ADVANCE TECHNOLOGIES INC
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 March 31, 2007
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
Identification No.) incorporation or organization)
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 March 31, 2007: 39,527,897 of
Common shares outstanding.
Transitional Small Business Disclosure Format (check one):
YES { } NO { X }
ADVANCE TECHNOLOGIES INC - 10-QSB Filing Date: 3/31/07
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Part I
FINANCIAL INFORMATION
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
MARCH 31, 2007 CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
--------
Condensed Consolidated Balance Sheets, March 31, 2007 and
September 30, 2006 2
Condensed Consolidated Statements of Operations, For the Three
and Six Months Ended March 31, 2007 and 2006 3
Condensed Consolidated Statements of Cash Flows, For the Six
Months Ended March 31, 2007 and 2006 4
Notes to the Condensed Consolidated Financial Statements 5 - 6
ADVANCE TECHNOLOGIES, INC. & SUBDIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
March 31, September 30,
2007 2006
------------- -------------
CURRENT ASSETS:
Cash $ 1,139 $ 4,200
Accounts receivable 6,000 5,700
Prepaid expenses 93 72
------------- -------------
Total Current Assets 7,232 9,972
PROPERTY AND EQUIPMENT, net 588 720
DEFINITE-LIFE INTANGIBLE ASSETS 16,365 3,000
------------- -------------
TOTAL ASSETS $ 24,185 $ 13,692
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 68,238 $ 30,457
Related party loans 78,950 77,750
------------- -------------
Total Current Liabilities 147,188 108,207
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 642,277 639,153
Retained earnings (deficit) (832,396) (800,784)
------------- -------------
Total Stockholders' Deficit (123,003) (94,515)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 24,185 $ 13,692
============= =============
See accompanying notes
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months
Ended March 31, Ended March 31,
-------------------------- --------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
REVENUES:
Royalty $ 6,000 $ 4,800 $ 12,600 $ 11,100
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Compensation - 5,148 - 13,398
Consulting 204 3,900 204 3,900
Professional fees 25,120 9,590 28,120 12,110
Other general and
administrative 5,181 6,839 8,657 14,980
------------ ------------ ------------ ------------
Total Operating
Expenses 30,505 25,477 36,981 44,388
------------ ------------ ------------ ------------
LOSS BEFORE OTHER INCOME
(EXPENSE) (24,505) (20,677) (24,381) (33,288)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (2,423) (1,327) (4,107) (2,268)
Interest expense -
related party (1,552) (1,487) (3,124) (2,919)
------------ ------------ ------------ ------------
Total Other Income
(Expense) (3,975) (2,814) (7,231) (5,187)
------------ ------------ ------------ ------------
NET LOSS $ (28,480) $ (23,491) $ (31,612) $ (38,475)
============ ============ ============ ============
LOSS PER COMMON SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============ ============ ============ ============
WEIGHTED-AVERAGE SHARES
OUTSTANDING 39,527,897 39,498,217 39,527,897 39,498,217
============ ============ ============ ============
See accompanying notes.
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months
Ended March 31,
--------------------------
2007 2006
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (31,612) $ (38,475)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation & amortization 132 491
Imputed interest 3,124 2,919
Stock issued for services - 21,764
(Increase) decrease in accounts receivable (300) 1,800
(Increase) in prepaid expenses (21) (191)
Increase in accounts payable 37,781 4,817
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 9,104 (6,875)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (536)
Payments for definite-life intangible assets (13,365) -
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (13,365) (536)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid on related party loans (1,200) -
Proceeds from related party loans 2,400 5,950
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,200 5,950
------------ ------------
NET INCREASE (DECREASE) IN CASH (3,061) (1,461)
CASH AT BEGINNING OF PERIOD 4,200 2,934
------------ ------------
CASH AT END OF PERIOD $ 1,139 $ 1,473
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION Cash paid
during the period for:
Interest $ 4,107 $ 2,268
Income taxes $ - $ -
SUMMARY OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the six months ended March 31, 2007: None
For the six months ended March 31, 2006:
In October 2005, the Company issued 160,000 shares of Series A
convertible preferred stock to settle a prior year liability consisting of
$2,000 in director fees and $6,000 in salary.
See accompanying notes.
ADVANCE TECHNOLOGIES INC. & SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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
six months ended March 31, 2007 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 March 31, 2007,
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 March 31,
Useful Lives 2007
------------ -------------
Lens 5 years $ 26,000
Office equipment 5 years 14,139
-------------
40,139
Less accumulated depreciation (39,551)
-------------
Net Property and Equipment $ 588
-------------
Depreciation expense for the six months ended March 31, 2007 and 2006 was $132
and $491, respectively.
ADVANCE TECHNOLOGIES INC. & SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - DEFINITE-LIFE INTANGIBLE ASSETS
Estimated March 31,
Useful Lives 2006
------------ -------------
Pending Patent Application N/A $ 16,365
-------------
16,365
Less accumulated amortization -
-------------
Net Definite-life Intangible Assets $ 16,365
-------------
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 March 31, 2007, the Company has available unused federal operating loss
Carryovers of approximately $184,000 which may be applied against future taxable
income and which expire 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 $27,500 and $20,800 as of March 31, 2007
and September 30, 2006, respectively, with an offsetting valuation allowance of
the same amount, resulting in a change in the valuation allowance of
approximately $6,700 during the six months ended March 31, 2007.
NOTE 6 - RELATED PARTY TRANSACTIONS
Related Party Loans - During the six months ended March 31, 2007 and 2006,
respectively, an officer/shareholder of the Company loaned $2,400 and $5,950 to
the Company and the Company repaid loans totaling $1,200 and $0. At March 31,
2007, the Company owes a total of $78,950 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 six months ended March 31, 2007 and 2006,
respectively, the Company imputed interest expense of $3,124 and $2,919.
