UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549








FORM
10-QSB/A








(Mark
One)


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





For the
Quarter Ended December 31,
2006





o
            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
              (State
      or Other Jurisdiction of Incorporation orOrganization)
            95-4691878
              (I.R.S.
      Employer Identification No.)3998
      FAU Blvd.,
      Bldg 1-210,Boca
      RatonFL
              (Address
      of Principal Executive Offices)
            33431
              (Zip
      Code)(561)
      417-7250
              (Registrant's
      Telephone Number, Including Area Code)Securities
      Registered Pursuant to Section 12(b) of the Act:
            NoneSecurities
      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.


Yesx Noo




Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o  Nox




There
were 72,531,581 shares of common stock, $0.001 par value, outstanding as of
February 14, 2007














Table of Contents








EXPLANATORY
NOTE:  Innovative Software Technologies, Inc. is filing this Quarterly
Report on Form 10-QSB/A to amend the Quarterly Report on Form 10-QSB initially
filed with the Securities Exchange Commission on February 14, 2007, to correct a
clerical error in reporting the Statement of Cash Flows for the quarter ended
December 31, 2006:




For
      the Nine Months Ended December 31, 2006AS
      FILED
              
              
              AS
      AMENDED
              
              
              DIFFERENCENet
      Loss
              
              $
              (2,424,383
              )
              
              $
              (3,386,485
              )
              
              $
              (962,102
              )Services
      paid in stock
              
              
              (881,795
              )
              
              
              80,307
              
              
              
              962,102
 
  Since
      Inception (January 12, 2005) Through December 31, 2006AS
      FILED
              
              
              AS
      AMENDED
              
              
              DIFFERENCENet
      Loss
              
              $
              (2,911,734
              )
              
              $
              (3,873,836
              )
              
              $
              (962,102
              )Services
      paid in stock
              
              
              (728,637
              )
              
              
              233,465
              
              
              
              962,102











INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.
 FORM
10-QSB/A
 QUARTER
ENDED DECEMBER 31, 2006


TABLEOF
CONTENTS









PageNumberPART
      I.
              FINANCIAL
      INFORMATIONItem
      1.
              Financial Statements
              1Consolidated Balance Sheet as of December 31, 2006
      (unaudited)
              1Consolidated Statements of Operations for the three and nine
      monthsEnded December 31, 2006 and 2005 and for the period from
      inception(January 12, 2005) through December 31, 2006
      (unaudited)
              2Consolidated Statements of Cash Flows for the nine
      monthsEnded December 31, 2006 and 2005 and for the period from
      inception(January 12, 2005) through December 31, 2006
      (unaudited)
              3Notes to Consolidated Financial Statements
      (unaudited)
              4Item
      2.
              Management's Discussion and Analysis or Plan of
      Operation
              11Item
      3.
              Controls and Procedures
              13PART
      II.
              OTHER
      INFORMATIONItem
      1.
              Legal Proceedings
              14Item
      2.
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              14Item
      3.
              Defaults Upon Senior Securities
              15Item
      4.
              Submission of Matters to a Vote of Security
      Holders
              15Item
      5.
              Other Information
              15Item
      6.
              Exhibits
              15SIGNATURES
              16








Table of Contents








PART
      I -
            FINANCIALINFORMATION




Item
      1.
            Financial
  Statements





INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
BALANCE SHEET


December
31, 2006


(UNAUDITED)




(Unaudited)December
      31,2006ASSETSCURRENT
      ASSETSCash
            
            $
            866,918Prepaid
      expenses and other current assets
            
            
            39,923Deferred
      financing costs
            
            
            152,156Total
      current assets
            
            
            1,058,996PROPERTY
      AND EQUIPMENT, NET
            
            
            125,390DEPOSITS
            
            
            17,400Total
      assets
            
            $
            1,201,786LIABILITIES
      AND STOCKHOLDERS’ (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
            
            $
            750,088Accrued
      officer salary and expenses
            
            
            60,500Customer
      deposits
            
            
            2,940Notes
      payable
            
            
            30,000Convertible
      debentures
            
            
            800,337Derivative
      financial instruments
            
            
            2,894,455Total
      current liabilities
            
            
            4,538,320COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      (DEFICIT)Preferred
      stock, 25,000,000 shares authorized, $1.00 stated valueSeries
      A, 1,500,000 shares authorized, 450,000 shares outstanding
            
            
            450,000Common
      stock - authorized, 100,000,000 shares of $.001 parvalue;
      issued and outstanding, 72,531,581 shares
            
            
            72,532Additional
      paid-in capital
            
            
            14,771Deficit
      accumulated during the development stage
            
            
            (3,873,836
            )Total
      stockholders' (deficit)
            
            
            (3,336,534
            )Total
      liabilities and stockholders' (deficit)
            
            $
            1,201,786





See
accompanying notes.






1
 Table of Contents




INNOVATIVESOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF OPERATIONS


(UNAUDITED)




Since
      InceptionFor
      the Three Months
            
            
            For
      the Nine Months
            
            
            (January
      12, 2005)Ended
      December 31,
            
            
            Ended
      December 31,
            
            
            ThroughDecember
      31,2006
            
            
            2005
            
            
            2006
            
            
            2005
            
            
            2006REVENUE
            
            
            20,770
            
            
            
            -
            
            
            
            59,437
            
            
            
            -
            
            
            
            59,437COST
      OF REVENUE
            
            
            22,402
            
            
            
            -
            
            
            
            58,967
            
            
            
            -
            
            
            
            58,967GROSS
      PROFIT
            
            
            (1,631
            )
            
            
            -
            
            
            
            470
            
            
            
            -
            
            
            
