FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
{X} Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2005
or
{ } Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period____________to_______________
Commission file number 0-27175
ADVANCE TECHNOLOGIES, INC.
______________________________________________________
(Exact name or registrant as specified in its charter)
Nevada 95-4755369
______________________________ ___________________
(State or other jurisdiction (I.R.S. Employer
Incorporation or organization) Identification No.)
716 Yarmouth Rd Suite 215
Palos Verdes Estates, CA 90274
________________________________________
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 265-7776
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 that the registrant was
Required to file such reports), and (2) has shorter period been subject to
Such filing requirements for the past 90 days. Yes {X} No { }
APPLICABLE ONLY TO ISSUES INVOLVED IN BANKRUPTCY.
Indicate by check whether the registrant has filed all documents And report
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities Under a plan
confirmed by a court. Yes { } No { }
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of March 31, 2005, approximately 37,791,337 shares of the Registrant's
Common Stock, $0.001 par value were outstanding. As of March 31, 2005,
approximately 27,724,037 shares of the Registrant's Class A Preferred Stock
par value $0.001 were outstanding.
__________________________________________________________________________
Page 1
TABLE OF CONTENTS
Page
Cover Page 1
Part I 4
Financial Statement Item 4
Financial Statements 4
Balance Sheet 4
Income Statement 5
Cashflow Statement 6
Financial Footnotes 7
Management Discussion 8
Announcements 8
Business Overview 8
Actions, Board of Directors 11
Signatures 13
Page 2
Part I
ITEM 1. FINANCIAL STATEMENTS
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Financial Statements
March 31, 2005
Page 3
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Consolidated Balance Sheets
ASSETS
March 31, September 31,
2005 2004
(Unaudited)
------------ ------------
Current Assets
Cash $ 5,274 $ 1,773
------------ ------------
Total Current Assets $ 5,274 $ 1,773
------------ ------------
Property & Equipment, Net $ 3,280 $ 6,563
------------ ------------
Total Assets $ 8,554 $ 8,336
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 4,883 $ 4,883
Accrued Interest - -
Note Payable - Officer 75,500 59,300
Advance Royalties - -
------------ ------------
Total Current Liabilities $ 80,383 $ 64,183
------------ ------------
Total Liabilities $ 80,383 $ 64,183
------------ ------------
Stockholders' Equity
Common Stock, Authorized 100,000,000
Shares of $.001 Par Value, Issued and
Outstanding 37,791,337 and 28,319,416
shares, respectively 37,791 28,319
Preferred Stock, Series A Authorized
100,000,000 Shares of $.001 Par Value,
Issued and Outstanding 27,724,037 and
37,195,958 shares, respectively 27,724 37,196
Additional Paid in Capital 558,389 550,889
Deficit Accumulated During the Development
Stage (695,734) (672,251)
------------ ------------
Total Stockholders' Equity $ (71,829) $ (55,847)
------------ ------------
Total Liabilities and Stockholders' Equity $ 8,554 $ 8,336
============ ============
Page 4
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception
For the For the For the For the on October
three months three months six months six months 1, 1985
ended March ended March ended March ended March thru March
31, 2005 31, 2004 31, 2005 31, 2004 31, 2005
------------ ------------ ----------- ----------- -----------
Revenues
Royalty Income $ - $ 25,000 $ -$ - $ 25,000
Consulting Fees 900 2,234 3,353 5,365 65,390
Product Sales - - - 144,073 119,073
------------ ------------ ----------- ----------- -----------
Total Sales 900 27,234 3,353 149,438 212,816
Cost of Goods Sold - - - 114,020 114,020
------------ ------------ ----------- ----------- -----------
Gross Profit 900 27,234 3,353 35,418 98,796
------------ ------------ ----------- ----------- -----------
Operating Expenses
Depreciation &
Amortization - 3,939 3,282 3,939 48,605
Organization Costs - - - - 11,301
Research &
Development - - - - 72,750
General &
Administrative 9,072 62,380 23,552 133,374 736,606
