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 September 30, 2005

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

                       COMMISSION FILE NUMBER: 000-1084047

                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


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



100 NORTH TAMPA STREET, SUITE 2410, TAMPA, FL               33602
  (Address of Principal Executive Offices)               (Zip Code)


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

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

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No ___

There were 50,651,183 shares of common stock,  $0.001 par value,  outstanding as
of November 14, 2005.

                                       1


<PAGE>


<TABLE>
<CAPTION>
                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                                   FORM 10-QSB

                        QUARTER ENDED SEPTEMBER 30, 2005

                                TABLE OF CONTENTS

                                                                                                    PAGE
                         PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements

<S>                                                                                             <C>
     Condensed Consolidated Balance Sheets as of September 30, 2005 (Unaudited)
       and December 31, 2004..................................................................        3

     Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine
       Months Ended September 30, 2005 and 2004...............................................        4

     Condensed Consolidated Statements of Cash Flow (Unaudited) for the Nine
       Months Ended September 30, 2005 and 2004...............................................        5

     Notes to the Condensed Consolidated Financial Statements (Unaudited).....................        6

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

Item 3.  Controls and Procedures..............................................................       18


                                                      PART II - OTHER INFORMATION

Item 1.  Legal Proceedings....................................................................       19

Item 3.  Defaults upon Senior Securities......................................................       20

Item 6.  Exhibits and Reports on Form 8-K.....................................................       20

Signatures    ................................................................................       21

Index to Exhibits.............................................................................       22

</TABLE>

                                       2

<PAGE>



PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                           (Unaudited)
                                                                           September 30,      December 31,
                                                                              2005                2004
                                                                           ------------       ------------
                                                   ASSETS

CURRENT ASSETS
<S>                                                                        <C>                <C>
    Cash                                                                   $     52,916       $    876,472
    Accounts receivable
    Merchant accounts receivable                                                   --               87,417
    Notes receivable, net of allowance for doubtful
           accounts of $3,260 and $245,496, respectively                          7,607            594,128
    Inventory                                                                     5,250              5,471
    Refundable income taxes                                                     582,836            582,836
    Prepaid expenses and other current assets                                    34,534             53,745
                                                                           ------------       ------------
    Total current assets                                                        683,143          2,200,069
PROPERTY AND EQUIPMENT, NET                                                      40,204            104,424
GOODWILL                                                                           --            1,088,686
INVESTMENT                                                                         --              178,120
DEPOSITS                                                                         35,158             39,215
                                                                           ------------       ------------
    Total assets                                                           $    758,505       $  3,610,514
                                                                           ============       ============
                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES
    Accounts payable and accrued expenses                                  $  1,054,695       $    976,573
    Deferred revenue                                                               --              111,492
    Notes payable and current maturities of capital lease obligations              --               79,300
                                                                           ------------       ------------
    Total current liabilities                                                 1,054,695          1,167,365
CAPITAL LEASE OBLIGATIONS                                                          --                8,249
                                                                           ------------       ------------
    Total liabilities                                                         1,054,695          1,175,614
                                                                           ------------       ------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)                                             --                 --

STOCKHOLDERS' EQUITY (DEFICIENCY)
    Preferred stock, issued and outstanding,  450,000 shares                    450,000            450,000
    Common stock - authorized, 100,000,000 shares of $.001 par
    value; issued and outstanding, 50,651,183 and 55,586,198
    shares as of September 30, 2005 and December 31, 2004, respectively          50,650             55,586
    Additional paid-in capital                                               18,327,206         18,398,495
    Accumulated deficit                                                     (19,124,045)       (16,469,181)
                                                                           ------------       ------------
    Total stockholders' equity (deficiency)                                    (296,190)         2,434,900
                                                                           ------------       ------------
    Total liabilities and stockholders' equity (deficiency)                $    758,505       $  3,610,514
                                                                           ============       ============
</TABLE>


                            See accompanying notes.

                                       3

<PAGE>



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



<TABLE>
<CAPTION>
                                                             For the Three Months               For the Nine Months
                                                              Ended September 30,                Ended September 30,
                                                      -------------------------------       -------------------------------
                                                          2005                2004               2005              2004
                                                      ------------       ------------       ------------       ------------
REVENUE
<S>                                                   <C>                <C>                <C>                <C>
     Services revenue                                 $       --         $     89,700       $    157,454       $  7,655,530
     Product sales                                            --              164,963            118,881          9,118,286
     Other revenue                                            --                 --                8,600            748,329
                                                      ------------       ------------       ------------       ------------
     Total revenue                                            --              254,663            284,935         17,522,145