            470OPERATING
      EXPENSESGeneral
      and administrative
            
            
            537,179
            
            
            
            185,961
            
            
            
            1,791,913
            
            
            
            215,510
            
            
            
            2,265,455Total
      operating expenses
            
            
            537,179
            
            
            
            185,961
            
            
            
            1,791,913
            
            
            
            215,510
            
            
            
            2,265,455(LOSS)
      FROM OPERATIONS
            
            
            (538,811
            )
            
            
            (185,961
            )
            
            
            (1,791,443
            )
            
            
            (215,510
            )
            
            
            (2,264,985
            )OTHER
      INCOME (EXPENSE) NETOther
      income
            
            
            23,165
            
            
            
            -
            
            
            
            32,145
            
            
            
            -
            
            
            
            32,145Derivative
      income (expense)
            
            
            (1,045,818
            )
            
            
            -
            
            
            
            (1,056,398
            )
            
            
            -
            
            
            
            (1,056,398
            )Interest
      (expense)
            
            
            (361,435
            )
            
            
            -
            
            
            
            (571,150
            )
            
            
            -
            
            
            
            (584,959
            )Interest
      income, deposits
            
            
            317
            
            
            
            -
            
            
            
            361
            
            
            
            -
            
            
            
            361OTHER
      INCOME (EXPENSE) NET
            
            
            (1,383,772
            )
            
            
            -
            
            
            
            (1,595,042
            )
            
            
            -
            
            
            
            (1,608,851
            )(LOSS)
      BEFORE INCOME TAXES
            
            
            (1,922,583
            )
            
            
            (185,961
            )
            
            
            (3,386,485
            )
            
            
            (215,510
            )
            
            
            (3,873,836
            )INCOME
      TAXES
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -NET
      (LOSS)
            
            
            (1,922,583
            )
            
            
            (185,961
            )
            
            
            (3,386,485
            )
            
            
            (215,510
            )
            
            
            (3,873,836
            )UNDECLARED
      PREFERREDSTOCK
      DIVIDENDS
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -(LOSS)
      APPLICABLETO
      COMMON STOCKHOLDERS
            
            $
            (1,922,583
            )
            
            $
            (185,961
            )
            
            $
            (3,386,485
            )
            
            $
            (215,510
            )
            
            $
            (3,873,836
            )BASIC
      AND DILUTED(LOSS)
      PER COMMON SHARE
            
            $
            (0.03
            )
            
            
            
            
            
            $
            (0.05
            )WEIGHTED
      AVERAGE NUMBER OFCOMMON
      SHARES USED IN BASIC ANDDILUTED
      PER SHARE CALCULATION
            
            
            72,473,638
            
            
            
            
            
            
            
            67,265,237




See
accompanying notes.










2
 Table of Contents








INNOVATIVESOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(UNAUDITED)




Since
      Inception(January
      12, 2005)For
      the Nine Months
              
              
              ThroughEnded
      December 31,
              
              
              December
      31,2006
              
              
              2005
              
              
              2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss)
              
              $
              (3,386,485
              )
              
              $
              (215,510
              )
              
              $
              (3,873,836
              )Adjustments
      to reconcile net (loss) to
              
              
              
              
              
              
              
              
              
              
              -net
      cash flows from operating activities
              
              
              
              
              
              
              
              
              
              
              -Depreciation
      and amortization
              
              
              32,248
              
              
              
              -
              
              
              
              32,326Stock
      and options based compensation
              
              
              726,528
              
              
              
              -
              
              
              
              973,484Services
      paid in stock
              
              
              80,307
              
              
              
              -
              
              
              
              233,465Amortization
      of convertible debt discount
              
              
              495,503
              
              
              
              -
              
              
              
              495,503Derivative
      loss
              
              
              1,056,398
              
              
              
              -
              
              
              
              1,056,398Amortization
      of deferred financing costs
              
              
              72,444
              
              
              
              -
              
              
              
              72,444Net
      change in operating assets and liabilitiesAccount
      receivables
              
              
              -
              
              
              
              -
              
              
              
              -Prepaid
      expenses and other current assets
              
              
              (17,722
              )
              
              
              (500
              )
              
              
              (29,123
              )Deposits
              
              
              16,350
              
              
              
              -
              
              
              
              (16,400
              )Accounts
      payable and accrued expenses
              
              
              (36,600
              )
              
              
              14,336
              
              
              
              (32,344
              )Customer
      deposits
              
              
              2,940
              
              
              
              -
              
              
              
              2,940Net
      cash flows from operating activities
              
              
              (958,089
              )
              
              
              (26,559
              )
              
              
              (1,085,143
              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
              
              
              (145,824
              )
              
              
              -
              
              
              
              (150,510
              )Increase
      in deferred financing costs
              
              
              (166,200
              )
              
              
              -
              
              
              
              (166,200
              )Net
      cash flows from investing activities
              
              
              (312,024
              )
              
              
              -
              
              
              
              (316,710
              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from notes payable
              
              
              372,114
              
              
              
              180,970
              
              
              
              489,122Proceeds
      from convertible debentures
              
              
              1,707,500
              
              
              
              
              
              
              
              1,707,500Stock
      issued for cash
              
              
              -
              
              
              
              21,000
              
              
              
              21,000Cash
      acquired in the reverse acquisition of Innovative
              
              
              51,148
              
              
              
              -
              
              
              
              51,148Net
      cash flows from financing activities
              
              
              2,130,762
              
              
              
              26,855
              
              
              
              2,268,770-NET
      INCREASE IN CASH
              
              
              860,649
              
              
              
              296
              
              
              
              866,918CASH
      AT BEGINNING OF PERIOD
              
              
              6,269
              
              
              
              -
              
              
              
              -CASH
      AT END OF PERIOD
              
              $
              866,918
              
              
              $
              296
              
              
              $
              866,918SUPPLEMENTAL
      CASH FLOW INFORMATIONIssuance
      of common stock for acquisition
              
              $
              440,000
              
              
              $
              -
              
              
              $
              440,000Issuance
      of common stock for debt repayment
              
              $
              183,115
              
              
              $
              -
              
              
              $
              183,115








See
accompanying notes.




