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ADVANCE TECHNOLOGIES INC
Filing Type: 10-Q
Description: N/A
Filing Date: 12/31/06
Ticker: AVTX
Cusip: 00750Y
State: TX
Country: US
Primary SIC: 3812
Primary Exchange: OTH
Billing Cross Reference:
Date Printed: 01/20/07
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
{X} QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2006
OR
{ } TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For transition period from _______________ to _______________
Commission File Number: 0-17953
Advance Technologies Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 95-4755369
(State or other jurisdiction of
(I.R.S. Employer incorporation or
organization) Identification No.)
15 N. Longspur Drive
The Woodlands, TX 77380
(Address of Principal Executive Offices)
(310) 213-2143
(Issuer's telephone
number)
-------------------------
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 { }
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES { } NO { X }
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of December 31, 2006: 39,527,897
of Common shares outstanding.
Transitional Small Business Disclosure Format (check one):
YES { } NO { X }
ADVANCE TECHNOLOGIES INC - 10-Q Filing Date: 12/31/06
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Table of Contents
Filing Sections
Document......................................................................1
Base..........................................................................1
Cover Page....................................................................2
Table of Contents.............................................................3
Part I........................................................................4
Balance Sheet.................................................................5
Income Statement..............................................................6
Cash-flow Statement...........................................................7
Financial Footnotes...........................................................8
Management Discussion........................................................10
Part II......................................................................13
Exhibits.....................................................................14
List of Exhibits.............................................................14
Signatures...................................................................14
Exhibits
Additional Exhibits 31 ......................................................15
Additional Exhibits 32 ......................................................16
ADVANCE TECHNOLOGIES INC - 10-Q Filing Date: 12/31/06
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PART I
Financial Information
ITEM 1. FINANCIAL STATEMENTS
-------------------
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
DECEMBER 31, 2006 CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
TABLE OF CONTENTS
PAGE
--------
Condensed Consolidated Balance Sheets, December 31, 2006 and
September 30, 2006 2
Condensed Consolidated Statements of Operations, For the Three
Months Ended December 31, 2006 and 2005 3
Condensed Consolidated Statements of Cash Flows, For the Three
Months Ended December 31, 2006 and 2005 4
Notes to the Condensed Consolidated Financial Statements 5 - 6
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
December 31, September 30,
2006 2006
------------- -------------
CURRENT ASSETS:
Cash $ 2,207 $ 4,200
Accounts receivable 6,600 5,700
Prepaid expenses 372 72
------------- -------------
Total Current Assets 9,179 9,972
PROPERTY AND EQUIPMENT, net 626 720
DEFINITE-LIFE INTANGIBLE ASSETS 7,465 3,000
------------- -------------
TOTAL ASSETS $ 17,270 $ 13,692
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 35,195 $ 30,457
Related party loans 78,150 77,750
------------- -------------
Total Current Liabilities 113,345 108,207
STOCKHOLDERS' DEFICIT:
-------
Series A convertible preferred stock, $.001
par value, 100,000,000 shares authorized,
27,588,477 shares issued and outstanding 27,588 27,588
Common stock, $.001 par value, 100,000,000
shares authorized, 39,527,897 shares issued
and outstanding 39,528 39,528
Capital in excess of par value 640,725 639,153
Retained earnings (deficit) (803,916) (800,784)
------------- -------------
Total Stockholders' DEFICIT (96,075) (94,515)
-------
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 17,270 $ 13,692
============= =============
See accompanying notes
Page 2
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months
Ended December 31,
--------------------------
2006 2005
------------ ------------
(Restated)
REVENUES:
Royalty $ 6,600 $ 6,300
------------ ------------
OPERATING EXPENSES:
Compensation - 8,250
Professional fees 3,000 2,520
Other general and administrative 3,476 8,141
------------ ------------
Total Operating Expenses 6,476 18,911
------------ ------------
INCOME (LOSS) BEFORE OTHER INCOME (EXPENSE) 124 (12,611)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (1,684) (941)
Interest expense - related party (1,572) (1,432)
------------ ------------
Total Other Income (Expense) (3,256) (2,373)
------------ ------------
NET LOSS $ (3,132) $ (14,984)
============ ============
LOSS PER COMMON SHARE $ (0.00) $ (0.00)
============ ============
WEIGHTED-AVERAGE SHARES OUTSTANDING 39,527,897 39,498,217
============ ============
See accompanying notes
Page 3
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months
Ended December 31,
--------------------------
2006 2005
------------ ------------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,132) $ (14,984)
Adjustments to reconcile net loss to net cash
Provided (used) by operating activities:
Depreciation & amortization 94 295
Imputed interest 1,572 1,432
Stock issued for services - 11,000
(Increase) decrease in accounts receivable (900) 300
(Increase) in prepaid expenses (300) (478)
Increase (decrease) in accounts payable 4,738 (796)
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 2,072 (3,231)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (536)
Payments for definite-life intangible assets (4,465) -
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (4,465) (536)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank overdraft - 83
Cash paid on related party loans (800) -
Proceeds from related party loans 1,200 750
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 400 833
------------ ------------
NET (DECREASE) IN CASH (1,993) (2,934)
CASH AT BEGINNING OF PERIOD 4,200 2,934
------------ ------------
CASH AT END OF PERIOD $ 2,207 $ -
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the period for:
Interest $ 1,684 $ 941
Income taxes $ - $ -
SUMMARY OF NON-CASH INVESTING AND FINANCING ACTIVITIES: For the three months
ended December 31, 2006: None For the three months ended December 31, 2005:
In October 2005, the Company issued 160,000 shares of preferred stock to
settle a prior year liability consisting of $2,000 in director fees and $6,000
in salary.
