U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]     ANNUAL  REPORT  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
        OF 1934

                                  For the fiscal year ended December 31, 2001.

[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
        ACT OF 1934

                                  For the transition period from_______to_______
                                  Commission file number _______________________

                  INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)

           Colorado                                        74-2929034
---------------------------------              ---------------------------------
   (State of Incorporation)                    (IRS Employer Identification No.)

100 South Orange Ave., Ste. 300, Orlando, FL                 32801
--------------------------------------------   ---------------------------------
(Address of principal executive offices)                   (Zip Code)

Issuer's telephone number,(   407     )     481       -      8900
                           -----------  -------------   -------------

Securities registered pursuant to Section 12(b) of the Act:
   None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [    ]

Check if no disclosure of delinquent  filers  pursuant to Item 405 of Regulation
S-B is contained  herein,  and no disclosure  will be contained,  to the best of
Registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

State Issuer's revenues for its most recent fiscal year.
       December 31, 2001 - $0

The aggregate market value of the voting stock held by  non-affiliates  on April
22,  2002 was  $348,747.  There are  approximately  19,374,884  shares of common
voting stock of the Registrant held by non-affiliates.

<PAGE>

State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date: December 31, 2001 - 29,374,884 shares
of Common Stock



Transitional Small Business Issuer Format
   YES [   ]   NO [ x ]


<PAGE>

                                     PART I

Item 1.       Description of Business.

         Forward-looking  Statements.  Certain  statements  in this Form 10-KSB,
particularly under Items 1 and 2, constitute "forward-looking statements". These
forward-looking statements involve known and unknown risks,  uncertainties,  and
other factors which may cause the actual results, performance or achievements of
the Company to be materially  different from any future results,  performance or
achievements, expressed or implied by the forward-looking statements.

DESCRIPTION OF BUSINESS


         Since its  inception  in 1987,  the  Company's  purpose  is to  conduct
offerings of its  securities to raise  capital to acquire  businesses in various
industries.  For the period from January 9, 1987  (inception)  to September  30,
1990, the Company  incurred a total net loss of $1,840,993.  During this period,
the Company devoted substantially all of its efforts to establish and organize a
television cablecast facility. However, by the end of 1990 the operations of the
Company ceased.

From  December  1990  through  October  1997,  the  Company  did not operate any
businesses and was inactive.

In  November  1997,  the  Company  changed  its name to  Innovative  Holdings  &
Technologies,  Inc.  In the  second  quarter  of 1998,  the  Company  signed  an
agreement to acquire BioCam  Company,  Inc.  (BioCam),  a developer of telemetry
technology  in the  amount  of  $1,000,000.  This was paid  for by  issuance  of
convertible  preferred  stock and  restricted  common  stock.  The Company began
supporting  the  operations  of  BioCam  financially  and  funded  approximately
$350,000,  in 1998. By the end of 1998, the principals of BioCam rescinded their
agreement with the Company and the relationship was terminated.

On January 8, 1999, the Company  incorporated  Xtreme  Telemetry  Systems,  Inc.
(Xtreme) and is its sole  stockholder.  Xtreme began the  development  of a real
time telemetric  monitoring  device, to be marketed  initially in the sports and
entertainment  industries.  The device was intended to monitor  performance  and
transmit the data by broadcast or over the  internet.  In September,  1999,  the
Company  secured the services of specialists in computer  software  development.
The alpha-beta  testing of the software  commenced in the fourth quarter,  1999.
The products under development have not been completed.  Further  development of
products by XTS has been suspended due to lack of funding and our  concentration
is currently on the business of US Tech Materials (USTM).  USTM is not producing
any  products on a  commercial  scale,  but is  providing  samples to  customers
interested in testing the PEAR resin for potential commercial use.

         US Tech Materials  Corporation (USTM) intends to develop  manufacturing
and marketing for Poly Ether Amide Resin,  also known as PEAR.  PEAR resins were
originally developed by Ashland, Inc., who entered into a license agreement with
USTM/IHTL in July, 2000, as amended effective in August,  2000,  October,  2000,
November  2000,  April 2001 and October  2001.  We have  endeavored  to seek out
financing and personnel to assist USTM's  infrastructure,  sales,  and marketing
systems and strategic  relationships  in order to bring PEAR to the marketplace.
USTM is still in its development  stages,  and there are no guarantees that USTM
will  successfully  raise  sufficient  capital,  attract  management  and  other
personnel, and be able to develop manufacturing  facilities,  materials sources,
R&D capabilities,  marketing  channels and delivery methods for PEAR resins. The
only relationship we have with Ashland, Inc. is as their licensee.

<PAGE>

         PEAR was a product of Ashland Chemical's late 1980's corporate research
initiative to develop new and innovative  products.  Ashland initially  licensed
PEAR to IHTL in July 2000 and revised and most recently  renewed that  agreement
in  October  2001.  A total of  $80,000  has been paid to  Ashland to retain the
licensing rights to PEAR since 2000. An ongoing royalty payment of seven percent
is also required based on gross sales.  License payments  totaling  $600,000 (in
$200,000  installments)  are due to Ashland on April,  1, 2002, July 1, 2002 and
September  1, 2002.  The April 1, 2002  payment was not made.  We are  currently
negotiating  with  Ashland  to modify the terms of this  agreement  to reduce or
eliminate the license payments.

PEAR  is  a  high-performance  family  of  composite  resins  that  combine
strength,  low weight,  chemical  and  temperature  resistance.  It doesn't burn
easily,  and  gives off less  toxins  when  subjected  to  flames,  and it's not
difficult to formulate  and process.  While  originally  developed for strategic
defense  applications  by Ashland,  Inc.,  subsequent  research showed that PEAR
resins had other  potential  applications  in a variety of industries  including
aerospace,  automotive,  oil & gas drilling/pipelines,  electronic & electrical,
transportation, and marine.

