UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 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 September 30, 2001

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


                       Commission File Number: 000-1084047


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


                California                                95-46918978
                ----------                                -----------
      (State or other jurisdiction             (IRS Employer Identification No.)
    of incorporation or organization)


                              112 Northwest Parkway
                               Riverside, MO 64150
                               -------------------
                    (Address of principal executive offices)

                                 (816) 584-8030
                                 --------------
                           (Issuer's telephone number)



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 such shorter  period that the  Registrant was
required  to file  such  report(s)),  and (2) has been  subject  to such  filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

There were 47,323,620 shares of common stock,  $0.001 par value,  outstanding as
of November 13, 2001.

                                       1
<PAGE>

                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                                   FORM 10-QSB
<TABLE>
<CAPTION>
                        QUARTER ENDED SEPTEMBER 30, 2001

                                TABLE OF CONTENTS

                                                                                                    Page

                          PART I-FINANCIAL INFORMATION
<S>                                                                                                  <C>
Item 1. Financial Statements

     Condensed Balance Sheets - September 30, 2001 (Unaudited)
       and December 31, 2000..................................................................        3

     Condensed Statements of Operations (Unaudited) for the
       Three Months and Nine Months Ended September 30, 2001 and 2000.........................        4

     Condensed Statement of Stockholders' Equity/(Deficiency) (Unaudited) for the
       Nine Months Ended September 30, 2001...................................................        5

     Condensed Statements of Cash Flows (Unaudited) for the
       Nine Months Ended September 30, 2001 and 2000..........................................        6

     Condensed Statements of Comprehensive Income for the
       Three and Nine Months Ended September 30, 2001 and 2000................................        7

     Notes to the Condensed Financial Statements (Unaudited)..................................        8

Item 2. Management's Discussion and Analysis of Financial Condition and
     Results of Operations....................................................................       13

                           PART II - OTHER INFORMATION

Item 2. Changes in Securities.................................................................       14

Item 6. Exhibits and Reports on Form 8-K......................................................       14

Signatures    ................................................................................       14
</TABLE>

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

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

                                                                                  (Unaudited)
                                                                                  September 30,   December 31,
                                                                                          2001            2000
                                                                                  -------------   --------------
                                     ASSETS
<S>                                                                               <C>              <C>
Current Assets
     Cash...... ...............................................................   $      69,268    $         888
     Accounts receivable........................................................          4,000               -
     Investments  - Available for sale..........................................        300,750           26,250
     Prepaid expenses...........................................................          1,875               -
     Other current assets.......................................................            358               -
                                                                                  -------------    -------------
         Total Current Assets...................................................        376,251           27,138
                                                                                  -------------    -------------
Property and Equipment, Net.....................................................         37,071            6,744
                                                                                  -------------    -------------
Other Assets
     Deposit  ..................................................................          2,615               -
                                                                                  -------------    ------------

Total Assets  ..................................................................  $     415,937    $      33,882
                                                                                  =============    =============

                LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIENCY)
Current Liabilities
     Trade accounts payable and accrued expenses................................  $      19,224    $          -
     Note payable...............................................................        248,491          264,412
                                                                                  -------------    -------------
         Total Current Liabilities..............................................        267,715          264,412
                                                                                  -------------    -------------
Stockholders' Equity/(Deficiency)
     Common stock - $0.001 par value;  60,000,000 shares
       authorized;  47,323,620 and 43,593,213 shares issued
       and outstanding, respectively............................................         47,324            4,359
     Additional paid-in-capital.................................................        680,078           59,753

     Accumulated comprehensive loss.............................................        (25,500)              -

     Accumulated deficit........................................................       (553,680)        (294,642)
                                                                                  -------------    --------------
Total Stockholders' Equity/(Deficiency).........................................        148,222         (230,530)
                                                                                  -------------    --------------

Total Liabilities and Stockholders' Equity/(Deficiency).........................  $     415,937    $      33,882
                                                                                  =============    =============
</TABLE>


         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

                                       3
<PAGE>

                     Innovative Software Technologies, Inc.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                For the Three Months           For the Nine Months
                                                 Ended September 30,            Ended September 30,
                                            ---------------------------    ----------------------------
                                                 2001          2000             2001           2000
                                            ------------   ------------    ------------    ------------
<S>                                         <C>            <C>             <C>             <C>
Sales ...................................   $    310,638   $      1,591    $    314,638    $     51,591

