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 2005
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, 2005:
39,498,217 of Common & 26,177,157 of Preferred.
Transitional Small Business Disclosure Format (check one):
YES [ x ] NO [ ]
INFORMATION REQUIRED IN ANNUAL REPORTS OF TRANSITIONAL SMALL
BUSINESS ISSUERS
PART I
Financial Information
ITEM 1. FINANCIAL STATEMENT
-------------------
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
December 31, September 30,
2005 2005
------------- -------------
(Restated)
CURRENT ASSETS:
Cash $ - $ 2,934
Accounts receivable 6,300 6,600
Prepaid expenses 478 -
------------- -------------
Total Current Assets 6,778 9,534
PROPERTY AND EQUIPMENT, net 565 851
------------- -------------
TOTAL ASSETS $ 7,343 $ 10,385
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Bank overdraft $ 83 $ -
Accounts payable 14,337 16,921
Notes payable - officer 71,750 71,000
Liability to be settled by issuance of stock - 8,000
------------- -------------
Total Current Liabilities 86,170 95,921
STOCKHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock, $.001
par value, 100,000,000 shares authorized,
26,337,157 and 26,017,157 shares issued and
Outstanding, respectively 26,337 26,017
Common stock, $.001 par value, 100,000,000
shares authorized, 39,498,217 and 39,498,217
shares issued and outstanding, respectively 39,498 39,498
Additional paid-in capital 574,069 558,389
Deficit accumulated during the development
stage (718,731) (709,440)
------------- -------------
Total Stockholders' Equity (Deficit) (78,827) (85,536)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 7,343 $ 10,385
============= =============
See accompanying notes.
Page 2
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period
From Entering
Development
Stage on
For the Three Months October 1,
Ended December 31, 1985 through
---------------------------- December 31,
2005 2004 2005
-------------- ------------- -------------
(Restated) (Restated)
REVENUES:
Royalty $ 6,300 $ 900 $ 48,400
Consulting - - 67,843
Product - - 119,073
-------------- ------------- -------------
Total Revenues 6,300 900 235,316
COST OF GOODS SOLD - - 114,020
-------------- ------------- -------------
GROSS PROFIT 6,300 900 121,296
OPERATING EXPENSES:
Depreciation and amortization 286 1,614 51,320
Research and development - - 72,750
Other general and administrative 15,305 15,309 790,690
-------------- ------------- -------------
Total Operating Expenses 15,591 16,923 914,760
OPERATING INCOME (LOSS) (9,291) (16,023) (793,464)
-------------- ------------- -------------
OTHER INCOME (EXPENSE):
Miscellaneous income - - 98,000
Interest expense - - (23,267)
-------------- ------------- -------------
Total Other Income (Expense) - - 74,733
-------------- ------------- -------------
NET INCOME (LOSS) $ (9,291) $ (16,023) $ (718,731)
============== ============= =============
NET INCOME (LOSS) PER SHARE $ (0.00) $ (0.00) $ (0.13)
============== ============= =============
WEIGHTED-AVERAGE SHARES
OUTSTANDING 39,498,217 28,319,416 5,358,905
============== ============= =============
See accompanying notes.
Page 3
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period
From Entering
Development
Stage on
For the Three Months October 1,
Ended December 31, 1985 through
---------------------------- December 31,
2005 2004 2005
-------------- ------------- -------------
(Restated) (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (9,291) $ (16,023) $ (718,731)
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Depreciation & Amortization 286 1,614 51,320
Organization Costs - - 11,331
Stock issued for services 8,000 - 419,025
(Increase) decrease in
accounts receivable 300 (900) (6,300)
(Increase) decrease in
prepaid expenses (478) - 14,202
Increase (decrease) in
accrued liabilities (2,584) 8,700 73,311
-------------- ------------- -------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (3,767) (6,609) (155,842)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment - - (39,386)
Investment in subsidiary - - 286
-------------- ------------- -------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES - - (39,100)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank overdraft 83 - 83
Cash paid on loan from officer - - (48,200)
Proceeds from loan from officer 750 - 119,950
Proceeds from line of credit - - 85,500
Proceeds from Issuance of Stock - - 30,109
Capital contribution - 7,500 7,500
-------------- ------------- -------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 833 7,500 194,942
-------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (2,934) 891 -
CASH AT BEGINNING OF PERIOD 2,934 1,773 -
-------------- ------------- -------------
CASH AT END OF PERIOD - 2,664 -
============== ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
SUMMARY OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In October and December 2005, the Company issued 320,000 shares of
Series A convertible preferred stock to pay $4,000 in director fees and
$12,000 in salary.