COST OF REVENUE
     Cost of services revenue                                 --               51,501              8,326          3,543,551
     Cost of product sales and other revenue                  --               47,399              6,248          4,657,024
                                                      ------------       ------------       ------------       ------------
     Total cost of revenue                                    --               98,900             14,573          8,200,575
                                                      ------------       ------------       ------------       ------------
GROSS PROFIT                                                  --              155,763            270,362          9,321,570
                                                      ------------       ------------       ------------       ------------
OPERATING EXPENSES
     General and administrative                            288,953          3,408,669          1,526,035          7,933,848
     Commissions and other selling expenses                   --               11,856            182,316          4,090,845
     Writedown of goodwill                                    --                 --            1,088,686               --
                                                      ------------       ------------       ------------       ------------
     Total operating expenses                              288,953          3,420,525          2,797,037         12,024,693
                                                      ------------       ------------       ------------       ------------
INCOME (LOSS) FROM OPERATIONS                             (288,953)        (3,264,762)        (2,526,675)        (2,703,123)
                                                      ------------       ------------       ------------       ------------
OTHER INCOME (EXPENSE) NET
     Interest and penalties on late tax payments              --              611,920            (10,000)           566,831
     Other income (expense)                                 18,406            (86,002)          (129,423)             1,565
     Interest income, deposits                                --               33,091               --               44,061
     Interest income, financing arrangements                   450               --               13,942             64,070
     Interest expense                                         --              (45,088)              --              (50,163)
                                                      ------------       ------------       ------------       ------------
OTHER INCOME (EXPENSE) NET                                  18,856            513,921           (125,481)           626,364
                                                      ------------       ------------       ------------       ------------
INCOME BEFORE INCOME TAXES                                (270,097)        (2,750,841)        (2,652,156)        (2,076,759)

INCOME TAXES                                                  (243)           266,262             (2,708)              --
                                                      ------------       ------------       ------------       ------------
NET INCOME (LOSS)                                         (270,340)        (2,484,579)        (2,654,864)        (2,076,759)

UNDECLARED PREFERRED STOCK DIVIDENDS                        (4,500)           (20,790)           (13,500)           (41,580)
                                                      ------------       ------------       ------------       ------------
INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS       $   (274,840)      $ (2,505,369)      $ (2,668,364)      $ (2,118,339)
                                                      ============       ============       ============       ============
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE      $      (0.01)      $      (0.05)      $      (0.05)      $      (0.04)
                                                      ============       ============       ============       ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN BASIC AND DILUTED PER SHARE CALCULATION         50,651,183         51,432,769         52,621,574         52,405,484
                                                      ============       ============       ============       ============
</TABLE>

                             See accompanying notes.

                                       4
<PAGE>



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

<TABLE>
<CAPTION>
                                                                 For the Nine Months
                                                                  Ended September 30,
                                                            ------------------------------
                                                                2005              2004
                                                            -----------       ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                        <C>               <C>
Net income (loss)                                           $(2,654,864)      $(2,076,760)
Adjustments to reconcile net income (loss) to
   net cash provided (used) by operating activities
Depreciation and amortization                                    11,970           176,219
Bad debt expense                                                158,211              --
Stock based compensation                                           --           1,750,000
Write down of Goodwill                                        1,088,686              --
Write down of Investment                                         30,464              --
Net change in operating assets and liabilities
   Merchant account receivables                                  84,670           (55,832)
   Other receivables                                             (6,413)         (143,483)
   Inventory                                                     (5,250)           (1,344)
   Prepaid expenses and other current assets                     15,537           (86,477)
   Accounts payable and accrued expenses                        283,880           147,729
   Deferred revenue                                              19,608          (446,594)
   Accrued federal and state income tax                            --            (142,579)
                                                            -----------       -----------
   NET CASH FLOWS FROM OPERATING ACTIVITIES                    (973,501)         (879,121)
                                                            -----------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash received on notes receivable from financed sales*          337,222           (51,629)
Increase in notes receivable from new financed sales*          (222,601)             --
Triad Media, Inc. cash balance at sale                          (11,064)             --
Sale of Investment                                              147,656              --
Purchase of fixed assets                                        (23,946)         (178,108)
                                                            -----------       -----------
   NET CASH FLOWS FROM INVESTING ACTIVITIES                     227,267          (229,737)
                                                            -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in notes payable                                       (75,435)             --
Payment under Settlement Agreement                                 --            (300,000)
Payments on capital lease obligations                            (1,888)          (42,732)
                                                            -----------       -----------
Net cash flows from financing activities                        (77,322)         (342,732)
                                                            -----------       -----------
NET INCREASE (DECREASE) IN CASH                                (823,556)       (1,451,590)

CASH AT BEGINNING OF PERIOD                                     876,472         3,890,929
                                                            -----------       -----------
CASH AT END OF PERIOD                                       $    52,916       $ 2,439,339
                                                            ===========       ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Property and equipment acquired under capital leases        $      --         $    15,192
                                                            ===========       ===========
EPMG Settlement Transaction, July 1 2004:
Decrease in Operating Assets                                                  $   414,870
Decrease in Fixed Assets                                                       (1,722,659)
Decrease in Operating Liabilities                                              (1,385,152)
Decrease in Long-term Liabilities                                               2,137,128
Increase in Equity                                                                555,812
                                                                              -----------
                                                                              $      --
                                                                              ===========
</TABLE>

    *2004 shows net change in Notes Receivable from Financed Sales


                             See accompanying notes.