Cost of Sales ...........................           --              798            --               798
                                            ------------   ------------    ------------    ------------

Gross Profit ............................        310,638            793         314,638          50,793
                                            ------------   ------------    ------------    ------------

Operating Expenses
     General and administrative .........        221,428          4,339         493,903          10,724
     Selling ............................         44,188           --            79,773            --
                                            ------------   ------------    ------------    ------------

     Total Operating Expenses ...........        265,101          4,339         573,676          10,724
                                            ------------   ------------    ------------    ------------

Income (Loss) From Operations ...........         45,537         (3,546)       (259,038)         40,069
                                            ------------   ------------    ------------    ------------

Other Income (Expense)
     Other expense ......................           --             --              --              --
     Interest income ....................           --             --              --              --
     Interest expense ...................           --             --              --              --
                                            ------------   ------------    ------------    ------------

     Total Other Income (Expense) .......           --             --              --              --
                                            ------------   ------------    ------------    ------------

Income (Loss) Before Income Taxes .......         45,537         (3,546)       (259,038)         40,069

Income Tax Expense ......................           --             --              --              --
                                            ------------   ------------    ------------    ------------

Net Income (Loss) .......................   $     45,537   $     (3,546)   $   (259,038)   $     40,069
                                            ============   ============    ============    ============

Basic and Diluted Income (Loss) per Share   $       0.00   $       0.00    $      (0.01)   $       0.00
                                            ============   ============    ============    ============

Weighted Average Number of Common
 Shares Used in Per Share Calculation ...     46,947,990     43,593,213      45,262,916      43,593,213
                                            ============   ============    ============    ============
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       4
<PAGE>

                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
            CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY/(DEFICIENCY)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                         Total
                                                                                                         Stock-
                                                            Additional     Accumulat-                    holder
                                      Common Stock            Paid-in     ed Compreh-   Accumulated     Equity/
                                    Shares     Amount         Capital     ensive loss     Deficit    (Deficiency)
                                  ----------   ----------   ----------    ----------    ----------    ----------
<S>                               <C>          <C>          <C>           <C>           <C>           <C>
Balance - December 31, 2000 ...   43,593,213   $    4,359   $   59,753    $     --      $ (294,642)   $ (230,530)

Stock split 3-for-1 ...........         --         41,541      (41,541)         --            --            --

Issuance of common stock ......    3,730,407        1,424      661,866          --            --         663,290

Unrealized loss on investments          --           --           --         (25,500)         --         (25,500)

Net loss for the period .......         --           --           --            --        (259,038)     (304,375)
                                  ----------   ----------   ----------    ----------    ----------    ----------

Balance - September 30, 2001 ..   47,323,620   $   47,324   $  680,078    $  (25,500)   $ (553,680)   $  148,222
                                  ==========   ==========   ==========    ==========    ==========    ==========
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       5
<PAGE>

                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                      For the Nine Months
                                                                      Ended September 30,
                                                                       2001        2000
                                                                    ---------    ---------

<S>                                                                 <C>          <C>
Cash Flows From Operating Activities
 Net income/(loss) ...........................................      $(259,038)   $  40,069
 Adjustments to reconcile net (loss) earnings to net cash
 provided by (used in) operating activities:
   Depreciation and amortization .............................          6,196        3,144
   Sale of platform software for investment securities .......       (300,000)        --
   Non-cash expenses .........................................         66,366         --
   Changes in operating assets and liabilities:
     Accounts Receivable .....................................         (4,000)        --
     Inventory ...............................................           --            (79)
     Prepaid Expense .........................................         (1,875)        --
     Other Current Assets ....................................           (358)        --
     Other Assets ............................................         (2,615)        --
     Accounts Payable and Accrued liabilities ................         19,224       (7,339)
                                                                    ---------    ---------

   Net Cash Provided by/(Used in) Operating Activities .......       (476,100)      35,795
                                                                    ---------    ---------

Cash Flows From Investing Activities
   Capital expenditures ......................................        (36,523)        --
                                                                    ---------    ---------

   Net Cash Used in Investing Activities .....................        (36,523)        --
                                                                    ---------    ---------