3
 Table of Contents








INNOVATIVESOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)








(1)    Basis
Of Presentation and Reporting





The
accompanying unaudited consolidated financial statements have been prepared in
accordance accounting principles generally accepted in the United States (GAAP)
for interim financial information and with the instructions to Form 10-QSB/A and
Regulation S-B. Accordingly, they do not contain all of the information and
footnotes required by GAAP 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 December 31, 2006, and the results of its
operations for the three and nine months ended December 31, 2006, and December
31, 2005, and the cash flows for the nine months ended December 31, 2006, and
December 31, 2005. These unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited 2005 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, 2005, as well as the Company’s report on Form 8-K filed
June 30, 2006, reporting the acquisition of AcXess, Inc., described below.
Operating results for the three and nine month periods ended December 31, 2006,
are not necessarily indicative of the operating results that may be expected for
the year ending March 31, 2007.





On June
26, 2006, Innovative Software Technologies, Inc., a California corporation
(“Innovative”), completed the acquisition of AcXess, Inc., a Florida corporation
(“AcXess”), in a stock exchange transaction (the “Transaction”) pursuant to a
Stock Exchange Agreement by and between Innovative, AcXess, the Shareholders of
AcXess, and Anthony F. Zalenski, acting as the Shareholder’s Agent (the
“Exchange Agreement”). As a result of the Transaction, AcXess became a wholly
owned subsidiary of Innovative. Following FAS 141, as governing and operating
control of the combined entity was under Mr. Zalenski, AcXess is deemed to be
the purchaser in the Transaction for financial reporting purposes. Therefore,
reverse acquisition accounting applies whereby AcXess is deemed to have issued
its common stock for the net assets or liabilities of Innovative accompanied by
a recapitalization of AcXess. For accounting purposes, AcXess is treated as the
continuing reporting entity. The fiscal year end of AcXess is March
31.





The
accompanying unaudited consolidated financial statements present the accounts of
Innovative and its wholly owned subsidiaries, AcXess, Inc., Softsale, Inc. and
EPMG, Inc. (collectively, the “Company”). All intercompany balances and
significant transactions have been eliminated.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. However, the Company has incurred a loss of
$3,873,836 from inception (January 12, 2005) through December 31, 2006, and has
working capital and stockholder deficits of $3,479,324 and $3,336,534,
respectively, at December 31, 2006. In addition, the Company currently has
minimal revenue generating operations. These factors raise substantial doubt
about the Company’s ability to continue as a going concern. 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.





Management
has raised funds for operations totaling $2,107,500 as of December 31, 2006,
from the issuance of convertible notes and debentures (see Note 6 below) and
intends to continue to seek debt and/or equity financing to fund operations and
the execution of its business plan. However, there can be no assurance that the
Company will be successful in raising the funds necessary to remain a going
concern.





(2)    Earnings
Per Share





The
Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding during periods when anti-dilutive common stock equivalents are not
considered in the computation.






4
 Table of Contents





INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)






(3)    Deferred
Financing Costs





The
Company capitalizes financing costs as incurred and amortizes these costs to
interest expense over the life of the underlying instruments.





(4)    Stockholders’
(Deficit)





On April
18, 2006, Innovative issued 200,000 shares of common stock with a fair market
value of $8,000 for the settlement of an account payable.





Pursuant
to the Exchange Agreement, on June 26, 2006, the shareholders of AcXess
exchanged 100% of the outstanding shares of common stock of AcXess for an
aggregate of 11,000,000 shares of common stock of Innovative.





On June
27, 2006, Innovative issued 4,377,872 shares of its common stock to holders of
$175,115 in AcXess promissory notes to extinguish this debt.





On
September 12, 2006, Innovative issued 523,811 shares of its common stock with a
fair market value of $57,619 for consulting services for September, October and
November of 2006.





Between
September 18, 2006, and November 18, 2006, Innovative issued 174,519 shares of
its common stock with a fair market value of $22,687 for legal services for
September, October and November of 2006.





(5)    Commitments,
Concentrations and Contingencies





(a)    Leases:





The
Company had no capital leases as of December 31, 2006.





In
February 2006 Innovative entered into a lease agreement for approximately 3,200
square feet of office space in Boca Raton, Florida. Monthly payments under the
lease agreement are $5,850 and the lease has a term extending through June 30,
2007.





In
February 2006 Innovative entered into a lease agreement for approximately 1,800
square feet for a corporate apartment in Boca Raton, Florida. Monthly payments
under the lease agreement are $2,500 and the lease has a term extending through
February 28, 2007.





Rent
expense under all operating leases for the three month periods ended December
31, 2006, and 2005, was $26,779 and $-0- respectively. Rent expense under all
operating leases for the nine month periods ended December 31, 2006, and 2005,
was $71,534 and $-0- respectively. In December 2004 our former subsidiary Triad
Media, Inc. entered into a lease for approximately 3,606 square feet in Kansas
City, Missouri with a term beginning February 1, 2005 and ending January 31,
2010 and a base rent of $3,756 per month which the Company guaranteed on behalf
of Triad Media, Inc. Following the sale of Triad Media in April 2005, the
Company accrued for this potential liability which accrual amounted to $59,892
at December 31, 2005. On February 28, 2006, the Company was informed that Triad
Media, Inc. had abandoned the premises. In July 2006 we reached an agreement
with the landlord to end the lease for a total of approximately $33,000 payable
with a payment of $10,000 at signing, and the remaining balance payable over 5
months. As of December 31, 2006, the Company had satisfied its obligation
regarding the lease and there was no remaining balance due.