                                       5
<PAGE>



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

(1)      ORGANIZATION,  BASIS OF  PRESENTATION,  AND CERTAIN INTERIM  ACCOUNTING
         POLICIES

         (a) Organization and Description of Business:

                  Innovative  Software  Technologies,  Inc. (the  "Company") was
                  incorporated in the State of California in May 1998.  Prior to
                  the  Company's  disposition  of  operating  assets of its EPMG
                  subsidiary   and  the  split-off  of  its  Triad   subsidiary,
                  discussed   in  Note  3,  the   Company  was  engaged  in  the
                  development,   marketing   and   delivery   of   business-type
                  educational programs, generally to individuals, throughout the
                  United States of America.  The Company's  educational programs
                  combined both self-training and coaching by Company employees.
                  Currently  the  Company  has  no  operating  business  and  is
                  actively seeking to acquire an operating entity.

         (b) Basis of Presentation:

                  The accompanying  unaudited condensed  consolidated  financial
                  statements  have been  prepared in accordance  with  generally
                  accepted   accounting   principles   for   interim   financial
                  information  and  with the  instructions  to Form  10-QSB  and
                  Regulation  S-B.  Accordingly,  they do not contain all of the
                  information  and  footnotes  required  by  generally  accepted
                  accounting  principles  for  complete  consolidated  financial
                  statements.  In the opinion of  management,  the  accompanying
                  unaudited condensed  consolidated financial statements reflect
                  all   adjustments   (consisting   only  of  normal   recurring
                  adjustments)  considered  necessary for a fair presentation of
                  the  Company's  financial  condition as of September 30, 2005,
                  and the  results  of its  operations  for the  three  and nine
                  months ended  September 30, 2005 and  September 30, 2004,  and
                  the cash flows for the nine months  ended  September  30, 2005
                  and September 30, 2004. These unaudited condensed consolidated
                  financial  statements  should be read in conjunction  with the
                  Company's  audited  2004  consolidated  financial  statements,
                  including the notes  thereto,  and the other  information  set
                  forth therein, included in the Company's Annual Report on Form
                  10-KSB for the year ended December 31, 2004. Operating results
                  for the three and nine month periods ended  September 30, 2005
                  are not necessarily  indicative of the operating  results that
                  may be expected for the year ending December 31, 2005.

         (c) Principles of Consolidation:

                  The consolidated  financial statements include the accounts of
                  the Company and its  wholly-owned  subsidiaries,  EPMG,  Inc.,
                  SoftSale,  Inc., IST Medical  Group,  Inc., and IST Integrated
                  Solutions,  Inc.  All  significant  intercompany  balances and
                  transactions have been eliminated in consolidation.

         (d) Income Taxes in Interim Periods:

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


                                        6
<PAGE>


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


(1)      ORGANIZATION,  BASIS OF  PRESENTATION,  AND CERTAIN INTERIM  ACCOUNTING
         POLICIES (CONTINUED)

                  to interim pre-tax income.  Changes in the projected effective
                  tax  rate in  future  quarters,  if  any,  are  accounted  for
                  prospectively in the period of change.

         (e) Earnings Per Common Share:

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

<TABLE>
<CAPTION>

                                                        Three Months Ended                  Nine Months Ended
                                                          September 30,                        September 30,
                                                --------------------------------      -------------------------------
                                                    2005               2004              2005                 2004
                                                ------------       -------------      ------------       ------------
<S>                                             <C>                <C>                <C>                <C>
Income applicable to common stockholders        ($   274,840)      ($ 2,505,369)      ($ 2,668,364)      ($ 2,118,339)
                                                ============       =============      ============       ============
Weighted average common shares outstanding        50,651,183         51,432,769         52,621,574         52,405,484
                                                ------------       -------------      ------------       ------------
Basic and diluted income per common share       ($      0.01)      ($      0.05)      ($      0.05)      ($      0.04)
                                                ------------       -------------      ------------       ------------
</TABLE>


(2)      LIQUIDITY AND MANAGEMENT'S PLANS

         The accompanying  condensed consolidated financial statements have been
         prepared assuming that the Company will continue as a going concern for
         a  reasonable  period.  However,  during July 2004,  the  Company  sold
         certain operating assets and liabilities of its EPMG subsidiary,  which
         represented a significant  portion of its revenue producing  operations
         to certain shareholders of the Company (See Note 3). During April 2005,
         the  Company  split-off  its  Triad  Media,  Inc.  subsidiary,  further
         curtailing future operations (See Note 3). Currently the Company has no
         operations.  As a  result  of the  EPMG  asset  transfer,  the  Company
         incurred a loss of  ($3,231,549)  and used cash of  ($3,189,958) in its
         operating  activities  during the year ended  December  31,  2004.  The
         Company  incurred a loss of ($2,654,864) and used cash of ($973,501) in
         its  operating  activities  during the nine months ended  September 30,
         2005.  Finally,  the  Company  has  a  working  capital  deficiency  of
         ($371,552).   These  conditions  raise   substantial  doubt  about  the
         Company's ability to continue as a going concern.