Cash Flows From Financing Activities
   Issuance of common stock ..................................        596,924         --
   Proceeds from borrowing under note payable to related party         35,503         --
   Payment on note payable to related party ..................        (51,425)     (35,516)
                                                                    ---------    ---------

   Net Cash Provided by (Used in) Financing Activities .......        581,001      (35,516)
                                                                    ---------    ---------

Net Increase in Cash and Cash Equivalents ....................         68,380          279

Cash and Cash Equivalents at Beginning of Period .............            888        4,043
                                                                    ---------    ---------

Cash and Cash Equivalents at End of Period ...................      $  69,268    $   4,322
                                                                    =========    =========

Supplemental Cash Flow Information:
   Unrealized loss on securities available for sale ..........      $ (25,500)   $    --
                                                                    =========    =========

   Issuance of common stock for services provided ............      $  66,366    $    --
                                                                    =========    =========

   Sale of platform software for investment securities .......      $ 300,000    $    --
                                                                    =========    =========
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       6
<PAGE>

                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                  CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                  For the Three Months     For the Nine Months
                                                   Ended September 30,      Ended September 30,
                                                 ---------------------    ----------------------
                                                    2001        2000         2001         2000
                                                 ---------   ---------    ---------    ---------
<S>                                              <C>         <C>          <C>          <C>
Net income/(loss) ............................   $  45,537   $  (3,546)   $(259,038)   $  40,069
Other comprehensive income/(loss), net of tax:
Unrealized loss on investments ...............          75        --        (25,500)        --
                                                 ---------   ---------    ---------    ---------
Other comprehensive income/(loss) ............   $      75   $    --      $ (25,500)   $    --
                                                 ---------   ---------    ---------    ---------
Comprehensive income/(loss) ..................      45,612      (3,546)    (284,538)      40,069
                                                 =========   =========    =========    =========
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       7
<PAGE>

                     Innovative Software Technologies, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE A - COMPANY DESCRIPTION

         Innovative  Software  Technologies,   Inc.  (Innovative)  is  a  global
         software  company  specializing in the aggregation and  distribution of
         business-to-business  and   business-to-consumer   eService  platforms.
         Through its  acquisition of Hackett Media,  Inc. on April 16, 2001, the
         Company has three main products  that consist of The Financial  Toolkit
         1.0, an integrated  financial services package that allows consumers to
         perform a comprehensive personal finance evaluation, and then creates a
         competitive  bidding  environment  from a network of financial  service
         providers;  Bizkit 1.0, a turnkey e-commerce solution targeted at small
         businesses  which provides all the resources  necessary to successfully
         plan,  launch,  and grow an online presence;  and Skills in Demand,  an
         eLearning  certification  course  catering to  Information  Systems and
         Internet Professionals.

         In addition,  the company was also in the  business of selling  vintage
         furniture and fixtures prior to December 31, 2000.

         On April 16, 2001,  Innovative,  with  immaterial net assets,  acquired
         100% of the outstanding common stock of Hackett Media, Inc.  (Hackett).
         The acquisition resulted in the owners and management of Hackett having
         effective   operating   control  of  the  combined   entity  after  the
         acquisition,  with the existing Innovative investors continuing as only
         passive investors.  Accordingly, these condensed consolidated financial
         statements  should be read in conjunction with the Company's  financial
         statements  and notes thereto  included in the Form 8-K filed April 25,
         2001, and Form 8-K/A filed June 15, 2001.

         Under accounting  principles  generally  accepted in the United States,
         the above noted  acquisition is considered to be a capital  transaction
         in  substance,  rather  than  a  business  combination.  That  is,  the
         acquisition  is  equivalent to the issuance of stock by Hackett for the
         net monetary assets of Innovative,  accompanied by a  recapitalization,
         and is accounted for as a change in capital structure. Accordingly, the
         accounting  for the  acquisition  is identical to that resulting from a
         reverse  acquisition,  except that no goodwill  intangible is recorded.
         Under  reverse  takeover  accounting,   the  post   reverse-acquisition
         comparative  historical  financial  statements of the "legal  acquirer"
         (Innovative Software  Technologies),  are those of the "legal acquiree"
         (Hackett) (i.e. the accounting  acquirer).  The Securities and Exchange
         Commission  requires that capital  transactions  consummated after year
         end but prior to the issuance of the consolidated  financial statements
         should be given  retroactive  effect as if the transaction had occurred
         on December 31, 2000.