See accompanying notes.
Page 4
ADVANCE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
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, 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, 2005.
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.
RESTATEMENT
Subsequent to filing its Form 10-KSB for the year ended September 30, 2005,
the Company discovered that (1) its revenues had been recorded on a cash
basis rather than accrual, (2) its revenues had not been recorded net of
discounts, and (3) officer and director compensation had not been accrued.
Shortly, the Company intends to file an amended Form 10-KSB for the year
ended September 30, 2005. The restatement had the following effects on the
amounts presented herein:
September 30, 2005 Balance Sheet
-----------------------------------------
Before After
Restatement Restatement Difference
------------- ------------- -------------
Accounts receivable $ - $ 6,600 $ 6,600
Current assets 2,934 9,534 6,600
Total assets 3,785 10,385 6,600
Liability to be settled by
issuance of stock - 8,000 8,000
Current assets 87,921 95,921 8,000
Retained earnings (708,040) (709,440) (1,400)
Stockholders' equity (deficit) (84,136) (85,536) (1,400)
Statement of Operations for the Three
Months Ended December 31, 2004
-----------------------------------------
Before After
Restatement Restatement Difference
------------- ------------- -------------
Royalty revenues $ - $ 900 $ 900
Total revenues - 900 900
Other general and
administrative expense 15,309 15,309 -
Operating income (loss) (16,923) (16,023) 900
Net income (loss) (16,923) (16,023) 900
Net income (loss) per share (0.00) (0.00) -
Page 5
Statement of Operations for the Period from
Entering Development Stage on
October 1, 1985 through December 31, 2005
-----------------------------------------
Before After
Restatement Restatement Difference
------------- ------------- -------------
Royalty revenues $ 57,800 $ 48,400 $ (9,400)
Total revenues 244,716 235,316 (9,400)
Other general and
administrative expense 798,690 790,690 (8,000)
Operating income (loss) (792,064) (793,464) (1,400)
Net income (loss) (717,331) (718,731) (1,400)
Net income (loss) per share (0.13) (0.13) -
ITEM 2. MANAGEMENT & DISCUSSIONS
------------------------
MAJOR ACTIVITY
Highlights of First Quarter
The NBAA annual show in October allowed Kollsman to put on display
their new initiatives in Enhanced Vision and related markets. Advance
Technologies Inc. directs the interested reader to Kollsman.com PR's
releases. At the same time Gulfstream unveiled their plans for a smaller
light weight Corporate Business Jet aimed for a smaller passenger market.
We refer the reader to the Press Releases at Gulfstream.com.
The Niteagle program took an important step forward with the signing
of a license agreement with a new Nevada corporation (RVS). AVTX will be
providing RVS support under the terms of the agreement. The ATI-RVS
License agreement is incorporated in this quarterly report as Exhibit 33.
ATI has secured a provisional patent application for our new Infrared
Security System (ISS) project. With the protection of our intellectual
property ATI has been contacting parties which may have an interest in
active participation. All contacts to date are preliminary and
confidential.
Enhanced Vision System (EVS)
Enhance Vision System, our first project; has entered production.
Advance Technologies benefits through a license agreement with Kollsman
Inc.
Kollsman has issued a detailed report of all sales and deliveries
through December 31, 2005. The EVS market continues to develop on schedule.
Sales are increasing but at a modest rate.
The agreement between Kollsman and FedEx is proceeding with the EVS
being slated for operation on all of FedEx's wide-body aircraft. See
Kollsman.com for additional details.
NITEAGLE
The NITEAGLE Project will be transferred to RVS in early 2006 under
the terms of the ATI-RVS License Agreement.
OTHER DEVELOPMENT ACTIVITIES
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 without compromising the development plan and/or the
application market.