         Management  is  currently  engaged  in seeking  merger and  acquisition
         candidates  within the  technologies and healthcare  industries,  which
         have  revenue  producing  and cash  generating  operations.  As further
         discussed in Note 3, on May 6, 2005, IST Integrated Solutions,  Inc. (a
         wholly-owned  subsidiary)  completed an  acquisition  of the assets and
         operations  of Lietz  Development,  Inc. and Saphire of Tampa Bay, Inc.
         (collectively  "Data Tech"), a Tampa,  Florida based computer equipment
         reseller, and hosting and network services provider.  Subsequent to the
         closing of the acquisition,  the Company  discovered certain facts that
         constituted  undisclosed  liabilities and/or breaches of representation
         or warranty by Data Tech and the Selling  Stockholders  under the Asset
         Purchase Agreement.  Therefore,  the Company, Data Tech and the Selling
         Stockholders  executed a mutual  rescission  agreement on June 27, 2005
         pursuant to which this  transaction  was  rescinded  (see Part II, Item
         6(b) Reports on Form 8-K).

         While management has  identified  a  number  of  other  prospective
         acquisition targets, there can be

                                        7
<PAGE>


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



(2)      LIQUIDITY AND MANAGEMENT'S PLANS (CONTINUED)

         no  assurance  that any  acquisition  will be  completed  or that  this
         strategy  would be  successful.  In addition,  management is seeking to
         raise  additional  capital to support its operations until a successful
         acquisition or acquisitions can be completed. There can be no assurance
         that  management  will  be  able  to  acquire   additional  capital  at
         acceptable terms, if at all.

         As of  September  30,  2005,  the Company  has cash and other  reserves
         amounting  to  $52,916,  certain  receivables  that are  expected to be
         collected  during the year ended December 31, 2005 amounting to $7,607,
         net of  allowances,  and refundable  income taxes,  net of interest and
         penalties due, of approximately $450,000. In the absence of a strategic
         acquisition   of  funding,   described  in  Note  2  to  our  financial
         statements,  management believes that it can curtail operating expenses
         and defer trade payables  sufficient to maintain our existence  through
         the fourth fiscal  quarter of the year ended  December 31, 2005.  There
         can be no  assurances  that we can  acquire  companies  or curtail  our
         expenses sufficiently to maintain our operations.

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

(3)      EPMG ASSET  DISPOSITION,  SPLIT-OFF OF TRIAD MEDIA,  AND ACQUISITION OF
         DATA TECH

         (a)      EPMG Asset Disposition

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

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

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

         The Company  recorded the settlement on the effective  date. No gain or
         loss  arose  from  the  settlement   pursuant  to  generally   accepted
         accounting  principles  which  requires a company's  receipt of its own
         securities in such transactions to be treated as transactions affecting
         only stockholders' equity.

                                       8
<PAGE>



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

(3)      EPMG ASSET  DISPOSITION,  SPLIT-OFF OF TRIAD MEDIA,  AND ACQUISITION OF
         DATA TECH (CONTINUED)

         (b) Split-off of Triad Media, Inc.

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

         (c)      Data Tech Rescission

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

         Subsequent to the acquisition the Company discovered certain facts that
         constituted  undisclosed  liabilities and/or breaches of representation
         or warranty by Data Tech and the Selling  Stockholders  under the Asset
         Purchase  Agreement.  On June 27, 2005 the  Company and IST  Integrated
         executed a mutual  rescission  agreement and release with Data Tech and
         the Selling Stockholders the effect of which was to rescind the earlier
         acquisition  agreement between the parties.  No portion of the Purchase
         Price or  Performance  Consideration  (as defined in Section 1.4 of the
         Asset  Purchase  Agreement)  had been paid by the Company in connection
         with the Asset Purchase Transaction.  There were no penalties to either
         party with  respect to the  rescission.  Expenditures  relating  to the
         failed acquisition in the amount of approximately $83,000 were expensed
         in the second quarter.

(4)      ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts  payable and accrued  expenses  consist of the following as of
September 30, 2005 and December 31, 2004:

<TABLE>
<CAPTION>
                                              September 30, 2005      December 31, 2004
                                              ------------------      -----------------
<S>                                              <C>                      <C>
Accrued expenses                                 $  757,118               $  710,133
Reserves for returns and refunds                       --                     88,212
Accounts payable                                    167,017                   57,668
Interest and penalties on late tax payments         130,560                  120,560
                                                 ----------               ------------
                                                 $1,054,695               $  976,573
                                                 ==========               ============
</TABLE>
                                        9

<PAGE>




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



(5)      OTHER STOCKHOLDERS' EQUITY

         (a) Convertible Preferred Stock:

