  collectibility  of the  principal  balance of the impaired  note is in
doubt,  all cash receipts on impaired  notes are applied to reduce the principal
amount of such notes until the principal has been  recovered and are  recognized
as  interest  income  thereafter.  Impairment  losses are  charged  against  the
allowance  when all possible  means of  collection  have been  exhausted and the
potential for recovery is considered remote.

Revenue Recognition and Returns and Allowances
----------------------------------------------

We  have  evaluated  our  product  offerings  in the  context  SAB  101  Revenue
Recognition and EITF 00-21 Revenue  Arrangements with Multiple  Deliverables and
have  determined  that  revenues  associated  with  the  multimedia  educational
materials (product sales) require  accounting  separate from the educational and
coaching  services  (services  revenue).  The fair value of these  offerings  is
established  through  separate  third party sales of each of these  products and
services.

Product  Sales:  We recognize  product sales upon  delivery to our students,  as
evidenced  by third  party  shipping  providers,  which is the  point  where the
student  assumes  ownership  and risk of loss.  Shipping  costs  are  billed  to
students and are  included as a component of revenue and cost of product  sales.
Returns are provided for based upon the Company's historical return experience.

Services  Revenues:  The educational  offering includes multiple sessions with a
Company-employed   coach.   We   recognize   services   revenue   pro   rata  as
coaching/training  sessions are rendered.  Deferred revenue  represents the fair
value of future  coaching  sessions that students have paid for,  $131,100 as of
March 31, 2005, but not yet received.

Our  obligation to provide  coaching and training  ceases one year following the
sale.  Refunds for unused courses are not provided for in the sales  arrangement
with the student.  However, the Company offers refunds in certain  circumstances
for which a history has been developed to estimate and reserve such amounts.

Results of Operations

Three months  ended March 31, 2005  compared to the three months ended March 31,
2004.

Revenues
--------

Revenues for the three  months  ended March 31, 2005 and 2004 were  $162,247 and
$9,649,389,  respectively, which represents a 98% decrease. Our principal source
of revenue  for the three  months  ended March 31,  2005 and 2004  consisted  of
business education and coaching services,  which represented 95% of consolidated
revenues.  Revenues decreased  substantially as a result of the transfer of EPMG
assets in July 2004 pursuant to a Settlement Agreement with Randy Garn and Ethan
Willis whereby certain  operating assets of our EPMG  subsidiary,  together with
certain  liabilities,  were  transferred  to Garn and Willis  (see note 3 in the



                                       16
<PAGE>


Notes to the Condensed Consolidated Financial Statements herein). As a result of
the  split-off of our Triad  subsidiary  in April 2005,  we are no longer in the
business of education and coaching services. On a pro forma basis, assuming that
these  transactions  had occurred on January 1, 2005, we would have had revenues
of $6,605. Subsequent to April 2005, we will restate our financial statements to
reflect EPMG and Triad as discontinued operations and, accordingly,  will report
no revenues from this business.  Our only source of revenues  prospectively will
be those  from (1) our  Softsale  subsidiary,  which is in its  early  stages of
development,  (2) Data Tech, which was acquired May 6, 2005and (3) business that
we acquire in the future, if any.

We recorded  revenues for multimedia  education  materials  (product sales) upon
delivery of the  material to our  students.  We recorded  revenues  for coaching
sessions  rendered and we deferred  revenue for coaching  sessions that are paid
for but have not yet been rendered.  We deferred $131,100 of services revenue as
of March 31, 2005 and  $2,103,538 as of March 31, 2004. Our deferral as of March
31, 2005 is substantially  less than the amount deferred as of March 31, 2004 as
the number of open coaching  sessions for which we are responsible for decreased
significantly after the EPMG asset disposition.

Cost of Sales and Margins
-------------------------

Cost of sales for the three  months  ended March 31, 2005 and 2004 were  $11,819
and  $4,511,658,  respectively,  representing  a decrease of 99%.  Cost of sales
included (i) the cost of the  multimedia  educational  materials that we ship to
our students,  (ii) the wages paid to our coaches and (iii) the commissions that
we pay to lead sources. Cost of sales decreased substantially as a result of the
above-described  disposition  of EPMG  operating  assets in July 2005.  Upon the
split-off  of our  Triad  subsidiary  in April  2005,  we are no  longer  in the
business of education and coaching services. On a pro forma basis, assuming that
these  transactions  had occurred on January 1, 2005,  we would have had cost of
sales  of  $350.  Subsequent  to  April  2005,  we will  restate  our  financial
statements  to  reflect  EPMG  and  Triad  as   discontinued   operations   and,
accordingly, will report no cost of sales from this business.

General and Administrative Expenses
-----------------------------------

General and  administrative  expenses  for the three months ended March 31, 2005
and 2004 were $742,257 and $2,923,724, respectively, representing an decrease of
75%. General and  administrative  expenses as a percentage of sales rose to 458%
in 2005 from 30% in 2004.  Our general  and  administration  expenses  consisted
primarily of salaries  and wages,  professional  fees,  rent,  travel  expenses,
payroll taxes, telephone expenses and other general and administrative  expenses
necessary to support the  operations of the Company in the current  period.  The
primary reasons for the increase in general and administrative expenses relative
to sales was a result of the fall in sales following the sale of the EPMG assets
while maintaining the company  infrastructure  including legal expenses relating
to the SEC investigation.