Page 6
Recreational Vehicles Systems (RVS)
Advanced Technologies signed a licensing agreement with Recreational
Vehicle Systems (RVS), a Nevada Corporation. Under terms of the agreement
Adv-Tech will provide technical know-how and development support to RVS to
develop an Infrared Imaging System for the license field of Recreational
Vehicles. In consideration for our technical support and certain licensed
technical property rights ATI will receive a royalty on each unit sold. No
sales are projected before late 2006 or early 2007. The terms of the
agreement specify $300.00 per system sold for a period of ten years
initiated by the first sale.
Medical Systems
The sale of 50 NVS cameras to United Integrated Services (UIS, a
Taiwan Corporation) under an export license granted by the United States
Commerce Department is still pending. UIS as indicated their desire to
complete this sale before the export license expires in June 2006. We
believe there is less than a 50% chance that UIS will be able to comply
with the license requirements prior to the expiration date. Revenue impact
is negligible.
Infrared Security System (ISS)
A provisional patent pending has been obtained for our Infrared
Security System. This protection for our intellectual property rights will
allow us to aggressively engage in discussion with potential partners and
customers. Preliminary discussions have been initiated.
OPERATIONS
In 2006 Advance Technologies will be establishing our headquarters in
Woodland Texas. The Board of Directors has instructed the CEO to initiate
a review of our operations to ascertain our future needs. Our primary
source of future income will be through our licensing agreements. Our
development activities are being conducted in concert with strategic
partners, relying upon their capital resources. Recommendations on how to
best optimize shareholder value will be formulated and presented to the
Board in the near future.
The development activity at Adv-Tech has shifted from internal
hardware based R&D activity to external technical marketing with potential
partners. This shift has been created by Infrared Imaging Cameras and
Systems moving from high technology to more of a commodity or production
component. The system application and embedded application software
represents most of the future opportunities for Advance Technologies.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.
(a) Directors and Executive Officers
------------------------ ------- -------------------------------
Name Age Position
------------------------ ------- -------------------------------
Gary E. Ball 68 CEO, President, and Director
------------------------ ------- -------------------------------
Gary L. Bane 67 Director (1)
------------------------ ------- -------------------------------
James Watson 57 Director (2)
------------------------ ------- -------------------------------
(1) Became a director on October 1, 2004.
(2) Became a director on January 1, 2005.
Page 7
(b) Qualifications
Mr. James Watson has joined Advance Technologies Board of Directors.
Mr. Watson's extensive experience as Director of Marketing for Western
Airlines will provide valuable sight into marketing issues affecting the
entry of EVS into the passenger segment of commercial aviation.
Mr.Watson's term with the Board will begin January 1, 2005.
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.
CALIFORNIA MANUFACTURING TECHNOLOGY CONSULTING, Gardena, California,
1999-Present, Vice President Operations 2001-Present
He was responsible for marketing, sales, consulting services and the
development of delivery tools and services. Re-directed the organization
from a service to industry "Go to Market" strategy by establishing teams
for the Aerospace & Defense and Distribution industry.
In the past Mr. Watson was Vice President of Passenger & Cargo sales
for WESTERN AIRLINES, Los Angeles, California. He was responsible for
managing over 1100 people in sales programs, field sales, reservations and
advertising with a budget in excess of $150 million.
GARY E. BALL
Age 68, residing in The Woodlands, Texas is married. He attended
California State University at Long Beach graduated with a BSEE and MSEE,
went on to perform Graduate Studies at University of Southern California.
Was Program Manager for Hughes Aircraft where he developed the Infrared
Enhanced Vision System reporting to the President of EDSG. Was a member of
NATO NIAG study group on Aircraft Integration. He has authored several
articles for trade publications, the last 9 years he has provided
consulting services to 10 U.S. and foreign corporations in the field of IR
technology.
Gary L. Bane
Age 67, Mr. Bane has been employed as an independent consultant for
the last seven years after retiring from Boeing Marine Systems. Mr. Bane
has BS and MS degrees from the University of Southern California in
engineering and management fields. Mr. Bane belongs to several government
committees involved in Ocean engineering and related fields. Mr. Bane has
a large consulting practice in his field of Marine Engineering. Mr. Bane
consults with Boeing and several other Marine engineering firms.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
-----------------------------------------
There has been no legal proceeding involving Advance Technologies Inc.