                  The  Company  has   25,000,000   shares  of  preferred   stock
                  authorized and has designated 1,500,000 shares as $1.00 stated
                  value Series A Preferred and 3,000,000  shares as $1.00 stated
                  value  Series B  Preferred.  Series A and  Series B  Preferred
                  Stock (collectively "Preferred Stock") have the same terms and
                  conditions.  The Preferred Stock is (i) entitled to cumulative
                  dividends  at a rate of 4.0% of the  liquidation  value ($1.00
                  per share),  (ii) convertible at any time into common stock at
                  a rate  of 95% of the  average  closing  market  price  of the
                  common  stock for five days  preceding  conversion  (6,232,687
                  common shares as of September 30, 2005),  (iii)  redeemable at
                  any time by the Company for $1.00 per share,  (iv) entitled to
                  one vote per share.  As of September 30, 2005,  450,000 shares
                  of Series A Preferred Stock were  outstanding and no shares of
                  Series B Preferred Stock were outstanding.

         (b) Stock-Based Compensation:

                  During the  nine-month  periods ended  September 30, 2005, and
                  2004, the Company did not issue any of its common or preferred
                  stock as compensation.  In addition,  the Company has no stock
                  options outstanding from other periods. Accordingly, pro forma
                  net income  (loss) and pro forma net income  (loss) per common
                  share,  assuming  the fair  value  approach  was used to value
                  stock   options  or  other   similar   forms  of   stock-based
                  compensation, are the same.

(6)      RELATED PARTY TRANSACTION

         None.



                                       10

<PAGE>


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


(7)      COMMITMENTS AND CONTINGENCIES

         (a) Leases:

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


                                                              Operating
                  Year ending December 31:                      Leases
                                                           ---------------
                  2005                                     $       15,701
                  2006                                             36,635
                  2007                                                  -
                  2008                                                  -
                  After 2008                                            -
                                                           ---------------
                  Total noncancelable lease payments       $       52,336
                                                           ===============


         Rent  expense  under all  operating  leases for the nine  months  ended
         September 30, 2005 was $57,145.

         (b) SEC Investigation:

                  On June 24,  2003,  the  Securities  and  Exchange  Commission
                  issued a formal order of investigation  authorizing  subpoenas
                  for   documents   and   testimony  in   connection   with  the
                  investigation of certain securities matters. On April 8, 2005,
                  the Independent  Committee appointed by the Board of Directors
                  of the Company  delivered  to the SEC its report  based on its
                  internal  investigation.   The  Company  has  and  intends  to
                  continue to fully cooperate with the SEC in its investigation.

         (c)      Litigation:

                  PROSPER, INC.
                  Subsequent  to the  transfer of certain  operating  assets and
                  liabilities of EPMG, as discussed above, the former principals
                  of EPMG, under the new name of Prosper, Inc. filed a complaint
                  that  seeks a refund to the  benefit  of  Prosper  of  certain
                  reserve funds amounting to approximately $580,000 that are due
                  to former  vendors.  Under the EPMG Settlement  Agreement,  we
                  agreed  to  pay   certain   reserves   potentially   owing  to
                  third-party  vendors upon  specified  conditions.  The lawsuit
                  alleges  that we have  breached  the  obligation  to pay these
                  reserves,  but  we  believe  that  the  conditions  for  these
                  payments have not been  satisfied  and/or  contest the amounts
                  and payees of the payments that are alleged to be owed by us.

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

                                       11
<PAGE>




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



(7)      COMMITMENTS AND CONTINGENCIES (CONTINUED)

                  SEEMA URE, M.D.
                  On July 15,  2005 Seema Ure,  M.D.,  a former  employee of the
                  Company's  IST  Medical  Group,  Inc.   subsidiary,   filed  a
                  complaint against the Company asserting breach of contract and
                  breach of fiduciary duty seeking damages in excess of $15,000.
                  The Company believes it has affirmative defenses and potential
                  counterclaims  against  Ms.  Ure and  intends  to defend  this
                  action  vigorously.  However,  there can be no  assurance of a
                  successful  outcome for the Company.  The Company has filed an
                  answer to this complaint and is preparing for depositions.


(8)      CORPORATE LEASE GUARANTEE OBLIGATION

         In November 2004 the Company signed a corporate  guarantee on behalf of
         Triad Media, Inc, its wholly owned  subsidiary,  for an operating lease
         on  facilities  in  Kansas  City,  Missouri.   Triad  Media,  Inc.  was
         subsequently split-off (see notes 2 and 3). The Triad Media lease has a
         term  of 5  years  from  February  2005  through  January  2010.  As of
         September  30, 2005 the  remaining  total  obligation on this lease was
         $204,340.  The  Company  evaluated  the fair  value  of this  guarantee
         according to FASB  Interpretation No. 45,  "Guarantor's  Accounting and
         Disclosure  Requirements for Guarantees,  Including Indirect Guarantees
         of Indebtedness  of Others",  and recorded a charge of $70,474 for this
         lease guarantee  obligation.  The Company will periodically  assess the
         adequacy of this lease  guarantee  obligation  and adjust the amount as
         necessary.