(b)    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 previously
management had voluntarily provided documents and information to the SEC staff
in response to informal, non-public inquiries by the staff. On April 8, 2005,
the Independent Committee of the Board of Directors turned over the results of
its investigation to the SEC. We intend to continue to fully cooperate with the
SEC in its investigation.






5
 Table of Contents





INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




(c)    Litigation:





The
Company is a defendant in a lawsuit in the Circuit Court of Platte County,
Missouri, “Kansas City Explorers vs. Innovative Software” Case no. 04CV82050 in
which the claimant is seeking money for advertising which it alleges is still
due, and have alleged damages of $50,028. The claimant has been court ordered to
produce answers to certain discovery requests of the Company which they have
failed to produce. Management intends to aggressively defend the claim based
upon the lack of contract between the parties, lack of proof of damages, as well
as minimal proof of advertising services actually performed for Company products
and services, and other legal and equitable defenses.





(6)    Convertible
Notes and Derivative Instrument Liabilities





Derivative
financial instruments





The
Company does not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks.





The
Company reviews the terms of convertible debt and equity instruments issued to
determine whether there are embedded derivative instruments, including the
embedded conversion option, that are required to be bifurcated and accounted for
separately as a derivative financial instrument. In circumstances where the
convertible instrument contains more than one embedded derivative instrument,
including the conversion option, that is required to be bifurcated, the
bifurcated derivative instruments are accounted for as a single, compound
derivative instrument. Also, in connection with the sale of convertible debt and
equity instruments, the Company may issue freestanding options or warrants that
may, depending on their terms, be accounted for as derivative instrument
liabilities, rather than as equity. The Company may also issue options or
warrants to non-employees in connection with consulting or other services they
provide.





Certain
instruments, including convertible debt and equity instruments and the
freestanding options and warrants issued in connection with those convertible
instruments, may be subject to registration rights agreements, which impose
penalties for failure to register the underlying common stock by a defined date.
If the convertible debt or equity instruments are not considered to be
"conventional", then the existence of the potential cash penalties under the
related registration rights agreement requires that the embedded conversion
option be accounted for as a derivative instrument liability. Similarly, the
potential cash penalties under the related registration rights agreement may
require us to account for the freestanding options and warrants as derivative
instrument liabilities, rather than as equity. In addition, when the ability to
physical or net-share settle the conversion option or the exercise of the
freestanding options or warrants is deemed to be not within the control of the
Company, the embedded conversion option or freestanding options or warrants may
be required to be accounted for as a derivative instrument
liability.





Derivative
financial instruments are initially measured at their fair value. For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported as charges or credits to
income. For option-based derivative financial instruments, the Company uses the
Black-Scholes option pricing model to value the derivative
instruments.





When
freestanding options or warrants are issued in connection with the issuance of
convertible debt or equity instruments and will be accounted for as derivative
instrument liabilities (rather than as equity), the total proceeds received are
first allocated to the fair value of those freestanding instruments. When the
freestanding options or warrants are to be accounted for as equity instruments,
the proceeds are allocated between the convertible instrument and those
derivative equity instruments, based on their relative fair values. When the
convertible debt or equity instruments contain embedded derivative instruments
that are to be bifurcated and accounted for as liabilities, the total proceeds
allocated to the convertible host instruments are first allocated to the fair
value of all the bifurcated derivative instruments. The remaining proceeds, if
any, are then allocated to the convertible instruments themselves, usually
resulting in those instruments being recorded at a discount from their face
amount.









6
 Table of Contents








INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




To the
extent that the fair values of the freestanding and/or bifurcated derivative
instrument liabilities exceed the total proceeds received, an immediate charge
to income is recognized, in order to initially record the derivative instrument
liabilities at their fair value.





The
discount from the face value of the convertible debt, together with the stated
interest on the instrument, is amortized over the life of the instrument through
periodic charges to income, usually using the effective interest method. When
the instrument is convertible preferred stock, the dividends payable are
recognized as they accrue and, together with the periodic amortization of the
discount, are charged directly to retained earnings.





The
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed periodically,
including at the end of each reporting period. If re-classification is required,
the fair value of the derivative instrument, as of the determination date, is
re-classified. Any previous charges or credits to income for changes in the fair
value of the derivative instrument are not reversed. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based
on whether or not net-cash settlement of the derivative instrument could be
required within twelve months of the balance sheet date. As of December 31, 2006
$2,894,454 of derivative financial instruments have been classified as current
liabilities.





In
January 2006 the Board of Directors of the Company approved the raising of up to
$1,000,000 via the issuance of promissory notes (the “Notes”) to accredited
investors. These notes have a term of six months, are convertible into shares of
common stock of the Company at a 30% discount to a future Qualified Financing
(as therein described). In addition, each note is issued with warrants to
purchase Innovative common stock at a strike price of $0.05 per share. The
number of warrants granted is determined by multiplying the face value of each
note issued by four. In October the Board of Directors of the Company approved
an increase in the amount to be raised under this financing to $1,500,000. A
total of $1,107,500 had been raised as of November 10, 2006, when the Company
closed the round. As of February 14, 2007, the Company was in default on eight
of these notes totaling a principal amount of $280,000 as the term of these
notes had passed. In the event of a default resulting from the Company's
non-payment of principal or interest when due, the note holder may declare all
unpaid principal and accrued interest due and payable immediately. The Company
has received no notice from any note holder and is currently in the process of
renegotiating the terms of its convertible promissory notes; however there can
be no assurance that such negotiations will be successful.