         A summary of the company's  significant  accounting policies applied in
         the preparation of the accompanying financial statements follows.

                                       8
<PAGE>

                     Innovative Software Technologies, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE B - SUMMARY OF ACCOUNTING POLICIES

1.       Recent Accounting Pronouncements
--       --------------------------------

         On July 20,  2001,  the  Financial  Accounting  Standards  Board (FASB)
         issued Statement of Financial Accounting Standards (SFAS) 141, Business
         Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
         effective for all business combinations  completed after June 30, 2001.
         SFAS 142 is effective  for fiscal years  beginning  after  December 15,
         2001;  however,  certain provisions of this Statement apply to goodwill
         and  other  intangible  assets  acquired  between  July 1, 2001 and the
         effective  date of SFAS 142. Major  provisions of these  Statements and
         their effective dates for the Company are as follows:

         o    All business  combinations  initiated after June 30, 2001 must use
              the purchase method of accounting.  The pooling of interest method
              of  accounting  is prohibited  except for  transactions  initiated
              before July 1, 2001.
         o    Intangible  assets  acquired  in a  business  combination  must be
              recorded  separately from goodwill if they arise from  contractual
              or other legal rights or are  separable  from the acquired  entity
              and can be  sold,  transferred,  licensed,  rented  or  exchanged,
              either  individually  or as part of a related  contract,  asset or
              liability.
         o    Goodwill,  as well as  intangible  assets with  indefinite  lives,
              acquired  after June 30, 2001,  will not be  amortized.  Effective
              January 1, 2002, all previously recognized goodwill and intangible
              assets  with  indefinite  lives  will  no  longer  be  subject  to
              amortization.
         o    Effective  January 1, 2002,  goodwill and  intangible  assets with
              indefinite  lives  will be  tested  for  impairment  annually  and
              whenever there is an impairment indicator.
         o    All  acquired  goodwill  must be assigned to  reporting  units for
              purposes of impairment testing and segment reporting.

         Although it is still  reviewing  the  provisions  of these  Statements,
         management's  preliminary  assessment is that these Statements will not
         have a material impact on the Company's  financial  position or results
         of operations.


2.       Interim Condensed Financial Statements
--       --------------------------------------

         The  accompanying   condensed  consolidated  financial  statements  are
         unaudited.  In the opinion of  management,  all  necessary  adjustments
         (which  include only normal  recurring  adjustments)  have been made to
         present fairly the financial  position,  results of operations and cash
         flows for the periods  presented.  Certain  information and disclosures
         normally included in financial  statements  prepared in accordance with
         accounting principles generally accepted in the United States have been
         condensed  or  omitted.   Accordingly,   these  condensed  consolidated
         financial  statements  should be read in conjunction with the Company's
         financial  statements  and notes  thereto  included  in the Form 10-KSB
         dated December 31, 2000,  Form 8-K dated April 16, 2001, and Form 8-K/A
         dated June 15, 2001.  The results of operations  for the three and nine
         months ended September 30, 2001 are not  necessarily  indicative of the
         operating results to be expected for the full year.

                                       9
<PAGE>

                     Innovative Software Technologies, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


3.       Revenue Recognition
--       -------------------

         The Company recognizes revenue in accordance with Statement of Position
         97-2,  Software  Revenue  Recognition,  which  states  that  revenue is
         recognized after delivery of the product.

4.       Depreciation
--       ------------

         Depreciation  is provided for in amounts  sufficient to relate the cost
         of depreciable assets to operations over their estimated service lives.
         Accelerated methods are used for both book and tax purposes.

           Machinery and Equipment                            3 - 5 years
           Office Furniture and Fixtures                      5 - 7 years


5.       Investments in Equity Securities
--       --------------------------------

         All equity  securities  are  classified  as  available-for-sale.  These
         securities  have been  adjusted to their fair  market  value based upon
         quoted market prices.  Unrealized holding gains and losses are reported
         as a separate  component of Stockholder's  equity.  Unrealized  holding
         losses amounted to $25,500 and $0 as of September 30, 2001 and December
         31, 2000, respectively.  Investments consist of 75,000 shares of common
         stock of Ensurge,  Inc. and 400,000 shares of common stock of Knowledge
         Transfer Systems, Inc.