------------ ------------ ----------- ----------- -----------
Total
Operating
Expenses $ 9,072 $ 66,319 $ 26,834 $ 137,313 $ 983,282
------------ ------------ ----------- ----------- -----------
Operating Income
(Loss) $ ( 8,172) $ (39,085) $ (23,481)$ 12,125 $ (770,466)
------------ ------------ ----------- ----------- -----------
Other Income (Expense)
Miscellaneous Income - - - - 98,000
Interest Expense - - - - (23,267)
------------ ------------ ----------- ----------- -----------
Total Other
Income (Expense) - - - - 74,733
------------ ------------ ----------- ----------- -----------
Net Income (Loss) $ (8,172) $ (39,085) $ (23,481) $ 12,125 $( 695,733)
============ ============ =========== =========== ===========
Net Income (Loss)
Per Share $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.17)
============ ============ =========== =========== ===========
Weighted Average
Shares Outstanding 34,598,553 22,833,717 31,406,947 22,833,717 3,977,191
============ ============ =========== =========== ===========
Page 5
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From the
beginning of
development
stage
For the six months ended October 1,
March 31, 1985 thru
-------------------------- March 31,
2005 2004 2005
------------ ------------ ------------
Cash Flows from Operating Activities
Net Income (Loss) $(23,481) $ 12,125 $(695,733)
Adjustments to Reconcile Net Loss to
Net Cash Provided by Operations:
Depreciation & Amortization 3,282 3,939 48,605
Stock Issued for Services - - 403,025
Organization Costs - - 11,331
Decrease in Prepaids - - 14,680
Change in Assets and Liabilities
Increase (Decrease) in Accounts Payable
and Accrued Expenses 16,200 (25,000) 80,057
------------ ------------ ------------
Net Cash Provided(Used) by Operating
Activities (3,999) (8,936) (138,035)
------------ ------------ ------------
Cash Flows from Investing Activities
Investment in Subsidiary - - 286
Purchase of Equipment - - (39,386)
------------ ------------ ------------
Net Cash Provided (Used) by Investing
Activities - - (39,100)
------------ ------------ ------------
Cash Flows from Financing Activities
Payments for Officer Loan - - (48,200)
Proceeds from Officer Loan - 8,900 107,500
Proceeds from Line of Credit - - 85,500
Proceeds from Issuance of Stock 7,500 - 37,609
------------ ------------ ------------
Net Cash Provided(Used) by Financing
Activities 7,500 8,900 182,409
------------ ------------ ------------
Increase (Decrease) in Cash 3,501 (36) 5,274
------------ ------------ ------------
Cash and Cash Equivalents at
Beginning of Period 1,773 240 -
------------ ------------ ------------
Cash and Cash Equivalents at End of Period 5,274 204 5,274
============ ============ ============
Cash Paid For:
Interest $ - $ - $ -
============ ============ ============
Income Taxes $ - $ - $ -
============ ============ ============
Page 6
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
GENERAL
Advance Technologies, Inc. (the Company) has elected to omit
substantially all footnotes to the financial statements for the three and
six months ended March 31, 2005 since there have been no material changes
(other than indicated in other footnotes) to the information previously
reported by the Company in their Annual Report filed on Form 10-KSB for the
fiscal year ended September 30, 2004.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records
of the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to properly
reflect the results of the interim period presented. The information
presented is not necessarily indicative of the results from operations
expected for the full fiscal year.
Page 7
BUSINESS OVERVIEW
Corporation Business Model
The Advanced Technologies Inc. corporation business model is to develop
Infrared Imaging systems for applications in the commercial market. The
commercial transportation market consists of air, land, or sea
applications. These systems are designed to provide two basic benefits,
operational safety and improved security utilizing the inherent night
vision capability. The Infrared technology at the heart of all these
systems is based upon military technology. The infrared technology has
been designated and approved for dual use (military and commercial) by the
United States government agencies.