On
December 22, 2006, the Company entered into a securities purchase agreement with
an accredited investor (the “Investor”) for the sale of $1,000,000 Convertible
Debentures (the “Debentures”). In connection with the Agreement, the Investor
received (i) a warrant to purchase 8,928,571 shares of common stock (“Long-Term
Warrants”) exercisable at $0.30 and (ii) a warrant to purchase 1,785,714 shares
of common stock (“Short Term Warrants”) exercisable at $0.143 per share. The
Long Term Warrants and the Short Term Warrants are exercisable for a period four
years from the date of issuance and the earlier of (i) December 22, 2007 and
(ii) the date a registration statement(s) covering the resale of all Registrable
Securities (as defined in the Registration Rights Agreement) is declared
effective by the Commission (the “Initial Exercise Date”) and on or prior to the
close of business on the four month anniversary of the Initial Exercise Date,
respectively.





The
Debentures bear interest at 4% until June 22, 2007 and 9% thereafter, payable in
arrears and mature three years from the date of issuance. Accrued interest will
be payable in cash semi-annually, beginning on January 1, 2007.





Warrants
have been accounted for as derivative instrument liabilities (see below) in
accordance with EITF 00-19, "Accounting for Derivative Financial Instruments
Indexed To, and Potentially Settled In, a Company's Own Common Stock" (EITF
00-19). Accordingly, the initial fair values of the warrants, amounting to an
aggregate of $82,239 relating to the issuance of the Notes, and $964,286
relating to the issuance of the Debentures, were recorded as a derivative
instrument liability. The fair value of the warrants was determined using the
Black-Scholes valuation model, based on the market price of the common stock on
the dates the Warrants were issued, an expected dividend yield of 0%, a
risk-free interest rate based on constant maturity rates published by the U.S.
Federal Reserve, applicable to the life of the Warrants, expected volatility of
114% and the five year life of the Warrants. Since we have a limited trading
history in terms of both time and trading levels, we have computed our
stock-price volatility percentages that are used in our valuation assumptions
using weighting methodologies applied to both company and peer-company
historical volatilities. The Company is required to re-measure the fair value of
the warrants at each reporting period.






7
 Table of Contents








INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




Because
the conversion price of the Notes is not fixed, the Convertible Notes are not
“conventional convertible debt” as that term is used in EITF 00-19. Accordingly,
the Company is required to bifurcate and account separately for the embedded
conversion options, together with any other derivative instruments embedded in
the Convertible Notes. The Debenture is a hybrid instrument that embodies
several derivative features. The instrument is not afforded the “conventional”
convertible exemption because of certain full-ratchet anti-dilution protections
afforded the investors. Further, certain derivative features did not meet the
conditions for equity classification set forth in EITF 00-19. As a result, the
Company has combined all embedded derivatives into one compound derivative
financial instrument for financial accounting and reporting..





The
freestanding warrants issued with the Debenture are also hybrid instruments that
embody derivative features. While bifurcation of the embedded derivatives was
not required, the warrants did not otherwise meet all of the conditions for
equity classification set forth in EITF 00-19. As a result, the Company has
recorded the warrants as derivative liabilities at fair value.





The
conversion option related to each Convertible Note was bifurcated from the
Convertible Note and accounted for separately as a derivative instrument
liability (see below). The bifurcated embedded derivative instruments, including
the embedded conversion options which were valued using the Flexible Monte Carlo
Simulation methodology, were recorded at their initial fair value of an
aggregate of $801,911.





The
discount from the face amount of the Convertible Notes represented by the value
assigned to the Warrants and bifurcated derivative instruments is being
amortized over the period to the due date of each Convertible Note, using the
effective interest method. Amortization for the three and nine month periods
ended December 31, 2006, was $315,867 and $485,503, respectively.





A summary
of the Convertible Notes and derivative instrument liabilities at December 31,
2006, is as follows:





Convertible
      Notes; 12% per annum; due December 15, 2006, though April 24,
      2007
            
            $
            1,107,500Less:
      unamortized discount related to warrants and bifurcated embedded
      derivative instruments
            
            
            (317,163
            )Total
      carrying value at December 31, 2006
            
            $
            790,337





The
conversion option related to the Debenture was bifurcated from the Debenture and
accounted for separately as a derivative instrument liability (see below). The
bifurcated embedded derivative instruments, including the embedded conversion
option which was valued using the Flexible Monte Carlo Simulation methodology,
was recorded at its initial fair value of an aggregate of $553,466.





The
discount from the face amount of the Debenture represented by the value assigned
to the Warrants and bifurcated derivative instruments is being amortized over
the period to the due date of the Debenture, using the effective interest
method. Amortization for the three and nine month periods ended December 31,
2006, was $10,000 and $10,000, respectively.





A summary
of the Debenture and related derivative instrument liabilities at December 31,
2006, is as follows:





Debenture;
      4% per annum (increasing to 9% per annum in July 2007); due December 22,
      2009
            
            $
            1,000,000Less:
      unamortized discount related to warrants and bifurcated embedded
      derivative instruments
            
            
            (990,000
            )Total
      carrying value at December 31, 2006
            
            $
            10,000











8
 Table of Contents





INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)








Derivative
financial instrument liabilities





We use
the Black-Scholes valuation model to value the warrants and the embedded
conversion option components of any bifurcated embedded derivative instruments
that are recorded as derivative liabilities.