See accompanying notes
Page 4
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed - Advance Technologies, Inc. and Subsidiary ("the Company") has
elected to omit substantially all footnotes to the financial statements for the
three months ended December 31, 2006 since there have been no significant
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, 2006.
Un-audited Information - The information furnished herein was taken from the
books and records of the Company without audit. However, such information
reflects all adjustments (normal recurring) which are, in the opinion of
management, necessary to properly reflect the results of the interim periods
presented. The information presented is not necessarily indicative of the
results from operations expected for the full fiscal year.
NOTE 2 - GOING CONCERN
The Company's financial statements have been presented on the basis that they
are a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. At December 31,
2006, the Company had current liabilities in excess of current assets and had
incurred losses during the last several years. These factors create an
uncertainty about the Company's ability to continue as a going concern. In this
regard, management is proposing to raise any necessary additional funds not
provided by operations through loans or through additional sales of common
stock. There is no assurance that the Company will be successful in raising this
additional capital or in achieving profitable operations. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
NOTE 3 - PROPERTY AND EQUIPMENT
Estimated December 31,
Useful Lives 2006
------------ -------------
Lens 5 years $ 26,000
Office equipment 5 years 14,139
-------------
40,139
Less accumulated depreciation (39,513)
-------------
Net Property and Equipment $ 626
=============
Depreciation expense for the three months ended December 31, 2006 and 2005 was
$94 and $295, respectively.
Page 5
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006 (Continued)
NOTE 4 - DEFINITE-LIFE INTANGIBLE ASSETS
Estimated December 31,
Useful Lives 2006
------------ -------------
Pending Patent Application N/A $ 7,465
-------------
7,465
Less accumulated amortization -
-------------
Net Definite-life Intangible Assets $ 7,465
=============
The Company's definite-life intangible assets consist only of a pending patent
application. Once a patent has been granted, the Company will amortize the
related costs over the estimated useful life of the patent. If a patent
application is denied, the related costs will be expensed immediately.
NOTE 5 - INCOME TAXES
At December 31, 2006, the Company has available unused federal operating loss
carryovers of approximately $146,000 which may be applied against future taxable
income and which expires in various years from 2022 through 2027. The amount of
and ultimate realization of the benefits from the operating loss carryovers for
income tax purposes is dependent, in part, upon the tax laws in effect, the
future earnings of the Company, and other future events, the effects of which
cannot be determined. Because of the uncertainty surrounding the realization of
the loss carryovers, the Company has established a valuation allowance equal to
the tax effect of the loss carryovers and, therefore, no deferred tax asset has
been recognized in the financial statements for the loss carryovers. The net
deferred tax assets are approximately $21,900 and $20,800 as of December 31,
2006 and September 30, 2006, respectively, with an offsetting valuation
allowance of the same amount, resulting in a change in the valuation allowance
of approximately $1,100 during the three months ended December 31, 2006.
NOTE 6 - RELATED PARTY TRANSACTIONS
Related Party Loans - During the three months ended December 31, 2006 and 2005,
respectively, an officer/shareholder of the Company loaned $1,200 and $750 to
the Company and the Company repaid loans totaling $800 and $0. At December 31,
2006, the Company owes a total of $78,150 to the officer/shareholder. The loans
bear no interest and are due on demand; however, the Company is imputing
interest at 8% per annum. During the three months ended December 31, 2006 and
2005, respectively, the Company imputed interest expense of $1,572 and $1,432.
Management Compensation - The Company has not paid any cash compensation to any
officer or director of the Company. However, the Company issued 200,000 shares
of preferred stock to directors of the Company for services rendered during the
three months ended December 31, 2005 valued at $11,000.