As a result the military technology has inherent US Government
restrictions. Compliance with the US government restrictions receives our
highest attention. The restrictions and method of compliance are detailed
in the United States International Traffic on Arms Regulation. The US
Department of Commerce (DOC)is the US over-sight authority for our
activities. When Department of Defense and/or Department of State (co-
administrators of the technology) need to be involved their activity is
coordinated through our DOC administrative authoritative.
Advance Technologies marketing strategy is based upon principles that
recognize our strengths and our business model. As a result all of our
projects require a strategic partner. The strategic partner must be one of
the leaders in the market field of our intended application. The strategic
partner, as a general rule, provides the marketing, sales, and after sales
support for the system. Our strategy minimizes the infrastructure cost,
investment, and risk to ATI. Our prime focus on the project is the proper
use of the technology and application engineering necessary to achieve the
desired functional capability. Production of each system is addressed on a
case by case basis. The strategic partner has a strong influence and a key
role in establishing the component suppliers, typically using their own
sources.
Advance Technologies has been cautious in the projects we have undertaken.
Our strategic partners take the majority of the investment risk.
Project Review
Our initial and most successful project is Enhanced Vision system, with
Kollsman Instruments as our strategic partner (licensee). Kollsman
Instruments was not our original strategic partner. The earlier partners
did not meet our requirements or fulfill their obligations and these
relationships were terminated prior to 1997. The EVS project with Kollsman
is proceeding forward in a positive fashion, see EVS Program for details.
The Niteagle project has experienced a similar start/stop history. We look
forward to a successful venture, but Adv-Tech will maintain a low profile
until all the conditions of our business model and business strategy have
been satisfied to our satisfaction.
Our activities in the medical applications have been limited to an off-
shore support to United Integrated Services, a Taiwanese public corporation
for their foreign market. Adv-Tech hopes to be involved with UIS
introduction of their Infrared Medical system in the USA in the future.
We continue to address the Infrared Security System project. Key
development issues are being addressed. This program is in an early
technology phase.
Page 8
Board of Director Review
Advance Technologies Corporate priorities have been reviewed by our board
of directors. The board of directors believes our conservative approach
should be continued, and projected profits from EVS royalties shall be
applied to: (1) Seed investment for on-going projects, (2) reduction of
corporate short term debt, (3) buy back of corporate common stock, and (4)
dividends to shareholders. Current level of corporate income is adequate
to meet our investment needs.
Background
The tragic events of September 11, 2001 and the resulting high level of
security activity continues to effect Adv-Tech and our strategic plans. As
time passes the impact is lessen and the over-all business recovery will
improve.
Past Events of current relevancy
Medical Project
Advanced Technologies received notification from the United States
Department of Commerce, Bureau of Industry and Security that an export
license (D326061, effective September 21, 2004) has been granted for fifty
(50) NV-2000 cameras.
The IR cameras are to be delivered to United Integrated Services Inc.
Taipei Taiwan. The NV-2000 IR Cameras are for installation in the Spectrum
9000, an Infrared medical system. The Spectrum 9000 will then be re-sold to
medical treatment facilities in Taiwan & South Korea in 2005. The NV-2000
Infrared Camera has been granted a commodity jurisdiction designation of
ECCN 6A003 for this application. The value of the export equipment
authorized under and specified in the export license is $250,000.
This is the third license granted to Adv-Tech from the DOC for the Spectrum
9000 medical equipment The work performed by Advance Technologies Inc. is
authorized under an agreement between United Integrated Services and ATI.
Enhanced Vision
Advanced Technologies was asked to provide assistance to Kollsman Inc. to
plan their 2005 R & D activities. This activity is in response to an
initiative by Kollsman to expand their commercial avionics business.
Information and project definitions were prepared and presented to Kollsman
senior management to assist them in their planning activity. The
proprietary material provided to Kollsman is consistent with and in
compliance with the Advance Technologies Kollsman Technology Transfer
Agreement, 1995.
