**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 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 or
              Organization)
            **95-4691878**
              (I.R.S.
                Employer Identification No.)**3998
                FAU Blvd., Bldg 1-210, Boca Raton FL**
              (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.


Yes x  No o




Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes o  No x




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











**INNOVATIVE
      SOFTWARE TECHNOLOGIES, INC.**


**FORM
      10-QSB**





**QUARTER
      ENDED DECEMBER 31, 2006**





**TABLE
      OF CONTENTS**





Page
              Number**PART
              I.**
            **FINANCIAL
              INFORMATION**Item
                1.
            Financial
                StatementsConsolidated
                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
            15**SIGNATURES**







**PART
              I -**
            **FINANCIAL
                INFORMATION**





**Item
              1.**
            **Financial
                Statements**





**INNOVATIVE
      SOFTWARE TECHNOLOGIES, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      BALANCE SHEET**


**December
      31, 2006**


**(UNAUDITED)**


**(Unaudited)****December
                  31,****2006****ASSETS****CURRENT
                  ASSETS**Cash
              
              $
              866,918Prepaid
                  expenses and other current assets
              
              
              39,923Deferred
                  financing costs
              
              
              152,156**Total
                  current assets**
              
              
              1,058,996**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              125,390**DEPOSITS**
              
              
              17,400**Total
                  assets**
              
              $
              1,201,786**LIABILITIES
                  AND STOCKHOLDERS’ (DEFICIT)****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              750,088Accrued
                  officer salary and expenses
              
              
              60,500Customer
                  deposits
              
              
              2,940Notes
                  payable
              
              
              30,000Convertible
                  debentures
              
              
              800,337Derivative
                  financial instruments
              
              
              2,894,455**Total
                  current liabilities**
              
              
              4,538,320**COMMITMENTS
                  AND CONTINGENCIES****STOCKHOLDERS’
                  (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


**INNOVATIVE
      SOFTWARE TECHNOLOGIES, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


**Since
                  Inception****For
                  the Three Months**
              
              **For
                  the Nine Months**
              
              **(January
                  12, 2005)****Ended
                  December 31,**
              
              **Ended
                  December 31,**
              
              **Through****December
                  31,****2006**
              
              **2005**
              
              **2006**
              
              **2005**
              
              **2006****REVENUE**
              
              
              20,770
              
              
              -
              
              
              59,437
              
              
              -
              
              
              59,437**COST
                  OF REVENUE**
              
              
              22,402
              
              
              -
              
              
              58,967
              
              
              -
              
              
              58,967**GROSS
                  PROFIT**
              
              
              (1,631
              )
              
              -
              
              
              470
              
              
              -
              
              
              470**OPERATING
                  EXPENSES**General
                  and administrative
              
              
              537,179
              
              
              185,961
              
              
              1,791,913
              
              
              215,510
              
              
              2,265,455**Total
                  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) NET**Other
                  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
              
              
              -
              
              
              361**OTHER
                  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
                  PREFERRED****STOCK
                  DIVIDENDS**
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -**(LOSS)
                  APPLICABLE****TO
                  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 OF****COMMON
                  SHARES USED IN BASIC AND****DILUTED
                  PER SHARE CALCULATION**
              
              
              72,473,638
              
              
              
              
              
              67,265,237


See
      accompanying notes.




2


**INNOVATIVE
      SOFTWARE TECHNOLOGIES, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**Since
                  Inception****(January
                  12, 2005)****For
                  the Nine Months**
              
              **Through****Ended
                  December 31,**
              
              **December
                  31,****2006**
              
              **2005**
              
              **2006****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  (loss)
              
              $
              (2,424,383
              )
              $
              (215,510
              )
              $
              (2,911,734
              )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
              
              
              (881,795
              )
              
              -
              
              
              (728,637
              )Amortization
                  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
              
              
              -
              
              
              2,940**Net
                  cash flows from operating activities**
              
              
              (958,089
              )
              
              (26,559
              )
              
              (1,085,143
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Purchase
                  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 ACTIVITIES**Proceeds
                  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
              
              
              -
              
              
              51,148**Net
                  cash flows from financing activities**
              
              
              2,130,762
              
              
              26,855
              
              
              2,268,770-**NET
                  INCREASE IN CASH**
              
              
              860,649
              
              
              296
              
              
              866,918**CASH
                  AT BEGINNING OF PERIOD**
              
              
              6,269
              
              
              -
              
              
              -**CASH
                  AT END OF PERIOD**
              
              $
              866,918
              
              $
              296
              
              $
              866,918**SUPPLEMENTAL
                  CASH FLOW INFORMATION**Issuance
                  of common stock for acquisition
              
              $
              440,000
              
              $
              -
              
              $
              440,000Issuance
                  of common stock for debt repayment
              
              $
              183,115
              
              $
              -
              
              $
              183,115


See
      accompanying notes.




3


**INNOVATIVE
        SOFTWARE 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
      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


**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


**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


**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


**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


**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**
            
            **Value****Price
                Per**
            
            **Issue**
            
            **December
                31,****Issue
                Dates**
            
            **Expiry
                Dates**
            
            
            
            **Share**
            
            **Date**
            
            **2006**May
                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


**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**
            
            **Value****Price
                Per**
            
            **Issue**
            
            **December
                31,****Issue
                Dates**
            
            **Expiry
                Dates**
            
            
            
            **Share**
            
            **Date**
            
            **2006**December
                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





**Item
      2.** **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.





**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





**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




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.





**Item
      3.** **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





**PART
      II -**  **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
      City Explorers 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.





**Item
      2. 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.





14





**Item
      3. 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.





15





**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 14, 2007
            
            /s/
                Philip D. EllettPhilip
                D. Ellett
              Chief
                Executive Officer





**Date:**February 14, 2007
            
            /s/ Christopher
                J. FloydChristopher
                J. Floyd
              Chief
                Financial Officer,
              Vice
                President of Finance, and Secretary










**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.