In
valuing the warrants and the embedded conversion option components of the
bifurcated embedded derivative instruments, at the time they were issued and at
December 31, 2006, we used the market price of our common stock on the date of
valuation, an expected dividend yield of 0% and the remaining period to the
expiration date of the warrants or repayment date of the Convertible Notes. All
warrants and conversion options can be exercised by the holder at any
time.





Because
of the limited historical trading period of our common stock, the expected
volatility of our common stock over the remaining life of the conversion options
and warrants has been estimated at 114%. Since we have a limited trading history
in terms of both time and trading levels, we have computed our stock-price
volatility percentages that are used in our valuation assumptions using
weighting methodologies applied to both company and peer-company historical
volatilities. The risk-free rates of return used were based on constant maturity
rates published by the U.S. Federal Reserve, applicable to the remaining life of
the conversion options or warrants.





At
December 31, 2006, the following derivative liabilities related to common stock
warrants and embedded derivative instruments were outstanding as a result of the
issuance of the Notes:





Exercise
            
            Value
            
            ValuePrice
      Per
            
            Issue
            
            December
      31,Issue
      Dates
            
            Expiry
      Dates
            
            
            
            Share
            
            Date
            
            2006May
      22, through
            
            
            May
      22, through
            
            
            1,600,000October
      26, 2006
            
            
            October
      26, 2011
            
            
            warrants
            
            $
            0.05
            
            $
            82,239
            
            $
            103,317Fair
      value of freestanding derivative instrument liabilities for
      warrants
            
            
            
            
            
            
            $
            103,317May
      22, through
            
            
            May
      22, throughOctober
      26, 2006
            
            
            October
      26, 2011
            
            
            
            
            
            
            
            $
            801,911
            
            $
            1,024,179Fair
      value of bifurcated embedded derivative instrumentliabilities
      associated with the above convertible notes
            
            
            
            
            
            
            $
            1,024,179Total
      derivative financial instruments
            
            
            
            
            
            
            
            
            
            $
            1,127,496





The
following table reflects the number of common shares into which the
aforementioned derivatives resulting from the issuance of Notes are indexed at
December 31, 2006:





Common
      shares indexed:Embedded
      derivative instruments
            
            
            15,821,429Freestanding
      derivatives (warrants)
            
            
            4,430,00020,251,429







9
 Table of Contents








INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)








At
December 31, 2006, the following derivative liabilities related to common stock
warrants and embedded derivative instruments were outstanding as a result of the
issuance of the Debenture:





Exercise
            
            Value
            
            ValuePrice
      Per
            
            Issue
            
            December
      31,Issue
      Dates
            
            Expiry
      Dates
            
            
            
            Share
            
            Date
            
            2006December
      22, 2006
            
            
            October
      26, 2011
            
            
            10,714,285
            
            $
            0.05
            
            $
            964,286
            
            $
            1,048,929warrantsFair
      value of freestanding derivative instrument liabilities for
      warrants
            
            
            
            $
            1,048,929May
      22, through
            
            
            May
      22, throughOctober
      26, 2006
            
            
            October
      26, 2011
            
            
            
            
            
            
            
            $
            553,466
            
            $
            718,031Fair
      value of bifurcated embedded derivative instrumentliabilities
      associated with the above convertible notes
            
            
            
            
            
            
            $
            718,031Total
      derivative financial instruments
            
            
            
            
            
            
            
            
            
            $
            1,766,960





The
following table reflects the number of common shares into which the
aforementioned derivatives resulting from the issuance of the Debenture are
indexed at December 31, 2006:





Common
      shares indexed:Embedded
      derivative instruments
            
            
            9,314,331Freestanding
      derivatives (warrants)
            
            
            10,714,28520,028,617








(8)    Subsequent
Events





Subsequent
to the disposition by us of certain of its assets, liabilities, and operations
related to our wholly owned subsidiary EPMG, Inc., in July 2004, the former
principals, under the new name of Prosper, Inc. filed a complaint that seeks a
refund to the benefit of Prosper of certain accrued reserves remaining in EPMG
amounting to approximately $570,000. These reserves were accrued under contracts
with former vendors of EPMG and are recorded as accounts payable and accrued
expenses in the accompanying consolidated balance sheet as of December 31, 2006.
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.





On
February 6, 2007, we entered into a Settlement Agreement and Mutual Release with
Prosper, Inc. pursuant to which we agreed to pay Prosper, Inc. $10,000 in
consideration for our release and dismissal of this action.







10
 Table of Contents





Item2.Management's Discussion and Analysis or Plan of Operation





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/A.





Overview





The
following discussion summarizes information about our accounting policies and
practices and information about our operations in a comparative manner for the
three and nine months ended December 31, 2006, and 2005. 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.





Acquisition
of AcXess, Inc.





On June
26, 2006, the Company completed the acquisition of AcXess, Inc., a Florida
corporation (“AcXess”), in a stock exchange transaction (the “Transaction”)
pursuant to a Stock Exchange Agreement by and between Innovative, AcXess, the
Shareholders of AcXess, and Anthony F. Zalenski, acting as the Shareholder’s
Agent (the “Exchange Agreement”). As a result of the Transaction, AcXess became
a wholly owned subsidiary of the Company. Following FAS 141, as governing and
operating control of the combined entity was under Mr. Zalenski, AcXess is
deemed to be the purchaser in the Transaction for financial reporting purposes.
Therefore, reverse acquisition accounting applies whereby AcXess is deemed to
have issued its common stock for the net assets or liabilities of Innovative
accompanied by a recapitalization of AcXess. For accounting purposes, AcXess is
treated as the continuing reporting entity.