The following includes literature relating to PEAR:

-  Materials  Technology  Magazine:   November/December  1996  issue:  New  Cost
Competitive Thermoset Resins for Advanced Composite Applications Have Properties
Superior or Equal to Epoxies

-  High Performance Composites  Magazine:  May/June 1998: PEAR Resin a Tough New
Contender

     PEAR resins will potentially reach the market in two ways:

     1. Resin Transfer Molding (RTM): This is a vacuum-assisted  molding process
using liquefied resin-based catalyzed compounds injected into an enclosed mold.

     2. Prepreg  (Pre-Impregnation):  The process of mixing resin and filler and
effecting a partial cure before shipping to the end user.  Either  ready-to-mold
material in sheet form or  ready-to-wind  material in roving form,  which may be
cloth, mat, unidirectional fiber, or paper impregnated with resin and stored for
use.

     Competition

The  marketplace  for high  performance  resins  is  served  by  major  chemical
manufacturers  including  Shell,  3M, BASF,  GE Plastics and Dow  Chemical,  and
smaller  polymer  producers.  We will have to compete with these companies which
may put us at a competitive disadvantage.

     Polymer  resins  that  are  considered  to  be  PEAR  competitors  include:
polyamides, polyimides, phenolics, and bismalimides.


     Sources of Raw Materials and Suppliers

     South  West  Texas  State  University's  Institute  for  Environmental  and
Industrial  Science is conducting  initial  testing,  manufacturing  and product
engineering for PEAR resins. SWT is acting as a toll (contract)  manufacturer on
an as-needed basis. Raw materials are purchased from independent suppliers.

<PAGE>

     Patents, trademarks, and licenses

     We have an exclusive  license to manufacture  and market PEAR resins in the
United States,  Canada,  Mexico,  Central America,  and,  Australia.  USTM has a
non-exclusive  license to manufacture  and market PEAR to the rest of the world.
This license  agreement  requires us to make certain payments to Ashland between
now and  September  2002.  We must also reach  certain sales goals by the end of
2002.  We are  currently  negotiating  with  Ashland to modify the terms of this
agreement and to reduce or eliminate the license payments.

The base patents for the PEAR  technology  were issued to Ashland,  Inc. in 1989
and are part of the license to us. They will not expire  until 2006.  A total of
28 patents  relating to PEAR and its improvements  were issued to Ashland,  Inc.
Additional  patents for PEAR  improvements  are  currently in the  possession of
South West Texas Research Institute,  which, in the past,  developed  additional
improvements on the PEAR technology. These patents extend the patent life of the
PEAR patents.  Since we will be improving and adapting the PEAR technology,  new
patents will be sought to protect any new PEAR  technology  improvements.  Under
our  agreement  with  Ashland,  Inc.,  patents  related to PEAR are  retained by
Ashland,  Inc.  and  licensed  to USTM for the 10 year  agreement  period.  Upon
fulfillment  of all  obligations  under the license  agreement all rights to the
Pear technology will be granted to us. Ashland, Inc. bears the responsibility of
maintaining these patents during the 1first five years of the agreement. Further
patent responsibility is at the option of Ashland, subject to negotiation.

Government Regulation

     By our agreement  with Ashland,  we are required to file a Pre  Manufacture
Notice  (PMN)  with the US  Environmental  Protection  Agency  (EPA).  This is a
registration  process  required for all new  chemicals by the EPA. We have filed
the PMN and it is in process.

The Company,  through its XTS  subsidiary,  has developed  the Xtreme  Telemetry
System, a high technology data acquisition and delivery system for broadcast
television  and  Internet  applications.  The  XTS  System  incorporates  sensor
technologies  to  gather  data from  biological,  mechanical  and  environmental
sources. This data then can be wirelessly transmitted from its source, by way of
XTS's  proprietary  software,  to broadcast  applications on TV or the Internet.
This  broadcast  information  can  then be  graphically  displayed  on TV or the
Internet. XTS has developed propriety software for which a US copyright has been
granted. XTS originally intended to offer telemetry (data acquisition  services)
to the auto  racing  field.  Potential  applications  were also  explored in the
fields of golf, football and baseball. None of these applications have proved to
be viable.  Further  development of the XTS software will be dependent on market
conditions and access to capital investment.

     During  2001,  the  Company  has not been  active in  marketing  or further
developing XTS or its  technologies.  It has not had the financial  resources to
move forward the business of XTS.

Employees

     Our president is our only full time employee.


Item 2.       Description of Property.

         The Company owns no real property.  It subleases shared office space on
a month-to-month basis. The monthly rent is currently $175.

Item 3.       Legal Proceedings.

         The  Company  is  not a  party  to  any  pending  or  threatened  legal
proceedings.

<PAGE>

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

         No matter was submitted to a vote of the security holders,  through the
solicitation  of proxies or otherwise,  during the fourth  quarter of the fiscal
year covered by this report.

                                     PART II

Item 5.       Market for Common Equity and Related Stockholder Matters.

(a)      Market Information.

         The Company's  common stock trades on the OTC Bulletin  Board under the
symbol IHTL. Table 3 sets forth the high and low bid information for each fiscal
quarter within the last two years. These quotations reflect inter-dealer prices,
without retail  mark-up,  mark-down or commission  and may not represent  actual
transactions.

Table 3.