(9)      SUBSEQUENT EVENTS

         None.

                                       12


<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

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

OVERVIEW

Innovative  Software   Technologies,   Inc.  (the  "Company")  is  a  California
corporation that has  historically  been engaged in the business of development,
marketing and delivery of Internet websites,  database management programs,  and
business  educational   programs,   generally  to  individuals.   The  following
discussion  summarizes  information about our accounting  policies and practices
and information  about our operations in a comparative  manner for the three and
nine months ended September 30, 2005 and 2004. Our  management's  discussion and
analysis of  financial  condition  and results of  operations  should be read in
conjunction with our consolidated financial statements and related notes thereto
included elsewhere herein.

DISCONTINUANCE OF BUSINESS

Historically,  we have been engaged primarily in the development,  marketing and
delivery  of Internet  websites,  database  management  programs,  and  business
educational programs, generally to individuals,  throughout the United States of
America  through our EPMG and Triad  subsidiaries.  In July 2004, we transferred
certain  operating  assets and  liabilities of EPMG to the former  principals of
EPMG  (from  whom we  acquired  the  stock  of EPMG in  December  2001)  under a
settlement agreement with said former principals. However, the transfer of these
assets and liabilities did not result in a discontinuation of this business.  In
April 2005, our board of directors  determined to discontinue  this business and
undertake a strategy of growth  through  acquisition  of private  companies  and
internal  product and  services  development  focused on small and medium  sized
businesses  ("SMB") and the medical  market,  and  accordingly  we split-off our
Triad  subsidiary  (f/k/a  Hackett  Media,  Inc.) in April  2005.  As a  result,
effective  April 20, 2005, we are no longer engaged in this business and have no
continuing  involvement  with  EPMG or  Triad.  These  two  former  subsidiaries
represented  substantially all of our operations during the 2004 fiscal year and
the nine month period ended September 30, 2005.

ACQUISITION OF DATA TECH

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

Subsequent to closing the acquisition the Company  discovered certain facts that
constituted   undisclosed  liabilities  and/or  breaches  of  representation  or
warranty  by Data Tech and the  Selling  Stockholders  under the Asset  Purchase
Agreement.  On June 27, 2005 the Company  and IST  Integrated  executed a mutual
rescission agreement and release with Data Tech and the Selling Stockholders the
effect of which was to rescind the  earlier  acquisition  agreement  between the
parties.  No portion of the  Purchase  Price or  Performance  Consideration  (as
defined in Section  1.4 of the Asset  Purchase  Agreement)  had been paid by the
Company  in  connection  with the  Asset  Purchase  Transaction.  There  were no
penalties to either party with respect to the rescission.  Expenditures relating
to the failed  acquisition in the amount of approximately  $83,000 were expensed
in the period ended June 30, 2005.

                                       13
<PAGE>

CURRENT STRATEGY

Although  the  Company  currently  has  no  operating  business,  management  is
currently  engaged  in  seeking  merger and  acquisition  candidates  within the
technologies and healthcare  industries,  which have revenue  producing and cash
generating   operations.   While  certain   acquisition   candidates  have  been
investigated,  there can be no  assurance  that the  Company  can  identify  and
acquire a merger  candidate at acceptable  terms, if at all. In addition,  there
can be no assurance  that the Company will be successful in its  acquisition  of
working capital.

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

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

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Our gross  notes  receivable  amounted to $10,867 as of  September  30, 2005 and
relate to product financing  arrangements  entered into with our clients.  These
notes are unsecured, bear interest at 15% and have terms ranging between one and
five years.  As of September 30, 2005,  we have recorded  reserves of $3,260 for
estimated uncollectible amounts.

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

REVENUE RECOGNITION AND RETURNS AND ALLOWANCES

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

                                       14
<PAGE>

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

Services  Revenues:  The educational  offering includes multiple sessions with a
Company-employed   coach.   We   recognize   services   revenue   pro   rata  as
coaching/training sessions are rendered. Deferred revenue, representing the fair
value of  future  coaching  sessions  that  students  have  paid for but not yet
received,  was $-0- as of  September  30,  2005 as the  Company  has  exited the
educational business with the split-off of its Triad Media, Inc. subsidiary.

RESULTS OF OPERATIONS

Three and nine months ended  September  30, 2005  compared to the three and nine
months ended September 30, 2004.

REVENUES

Revenues for the three months  ended  September  30, 2005 and 2004 were $-0- and
$254,663 respectively,  which represents a 100% decrease.  Revenues for the nine
months  ended  September  30,  2005  and 2004  were  $284,935  and  $17,522,145,
respectively,  which represents a 98% decrease.  Our principal source of revenue
for these  periods  consisted  of  business  education  and  coaching  services.
Revenues  decreased  substantially as a result of the transfer of EPMG assets in
July 2004  pursuant to a Settlement  Agreement  with Randy Garn and Ethan Willis
whereby certain  operating assets of our EPMG subsidiary,  together with certain
liabilities, were transferred to Garn and Willis (see note 3 in the Notes to the
Condensed  Consolidated  Financial  Statements  herein).  As  a  result  of  the
split-off  of our  Triad  subsidiary  in April  2005,  we are no  longer  in the
business  of  education  and  coaching  services.  Our only  source of  revenues
prospectively  will be those from businesses  that we acquire in the future,  if
any.

