Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 11:  Commitments and Contingencies

Leases:

The Company leases office space in Washington, D.C.; Orlando, Florida; Fairfax, Virginia; and Brentwood, Tennessee under operating leases expiring at various dates through 2013. The premises leases contain scheduled rent increases and require payment of property taxes, insurance and certain maintenance costs. The minimum future commitments under lease agreements existing as of June 30, 2011 are approximately as follows:

Year ending December 31,
2011	$	95,000
2012		128,000
2013		33,000
	$	256,000

Total rent expense amounted to $150,647 and $363,478 for the six months ended June 30, 2011 and 2010, respectively.

In 2010, Innovative vacated its office space prior to expiration of the lease. The landlord subsequently filed a lawsuit against the Company under which it pursued total damages of approximately $1,000,000, which approximates the rent charges for the remaining term of the lease. On February 14, 2011, Innovative entered into a settlement agreement in which it agreed to a payment of $350,000 on May 31, 2011. In the event Innovative did not make the payment timely, it  agreed to a confessed judgment in the amount of  $936,510. This amount was included in other accrued liabilities on the balance sheet as of March 31, 2011 and December 31, 2010, since management was of the opinion that payment of $350,000 would not be made in time. In July 2011 the settlement agreement was amended to extend the $350,000 payment to August 8, 2011.  The entire $350,000 was paid in full by August 8, 2011, of which $75,000 was paid during the three months ended June 30, 2011. Therefore, $586,510 was recognized as other income during the three months ended June 30, 2011 and the total liability under this settlement agreement amounted to $275,000 as of June 30, 2011.

Late Deposit of Payroll Taxes and Employee Income Tax Withholdings:

During 2011, 2010, and part of 2009, the Company did not make deposits of federal and state employer payroll taxes, as well as employee income tax withholdings.  As of  June 30, 2011 and December 31, 2010, management estimated the total of payroll tax accrued and income tax withheld balances including penalties and interest, amounted to $2,898,619 and $1,791,250, respectively. The Company is currently in discussions with the taxing authorities to develop a payment plan.  On March 17, 2011 the taxing authorities file a notice of federal tax lien in the amount of $321,494 in Fairfax, Virginia.

Employment Agreement:

On April 1, 2009, Innovative entered into an employment agreement with its President and Chief Executive Officer through March 31, 2014, which provides for a minimum annual salary of $198,000. At June 30, 2011, the total commitment, excluding incentives, was $544,500.

Contracts:

Substantially all of the Company’s revenues have been derived from prime or subcontracts with the U.S. government. These contract revenues are subject to adjustment upon audit by the Defense Contract Audit Agency.  Audits have been finalized through 2005. Management does not expect the results of future audits to have a material effect on the Company’s financial position or results of operations.

Delinquent payables

The Company has been delinquent in numerous payables to different parties of which some filed lawsuits against the Company. All necessary accruals have been made as of June 30, 2011 and December 31, 2010 and are included in accounts payable and other accrued liabilities.