SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
( X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2002
Commission File No. 0-27175
ADVANCE TECHNOLOGIES, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Nevada 95-4755369
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
716 Yarmouth Road # 215
Palos Verdes Estates, CA 90275
________________________________________
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 265-7776
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Common Name of Each exchange on which registered
National Association of Securities Dealers
Securities registered pursuant to Section 12(g) of the Act:
_________________________________
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 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 if disclosure of
delinquent filers pursuant to item 405 of Regulation
S-K is not contained herein, and will not be
contained, to the best of registrants's knowledge, in
definitive proxy or information statements
incorporated by reference in part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $29,039
The aggregate market value of voting stock
held by non-affiliates of the Registrant as of September 30,
2002 was approximately $1,033,140
On October 1, 2002, approximately 17,218,967
Shares of the Registrant's Common Stock, $0.001 par
value, were outstanding.
Documents Incorporated by Reference
Exhibit A & Exhibit B
ADVANCE TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
PART I
Item 1. BUSINESS......................................................... 4
Item 2. PROPERTIES....................................................... 5
Item 3. LEGAL PROCEEDINGS................................................ 6
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 6
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................ 6
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................ 6
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 7
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................ 7
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................ 7
Item 10. EXECUTIVE COMPENSATION........................................... 8
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................. 8
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 8
PART IV
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT.............. 9
Item 14. EXHIBITS, MANAGEMENT DISCUSSIONS AND OPERATIONS.................. 9
SIGNATURES....................................................... 10
PART I
ITEM 1. BUSINESS
Overview
Advance Technologies Inc. is a developer of Infrared Enhanced Vision
Technology and commercial solutions. The company has a world wide
license from Hughes Aircraft company, Los Angeles, California for a
patented advanced infrared imaging system. Advance Technologies licenses
and develops applied infrared enhanced vision solutions for use in
diverse industries including aviation, recreational vehicles, commercial
trucking, marine, security, and fire fighting applications. The Company
is currently engaged in the development of night vision systems with
applications in the commercial sector.
Advance Technologies has entered into a licensing agreement with
Kollsman Inc., which has incorporated the company's technology and
intellectual property into an Enhanced Vision System for use on the
Gulfstream series of Aircraft. The system entered production in early
2002, and is in the process of ramping up for full production. Kollsman
has announced a new enhanced vision product in late 2002 focused at the
low-end private aviation market. This product is expected to enjoy the
same success as the Gulfstream product but with a far larger market.
Background
Advance Technologies, Inc. ("the Company") The Company was organized
under the laws of the State of Delaware under the name PWB Industries,
Inc.; the articles of incorporation were issued June 16, 1969. The name
was changed to Sun Energy, Inc. ("The Company"), which merged with Sto
Med, Inc. on February 22, 1996 changing its name to Sto Med, Inc. ("The
Company") and domicile to the State of Nevada. On February 23, 1996, Sto
Med, Inc., a privately held California corporation, was acquired by Sto
Med, Inc. ("The Company") the California Corporation acquisition was
rescinded on August 23rd 1997. Sto Med Inc. ("The Company") the Nevada
Corporation changed its name to Advance Technologies, Inc., ("The
Company") on August 23rd 1997. On September 27, 1999 the "Company"
acquired Seacrest Industries of Nevada, also known as Infrared Systems
International.
4
The Company
The Registrant through its wholly owned subsidiary SEACREST INDUSTRIES,
INC., and through its president and director Mr. Gary Ball was granted
an exclusive world-wide license agreement for the use of US patent
number 5,534,694 by Hughes Aircraft Company, for a key optical element
of the Infrared Aircraft Landing System. Gary Ball founder and CEO of
Infrared Systems International (ISI) a/k/a Seacrest Industries
International, Inc. in 1992 formed the company for the singular purpose
of providing manufacturing and sales support for the unique Infrared
System called Enhanced Vision System (EVS). While employed by
Electro-Optical Systems, a segment of Hughes Aircraft Company, as senior
Program Manager and engineer, he led the research and development team
responsible for the development of the Enhanced Vision System (EVS).
This technology was designed to allow aircraft pilots to actually "see"
the airport environment through cloud ceiling or surface fog. The factor
of enhanced safety, alone, is generating an enormous demand for this
type of system.
Significant Corporate Milestones
Advance Technologies Inc. was granted an export license for
Micro-bolonmeter IR cameras for Medical Applications in the Far East.
The Department of Commerce license allowed Advance Technologies to
export 35 Night Vision Camera to Telesis Technologies of Taiwan for
incorporation in their medical system, Spectrum 9000. These units were
than resold to end-users medical facilities in Korea and Taiwan. The
license was obtained on behalf of Telesis Technologies under terms of
our Agent Agreement.
Advance Technologies Inc. received the initial two pre-production
Niteagle Systems from Telesis in 2002. These units have been evaluated
and demonstrated to potential customers. This effort will continue into
2003.
Employees
The Company employs a total of three (3) employees, One of which is full
time, the other two are used on a Reduced hour workweek as required.