Office Space - In January 2006, the Company started renting office space from an
officer/shareholder of the Company for $400 per month. During the three months
ended December 31, 2006, the Company paid or accrued $1,200 in rent to the
officer/shareholder.
Page 6
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The management discussions contain certain forward-looking statements and
information that are based on the beliefs of management as well as assumptions
made by and information currently available to management. When used in this
document, the words "anticipate," "believe," "estimate," "expect," "intend,"
"will," "plan," "should," "seek," and similar expressions, are intended to
identify forward-looking statements. Such statements reflect the current view of
management regarding future events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual actions or results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended.
The following discussion and analysis should be read in conjunction with the
company's consolidated financial statements and related footnotes for the year
ended September 30, 2006. The discussion of results, causes and trends should
not be construed to imply any conclusion that such results or trends will
necessarily continue in the future.
Results of Operations
EXECUTIVE SUMMARY
(A) Advance Technologies, Inc. has been receiving sales credit from Kollsman
Inc. since 2002. The first 200 units were stipulated as "without royalties". The
next 210 units are subject to royalties, but 63% of the income is applied to an
"Advance Royalty" account. Advance Technologies' net royalty income will
increase by virtue of the payment in full of the "advance royalty" account and
improving sales.
(B) The first quarter for 2007 had an overall increase of $300 in sales over the
fiscal year of 2006. The royalty sales amounted to an increase of $300 for like
first quarter periods. The EVS royalties reflect sales of the EVS I product by
Kollsman, and with the introduction of EVS II in 2007, we expect additional
sales in the Gulfstream retrofit market and with FedEx, Kollsman's newest
customer.
The payment in full of the "advanced Royalty" account will be achieved by the
second quarter of 2007 based upon current and projected sales. The initial sales
to the FedEx customer will most likely occur in 2007. By satisfying of the
"Advance Royalty Account", net profit margins will increase by 167% for the same
sales.
Advance Technologies, Inc. is pursuing a new product (Infrared Security System).
The funds for this new venture will be obtained from investment sources without
liability to Advance Technologies Inc. Therefore, no incurred expense or set
aside provisions for future expense has been made.
MAJOR ACTIVITY
Highlights of First Quarter of Year 2007
The Enhanced Vision System project continues with on-going sales by Kollsman to
Gulfstream. These sales closely track the new aircraft deliveries by Gulfstream.
The retrofit market for Gulfstream continues at a slow rate, but is projected to
improve once the EVS II is certified and in production.
Recreational Vehicle Systems Inc. has completed their incorporation filing, and
they have stated they intend to initiate operations in 2007. RVS has encountered
delays of an unknown origin. The License Agreement requires sales within a 3
year period to retain their exclusivity.
I-6 ACTIVITIES
ATI formed a subsidiary company to pursue the Infrared Security System (ISS).
This wholly owned, Infrared Systems International (ISIX or I-6) has been
licensed by ATI for the intellectual property pertaining to ISS. The ISS project
requires a major effort that encompasses advance technology in the areas of
Infrared, Image Processing, Wireless conductivity, Advanced Server Design, and
Security Response Providers.
I-6 has continued discussions with several corporations. These discussions cover
a broad range of topics. The key subjects are: investments, equity
considerations, technical responsibilities, and project role. The market focus
has been for applications to the small to medium size commercial wholesalers,
manufacturers, and distributors. This market segment has been projected to
exceed 1/2 million units in the first five years from start up. The launching of
this effort is our focus for 2007.
I-6 has secured the cooperation of several strategy partners for the development
of ISS. These corporations are experts in their core technologies: Wireless
mobile transport, Specialized Wireless Server Design, Software design and
coding, IR Cameras, Internet protocol, and OEM high rate production. These
organizations currently participate under binding non-disclosure agreements.
There are no commitments from I-6 for their involvement beyond this early
technical assessment phase. When future agreements that bind I-6 to any
corporation are executed, the nature of the agreement and the participating
party or parties will be announced within proprietary and competition sensitive
limits.
FINANCING
The company believes that no additional financing will be required, and present
interim financing will meet all of our short term needs as required until
royalties will cover all of our expenses. Additional funding if required for I-6
will be secured using I-6 collateral as the sole security for any such
obligation. This insulates Advance Technologies Inc and its shareholders from
any debt or obligation that is incurred by I-6 in pursuit of the Infrared
Security Market.