AcXess
was formed to provide Business Continuity (“BC”) products and services to the
Small and Medium Enterprise (“SME”) market. “Business Continuity” products and
services are an advanced form of disaster recovery solutions for electronic data
backup wherein the data and/or applications are available upon failure through
means of connectivity to remote server locations. Management believes that the
North American SME market for BC services (defined as companies with 50 to 5,000
employees) is underserved and that various technologies have matured to a point
where the SME market can now be supplied robust BC services which were
previously only available to large corporations and at substantial
cost.





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’s critical
accounting policies are discussed in its annual report on Form 10-KSB for the
year ended December 31, 2005.







11
 Table of Contents





Results
of Operations





Three
and nine months ended December 31, 2006, compared to the three and nine months
ended December 31, 2005.





Revenues





Revenues
for the three months ended December 31, 2006, and 2005 were $20,770 and $-0-,
respectively. Revenues for the nine months ended December 31, 2006, and 2005
were $59,437 and $-0-, respectively. The minimal amount of revenue reflects the
startup nature of the Company.





Cost of Sales and
Margins





Cost of
sales for the three months ended December 31, 2006, and 2005 were $22,402 and
$-0-, respectively. Cost of sales for the nine months ended December 31, 2006,
and 2005 were $58,967 and $-0-, respectively. Cost of sales comprise primarily
network charges for the periods.





General and Administrative
Expenses





General
and administrative expenses for the three months ended December 31, 2006, and
2005 were $537,179 and $185,961, respectively. General and administrative
expenses for the nine months ended December 31, 2006, and 2005 were $1,791,913
and $215,510, respectively. General and administrative expenses consisted
primarily of salaries and wages, professional fees, rent, travel expenses,
payroll taxes, telephone expenses and other general and administrative expenses.
The increase in general and administrative expenses is due primarily to the
increase in number of employees and concomitant salaries and wages, increased
professional fees due to increased accounting, legal and consulting
requirements, and increased marketing and travel expenses due to attending trade
shows.





Other Income
(Expense)





Other
income (expense), for the three months ended December 31, 2006, and 2005 were
($1,383,772) and $-0-, respectively. Other income (expense), for the nine months
ended December 31, 2006, and 2005 were ($1,595,042) and $-0-, respectively.
Other expense for the periods comprise primarily of interest expense and
derivatives loss due to derivative liabilities (see Note 6 in the Notes to the
Financial Statements) as well as other income due primarily from income
recognized upon the favorable settlement of certain outstanding accounts
payable.





Net Loss





Our net
loss for the three months ended December 31, 2006, amounted to ($1,922,583)
compared to a net loss of ($185,961) for the three month period ended December
31, 2005. Our net loss for the nine months ended December 31, 2006, amounted to
($3,386,485), compared to a net loss of ($215,510) for the nine month period
ended December 31, 2005.




Liquidity
and Capital Resources





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. However, the Company has incurred a loss of
$3,873,836 from inception (January 12, 2005) through December 31, 2006, and has
working capital and stockholder deficits of $3,479,324 and $3,336,534,
respectively, at December 31, 2006. In addition, the Company currently has
minimal revenue generating operations and expects to incur substantial operating
expenses in order to expand its business. As a result, we expect to incur
operating losses for the foreseeable future. As of December 31, 2006, we had
cash amounting to $866,918. Our financial statements do not include any
adjustments that might become necessary should the Company be unable to continue
as a going concern.






12
 Table of Contents







In
January 2006 the Board of Directors of the Company approved the raising of up to
$1,000,000 via the issuance of promissory notes to accredited investors. These
notes have a term of six months, are convertible into shares of common stock of
the Company at a 30% discount to a future Qualified Financing (as therein
described). In addition, each note is issued with warrants to purchase
Innovative common stock at a strike price of $0.05 per share. The number of
warrants granted is determined by multiplying the face value of each note issued
by four. In October the board of directors of the Company approved an increase
in the limit of funding under these terms to $1,500,000. As of December 31,
2006, the Company had raised $1,107,500 under such notes.





On
December 22, 2006, the Company entered into a securities purchase agreement (the
“Agreement”) with an accredited investor (the “Investor”) for the sale of
$1,000,000 Convertible Debentures (the “Debentures”). In connection with the
Agreement, the Investor received (i) a warrant to purchase 8,928,571 shares of
common stock (“Long-Term Warrants”) exercisable at $0.30 and (ii) a warrant to
purchase 1,785,714 shares of common stock (“Short Term Warrants”) exercisable at
$0.143 per share. The Long Term Warrants and the Short Term Warrants are
exercisable for a period four years from the date of issuance and the earlier of
(i) December 22, 2007 and (ii) the date a registration statement(s) covering the
resale of all Registrable Securities (as defined in the Registration Rights
Agreement) is declared effective by the Commission (the “Initial Exercise Date”)
and on or prior to the close of business on the four month anniversary of the
Initial Exercise Date, respectively.





The
Debentures bear interest at 4% until June 22, 2007, and 9% thereafter, payable
in arrears and mature three years from the date of issuance. Accrued interest
will be payable in cash semi-annually, beginning on January 1,
2007.





At
December 31, 2006, we had current liabilities of $4,538,320.





We have
no material commitments for capital expenditures. Capital expenditures for the
three and nine months ended December 31, 2006, amounted to $6,092 and $145,824,
respectively.





Off
Balance-Sheet Arrangements





The
Company has no material off-balance sheet arrangements as of December 31,
2006.





Item3.Controls and Procedures





As of
December 31, 2006, we carried out an evaluation, under the supervision and with
the participation of our Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were
effective in ensuring that information required to be disclosed by us in our
periodic reports is recorded, processed, summarized and reported, within the
time periods specified for each report and that such information is accumulated
and communicated to our management, including our principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.