Management Compensation - The Company has not paid any cash compensation to any
officer or director of the Company. However, the Company issued a total of
464,000 shares of Series A convertible preferred stock to directors of the
Company for services rendered during the six months ended March 31, 2006 valued
at $17,864.
Office Space - In January 2006, the Company started renting office space from an
officer/shareholder of the Company for $400 per month. During the six months
ended March 31, 2007, the Company paid or accrued $2,400 in rent to the
officer/shareholder.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The management discussion contains 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.
EXECUTIVE SUMMARY
Advance Technologies, Inc. has been receiving sales credit from Kollsman Inc.
since 2002. The first 200 Enhanced Vision System (EVS) units were stipulated as
"without royalties". The next 210 EVS units are subject to royalties, but 63% of
the income is applied to an "Advance Royalty" account. Advance Technologies' net
royalty income will increase to $800 per unit with the payment in full of the
Advance Royalty account. Approximately 404 units have been delivered to date.
Advance Technologies, Inc. (ATI) has been pursuing a new product (Infrared
Security System) for the last year. We have recruited a technical team, filed
for a patent, and marketed the system under NDA protection. At this point in
time funds are needed to build a proof-of-principle demonstration unit to market
the opportunity.
On March 30, 2007 Advance Technologies signed a non-binding letter of intent
with American SXAN Biotech, Inc., a Delaware corporation. The letter of intent
contemplates that Advance Technologies would transfer all of its assets and
liabilities to a wholly-owned subsidiary that would be managed by the current
management of Advance Technologies. Advance Technologies would then acquire
American SXAN in exchange for preferred stock with supermajority voting power.
This arrangement would permit the management of the subsidiary time to explore
the best use of the Advance Technologies business for the benefit of the current
shareholders of Advance Technologies.
The need for ATI to look at our operations, on-going prospects and the risks of
continuing to operate in the deficit was previously presented to our
shareholders. Since that time our licensee's EVS sales have remained flat, while
our licensee has lost available market share to CMC Electronics and Max-Viz. Our
operating costs have grown due to increased debt and compliance costs for
Sarbanes-Oxley regulations. The need to re-structure our operations has become
more critical for ATI. If the reverse-merger with American SXAN Biotech Inc.
does not complete as scheduled, ATI will need to examine other measures to
protect the declining value of ATI for the shareholders.
MAJOR ACTIVITY
Highlights of Second Quarter of Year 2007
The Enhanced Vision System has projected a continuation of on-going sales by
Kollsman to Gulfstream. The sales in the past closely track the new aircraft
deliveries by Gulfstream. The delivered EVS units (not yet sold) dropped from a
backlog of 33 to a current backlog of 13. This resulted because no deliveries
have been made by Kollsman to Gulfstream since late February 2007. It is
believed that the delays in the certification of EVS II are causing this
problem. No information has been provided by Kollsman over potential impact,
remedies, or likely recovery.
I-6 ACTIVITIES
ATI formed a subsidiary company in 2006 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.
There has been no progress in securing the necessary outside capital needed to
fabricate a demonstration unit. We have 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.
Development capital will be required to continue the progress on ISS.
FINANCING
The company believes that no additional financing will be required to sustain
present operations. Interim financing will meet all of our short term needs as
we operate at a loss. The completion of the proposed acquisition described above
in the "Executive Summary" section is intended to provide a portion of the
demonstration funds required by I-6. Transaction costs for the proposed
acquisition have been estimated, but any unexpected costs will diminish our
projected development capital.
ATI continues to utilize the services of an SEC Attorney on retainer, and
contract for bookkeeping services on a time and material basis. This has
substantially added to our cost of ensuring that we are and remain fully
complaint with all SEC regulations.
SIX MONTHS ENDED MARCH 31, 2007 COMPARED WITH THE SIX MONTHS ENDED MARCH 31,
2006
REVENUES
Revenues for the company were approximately $12,600 for the six month period
ending on March 31, 2007 as compared to approximately $ 11,100 for the same
period a year earlier. For the three-month period ending on March 31, 2007
revenues were $ 6,000 as compared to $ 4,800 for the same period last year. The
total sales of EVS by our licensee were essentially the same for the common
period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses for the six-month period ending March 31, 2007 were $ 36,981
as compared to $ 44,388 for the same six-month period in 2006. The operating
expenses for the three-month period ending on March 31, 2007 were $ 30,505
versus $ 25,477 in 2006. The increase in our operating costs for the current
three-month period can be attributed to additional controls and procedures that
have been implemented to ensure the company's reporting is fully compliant with
Sarbanes-Oxley requirements. The decrease in the current six-month period can be
attributed to the phase out of the Executive Compensation Plan in 2006.
OTHER INCOME AND EXPENSE
For the six-month period this year, interest expense was $ 7,231 versus $ 5,187
in 2006. Interest expense for the three-month period ending March 31, 2007 was $
3,975 compared to $ 2,814 in the like period of 2006.
NET LOSS
The net loss for the six-month period ending March 31, 2007 was $ 31,612 versus
$ 38,475 in 2006. The company's net loss for the three-month period ending on
March 31, 2007 was $ 28,480 versus $ 23,491 for the same three-month period in
2006. The major expenses for both years were related to regulatory obligations.
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. Once the Advance
Royalty debt is satisfied our per unit royalty will increase from $300 per unit
to $800 per unit. The apparent interruption in sales of EVS units to Gulfstream
will have an unknown impact on revenue.
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: May 4, 2007 Advance Technologies, Inc.
(Registrant)
By:/s/ GARY E. BALL
---------------------------------------
Gary E. Ball
President and Director