GROSS PROFIT
The first Quarter of fiscal year 2007 (4th quarter cy 2006) the Company showed a
modest increase in royalty income of $6,600 as compared to $6,300 in the like
quarter of last year. The flat revenue was anticipated, and will remain flat
until EVS II deliveries begin. The Company expects EVS II will begin deliveries
in the first half of CY 2007.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the first Quarter of fiscal year 2007 the Company's Operating Expenses
declined from $18,911 same quarter last year to $6,476. This reduction in
expenses occurred mostly by the elimination of the Executive Compensation
Program. That item eliminated $8,250 in incurred expense.
OTHER INCOME AND EXPENSE
Other expenses showed an increase in expenses from $2,373 (2005) to $3,256
(2006) for same quarter. The increase in expense was due in most part to an
increase in interest payment on the Company's short term debt. The short term
debt increased through the absorbing of the costs associated with the filing of
the patent for the Infrared Security System. Eighty percent of the cost has been
incurred, with one additional payment to the Patent attorney of $3,000 due
February of 2007.
NET PROFIT (LOSS) BEFORE PROVISIONS FOR INCOME TAXES
The Net loss for the first Quarter of 2007 was $3,132 compared to $14,984 in the
like first Quarter of Fiscal 2006. The improvement was the result of the
elimination of the Executive Compensation Program at the end of Fiscal year
2006.
NET SALES
The Net Sales for the first quarter of 2007 consisted of the royalties received.
The royalty payment consisted of $6,600 as compared to $6,300 in the like
quarter of 2005.
GROSS PROFIT
Gross profit is the same as Net Profit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of revenues is from royalties from our EVS licensee
Kollsman. Our Royalties reported as revenues are net royalties with the gross
revenue at 2.27 times the reported royalties. The reduction to net royalties is
caused by the repayment of advance royalties as specified in the Kollsman
License Agreement. Based upon current sales, the advance royalties will be fully
paid (currently 82% has been paid) by the second quarter of 2007. This will
cause our net income to increase by a factor of 1.67 for each sale.
The other source of income comes from our Agent agreement with United Integrated
Service Co. LTD, Taiwan. The collaboration with UIS has allowed our Company to
be coupled into the Far East market. This Agent relationship in 2007 could add
between 10-12 thousand dollars to our net earnings annually, and continue to
foster an important professional relationship with UIS.
The Company has formed a wholly owned subsidiary called I-6. The Infrared
Security System has been licensed to I-6. Under terms of the license I-6 has
issued a promissory note to the Company for $100,000. This note when collected
will defer internal expenses, the most notable being for a patent attorney to
complete the ISS patent filed last November 6, 2005 and organization costs for
I-6.
The Board of Directors has offered I-6 a twenty-four month buy-back option for
the ISS intellectual property. The option is for $100,000,000. The option offer
has been received and approved by I-6 and their Board of Directors. The option
will provide protection to the shareholders against a hostile take over of ATI.
I-6 expects to receive all investment funds from ISS Associate Contractors for
certain considerations, but limited to the ISS project. The Company stands to
benefit through the success of I-6, but is structured to be insolated from any
liability. And with the "Hostile take over provisions", the Company is
adequately protected against any attempt to abridge our patent rights.
Investments incurred by I-6 will be separately recorded, but will be included as
part of Advance Technologies, Inc. for the immediate future.
Item 3. Controls and Procedures
The President/CEO/CFO maintains direct control over all financial proceedings of
the Company.
The President reviews all expenditures and reconciles all income and expenses
through the Corporate Bank account. The President is the only person authorized
for this account. This procedure has been used since the original Company was
established in 1993.
The President maintains budget control, and the Board of Directors authorizes
any new expenses.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
There were no legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no sales or issuing of securities.
Item 3. Defaults Upon Senior Securities
There were no defaults.
Item 4. Submission of Matters to a Vote of Securities Holders.
There were no matters submitted to shareholders.
Item 5. Other Information
There was no other information for disclosure.
ITEM 6. EXHIBITS
3.1 Articles of Incorporation (1)
3.2 Amendments & Bylaws (1)
10 Material Contracts (2)
31 Rule 13a-14(a)/15d-14a (a) certifications
32 Section 1350 certifications
(1) Incorporated by reference to the exhibits to Registrant's Registration
Statement on Form 10-SB filed August 30, 1999, file Number 000-27175.
(2) Incorporated by reference to the exhibits to Registrant's Annual Report on
Form 10-KSB filed on December 15, 2006.
31.1 CERTIFICATION PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A) UNDER THE
SECURTIES AND EXCHANGE ACT OF 1934.
32.1 Certification of President, Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 10, 2007 Advance Technologies, Inc.
(Registrant)
By:/s/ GARY E. BALL
---------------------------------------
Gary E. Ball
President and Director