There was
no change in our internal controls over financial reporting that has materially
affected, or is reasonable likely to materially affect, our internal control
over financial reporting during the quarter covered by this Report.







13
 Table of Contents





PARTII
- OTHER
INFORMATION





Item
1.Legal
Proceedings





From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm business. Except as disclosed below we are
currently not aware of any such legal proceedings or claims that will have,
individually or in the aggregate, a material adverse affect on business,
financial condition, operating results, or cash flows.





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 previously
management had voluntarily provided documents and information to the SEC staff
in response to informal, non-public inquiries by the staff. On April 8, 2005,
the Independent Committee of the Board of Directors turned over the results of
its investigation to the SEC. We intend to continue to fully cooperate with the
SEC in its investigation.




Prosper, Inc.
Complaint





Subsequent
to the disposition by us of certain of its assets, liabilities, and operations
related to our wholly owned subsidiary EPMG, Inc., in July 2004, the former
principals, under the new name of Prosper, Inc. filed a complaint that seeks a
refund to the benefit of Prosper of certain accrued reserves remaining in EPMG
amounting to approximately $570,000. These reserves were accrued under contracts
with former vendors of EPMG and are recorded as accounts payable and accrued
expenses in the accompanying consolidated balance sheet as of December 31, 2006.
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.





On
February 6, 2007, we entered into a Settlement Agreement and Mutual Release with
Prosper Inc. pursuant to which we agreed to pay Prosper, Inc. $10,000 in
consideration for our release.




Kansas CityExplorers
Complaint





The
Company is a defendant in a lawsuit in the Circuit Court of Platte County,
Missouri, “Kansas City Explorers vs. Innovative Software” Case no. 04CV82050 in
which the claimant is seeking money for advertising which it alleges is still
due, and have alleged damages of $50,028. The claimant has been court ordered to
produce answers to certain discovery requests of the Company which they have
failed to produce. Management intends to aggressively defend the claim based
upon the lack of contract between the parties, lack of proof of damages, as well
as minimal proof of advertising services actually performed for Company products
and services.





Item2. Unregistered Sales of Equity Securities and Use of
Proceeds





On
December 22, 2006, the Company entered into a securities purchase agreement (the
“Agreement”) with an accredited investor (the “Investor”) for the sale of
$1,000,000 Convertible Debentures (the “Debentures”). In connection with the
Agreement, the Investor received (i) a warrant to purchase 8,928,571 shares of
common stock (“Long-Term Warrants”) exercisable at $0.30 and (ii) a warrant to
purchase 1,785,714 shares of common stock (“Short Term Warrants”) exercisable at
$0.143 per share. The Long Term Warrants and the Short Term Warrants are
exercisable for a period four years from the date of issuance and the earlier of
(i) December 22, 2007 and (ii) the date a registration statement(s) covering the
resale of all Registrable Securities (as defined in the Registration Rights
Agreement) is declared effective by the Commission (the “Initial Exercise Date”)
and on or prior to the close of business on the four month anniversary of the
Initial Exercise Date, respectively.





The
Debentures bear interest at 4% until June 22, 2007, and 9% thereafter, payable
in arrears and mature three years from the date of issuance. Accrued interest
will be payable in cash semi-annually, beginning on January 1,
2007.





As of
November 8, 2006, the Company had issued $1,107,500 in convertible promissory
notes. These notes have a term of six months, are convertible into shares of
common stock of the Company at a 30% discount to a future Qualified Financing as
therein described. In addition, each note is issued with warrants to purchase
Innovative common stock at a strike price of $0.05 per share. The number of
warrants granted is determined by multiplying the face value of each note issued
by four. Proceeds from the issuance of such notes were used for general working
capital and capital expenditures.





On
September 12, 2006, the Company issued 523,811 shares of its common stock with a
fair market value of $57,619 for consulting services for September, October and
November of 2006.





Between
September 18, 2006, and November 18, 2006, Innovative issued 174,519 shares of
its common stock with a fair market value of $22,687 for legal services for
September, October and November of 2006.







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Item3. Defaults Upon Senior Securities





As of
February 14, 2007, the Company was in default on eight convertible promissory
notes totaling a principal amount of $280,000 as the term of these notes had
passed. In the event of a default resulting from the Company's non-payment of
principal or interest when due, the note holder may declare all unpaid principal
and accrued interest due and payable immediately. The Company has received no
notice from any note holder and is currently in the process of renegotiating the
terms of its convertible promissory notes; however there can be no assurance
that such negotiations will be successful.





Item
4. Submission of Matters to a Vote of Security Holders





On
December 7, 2006, Shareholders holding a majority of the Company's outstanding
common stock as of the record date of December 4, 2006, voted in favor of
certain corporate matters consisting of the approval to (1) authorized the
change the Company's legal name from Innovative Software Technologies, Inc. to
AcXess, Inc.; (2) authorize an increase in the number of authorized shares of
the Company's common stock from 100 million to 300 million; (3) authorize the
filing of an amendment and restatement of the Company's Articles of
Incorporation; and (4) authorize the adoption of the amended and restated
Bylaws.




Item
5. Other Information





Not
applicable




Item
6. Exhibits.




Exhibits
included or incorporated by reference herein are set forth in the attached
Exhibit Index.








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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: February 15,
      2008
            
            /s/ Philip D.
      EllettPhilip
      D. Ellett
              Chief
      Executive Officer








Date: February 15,
      2008
            
            /s/ Christopher
      J.
      FloydChristopher
      J. Floyd
              Chief
      Financial Officer,
              Vice
      President of Finance, and Secretary













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INDEX TO
EXHIBITS





Exhibit
              Number
            
            Description31.1
            
            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.









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