Bid Information
--------------------------------------------------------------------------------

Fiscal Quarter Ended                        High                    Low
--------------------------------------------------------------------------------
December 31, 2001                           0.09                    0.02
September 30, 2001                          0.07                    0.03
June 30, 2001                               0.08                    0.03
March 30, 2001                              0.125                   0.03
December 31, 2000                           0.187                   0.0312
September 30, 2000                          0.348                   0.125
June 30, 2000                               0.348                   0.0625
March 31, 2000                              0.437                   0.265
December 31, 1999                           0.22                    0.12
September 30, 1999                          1.02                    0.16
June 30, 1999                               0.84                    0.375
March 31, 1999                              1.22                    0.325
December 31, 1998                           0.78                    0.27
--------------------------------------------------------------------------------

(b)      Holders.

         The Company has approximately  2,234 active  shareholders of its common
stock holding 29,374,884 common shares.

(c)      Dividends.

         No dividends  have been  declared or paid to date and none are expected
to be paid in the foreseeable future.  There are no restrictions  imposed on the
Company which limit its ability to declare or pay dividends on its common stock.

Item 6.       Management's  Discussion  and  Analysis of Financial Condition and
              Plan of Operations


         Innovative  Holdings & Technologies,  Inc. was  incorporated  under the
laws of the State of Colorado on January 7, 1987. We have two  subsidiaries:  US
Tech Materials  Corporation,  a Nevada corporation and Xtreme Telemetry Systems,
Inc. (XTS), a Florida  corporation.  Further  development of products by XTS has
been suspended due to lack of funding and our  concentration is currently on the
business of US Tech  Materials  (USTM).  USTM is not producing any products on a
commercial  scale, but is providing  samples to customers  interested in testing
the PEAR resin for potential commercial use.

<PAGE>

         US Tech Materials  Corporation (USTM) intends to develop  manufacturing
and marketing for Poly Ether Amide Resin,  also known as PEAR.  PEAR resins were
originally developed by Ashland, Inc., who entered into a license agreement with
USTM/IHTL in July, 2000, as amended effective in August,  2000,  October,  2000,
November  2000,  April 2001 and October  2001.  We have  endeavored  to seek out
financing and personnel to assist USTM's  infrastructure,  sales,  and marketing
systems and strategic  relationships  in order to bring PEAR to the marketplace.
USTM is still in its development  stages,  and there are no guarantees that USTM
will  successfully  raise  sufficient  capital,  attract  management  and  other
personnel, and be able to develop manufacturing  facilities,  materials sources,
R&D capabilities,  marketing  channels and delivery methods for PEAR resins. The
only relationship we have with Ashland, Inc. is as their licensee.

         PEAR was a product of Ashland Chemical's late 1980's corporate research
initiative to develop new and innovative  products.  Ashland initially  licensed
PEAR to IHTL in July 2000 and revised and most recently  renewed that  agreement
in  October  2001.  A total of  $80,000  has been paid to  Ashland to retain the
licensing rights to PEAR since 2000. An ongoing royalty payment of seven percent
is also required based on gross sales.  License payments  totaling  $600,000 (in
$200,000  installments)  are due to Ashland on April,  1, 2002, July 1, 2002 and
September  1, 2002.  The April 1, 2002  payment was not made.  We are  currently
negotiating  with  Ashland  to modify the terms of this  agreement  to reduce or
eliminate the license payments.

         PEAR is a  high-performance  family of  composite  resins that  combine
strength,  low weight,  chemical  and  temperature  resistance.  It doesn't burn
easily,  and  gives off less  toxins  when  subjected  to  flames,  and it's not
difficult to formulate  and process.  While  originally  developed for strategic
defense  applications  by Ashland,  Inc.,  subsequent  research showed that PEAR
resins had other  potential  applications  in a variety of industries  including
aerospace,  automotive,  oil & gas drilling/pipelines,  electronic & electrical,
transportation, and marine.




Revenues

The Company had no revenues for the years ended December 31, 2001 and 2000.

General and Administrative

General and  administrative  expenses  have  increased  from $300,898 in 2000 to
$464,085 in 2001.  The increase in these  expenses  resulted from our efforts to
develop the business of USTM and further develop the PEAR resins.

Research and Development

Research and development  expenses increased from $28,455 in 2000 to $610,000 in
2001. These expenses resulted from entering into the agreement with Ashland Inc.
for the license to the PEAR resins.

Interest Expense

Interest expense increased from $9,729 in 2000 to $35,081 in 2001.

<PAGE>

Liquidity and Capital Resources

We  require  capital  principally  for  the  financing  of  operations  and  the
development  and  marketing  of its  subsidiary's  products.  To  date,  we have
financed our operations primarily through the sale of equity securities.

As stated in our  Financial  Statements,  our  ability  to  continue  as a going
concern is dependent upon issuance of stock and obtaining debt financing.  There
can be no  assurance  the  additional  financing  will be  attained  or that the
operations  will be  profitable.  Such inability  would have a material  adverse
effect on our business, operating results and financial condition.

We currently  have  commitments  to pay Ashland Inc.  $600,000  during 2002. The
first  payment  was due on April  1,  2002 and was not  paid.  We are  currently
attempting to renegotiate these payments.

We believe  that our  current  cash  balances  will not  provide  the  liquidity
necessary to satisfy our working capital needs.


Plan of Operation


During  2002,  we plan to  continue  providing  samples  of the PEAR  resins  to
potential customers for testing. We also plan to continue the development of the
resins  through our  research  association  with  Southwest  Texas  University's
Institute for  Environmental and Industrial  Science.  Once testing by potential
customers and further development is completed, toll manufacturing will begin on
a limited basis.