6.       Use of Estimates
--       ----------------

         The  preparation of financial  statements in conformity with accounting
         principles  generally accepted in the United States requires management
         to make estimates and assumptions  that affect certain reported amounts
         and  disclosures.  Accordingly,  actual results could differ from those
         estimates.

7.       Advertising Costs
--       -----------------

         Advertising and promotion  costs are expensed as incurred.  Advertising
         costs charged  against  income for the nine months ended  September 30,
         2001 and 2000 were $70,172 and $0, respectively.

                                       10
<PAGE>

                     Innovative Software Technologies, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE C - PROPERTY AND EQUIPMENT

         Property and equipment consisted of the following at September 30, 2001
         and December 31, 2000:

                                               September 30,     December 31,
                                                        2001            2000
                                              ---------------------------------
         Machinery and Equipment..............$       36,866     $       14,258
         Furniture and Fixtures...............        10,465              3,475
         Computer Software....................         4,047                  -
         Leasehold improvements...............         2,877                  -
                                              --------------     --------------
         .....................................        54,255             17,733
         Less: Accumulated depreciation.......       (17,184)           (10,989)
                                              ---------------    --------------

         Net Property and Equipment...........$       37,071     $        6,744
                                              ==============     ==============

         Depreciation  and  amortization  expense  for  the  nine  months  ended
         September 30, 2001 and 2000 was $6,196 and $3,144 respectively.

NOTE D - Related Party Transactions

         Note  payable to  shareholder  represents  the balance due for advances
         made to the company.  The balance within the note payable account as of
         September  30, 2001 and December  31, 2000 was  $248,491 and  $264,412,
         respectively.  There is no formal maturity date and no imputed interest
         associated with the note.

         A company  executive  and  shareholder  is also the  shareholder  of an
         affiliated  company,  JCL  Holdings,  Inc (JCL).  On December 30, 2000,
         Hackett  Media sold its  inventory to JCL for 75,000 shares of Ensurge,
         Inc.  common  stock at a FMV of $0.35 per share,  split  adjusted.  The
         Company  recorded  the shares at a fair market  value of  $26,250.  The
         inventory of $11,448 was  transferred to the related party at cost. The
         difference of $14,802 was recorded as contributed capital.

         The Company  provided  consulting  services for an  affiliated  company
         during  2000,  Ensurge,  Inc. The  consulting  fees earned for the nine
         months ended September 30, 2000 totaled $50,000.


                                       11
<PAGE>

                     Innovative Software Technologies, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE E - COMMITMENTS AND CONTINGENCIES

         In 2001, the Company entered into an operating lease for certain office
         space.  Future minimum lease  payments under the operating  lease as of
         September 30, 2001 are as follows:

                  Year Ending December 31:
                  2001....................................$     5,625
                  2002                                         22,500
                  2003                                         22,500
                  2004                                         22,500
                  2005                                         22,500
                  2006                                          5,625
                                                          -----------

                  Total...................................$   101,250
                                                          ===========

         Rent expense for the nine months ended  September 30, 2001 and 2000 was
         $11,250 and $1,423, respectively.

                                       12
<PAGE>

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

         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,  which could cause  actual  results to 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.

Results of Operations

         Sales for the  three  months  ended  September  30,  2001 and 2000 were
$310,638 and $1,591, respectively,  which represents a significant increase. The
company's principal source of revenue for the third quarter of 2000 was the sale
of vintage  furniture and fixtures.  The Company's  current  quarter  sources of
revenue changed due to the  acquisition of one company.  Revenue sources for the
three months ended  September 30, 2001 consisted of product sales and consulting
services.  The  primary  component  of the  current  quarter  sources of revenue
consisted of the sale of a software  platform to NowSeven.com,  Inc.,in exchange
for  investment  securities  amounting  to  $300,000.  The  President  and Chief
Executive  Officer of the Company is the former  President  and Chief  Executive
Officer of NowSeven.com, Inc.