Item 9. REMUNERATION OF DIRECTORS AND OFFICERS.
---------------------------------------
Effective October 1, 2005 the previously approved Executive
compensation plan was put into effect. Under the provision of the plan
preferred shares of AVTX were issued to the CEO/President of AVTX and the
Board of Directors. The issuing of these shares (160,000 Class B shares) to
the Board of Directors and the Chief Operating Officer/President of Advance
Technologies Inc. increased the outstanding shares of Class B to
26,177,157. This action is in accordance with the proposed and accepted
Executive Compensation Plan.
Page 8
Item 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.
---------------------------------------------------------------
Title of Name and address
class of owner Amount owned Percent of class
--------- ---------------- ------------ ----------------
Common Gary Ball 7,800,000 12%
--------- ---------------- ------------ ----------------
Common Wendy Ball 7,800,000 12%
--------- ---------------- ------------ ----------------
Common Gary L. Bane 1,200,000 2%
--------- ---------------- ------------ ----------------
Preferred Jim Watson 20,000 ~
--------- ---------------- ------------ ----------------
PERSONS HOLDING WARRANTS, OPTIONS OR OTHER RIGHTS.
--------------------------------------------------
No other person is known to hold 10% or more of a class of equity
securities of AVTX.
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
-----------------------------------------------------------
Gary Ball has provided office space for the executive offices of AVTX,
for which Mr. Ball has received $0.00 monthly compensation.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS.
----------------------------------------------------------------
Advance Technologies Inc. is traded under the symbol of AVTX on the
NASDAQ BB. The high and low share prices for the last two fiscal years by
are:
Common Stock
Bid Price
Low High
Fiscal Year 2004
First Quarter .02 .09
Second Quarter .04 .08
Third Quarter .03 .05
Fourth Quarter .02 .03
Fiscal Year 2005
First Quarter .02 .04
Second Quarter .03 .09
Third Quarter .04 .08
Fourth Quarter .03 .06
SHAREHOLDERS OF AVTX
Common Stock, (39,498,217 shares) there was 1,023 shareholders listed
by Pacific Stock Transfer Company, our agent of record on December 31,
2005.
Preferred Stock, (26,177,157) there were 128 shareholders listed by
Pacific Stock Transfer Company, our agent of record on December 31, 2005.
Page 9
DIVIDENDS
There have been no dividends paid to shareholders in the last two
years.
EQUITY COMPENSATION PLANS
The Equity Compensation paid to key employees, directors and/or
Executive Officers in the last two years was 160,000 shares, October 15,
2005.
ITEM 2. DESCRIPTION OF EXHIBITS
-----------------------
See Item 2 of Part III, below.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
Not applicable.
ITEM 5. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
--------------------------------------------------
The Board of Directors, all Officers, and major shareholders of
10% or more of Advance Technologies Inc. are in compliance with
all reporting requirements of the exchange act.
Page 10
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit
Number Description Page Number
------- ------------------------------------------------- -----------
2.1 Articles of Incorporation (1)
2.2 Amendment to Articles of Incorporation filed on
November 10, 1975(1)
2.3 Amendment to Articles of Incorporation filed on
December 6, 1982(1)
2.4 Amended Bylaws (1)
3.1 See Articles of Incorporation, as Amended (1)
6.1 License Agreement dated July 1997 with Kollsman,
Inc. (1)
31.1 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. 13
32.1 Certification of President, Chief Executive Officer
and Chief Financial Officer Pursuant to Rule 13-14
or Rule 15-14 of the Securities and Exchange Act
of 1934 as adopted pursuant to Section 906 of The
Sarbanes-Oxley act of 2002. 15
33.1 License Agreement with Infrared Vision Sensor
System 16
(1) Incorporated by reference to the exhibits to Registrant's Registration
Statement on Form 10-SB filed on August 30, 1999, File Number 000-27175.
ITEM 2. DESCRIPTION OF EXHIBITS.
------------------------
The Exhibits follow the Signature Page.
Page 11
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 12, 2006 Advance Technologies, Inc.
(Registrant)
By:/s/ GARY E. BALL
---------------------------------------
Gary E. Ball
President and Director
Page 12