In order to devote  resources to research  and  development  we have  approached
Ashland about restructuring or eliminating the $600,000 in license payments that
are due during 2002.

Item 7.       Financial Statements.

         The  required  financial  statements  are  included  in  this  document
starting at Page F-1.

Item 8.       Changes  In  and  Disagreements With Accountants on Accounting and
              Financial Disclosure.

         There  have  been no  changes  or  disagreements  with  accountants  on
accounting or financial  disclosure  during the Company's two most recent fiscal
years.

                                    PART III

Item 9.       Directors,  Executive  Officers,  Promoters  and  Control Persons;
              Compliance with Section 16(a) of the Exchange Act.

The following table sets forth the officers and directors of the Company.

Name                             Position                                 Age
--------------                   -------------------                      ---
Helmuth Wyzisk                   President, Director                       44

(a)      Identify Directors and Executive Officers.

         The Company's  one director is Mr.  Helmuth  Wyzisk.  Mr. Wyzisk is the
President  and Chief  Executive  Officer.  Mr.  Wyzisk has served in his present
capacities  since  November  1997.  From  1995  through  1997 he  served  as the
President of Celesta  Corporation.  Celesta offered financial and other business
services  to its  customers.  Prior to 1995,  Mr.  Wyzisk was  President  of ELF
Investments,  a company providing contract  negotiation and acquisition services
to its customers.

<PAGE>

Item 10.      Executive Compensation.

         The  Company has one  executive  officer.  Mr.  Wyzisk has been paid no
compensation during 2001 and 2000. Mr. Wyzisk was paid executive compensation in
the form of common  stock for the years 1994  through  1997 with the issuance of
6,000,000 common shares.  This compensation was valued at $300,000 or five cents
per share.  The company has granted stock options to its President to acquire up
to Ten Million  (10,000,000)  common shares for purchase price of $500,000.  The
option is exercisable commencing on June 1, 2000 and expires on March 9, 2003.

Item 11.      Security Ownership of Certain Beneficial Owners and Management.

         Table 1 lists the persons who are known to the Company to be the owners
of more than five  percent of the  Company's  equity  shares as of December  31,
2001.

(a)      Beneficial Ownership of more than 5%.

         Table 1.

     (1)                  (2)                   (3)               (4)
Title of Class     Name and Address      Amount and Nature     Percent of
                                                                  Class
---------------    -----------------     -----------------     -----------
Common             Helmut Wyzisk            21,392,500 (1)        55.7%
---------------    -----------------     -----------------     -----------
Common             Leonard Aloi              2,000,000             7.0%
---------------    -----------------     -----------------     -----------
Common             William Parente           3,000,000 (2)         9.6%
---------------    -----------------     -----------------     -----------
Common             Paul Zuromski             8,000,000 (3)          22%
---------------    -----------------     -----------------     -----------

(1)      Mr. Wyzisk holds 10,000,000  options to purchase  10,000,000  shares of
         common  stock of the company  which are  immediately  exercisable.  The
         options are included in the total.
(2)      Mr. Parente holds  3,000,000  options to purchase  3,000,000  shares of
         common  stock of the company  which are  immediately  exercisable.  The
         options are included in the total.
(3)      Mr. Zuromski holds 8,000,000  options to purchase  8,000,000  shares of
         common  stock of the company  which are  immediately  exercisable.  The
         options are included in the total.

(b)      Security Ownership of Management.

         Table 2.

     (1)                  (2)                   (3)               (4)
Title of Class     Name and Address      Amount and Nature     Percent of
                                                                  Class
---------------    -----------------     -----------------     -----------
  *Common           Helmut Wyzisk           21,392,500            55.7%


*Includes  10,000,000  options that are  immediately  exercisable for 10,000,000
shares of common stock.

<PAGE>

Item 12.      Certain Relationships and Related Transactions.

(a)      Transactions with Management and Others.

         Except  as  otherwise  set  forth  in  this  document,   no  member  of
management,  executive  officer,  director,  nominee  for a director or security
holder who is known to the  Company to own of record or  beneficially  more than
five percent of any class of the Company's voting securities,  nor any member of
the  immediate  family of any of the  foregoing  persons,  has had any direct or
indirect  material interest in any transaction to which the Company was or is to
be a party.

         The Company retains the services of a marketing company whose principal
owner is the controlling  shareholder of the Company.  During 1999,  payments of
$20,000 were made to this related company.

(b)      Certain Business Relationships.

         During 1997 and 1998 and prior to July 1, 1999 the Company's operations
were  based  at the  offices  of a  shareholder.  Payments  were  made  to  this
shareholder for rent,  administrative and miscellaneous  services.  During 1998,
50,000 shares were issued to and $53,800 was paid to this  shareholder.  For the
eight months ended  August 31, 1999,  payments in the  aggregate of $60,387 were
made to this shareholder.

         On March 10, 1998, the Company granted an option to purchase 10,000,000
shares of its common stock to the controlling  shareholder at a price of at $.05
per share. On March 10, 1998 the Company granted an option to purchase 2,000,000
shares of its common  stock to a  shareholder  at a price of $.05 per share.  On
March 10, 1998, the Company  granted an option to purchase  8,000,000  shares of
its common  stock to a  consultant  of the Company at a price of $.05 per share.
The options are  exercisable  commencing  on June 1, 2000 and expire on March 9,
2003.

(c)      Indebtedness of Management.

         No member of the  Company's  management  is or has been indebted to the
Company since the beginning of the Company's last fiscal year.

(d)      Transactions with Promoters.

         The  Company's  promoters  have not received,  directly or  indirectly,
anything of value from the Company, nor are they entitled to receive anything of
value from the Company.