COST OF SALES AND MARGINS

Cost of sales for the three months ended  September  30, 2005 and 2004 were $-0-
and $98,900,  respectively,  representing a decrease of 100%.  Cost of sales for
the nine months ended  September 30, 2005 and 2004 were $14,573 and  $8,200,575,
respectively,  representing  a decrease of 100%.  Cost of sales included (i) the
cost of the multimedia educational materials that we ship to our students,  (ii)
the wages  paid to our  coaches  and (iii) the  commissions  that we pay to lead
sources.   Cost  of  sales   decreased   substantially   as  a  result   of  the
above-described  disposition  of EPMG  operating  assets in July 2004.  Upon the
split-off  of our  Triad  subsidiary  in April  2005,  we are no  longer  in the
business of education and coaching services.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses for the three months ended  September  30,
2005 and  2004  were  $355,238  and  $3,408,669,  respectively,  representing  a
decrease of 90%. General and  administrative  expenses for the nine months ended
September  30,  2005 and 2004  were  $1,592,320  and  $7,933,848,  respectively,
representing  a  decrease  of 80%.  General  and  administrative  expenses  as a
percentage  of sales rose to 559% for the nine months ended  September  30, 2005
from 45% for the nine months ended 2004. Our general and administration expenses
consisted  primarily  of salaries and wages,  professional  fees,  rent,  travel
expenses, payroll taxes, telephone expenses and other general and administrative
expenses  necessary  to support  the  operations  of the  Company in the current
period.  The  primary  reason for the  increase  in general  and  administrative
expenses  relative  to sales  was a result  of the  dramatic  decrease  in sales
following the sale of the EPMG assets,  the  recognition of $150,000 in bad debt
expense  for the  period,  and  the  disposition  of the  Triad  subsidiary.  In
addition,  even as management  curtails  activity certain  expenses  relating to
Company's infrastructure (including legal and auditing expenses) will remain.

                                       15
<PAGE>

COMMISSIONS AND OTHER SELLING EXPENSES

Selling  expenses for the three months  ended  September  30, 2005 and 2004 were
$-0- and  $11,856,  respectively,  representing  a  decrease  of  100%.  Selling
expenses for the nine months ended September 30, 2005 and 2004 were $182,316 and
$4,090,845,  respectively,  representing  a decrease  of 96%.  Selling  expenses
consisted primarily of commissions paid to sales associates as well as marketing
and advertising expenses associated with key products and services. The decrease
in selling  expenses  is  attributed  to the  disposal  of EPMG assets and Triad
Media.

WRITE-DOWN OF GOODWILL

Following  the  split-off  of its Triad  Media,  Inc.  subsidiary,  the  Company
effectively  exited the education and coaching services  business.  As such, all
remaining  goodwill  relating to its  acquisition of EPMG, Inc. in the amount of
$1,088,686  was  determined to be impaired and written off in the second quarter
of 2005.

OTHER INCOME (EXPENSE)

Other income  (expense)  for the three months ended  September 30, 2005 and 2004
were $18,856 and $513,921,  respectively,  representing a decrease of 96%. Other
income  (expense)  for the nine months  ended  September  30, 2005 and 2004 were
($125,481)  and  $626,364  respectively,  representing  a decrease of 120%.  The
decrease is primarily  attributable  to a decrease in interest income due to our
declining   financing  notes   receivable   balance  as  well  as  a  charge  of
approximately  $83,000 for our failed  acquisition  of Data-Tech (see note 3), a
write-down on investment of $30,464, and the charge of $70,474 for our corporate
guarantee for the Triad Media, Inc. lease (see note 8).

INCOME TAXES

Our  provision  for income  taxes  amounted to $2,708 for the nine months  ended
September  30, 2005  compared to a provision  of $-0- for the nine months  ended
September 30, 2004. The current year provision reflects various state income tax
requirements.

NET LOSS

Our net  loss  for the  three  months  ended  September  30,  2005  amounted  to
($270,340),  compared  to a net  loss  of  ($2,484,579)  for  the  period  ended
September  30, 2004.  Our net loss for the nine months ended  September 30, 2005
amounted to ($2,654,864),  compared to a net loss of ($2,076,759) for the period
ended  September  30,  2004.  This  decrease  was  attributable  to the  matters
discussed  above  relating  to the EPMG asset  disposition  and our split off of
Triad Media, which included decreased revenue and markedly increased general and
administrative expenses along with the write-off of $1,088,686 of goodwill.