Commissions and Other Selling Expenses
--------------------------------------

Selling  expenses  for the  three  months  ended  March  31,  2005 and 2004 were
$162,296 and $1,885,458,  respectively,  representing a decrease of 92%. Selling
expenses consisted  primarily of commissions paid to sales associates as well as
marketing and  advertising  expenses  associated with key products and services.
The decrease in selling expenses is attributed to the disposal of EPMG assets.

Other Income (Expense)
----------------------


                                       17


<PAGE>

Other  income,  net of other  expenses for the three months ended March 31, 2005
and 2004 were $12,920 and $65,915, respectively, representing a decrease of 20%.
The decrease is primarily attributable to a decrease in interest income from our
financing notes receivable balance.

Income Taxes
------------

Our benefit from income taxes  amounted to $-0- for the three months ended March
31, 2005 compared to a provision of $(155,813)  for the three months ended March
31, 2004.  The Company did not record any income tax benefit from current period
losses as the realization of such benefit in future periods is uncertain.

Net Loss
--------

Our net loss for the three  months  ended March 31, 2005  amounted to  $741,205,
compared to a net income of $238,650 for the period  ended March 31, 2004.  This
decrease was  attributable  to the matters  discussed above relating to the EPMG
asset  disposition,  which  included  decreased  revenue and markedly  increased
general and  administrative  expenses.  Our decision to split off Triad in April
2005 is  expected to decrease  our net loss by  approximately  $50,000 per month
following the split off.

Liquidity and Capital Resources

Our  consolidated  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern for a  reasonable  period.  However,
during the period ended March 31, 2005,  we incurred a loss of $741,205 and used
cash of $749,487 in our operating activities. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.

Management is currently  seeking merger and  acquisition  candidates  within the
technologies  industry,   which  have  revenue  producing  and  cash  generating
operations.  As  further  discussed  in  Note  8 to the  accompanying  financial
statements,  on May  6,  2005,  IST  Integrated  Solutions,  Inc.  completed  an
acquisition of the assets and operations of Lietz Development, Inc. and Sapphire
of Tampa Bay,  Inc.  (collectively  dba "Data  Tech"),  a Tampa,  Florida  based
computer equipment reseller, and hosting and network services provider. While we
have identified a number of other prospective  acquisition targets, there can be
no assurance that any acquisition  will be completed or that this strategy would
be successful.  In addition, we anticipate that we will need to raise additional
capital to support our operations until a successful acquisition or acquisitions
can be  completed.  There  can be no  assurance  we  will  be  able  to  acquire
additional capital at acceptable terms, if at all.

As of March 31, 2005 we had cash and other reserves  amounting to $329,474,  and
certain  receivables  that are  expected to be  collected  during the year ended
December 31, 2005 amounting to $427,349 net of allowances and refundable  income
taxes of  $582,836.  In the  absence  of a  strategic  acquisition  of  funding,
described in Note 2 to our financial statements, management believes that it can
curtail operating  expenses and defer trade payables  sufficient to maintain our
existence  through the third fiscal quarter of the year ended December 31, 2005.
There can be no assurances that we can acquire companies or curtail our expenses
sufficiently to maintain our operations.

Our  financial  statements  do not include  any  adjustments  that might  become
necessary should the Company be unable to continue as a going concern.

At March 31,  2005 we had  current  assets of  $1,388,488,  which  represents  a
decrease of $811,581  over current  assets as of December 31, 2004.  Much of the
decrease is attributable to a decrease in cash. At March 31, 2005 we had cash on
hand of $246,025,  which  represents a decrease of $630,447 over the balances as
of December 31, 2004.


                                       18


<PAGE>


At March 31, 2005 we had current  liabilities of $1,124,627,  which represents a
decrease of $42,738 over current liabilities as of December 31, 2004.

As March 31, 2005 our working  capital  decreased to $263,861 from $1,032,704 as
of December 31, 2004.  This decrease  results  primarily from the use of cash in
operations  as noted  above due to the lack of cash  generating  revenue and the
continued  high rate of  corporate  expenses.  With the April  2005 split off of
Triad,  we currently have no operating  business and no cash is being  generated
from revenues.  Accordingly,  our working capital will decline as we address our
new business development initiatives.

We have no material commitments for capital  expenditures.  Capital expenditures
for the three  months ended March 31, 2005  amounted to $19,665.  We may require
additional  facilities and support equipment if our growth rate continues at the
current rate.

We  currently  do not  have a stock  option  or  stock  purchase  plan.  We also
currently do not have any employee  benefit  plans that would require the use of
our securities.

Off Balance-Sheet Arrangements

The Company has no material off-balance sheet arrangements as of March 31, 2005.