Item 13.      Exhibits and Reports on Form 8-K.

         (a) Exhibits

         3.1*     Articles of Incorporation and amendment filed as an exhibit to
                  the  Company's  registration  statement on Form 10-SB filed on
                  December 22, 1999 are  incorporated  in this annual  report by
                  reference.
         3.2*     By-Laws  filed as an  exhibit  to the  Company's  registration
                  statement  on Form  10-SB  filed  on  December  22,  1999  are
                  incorporated in this annual report by reference.

         * Previously filed

         (b) There were no reports on Form 8-K filed by the  Company  during the
quarter ending December 31, 2001.

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

Dated: April 22, 2002

INNOVATIVE HOLDINGS & TECHNOLOGIES, INC.

/s/  Helmuth Wyzisk
-------------------
By:  Helmuth Wyzisk
Title: President

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

/s/  Helmuth Wyzisk                                           April 22, 2002
---------------------------
By:  Helmuth Wyzisk
Title: President, Director

<PAGE>

                                TABLE OF CONTENTS



Independent Auditors' Report                                             F-1

Financial Statements

Balance Sheets                                                           F-2

Statements of Operations                                                 F-3

Statements of Changes in Stockholders' Equity (Deficit)                  F-4

Statements of Cash Flows                                                 F-5

Notes to Financial Statements                                         F-6 - F-11

<PAGE>

                             DiRocco Dombrow, P.A.
                         3601 West Commercial Boulevard
                                    Suite 39
                         Ft. Lauderdale, Florida 33309
                                 (954) 731-8181

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

To the Board of Directors
Innovative Holdings & Technologies, Inc. and Subsidiary

We have  audited the  accompanying  consolidated  balance  sheets of  Innovative
Holdings & Technologies,  Inc. and Subsidiary (the "Company") as of December 31,
2001  and  2000,  and  the  related   consolidated   statements  of  operations,
stockholders'  equity  (deficit) and cash flows for the years then ended.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as  evaluating  the overall  financial  statement  presentation.  We believe our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Innovative Holdings
&  Technologies,  Inc. and  Subsidiary as of December 31, 2001 and 2000, and the
results of its operations and cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.


The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 12 to
the  consolidated   financial  statements,   the  Company's   significant,   and
continuing, operating losses raise substantial doubt about the Company's ability
to continue as a going concern.  Management's  plans regarding these matters are
also described in Note 11. The consolidated  financial statements do not include
any adjustments that might result from the outcome of this uncertainty.



/s/ DiRocco & Dombrow, P.A.
April 12, 2002

                                      F-1
<PAGE>
<TABLE>
<CAPTION>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000


                                     ASSETS

                                                                      2001           2000
                                                                  -----------    -----------
<S>                                                               <C>            <C>
Current assets
  Cash                                                            $       121    $       440
  Prepaid expenses                                                       --           28,953
  Due from affiliate                                                   69,800         59,800
                                                                  -----------    -----------
    Total current assets                                               69,921         89,193

Investment                                                                200            200
Property and equipment (net)                                           14,015         18,567
Other assets                                                            3,473          3,473
                                                                  -----------    -----------
    Total assets                                                  $    87,609    $   111,433
                                                                  ===========    ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
  Accounts payable and accrued
    expenses                                                      $ 1,006,874    $    52,212
  Withholding taxes payable                                           169,723        171,816
  Due to stockholder                                                  280,506        155,287
  Notes payable                                                          --           25,000
  Due to affiliates                                                     8,736        126,218
                                                                  -----------    -----------
    Total current liabilities                                       1,465,839        530,533
                                                                  -----------    -----------

Stockholders' equity (deficit)
  Preferred stock, $0.001 par value, 50,000,000
    shares authorized, no shares issued and outstanding                  --             --
  Common stock, $0.0001 par value, 450,000,000
    shares authorized, 29,374,884 and 26,374,884
    issued and outstanding, respectively                                2,938          2,638
  Additional paid-in capital                                        3,227,723      3,162,023
  Stock subscriptions receivable                                     (200,000)      (284,000)
  Deficit                                                          (4,408,891)    (3,299,761)
                                                                  -----------    -----------
    Total stockholders' deficit                                    (1,378,230)      (419,100)
                                                                  -----------    -----------
    Total liabilities and stockholders' deficit                   $    87,609    $   111,433
                                                                  ===========    ===========
</TABLE>

     See accompanying summary of notes to unaudited condensed consolidated
                             financial statements.

                                      F-2
<PAGE>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 For the Years Ended December 31, 2001 and 2000


                                               2001            2000
                                          ------------    ------------

Expenses
  General and administrative              $    464,085    $    300,898
  Research and development                     610,000          28,455
  Interest expense                              35,081           9,729
                                          ------------    ------------
    Total expenses                           1,109,166         339,082
                                          ------------    ------------

Operating loss                              (1,109,166)       (339,082)

Other Income
  Interest income                                   36           2,754
                                          ------------    ------------

Net loss                                  $ (1,109,130)   $   (336,328)
                                          ============    ============


Net loss per share                        $      (0.03)   $      (0.01)
                                          ============    ============

Weighted average common shares              36,679,532      25,172,830
                                          ============    ============





  The accompanying notes are and integral part of these financial statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)




                                  Preferred Stock           Common Stock       Additional     Stock                       Total
                               ----------------------  ----------------------    Paid-in   Subscriptions  Accumulated  Stockholders'
                                 Shares      Amount      Shares      Amount      Capital    Receivable      Deficit      Deficit
                               ----------  ----------  ----------  ----------  ----------  -----------    -----------  -----------
<S>                            <C>         <C>         <C>         <C>         <C>         <C>            <C>          <C>
Balance at January 1, 2000           --    $     --    23,124,884  $    2,313  $3,080,619  $  (334,000)   $(2,963,433) $  (214,501)

