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 June 30, 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.)
2905A Sepulveda Blvd #333
Manhattan Beach, CA 90266
________________________________________
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 213-2143
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 June 30, 2005, approximately 39,159,537 shares of the Registrant's
Common Stock, $0.001 par value were outstanding. As of June 30, 2005,
approximately 26,355,837 shares of the Registrant's Class A Preferred Stock
par value $0.001 were outstanding.
__________________________________________________________________________
TABLE OF CONTENTS
Page
Cover Page 1
Part I
Financial Statements 2
Balance Sheet 3
Income Statement 4
Cashflow Statement 5
Financial Footnotes 6
Part II
Management Discussion 6
Business Overview 7
Actions, Board of Directors 8
Signatures 10
ITEM 1. FINANCIAL STATEMENTS
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Financial Statements
June 30, 2005
ASSETS
-------
June 30, September 30,
2005 2004
------------- -------------
(Unaudited)
Current Assets
Cash $ 862 $ 1,773
------------- -------------
Total Current Assets 862 1,773
------------- -------------
Property & Equipment, Net - 6,563
------------- -------------
Total Assets $ 862 $ 8,336
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts Payable $ 4,883 $ 4,883
Accrued Interest - -
Note Payable - Officer 68,000 59,300
Advance Royalties -
------------- -------------
Total Current Liabilities 72,883 64,183
------------- -------------
Total Liabilities 72,883 64,183
------------- -------------
Stockholders' Equity
Common Stock, Authorized 100,000,000
Shares of $.001 Par Value, Issued and
Outstanding 39,159,537 shares, and
28,319,416 39,160 28,319
Preferred Stock, Series A Authorized
100,000,000 Shares of $.001 Par Value,
Issued and Outstanding 26,355,837 Shares,
and 37,195,958 26,355 37,196
Additional Paid in Capital 558,389 550,889
Deficit Accumulated During the Development
Stage (695,925)
(672,251)
------------- -------------
Total Stockholders' Equity (72,021)
(55,847)
------------- -------------
Total Liabilities and
Stockholders' Equity $ 862 $ 8,336
============= =============
Advance Technologies, Inc.
(a Development Stage Company)
Consolidated Statements of Operations(Unaudited)
From the
Beginning of
For For For For Development
the Three the Three the nine the nine stage
months months months months October 1,
ended ended ended ended 1985 thru
June 30, June 30, June 30, June 30, June 30,
2005 2004 2005 2004 2005
----------- ----------- ----------- ----------- -----------
Revenues $ 8,800 $ - $ 12,153 $ 149,43 $ 220,716
Cost of Goods sold - - - 114,020 114,020
Gross Profit 8,800 - 12,153 35,419 106,696
Operating Expenses
Depreciation &
Amortization 1,969 1,964 6,562 5,892 50,574
Organization Costs - - - - -
Research & Development - - - - -
General &
Administrative 11,243 6,048 33,484 25,414 826,780
----------- ----------- ----------- ----------- -----------
Total Operating
Expenses (13,212) (8,012) (40,046) (31,306) (877,354)
Operating Income (Loss) (4,412) (8,012) (27,893) 4,113 (770,658)
----------- ----------- ----------- ----------- -----------
Miscellaneous Income 98,000
Interest Expense (23,267)
----------- ----------- ----------- ----------- -----------
Net Income (Loss) $ (4,412) $ (8,012) $ (27,893) $ 4,113 $ (695,925)
=========== =========== =========== =========== ===========
Net Income (Loss)
Per Share $ (0.00) $ (0.00) $ 0.00 $ (0.00) $ (0.15)
=========== =========== =========== =========== ===========
Weighted Average
Shares Outstanding 39,159,537 28,306,416 33,774,287 28,306,416 4,490,068
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
Advance Technologies, Inc.
(a Development Stage Company)
Consolidated Statements of Cash Flows(Unaudited)
From the
Beginning of
Development
stage
October
For the nine months ended1, 1985
June 30, thru
--------------------------June 30,
2005 2004 2005
------------ ------------ ------------
Cash Flows from Operating Activities
Net Income (Loss) $ (27,893) $ 414 $ (695,925)
Adjustments to Reconcile Net Loss to
Net Cash Provided by Operations:
Depreciation & Amortization 6,562 5,906 51,886
Stock Issued for Services 4,000 403,025
Organization Costs - - 11,331
Decrease in Prepaids - - 14,680
Change in Assets and Liabilities
Increase (Decrease) in Accounts
Payable and Accrued Expenses (25,000) 63,856
------------ ------------ ------------
Net Cash Provided(Used) by
Operating Activities (21,329) (14,680) (151,147)
------------ ------------ ------------
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 (7,500) - (55,700)
Proceeds from Officer Loan 16,200 17,900 123,700
Proceeds from Line of Credit 4,218 - 85,500
Proceeds from Issuance of Stock 7,500 - 37,609
------------ ------------ ------------
Net Cash Provided (Used) by
Financing Activities 20,418 17,900 191,109
------------ ------------ ------------
Increase (Decrease) in Cash (911) 3,220 862
------------ ------------ ------------
Cash and Cash Equivalents at
Beginning of Period 1,773 (2,029) -
------------ ------------ ------------
Cash and Cash Equivalents
at End of Period 862 1,191 862
============ ============ ============
Cash Paid For:
Interest $ - $ - $ -
============ ============ ============
Income Taxes $ - $ - $ -
============ ============ ============
The accompanying notes are an integral part of these financial statements.