         Cost of sales for the three  months ended  September  30, 2001 and 2000
were $0 and  $798,  respectively.  Cost of  sales  for the  third  quarter  2000
represents costs associated with the purchase of vintage  furniture and fixtures
for the purpose of resale.  The  company's  current  quarter  cost of goods sold
changed due to the acquisition of one company.  There were no cost of goods sold
for the three months ended  September 30, 2001;  however,  as our expected sales
increase  in the  coming  periods,  we  expect  our cost of  sales  to  increase
proportionately.

         General  and  administrative   expenses  for  the  three  months  ended
September  30,  2001 and 2000  were,  respectively,  $221,428  and  $4,339.  The
Company's  current  quarter  general  and   administration   expenses  consisted
primarily of salaries and wages of $77,608, professional fees of $59,770, travel
and  entertainment  of $43,343,  and utility  expenses of $6,379.  The remaining
costs of $34,328 are from general operations.

         Selling expenses for the three months ended September 30, 2001 and 2000
were $43,673 and $0, respectively. The current quarter costs consisted primarily
of advertising expenses associated with key products of $38,272 and salaries and
wages of $5,402.

         Depreciation  and  amortization  expense  for the  three  months  ended
September 30, 2001 and 2000, was $3,585 and $1,048,  respectively.  Depreciation
and  amortization  expense  increased  primarily as a result of the additions of
computer equipment and furniture and fixtures in the current period.

Liquidity and Capital Resources

         At September 30, 2001, cash and short-term  investments are $69,268, an
increase of $68,380 from  December 31, 2000.  Cash flow used in  operations  was
$476,100 for the nine months ended  September 30, 2001. The company has one note
payable  outstanding  to a shareholder  of the company.  The balance of the note
payable as of September 30, 2001 is $248,491 while stockholders'  equity amounts
to $148,222 as of September 30, 2001.

         The company has financed its  operations  to date  primarily  through a
Finance  Agreement of convertible  debt and  securities.  The Finance  Agreement
calls for  financing  of up to $2.5 million of which $1 million will be received

                                       13
<PAGE>

in increments in 2001 and the remaining  $1.5 million be received based upon the
company's  performance.  As of September  30,  2001,  $550,000 of the initial $1
million was received by the company.  The  Company's  current  quarter  proceeds
under the terms of the above Finance Agreement totaled $150,000.  These proceeds
were converted under the terms of the Finance  Agreement to equity securities in
the current quarter. An additional $100,000 was received on October 23, 2001.

         In  addition,  the  company in the  current  quarter  received  $46,923
through  private  placements to  individual  investors  overseas.  These capital
infusions are to be used to cover  operations and working  capital  requirements
for the next three months.

         The company  expects that its existing  cash  resources  and  available
financing  will be sufficient to meet its  operating  requirements  and ordinary
capital  spending  needs  until the  company  expects  its cash  generated  from
operations  will be sufficient to meet its operating  requirements  and ordinary
capital spending needs going forward.


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

Item 2.  Changes in Securities.
         ----------------------

         The company has financed its  operations  to date  primarily  through a
Finance  Agreement of convertible  debt and  securities.  The Finance  Agreement
calls for  financing  of up to $2.5 million of which $1 million will be received
in increments in 2001 and the remaining  $1.5 million be received based upon the
company's  performance.  As of September  30,  2001,  $550,000 of the initial $1
million was received by the company.  The  Company's  current  quarter  proceeds
under the terms of the above Finance Agreement totaled $150,000.  These proceeds
were converted under the terms of the Finance  Agreement to equity securities in
the current quarter.  These securities were issued under the exemption  provided
by Section 4(2) of the Securities Act of 1933.

         In  addition,  the  company in the  current  quarter  received  $46,923
through  private  placements to  individual  investors  overseas.  These capital
infusions are to be used to cover  operations and working  capital  requirements
for the next three  months.  These  securities  were issued under the  exemption
provided by Section 4(2) of the Securities Act of 1933.

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

         None


OTHER ITEMS

         There were no other items to be reported under Part II of this report.

                                       14
<PAGE>


                                   SIGNATURES


In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                Innovative Software Technologies, Inc.

Date: November 13, 2001         /s/ Douglas S. Hackett
                                --------------------------
                                Douglas S. Hackett
                                President, Chief Executive Officer and Director