Cancellation of stock
  subscriptions                      --          --    (2,500,000)       (250)   (249,750)     250,000           --           --

Issuance of stock for services       --          --       250,000          25      24,975         --             --         25,000

Issuance of stock for
  repayment of notes payable         --          --     1,500,000         150     106,579         --             --        106,729

Issuance of stock under
  subscription agreements            --          --     4,000,000         400     199,600     (200,000)          --           --

Net loss for the year ended
  December 31, 2000                  --          --          --          --          --           --         (336,328)    (336,328)
                               ----------  ----------  ----------  ----------  ----------  -----------    -----------  -----------

Balance - December 31, 2000          --          --    26,374,884       2,638   3,162,023     (284,000)    (3,299,761)    (419,100)

Cancellation of stock
  subscriptions                      --          --          --          --       (84,000)      84,000           --           --

Issuance of stock at $0.05 per
  share                              --          --     2,000,000         200      99,800         --             --        100,000

Issuance of stock for
  repayment of notes payable         --          --     1,000,000         100      49,900         --             --         50,000

Net loss for the year ended
  December 31, 2001                  --          --          --          --          --           --       (1,109,130)  (1,109,130)
                               ----------  ----------  ----------  ----------  ----------  -----------    -----------  -----------
Balance - December 31, 2001          --          --    29,374,884  $    2,938  $3,227,723  $  (200,000)   $(4,408,891) $(1,378,230)
                               ==========  ==========  ==========  ==========  ==========  ===========    ===========  ===========

</TABLE>

   The accompanying notes are and integral part of these financial statements.

                                       F-4
<PAGE>
<TABLE>
<CAPTION>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2001 and 2000


                                                            2001           2000
                                                        -----------    -----------
<S>                                                     <C>            <C>
Cash flows from operating activities:
Net loss                                                $(1,109,130)   $  (336,328)
Adjustments to reconcile net loss to net cash used by
  operating activities:
    Stock issued for services                                  --           31,729
    Depreciation                                              4,552          4,554
    (Increase) decrease in:
      Prepaid expenses                                       28,953        (25,272)
      Note receivable                                          --           10,250
      Other assets                                             --              790
    Increase (decrease) in:
      Accounts payable and accrued expenses                 954,662         26,386
      Withholding taxes payable                              (2,093)         8,566
                                                        -----------    -----------
        Net cash used by operating activities              (123,056)      (279,325)
                                                        -----------    -----------

Cash flows from investing activities:
  Purchase of investment                                       --             (200)
                                                        -----------    -----------
        Net cash used by investing activities                  --             (200)
                                                        -----------    -----------

Cash flows from financing activities:
  Proceeds from stockholder loans                           125,219        255,287
  Repayments of notes payable                               (25,000)          --
  Repayments of advances from affiliate                    (117,482)
  Advances to affiliate                                     (10,000)          --
  Advances from affiliate                                      --           22,667
  Proceeds from issuance of common stock                    150,000           --
                                                        -----------    -----------
        Net cash provided by financing activities           122,737        277,954
                                                        -----------    -----------

Increase (decrease)  in cash                                   (319)        (1,571)
Cash at beginning of year                                       440          2,011
                                                        -----------    -----------
Cash at end of year                                     $       121    $       440
                                                        ===========    ===========

Supplemental Cash Flow Information:
  Cash paid during the year for:
    Interest paid                                       $    24,416    $      --
                                                        ===========    ===========
    Income taxes paid                                   $      --      $      --
                                                        ===========    ===========

Non cash transactions:
  Cancellation of stock subscriptions receivable        $    84,000    $   250,000
                                                        ===========    ===========
  Issuance of stock under subscription agreements       $      --      $  (200,000)
                                                        ===========    ===========

</TABLE>

   The accompanying notes are and integral part of these financial statements.

                                       F-5
<PAGE>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization and Summary of Significant Accounting Policies

Organization
------------

Innovative  Holdings and Technologies,  Inc. (the "Company") was incorporated in
the State of Colorado  in 1987 as Celesta  Corporation.  The Company  intends to
develop,  manufacture, and market a Poly Ether Amide Resin, known as PEAR, under
license  from a third  party.  PEAR is a  high-performance  family of  composite
resins  that  combine  strength  with low weight and  chemical  and  temperature
resistance. PEAR has potential applications in a variety of industries including
aerospace,  automotive, oil and gas, electronic and electrical,  transportation,
and marine. The Company's office is located in Orlando, Florida.

Subsidiary
----------

On January 8, 1999 the  Company  incorporated  Xtreme  Telemetry  Systems,  Inc.
("Xtreme") in the State of Florida and is its only stockholder.  The transaction
was   accounted  for  by  the  purchase   method  of  accounting   for  business
combinations.

Consolidation Policy
--------------------

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly owned subsidiary.  Intercompany transactions and balances
have been eliminated in consolidation.

Property and Equipment
----------------------

Furniture and equipment are stated at cost.  Major renewals and  betterments are
capitalized while maintenance and repairs,  which do not extend the lives of the
respective assets, are expensed when incurred. Depreciation is computed over the
estimated  useful  lives  of the  assets  using  the  straight  line  method  of
accounting.