                                       16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Our  consolidated  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern for a  reasonable  period.  However,
during the six month period  ended  September  30,  2005,  we incurred a loss of
($2,654,864) and used cash totaling $823,556. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.

Management is currently  seeking merger and  acquisition  candidates  within the
technology  and  healthcare  industries,  which have revenue  producing and cash
generating  operations.  While  we  have  identified  a  number  of  prospective
acquisition  targets,  there can be no assurance  that any  acquisition  will be
completed or that this strategy would be successful.  In addition, we anticipate
that we will need to raise additional  capital to support our operations until a
successful  acquisition  or  acquisitions  can  be  completed.  There  can be no
assurance we will be able to acquire  additional capital at acceptable terms, if
at all.

As of September 30, 2005, the Company has cash and other  reserves  amounting to
$52,916,  certain  receivables that are expected to be collected during the year
ended December 31, 2005 amounting to $7,607,  net of allowances,  and refundable
income taxes, net of interest and penalties due, of approximately  $450,000.  In
the absence of a strategic  acquisition  of funding,  described in Note 2 to our
financial statements, management believes that it can curtail operating expenses
and defer trade payables sufficient to maintain our existence through the fourth
fiscal quarter of the year ended  December 31, 2005.  There can be no assurances
that we can acquire  companies or curtail our expenses  sufficiently to maintain
our operations.

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

At  September  30, 2005 we had current  assets of $683,143,  which  represents a
decrease of $1,516,926  over current assets as of December 31, 2004. Much of the
decrease is  attributable  to a decrease in cash.  At September  30, 2005 we had
cash on hand of  $52,916,  which  represents  a decrease  of  $823,556  over the
balances  as of  December  31,  2004.  At  September  30,  2005  we had  current
liabilities of $1,054,695,  which represents a decrease of $112,670 over current
liabilities as of December 31, 2004.

As September  30, 2005 our working  capital  decreased to a negative  ($371,552)
from a positive  $1,032,704  as of December  31,  2004.  This  decrease  results
primarily  from the use of cash in  operations as noted above due to the lack of
cash generating revenue and the continued high rate of corporate expenses.  With
the April 2005 split off of Triad,  we currently have no operating  business and
no cash is being  generated from  operations.  Accordingly,  our working capital
will likely decline as we address our new business development initiatives.

We have no material commitments for capital  expenditures.  Capital expenditures
for the nine months  ended  September  30, 2005  amounted to $23,946.  We do not
expect  additional  facilities  or  equipment  expenditures  in the  absence  of
acquisitions.

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

OFF BALANCE-SHEET ARRANGEMENTS

The Company has no material  off-balance sheet  arrangements as of September 30,
2005.

                                       17
<PAGE>


ITEM 3.  CONTROLS AND PROCEDURES

(a)  As of September 30, 2005, the Chief  Executive  Officer and Chief Financial
     Officer of the Company, with the participation of the Company's management,
     carried out an evaluation of the effectiveness of the Company's  disclosure
     controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that
     evaluation,  the Chief Executive  Officer and the Chief  Financial  Officer
     believe that, as of the date of the  evaluation,  the Company's  disclosure
     controls and  procedures  are  effective  in making known to them  material
     information   relating  to  the   Company   (including   its   consolidated
     subsidiaries) required to be included in this report.

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


                                       18

<PAGE>



PART II -         OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

SEC INVESTIGATION

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

PROSPER, INC. COMPLAINT

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

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


SEEMA URE, M.D.

On July 15, 2005 Seema Ure, M.D., a former employee of the Company's IST Medical
Group, Inc.  subsidiary,  filed a complaint against the Company asserting breach
of contract and breach of fiduciary  duty seeking  damages in excess of $15,000.
The Company  believes it has  affirmative  defenses and potential  counterclaims
against Ms. Ure and intends to defend this action vigorously. However, there can
be no assurance of a successful  outcome for the Company.  The Company has filed
an answer to this complaint and is preparing for depositions.


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<PAGE>




ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

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


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

a.       Exhibits

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

b.       Reports on Form 8-K

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

           On July 18, 2005 the Company filed a Current Report on Form 8-K under
Item 7.01 (Regulation FD Disclosure) stating that it executed a mutal rescission
agreement and release the effect of which was to rescind the earlier acquisition
agreement  between  the  Company  and  Data  Tech and the  selling  stockholders
executed May 9, 2005.

                                       20

<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 15, 2005    /S/ PETER M. PETERSON
                                  --------------------------------------------
                                  Peter M. Peterson
                                  Chairman of the Board,
                                  Chief Executive Officer, and President
                                  Principal Executive Officer


                                  /S/ CHRISTOPHER J. FLOYD
                                  --------------------------------------------
                                  Christopher J. Floyd
                                  Chief Financial Officer,
                                  Vice President of Finance, and Secretary
                                  Principal Financial and Accounting Officer



                                       21

<PAGE>



                                INDEX TO EXHIBITS

Exhibit
NUMBER                                      DESCRIPTION


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

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

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

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



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