5
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 2004 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, 2003.
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.
6
BUSINESS OVERVIEW
Corporation Business Model
The Advanced Technologies Inc.'s corporation business model is to develop
Infrared imaging systems for commercial market applications. These markets
fall into the areas of medical, security, and the largest, transportation.
The commercial transportation market consists of air, land, and sea
applications. These systems are designed to provide two basic benefits,
operational safety and improved security. These goals are achieved by
utilizing the inherent night vision capability, our core technology adapted
to the specific needs of the market. Infrared technology is at the heart of
these systems. Infrared technology is based upon advanced research
developed for the US military. Infrared technology has been designated and
approved for dual use (military and commercial) by the United States
government.
All Military technology has inherent US Government restrictions. ATI's
highest priority is to ensure we are compliant with restrictions imposed by
the US government. The restrictions and methods 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) become involved, their activity is
coordinated through our DOC administrative authoritative.
Advance Technologies marketing strategy is based upon principles that
recognize both our strengths and our weaknesses. This strategy is embodied
in a well-defined business model. Most of our projects require a strategic
partner. The strategic partner needs to be a leader 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 start-up and infrastructure cost, our market investment, and the
overall risk to ATI. Our primary role for each project is: (1) to ensure
the technology is used properly in each application, (2) the system
engineering necessary to achieve the desired functional capability is
performed, and (3) the end product is compliant with ITAR. Production for
each project is addressed on a case by case basis. The strategic partner
has a key role in establishing the component suppliers, often preferring to
use their own captive sources.
Our business model licenses intellectual property for a specific field and
product to our strategic partner. It is essential that ATI retain core
ownership over the basic technology and intellectual property. Our license
agreements are for applications restricted to the licensed field. By
utilizing our intellectual property in this way, the same technology is
licensed to different fields of application on an exclusive basis without
creating a problem of over-lapping markets and license rights.
Project Review Highlights
Our initial and most successful project to date is Enhanced Vision system.
Kollsman is our strategic partner for EVS (licensee). The EVS project with
Kollsman is proceeding forward in a positive fashion. Kollsman has not
announced any new customers beyond Gulfstream and FedEx in the last
quarter.
We receive a proposed license agreement for the Niteagle project. The
offer required the selling or transfer of certain intellectual property, a
condition that is not compatible with our business model. As a result the
offer was declined, and a counter proposal was submitted for consideration.
At this time, we have not received a response to our proposal. As a
result, we will continue to pursue all options with regard to Niteagle. We
look forward to a successful venture, but ATI will remain patient until all
the conditions of our business model and business strategy have been met to
our satisfaction.
Our activities in the medical applications have been limited to CONUS
support to United Integrated Services, a Taiwanese public corporation. ATI
would like to be involved with UIS in the introduction of their Infrared
Medical system in the USA in the future.
7
ATI continues to address the Infrared Security System project. This program
is in an early technology definition phase. We continue to engage in
preliminary discussions with potential strategic partners looking for the
proper business arrangement.
Board of Director Review
Advance Technologies Corporation priorities remain unchanged. They are (1)
provide 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 (priority 1). This fact is due to modest investment needs
at this time. The balance of the net income has been applied to our short-
term corporate debt.
Past Events of current relevancy
NV-2000 IR Camera Export
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. 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
The quarterly sales through June 30, 2005 is the second full quarter of
sales where the quantity of units to satisfy level 1 of our Royalty
schedule has been satisfied. Level 1, under terms of the agreement, was
designated as royalty free. This quarter, ending June 30, 2005, is the
first full quarter where royalty sales are included in the financials.
Because our corporate quarter coincides with our license quarterly
reporting, the income from the sales is delayed a few weeks causing the
stated income to fall into the next quarter. Advance Technologies will
continue to report the royalty income under net earning. Information on
number of units sold remains competition sensitive.
Advance Technologies Inc. will provide guidance on sales through June 30,
2005 (ATI 3rd fiscal quarter) in a qualitative fashion addressing sales
trends. This will provide our shareholders up-to-date information on our
sales outlook, while protecting the competition sensitive material.
Gulfstream Aerospace announced the EVS Supplemental Type Certification
(STC) for their G-IV Aircraft. 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 is performed at five Service
Centers in the USA. EVS remains standard equipment on G450 & G550 currently
in production. See Gulfstream.com for additional details.
Niteagle
The advancements in price, performance, and delivery of the Microbolometer
IR technology has matured to the point where Niteagle is commercially
viable. This long awaited event is key to many commercial applications
besides Niteagle. Advance Technologies Inc. will continue to explore all
viable opportunities and alternatives for Niteagle.