Useful lives for property and equipment are as follows:

                                                       Years
                                                   -------------
                       Furniture                         7
                       Computers                         5

Loss Per Share
--------------

Basic loss per  share,  which  does not  include  any  dilutive  securities,  is
computed by dividing the loss available to common  stockholders  by the weighted
average  number of common  shares  outstanding  during the period.  In contrast,
diluted loss per share  considers the  potential  dilution that could occur from
other financial  instruments that would increase the total number of outstanding
shares of common stock. Potentially dilutive securities,  however, have not been
included in the  diluted  loss per share  computation  because  their  effect is
anti-dilutive.


                                      F-6
<PAGE>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Note 1 - Organization and Summary of Significant Accounting Policies (Continued)

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

Deferred tax assets and  liabilities  are recorded for  differences  between the
financial statement and tax basis of the assets and liabilities that will result
in taxable or  deductible  amounts in the future  based on enacted  tax laws and
rates  applicable to the periods in which the differences are expected to affect
taxable income.  Valuation  allowances are established  when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
recorded  for the amount of income  tax  payable  or  refundable  for the period
increased  or  decreased  by the change in deferred  tax assets and  liabilities
during the period.

Financial Instruments
---------------------

The carrying amounts reported in the balance sheets for cash,  prepaid expenses,
accounts payable,  and other accrued liabilities  approximate their fair values.
The carrying amounts reported for notes payable  approximates  their fair market
value  because,  in  general,   the  interest  on  the  underlying   instruments
approximates market rates.

Accounting Estimates
--------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.  Estimates and assumptions are
reviewed  periodically  and  the  effects  of  revisions  are  reflected  in the
financial statements in they are determined to be necessary.

Recent Accounting Pronouncements
--------------------------------

In June 2001, the FASB issued SFAS number 141, "Business Combinations", and SFAS
number 142, "Goodwill and Other Intangible  Assets".  Under these new standards,
all  acquisitions  subsequent  to June 30, 2001 must be accounted  for under the
purchase  method  of  accounting,  and  purchased  goodwill  will no  longer  be
amortized  over its  estimated  useful  life,  but will be subject to a periodic
impairment test base on its fair value.

In  August  2001,  the FASB  issued  SFAS  number  143,  "Accounting  for  Asset
Retirement   Obligations".   SFAS  143  establishes   accounting  standards  for
recognition  and  measurement  of a liability for the costs of asset  retirement
obligations.  Under SFAS 143, the costs of retiring an asset will be recorded as
a liability when the retirement  obligation  arises,  and will be amortized over
the life of the asset.

In October 2001, the FASB issued SFAS number 144,  "Accounting for Impairment or
Disposal of Long-Lived  Assets".  SFAS 144 addresses  financial  accounting  and
reporting for the impairment or disposal of long-lived  assets and  discontinued
operations.

Management  is  currently  evaluating  the  impact  of these  pronouncements  to
determine the effect,  if any, that they may have on the financial  position and
results of operations.  The Company is required to adopt each of these standards
in the first quarter of 2002.


                                      F-7
<PAGE>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Note 2 - Property and Equipment

At December 31, 2001 and 2000 the Company's property and equipment  consisted of
the following:

                                                         2001        2000
                                                       ---------   ---------
           Furniture                                   $   7,082   $   7,082
           Computers                                      17,709      17,709
                                                       ---------   ---------
                                                          24,791      24,791
           Less: accumulated depreciation                 10,776       6,224
                                                       ---------   ---------
           Total                                       $  14,015   $  18,567
                                                       =========   =========

Depreciation  expense for the years ended  December 31, 2001 and 2000 was $4,552
and $4,554, respectively.

Note 3 - Investment

In 2000,  the Company  purchased  1% of the  outstanding  common stock of USTech
Material Corp., Inc.  ("USTech") in the amount of $200. The investment is valued
at cost  because the Company  does not have the ability to exercise  significant
influence over USTech.

In July 2001 the Company  signed a letter of intent to acquire an additional 50%
of USTech in  consideration  for the amounts the Company advanced to USTech (see
note 6).

Note 4 - Withholding Taxes Payable

The Company  compensated  various  individuals for consulting  services rendered
through the issuance of the Company's common stock. Back-up withholding tax at a
rate of 20% was computed for these amounts.

Note 5 - Notes Payable

Notes payable as of December 31, 2001 and 2000 consisted of the following:

                                                          2001        2000
                                                        ---------   ---------
           Note payable to an existing stockholder,
           interest at 12%, due September 2001          $    --     $  25,000
                                                        =========   =========

Note 6 - Related Party Transactions

During 2001 and 2000, the Company advanced $10,000 and $59,800, respectively, to
USTech.  These advances are  uncollateralized  and there are no formal repayment
terms (see note 3).

The  Company is  indebted  to various  affiliates  in the amounts of $ 8,736 and
$126,218  at  December  31,  2001 and  2000,  respectively.  There are no formal
repayment terms.

                                      F-8
<PAGE>
<TABLE>
<CAPTION>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 6 - Related Party Transactions (Continued)

The Company is indebted to various  shareholders  in the amounts of $280,506 and
$155,287  at  December  31,  2001 and  2000,  respectively.  There are no formal
repayment terms.

Note 7 - Commitments

In  February  2001,  as part of  management's  cost-cutting  plan,  the  Company
terminated its office sublease  agreement that was to expire in October 2002 and
began leasing shared office space on a month to month basis. The monthly rent is
$175. Rent expense was $8,880 and $45,274 in 2001 and 2000, respectively.

In October 2001 the Company  entered into a licensing  agreement to  manufacture
and  sell  certain  resins.  The  agreement  called  for the  Company  to make a
good-faith  payment of $10,000 and  subsequent  payments of $200,000 on April 1,
2002,  July 1, 2002 and  September  1, 2002.  The  agreement  also  requires the
Company to make royalty  payments of 7% of gross sales. The Company did not make
the required payment on April 1, 2002 and is currently  renegotiating  the terms
of the agreement.