With the quarterly sales through December 31, 2004, the quantity of units
for level 1 have been satisfied. Level 1, under terms of the agreement
were designated as royalty free. With the satisfying of the initial sales,
all future sales will provide royalties to Advance Technologies Inc.
Advance Technologies will report the royalty income under net earning.
Information on number of units sold and/or the royalty fee per unit are
competition sensitive and will not be report beyond any units that Kollsman
may elects to make public.
Page 9
Gulfstream Aerospace announced the EVS Supplemental Type Certification
(STC) for their G-IV Aircraft. The addition of the G-IV increases the EVS
market by more than 500 systems. As a result of this action, Gulfstream now
offers EVS as a retrofit on six models (GIV, GIV-SP, G300, G400, and GV).
The retrofit modification is combined with scheduled maintenance and can be
performed at five Service Centers in the USA. EVS remains standard
equipment on G450 & G550 currently in production. See Gulfstream.com for
more details.
The FAA has adopted the proposed rule change for EVS. The flight rule for
EVS provides for precision approach during conditions of low visibility FAA
defined flight operations. This rule removes the last limitation, and EVS
can now be expanded beyond the Business Jet (Part -91 operations) to the
Regional Carriers (Part -135), Major Carriers (Part -121), and the Package
Carrier operators (Part -127/-121). The agreement between Kollsman and
FedEx is proceeding with the EVS being projected to begin deliveries by
2006.
Niteagle
The advancements in price, performance, and delivery of the microbolometer
IR technology have matured to the point where Niteagle is commercially
viable. This long awaited event is key to several commercial applications
besides Niteagle. ATI remains confident over the viability of the Niteagle
opportunity.
Current Quarter event update
SPECTRUM 9000, Medical Equipment
Advanced Technologies continous to provide support to United Integrated
Services Ltd. Taiwan. Under the explicit provisions of our export license
all end users of the medical equipment must be identified and certified by
a receipt of an acknowledgement of the terms and conditions of the sale.
UIS is in the process of completing their 50 unit end user sales and
certification list. No guidance has been received from UIS on their
progress.
Enhance Vision System
The sales of EVS by Kollsman appear to be increasing. This increase in
sales is attributed to two factors. First, the introduction of the "next
generation" EVS by Kollsman is smaller, lighter, and has improved
operational capability. Secondly, the retrofit market appears to be
starting to take hold. The "next generation" EVS is key to the retrofit
market by virtue of a simpler installation and improved performance.
Kollsman.com is an internet source for direct information. The FedEx
program is continuing, FAA certification is the next critical milestone.
DEVELOPMENT PROJECTS
Advance Technologies Inc. continues development activities on new Infrared
systems for commercial markets. These projects cannot be forecast with any
degree of certainty and all strategic partnerships or business arrangements
remain confidential until such time as a formal announcement is
appropriate. Premature announcement or market speculation could compromise
the development plan and/or the application market.
Page 10
This release contains forward-looking statements within the meaning of the
federal securities laws that relate to future events or Advance
Technologies' future performance. All statements in this release that are
not historical facts, including any statements about the markets, potential
markets, market growth, and Advance Technologies' ability to compete in
the Infrared Imaging markets are hereby identified as "forward- looking
statements." In this release, Advance Technologies has based these
forward-looking statements on management's current expectations. Such
forward-looking statements should, therefore, be considered in light of
various important factors as stated and unstated in Advance Technologies
past filing. Actual results may differ from these statements due to risks
and uncertainties, including those associated with the introduction of
competing products, and market acceptance of existing and new products.
Investors are cautioned not to place undue reliance on these forward-
looking statements. Investors also should understand that is not possible
to predict or identify all risk factors. Advance Technologies has no
obligation to publicly update or release any revisions to these forward-
looking statements to reflect events or circumstances after the date of
this release.
CAPITAL RESOURCES
No commitment for capital resources has been made during this reporting
period.
FINANCIAL ANALYSIS
The results on the operation present projects of likely future events that
cannot be guaranteed. Therefore, the financial analysis does not include
projects, and no quantitative assessment has been provided based upon the
future discussion of potential events in section 3.