8
SPECTRUM 9000, Medical Equipment
Advanced Technologies continuous to provide support to United Integrated
Services Ltd. Taiwan. Under the explicit provisions of our export license
grant by the US Department of Commerce 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 the progress or the date of
expected completion.
Enhance Vision System Quarterly Sales Outlook
The sales of EVS by Kollsman appear to be increasing at a modest rate.
Quarterly sales have increased quarter over quarter since mid 2004. EVS has
experienced three consecutive quarters of increased sales. This sales
increase we attribute to the emerging retrofit market. The retrofit
business has a larger potential than the new aircraft market. This fact
results from the long service life of commercial aircraft.
The "next generation" EVS (Kollsman descriptor for EVS II) is an important
step for the retrofit market. A simpler installation (smaller size) and
improved performance highlight the new product. EVS II is also slated for
the FedEx program. Kollsman.com is a source for additional information.
The FedEx program remains on track by our indications. By monitoring key
internal milestones we are able to stay current on their progress. FAA
certification, this fall, is a critical milestone for the program.
CURRENT DEVELOPMENT PROJECTS
Advance Technologies Inc. continues our 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.
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 it 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.
9
ADVANCE TECHNOLOGIES INC. BOARD OF DIRECTOR ACTIONS
Advance Technologies in 2005 has completed the transition from a
"development company" to a self-sustaining company, a modest but a
significant event. A summary of the Board of Director actions that were
taken in 2004 to facilitate this transition are as stated:
PAST BOARD OF DIRECTOR ACTIONS SUMMARY
All Class B preferred shares are now eligible for conversion to Class A,
common shares, provided the holding period has been satisfied. The
effective date for 100% conversion was January 5, 2005.
Mr. Gary L. Bane has re-joined the Board of Directors of Advance
Technologies
Inc. Mr. Bane had been on ATI's BOD since our founding in 1992. Mr. Bane's
term on ATI's BOD became effective on September 1, 2004.
Mr. James Watson has joined the Board, effective Jan 5, 2005.
As a result of prior actions Class B, preferred Shares and Class A, Common
share enjoy the same privilege of dividend participation and voting rights.
Board of Directors Compensation Review
The Board of Directors has completed their review of compensation for the
Chief Executive Officer/President, AVTX corporate consul, and the ATI's
Board of Directors. Board of Directors & Executive Officer compensation
recommendation is for the compensation to be in the form of Preferred
Stock, Class B shares subject to the 144 holding period. This form of
compensation will have minimal impact on cash reserves. At the conclusion
of each quarter, an average AVTX stock price shall be computed using the
last 10 days for a weighted-average unit price.
The equivalent salary compensation in the form of newly issued shares are
as follows: Each Board of Directors Member = $1,000, Corporate Attorney =
$2,500, and CEO/President = $6,000 per quarter. The issued shares will
than be reported in the appropriate (quarterly or annual) SEC filing.
The recommendation was prepared for comment and included in the previous
SEC 10K filing. Comments were to be submitted to Advanced Technologies
Inc. 716 Yarmouth Road, Suite 215, Palos Verdes Estates, CA 90274, (note, a
new current address has been provided) or by E-mail to BaG370@aol.com
CURRENT BOD ACTIONS FOR THIS QUARTERLY PERIOD
The shareholder response has been supportive of the proposed compensation
package. In light of favorable response, the board of directors has
adopted the proposed compensation package beginning the first fiscal
quarter of 2006 beginning October 1, 2005.
Mr. Alan Curtis has resigned as Advance Technologies Inc. corporate counsel
for personal reasons. We wish Mr. Curtis the best, and thank him for his
support in the past. The board of directors is reviewing several options.
Our need for a retained counsel is being reviewed. The BOD is looking into
our need to out source the Sarbanes-Oxley compliance review.
Advance Technologies Inc. has been involved with a SEC committee that is
attempting to secure relief from S/O compliance for BB small cap fully
reporting corporations. The need for S/O reporting and compliance is not
in dispute, but the full weight of compliance on Corporations like Advance
Technologies Inc., in our opinion, penalizes small Cap-corporation and
their shareholders far more than any perceived benefit.
Notice of Intent to sell common shares
Mr. Ball has submitted a notice of intent to sell up to one million
(1,000,000) shares of AVTX in a private transaction. The private sale of
common stock is in compliance with SEC rule 144. The sale of the total
amount of these shares will reduce Mr. Ball and Mrs. Ball's joint holding
in Advance Technologies Inc. by approximately 6%.
10
Change of Address
Advance Technologies Inc. is in the process of changing our place of
business. The change to a permanent address is in progress at this time.
Our temporary address is:
Advance Technologies Inc.
2905 A Sepulveda 333
Manhattan Beach, CA 90266
Tel: (310) 213-2143
Fax: (310) 546-3388
E-mail: BaG370@aol.co
11
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: August 10, 2005 By: /s/ GARY E. BALL
--------------------------------------
Gary E. Ball
President and Director
12