Item  3. Controls and Procedures

(a)   As of March 31,  2005,  the Chief  Executive  Officer and Chief  Financial
      Officer  of  the  Company,   with  the   participation  of  the  Company's
      management,  carried  out  an  evaluation  of  the  effectiveness  of  the
      Company's disclosure controls and procedures pursuant to Exchange Act Rule
      13a-14.  Based on that  evaluation,  the Chief  Executive  Officer and the
      Chief  Financial  Officer  believe that, as of the date of the evaluation,
      the Company's  disclosure  controls and procedures are effective in making
      known to them material  information relating to the Company (including its
      consolidated subsidiaries) required to be included in this report.

(b)   There were no  changes  in the  Company's  internal  controls  or in other
      factors that could  significantly  affect internal controls,  known to the
      Chief Executive Officer or the Chief Financial Officer,  subsequent to the
      date of the evaluation.


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<PAGE>



PART II - OTHER INFORMATION
          -----------------

Item 1.  Legal Proceedings
         -----------------

From  time to time,  we are  involved  in  litigation  concerning  our  business
operations.  Management  believes that the  litigation in which we are currently
involved is not  reasonably  likely to be material to its  financial  condition,
results of its  operations or its cash flows,  other than the  litigation  noted
below.

SEC Investigation
-----------------

On June 24, 2003 the Securities and Exchange  Commission ("SEC") issued a formal
order of  investigation,  authorizing the  investigation  of certain  securities
matters.  The SEC staff has taken the  testimony  of  certain  officers  and has
informed us that it intends to take additional testimony. The SEC staff has also
issued additional requests for the voluntary  production of documents.  Prior to
the issuance of the order, we had voluntarily provided documents and information
to the SEC staff in response to informal,  non-public inquiries by the staff. On
April 8th, 2005 the Independent  Committee of the Board of Directors turned over
the results of its  investigation  to the SEC and we intend to continue to fully
cooperate with the SEC in its investigation.

Prosper, Inc. Complaint
-----------------------

Subsequent  to the EPMG  asset  disposition,  as  discussed  above,  the  former
principals,  under the new name of Prosper,  Inc. filed a complaint that seeks a
refund to the benefit of Prosper of certain  reserve funds amounting to $580,000
that are due to former vendors.  Under the EPMG Settlement Agreement,  we agreed
to pay certain reserves  potentially owing to third-party vendors upon specified
conditions.  The lawsuit  alleges that we have  breached the  obligation  to pay
these reserves,  but we contest that the conditions for these payments have been
satisfied and/or contest the amounts and payees of the payments that are alleged
to be owed by us.

Although we believe that these  allegations  do not have any merit,  if Prosper,
Inc. were to prevail in its complaint there would be serious negative  financial
consequences resulting from utilization of our cash reserves.  Moreover, such an
action could divert  management's time and efforts away from the business of the
Company.


                                       20


<PAGE>


Item 3.  Defaults upon Senior Securities

      (b)There has not been any  material  arrearage in the payment of dividends
on any preferred  stock.

Item 6.  Exhibits and Reports on Form 8-K.

      a.    Exhibits

                  The exhibits  required by this item are listed in the Index to
                  Exhibits set forth at the end of this Form 10-QSB.


      b.    Reports on Form 8-K

            During the period  covered by this  report,  the  Company  filed the
            following report on Form 8-K:

                  On February 4th,  2005,  the Company filed a Current Report on
                  Form 8-K under Item 8.01 (Other  Events)  stating  that it had
                  discovered certain material  misrepresentations  and omissions
                  made to the Company in  connection  with the  negotiation  and
                  closing of the  acquisition  of the business  assets of Get In
                  the Game, Inc., a seminar and online marketing business.


                                       21


<PAGE>


                                   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 Software Technologies, Inc.


Date:  May 20, 2005                     /s/ Peter M. Peterson
                                        ----------------------------------------
                                        Peter M. Peterson
                                        Chairman of the Board,
                                        Chief Executive Officer, and President


                                        /s/ Christopher J. Floyd
                                        ----------------------------------------
                                        Christopher J. Floyd
                                        Chief Financial Officer,
                                        Vice President of Finance, and Secretary



                                       22


<PAGE>


                                INDEX TO EXHIBITS
                                -----------------

Exhibit
Number                        Description
------                        -----------


31.1     Certification  of  Chief  Executive  Officer  of  Innovative   Software
         Technologies,  Inc.  pursuant to Rule  13a-15(e)  or  15d-15(e)  of the
         Securities Exchange Act of 1934, as amended.

31.2     Certification  of  Chief  Financial  Officer  of  Innovative   Software
         Technologies,  Inc.  pursuant to Rule  13a-15(e)  or  15d-15(e)  of the
         Securities Exchange Act of 1934, as amended.

32.1     Certification  of  Chief  Executive  Officer  of  Innovative   Software
         Technologies, Inc. pursuant to 18 U.S.C. 1350.

32.2     Certification  of  Chief  Financial  Officer  of  Innovative   Software
         Technologies, Inc. pursuant to 18 U.S.C. 1350.


                                       23