No material changes have been provided; therefore impact of unforeseeable
events cannot be assessed.
Present financial plans are adequate to meet our cash flow needs with our
current project schedule.
ADVANCE TECHNOLOGIES INC. BOARD OF DIRECTOR ACTIONS
Advance Technologies has completed the transition from a "development
company" to a self-sustaining company. A summary of the Board of Director
actions that were taken in 2004 are as stated:
Past Board of Director Actions
All Class B preferred shares are now eligible for conversion to Class A
common shares provided their two year holding period has been satisfied.
The effective date for 100% conversion was January 5, 2005.
Mr Gary L. Bane has re-join the Board of Directors of Advance Technologies
Inc. Mr. Bane had been on ATI's BOD since our founding in 1992. Mr. Bane
term on ATI's BOD was effective on September 1, 2004.
Mr. James Watson has accepted an invitation to join the Board, effective
Jan 5, 2005. See resume for details on Mr. Watson's experience.
Page 11
As a result of prior actions Class B, preferred Shares and Class A, Common
share enjoy the same privileges of dividend participation and voting
rights.
Mr. JAMES R. WATSON
Sales, Marketing and General Management Executive with over twenty-five
years experience in managing a wide range of marketing, sales and
operations functions designed to create or expand domestic and
international sales opportunities.
Prior Experience: CALIFORNIA MANUFACTURING TECHNOLOGY CONSULTING, Vice
President Operations 2001-Present ANCHOR AUDIO, INC.,Vice President Sales
& General Manager Europe SUPERSHUTTLE INTERNATIONAL, INC.,Vice President
Sales & Marketing, TOTAL AIR/AIR AMERICA, Vice President Marketing NEEDHAM
HARPER, WORLDWIDE. Vice President, Management Representative WESTERN
AIRLINES., Vice President
Board of Directors Compensation Review
The Board of Directors has completed their review of compensation for the
Chief Executive Officer/President, AVTX corporate consul & the Advance
Technologies Inc. Board of Director. The review consisted of reviewing
similar Nasdaq BB corporation as well as assessing the scope of effort and
responsibilities of the effected members. The review took into
consideration the current cash flow position of AVTX to ensure any proposed
compensation package would not place an unnecessary burden on the cash
reserves of AVTX.
This review was performed in concert with a priority of AVTX objectives,
and in particular the use of royalty income. The prioritization of
objectives reconfirmed our long standing objective of corporation growth
through the development of new Infrared Products for commercial
applications. The priorities for the use funds are: (1) New product
development, (2) Reduction of short term debt, (3) Corporation buyback of
common stock, and (4) Dividends to shareholders. The buyback option is
based upon the market value of AVTX common. The priority between stock
buyback and dividends will be reviewed and updated as required.
Board of Directors & Executive Officer compensation recommendation is for
all compensation at this time to be in the form of Preferred Stock, subject
to 144 holding period. This form of compensation will have minimal impact
on cash reserves. At the end of each quarter an average AVTX stock price
will be computed using the last 10 days for a weighted average unit price.
The equivalent salary compensation is recommended as follows: Each Board of
Directors Member = $1,000, Corporate Attorney = $2,500, and CEO/President =
$6,000 per quarter
Preferred Stock will be issued by dividing the compensation ($1,000, $2,500
or $6,000) by the 10 day weight average. The issued shares would than be
reported in the appropriate (quarterly or annual) SEC filing.
This recommendation has been prepared for comment. Comments maybe
submitted in writing to Advanced Technologies Inc. 716 Yarmouth Road, Suite
215, Palos Verdes Estates, CA 90274, or by E-mail to BaG370@aol.com
--------------
Page 12
SIGNATURES
Pursuant to the requirement 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.
ADVANCE TECHNOLOGIES, INC.
(Registrant)
Date: May 10, 2005 By: /s/ GARY E. BALL
--------------------------------------
Gary E. Ball
President and Director
Page 13