Note 8 - Income Taxes

The total deferred tax assets are as follows:

                               Net Operating Loss Carry Forward at
                                        Applicable Tax Rate                             Amount
                             ---------------------------------------                     per
                               Federal        State                     Valuation      Balance
                               (34.0%)        (5.0%)        Total       Allowance       Sheet
                             -----------   -----------   -----------   -----------  -------------
<S>                          <C>           <C>           <C>           <C>          <C>
Deferred tax assets
  at January 1, 2000         $   945,848   $   146,416   $ 1,092,264   $(1,092,264)  $      --

Changes for the year ended
  December 31, 2000              107,069        16,574       123,643      (123,643)         --
                             -----------   -----------   -----------   -----------   -----------

Deferred tax assets
  at December 31, 2000         1,052,917       162,990     1,215,907    (1,215,907)         --

Changes for the year ended
  December 31, 2001              164,500        25,500       190,000      (190,000)         --
                             -----------   -----------   -----------   -----------   -----------

Deferred tax assets
  at December 31, 2001       $ 1,217,417   $   188,490   $ 1,405,907   $(1,405,907)  $      --
                             ===========   ===========   ===========   ===========   ===========

</TABLE>

Due to  continuing  net  operating  losses  and  the  resulting  uncertainty  of
realization,  no tax  benefit  has been  recognized  for  operating  losses.  At
December  31,  2001,  net  operating  losses  of  approximately  $3,770,000  are
available  for  carryforward  against  future  years'  taxable  income and begin
expiring in the year 2002.  The  Company's  ability to utilize its net operating
loss  carryforwards is uncertain and thus a valuation  reserve has been provided
against the Company's net deferred tax assets.


                                      F-9
<PAGE>
<TABLE>
<CAPTION>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Note 9 - Common Stock Transactions

Common stock transactions during 2000
-------------------------------------

The  Company  cancelled  2,500,000  shares of its  restricted  common  stock for
nonpayment of stock subscriptions.

The Company issued 250,000 shares of its restricted  common stock in payment for
future services in the amount of $25,000.

The Company issued  1,500,000  shares of its restricted  common stock in lieu of
payment of notes payable plus accrued interest in the amount of $106,729.

The Company issued 4,000,000 shares of its restricted common stock in connection
with a stock option under a subscription agreement.

Common stock transactions during 2001
-------------------------------------

The Company issued 2,000,000 shares of its restricted  common stock at $0.05 per
share to one individual.

The Company issued 1,000,000 shares of its restricted  common stock at $0.05 per
share to three individuals.

Note 10 - Stock Options

On March 10, 1998,  the Company  entered into a stock option  agreement in which
the Company granted the option to shareholders and consultants to purchase up to
21,000,000 shares of the Company's  restricted common stock at an exercise price
of $0.05 per  share.  The  options  were  fully  vested at the date of issue and
expire on March 9, 2003.

The following is a summary of stock option activity for the years ended December
31, 2001 and 2000.


                                                            2001          2000
                                                        -----------   -----------
<S>                                                     <C>           <C>
Number of options outstanding on January 1               17,000,000    21,000,000

Number of options exercised                                    --      (4,000,000)
                                                        -----------   -----------
Number of options outstanding on December 31             17,000,000    17,000,000
                                                        ===========   ===========
Number of options exercisable at December 31             17,000,000    17,000,000
                                                        ===========   ===========

Weighted average exercise price per share outstanding
  and exercisable                                       $      0.05   $      0.05
                                                        ===========   ===========
Weighted average remaining contractual life of options
  outstanding and exercisable                            1.2 years      2.2 years

</TABLE>

No options were forfeited or expired in 2001 and 2000.

                                      F-10
<PAGE>

            INNOVATIVE HOLDINGS AND TECHNOLOGIES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 10 - Stock Options (Continued)

The Company uses the intrinsic-value method of accounting for stock-based awards
granted to employees and, accordingly,  does not recognize  compensation expense
for its  stock-based  awards to  employees  in the  Consolidated  Statements  of
Operations.  Under this method of accounting for stock-based  compensation,  the
Company  is  required  to  provide  pro forma  information  on the impact of the
fair-value method of accounting for stock options,  however, the Company did not
grant any options to its employees during 2001 and 2000 and accordingly,  no pro
forma information is presented.

Note 11 - Going Concern

As shown in the  accompanying  financial  statements,  the Company  incurred net
losses of  $1,109,130  $336,328 for the years ended  December 31, 2001 and 2000,
respectively.  The Company's current liabilities  exceeded its current assets by
$1,378,230 and $441,340 at December 31, 2001 and 2000, respectively. The ability
of the Company to continue as a going  concern is dependent  on the  development
and marketing of its products and or the Company's  ability to raise  additional
capital through debt or equity offerings.

Note 12 - Contingency

In July 2000 the Securities and Exchange  Commission  commenced an investigation
of the Company pursuant to a Formal Order. This investigation focuses on whether
the  Company  and others  misrepresented  material  facts or omitted to disclose
material  facts  in press  releases  and  reports  filed  with  the  Commission,
concerning,  among other things,  the Company's  assets,  operations,  financial
condition and anticipated revenue. It cannot be predicted, at this time, whether
an enforcement  proceeding  will be recommended by the staff to the  Commission,
what the nature of such  enforcement  proceeding would be, the type of sanctions
sought or what the likelihood would be of reaching a settlement.

Accordingly,  no provision for any liability that may result upon  resolution of
this investigation has been recorded in the accompanying financial statement.




                                      F-11