This staff reduction Is the result of economic conditions discussed in
the Management Discussion Section in depth.
ITEM 2. PROPERTIES
The Company's executive offices are located in Palos Verdes Estates, California.
5
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings known or pending against the Registrant or its
subsidiary
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's Security holders through
the solicitation of proxies or Otherwise, during the fiscal year ended September
30, 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company is currently trading, OTC, on the Nationals Association of
Securities Dealers "Pink Sheets" with the high bid at $0.90 per share and the
low bid of $0.06 per share during the last year. Additional information required
by this item may be found in the Company's 2002 Financial Statements.
On September 30, 2002 there was 17,218,967 shares outstanding of registrant's
common stock, at $0.001 par value. There was an additional 38,858,057 shares of
Class B restricted stock.
The increase of common stock from 2,572,923 to 17,218,967 Resulted from the 30%
conversion of 144 restricted stock To free trading stock. The conversion was
authorized by The board of directors of Advance Technologies January 1, 2002.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REPORTS
OF OPERATION
From time to time, we may publish forward-looking statements relating to
matters, including anticipated financial performance business propects, the
progress and goals for our research and development programs, marketing
strategies, and other similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor, a variety of factors could cause Our actual
results and experience to differ materially from the Anticipated results or
other expectations expressed in our Forward-looking statements. In addition, we
disclaim any Intent or obligation to update those forwarding-looking statements.
When used in this discussion, the words "believes," "anticipates" "expected"
"assumes" "and similar expressions are intended to identify forward looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking statements that
speak only as of the date of this report. We undertake no obligation to publicly
release the results of any Revisions to these forward-looking statements that
may be made To reflect events or circumstances after the date of this report or
to Reflect the occurrence of unanticipated events.
6
For a more detailed description of our operations for 2002 see Item 14
Management Discussion for 2002
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required by this item are included in the Company's
2000 Financial Statements and are presented in Part IV, Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING FINANCIAL
DISCLOSURE:
None
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
GARY E. BALL Age 65, residing in Manhattan Beach, California is married.
He attended California State University at Long Beach graduating in 1967
BSEE and MSEE, went on to perform Graduate Studies at University of
Southern California. He has specialized in product design, development,
and management for North American Aviation, Autonetics Division.
Technical Manager in charge of the Pave Track program for Ford
Aerospace. Program Manager for Northrop Electro-Mechanical in charge of
business development on several classified DOD programs, including the
AMRAAM effort. Program Manager for Hughes Aircraft where he developed
the Infrared Enhanced Vision System, reporting to the President of EDSG
as directed by General Motors and directed all non-core business. He is
a member of NATO NIAG study group on Aircraft Integration. He has
authored several articles for trade publications, the last 4 years he
has provided consulting services to 10 U.S. and foreign corporations in
the field of IR technology.
GARY L. BANE Age 64, residing in Santa Barbara, California is married.
He attended University of Southern California attaining BS Mechanical
and Aeronautical (1960) MS Control Systems and Instrumentation (1966) MS
Systems Management (1968). University of California, Los Angeles
studying Deep Submergence Vehicle, Oceanography and Offshore Systems
Engineering. Stanford University Executive Institute of Management of
High Technology Companies. Mr. Bane is a specialist in the development
and management of Deep Ocean and offshore technology projects. He
recently retired from Rockwell after 30 years as director of Ocean
Systems. While at Rockwell he successfully managed significant technical
solutions and advanced state-of-the-art programs for a number of
classified programs. He was General Manager of Interstate Electronics;
Oceanic Division where he was responsible for profit and loss and R and
D for offshore oil drilling and recovery projects.
7
WENDY BALL Age 56, residing in Manhattan Beach, California is married.
She graduated from University of Southern California, BS cum Laude. Her
career has been focused on retail merchandising, where she has
demonstrated exceptional skills in management, team building and
communications. She is National Sales Director for Christian Lacroix New
York, a wholly owned subsidiary of Louis Vitton Moet Hennessey (LVNH).
She was an account executive for Carolee Jewelry for Southern
California, Arizona and Utah. She was co-owner Brava Specialty Clothing
Store in Redondo Beach, California.
ITEM 10. EXECUTIVE COMPENSATION
Other than information provided in the Company's 2002 Financial
Statements incorporated Herein,executive officers and directors have
Received no other compensation.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(1) Name and Address of (2) Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
______________ ___________________ ____________________ ___________
Preferred Gary E. Ball 9,240,000 Issued Shares 18.4
28 Santa Cruz Court
Manhattan Beach, CA 90266
Preferred Gary L. Bane 364,000 Issued Shares 1.0
2015 Edgewater
Santa Barbara, CA 93109
Preferred Wendy Ball 9,240,000 Issued Shares 18.4
28 Santa Cruz Court
Manhattan Beach, CA 90266
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gary E. Ball and Wendy Ball are married.
The consideration exchanged under the Plan was negotiated between the
directors and executive officers of the Registrant, the Board of
Directors of SEACREST INDUSTRIES, INC. (the board of directors of the
Registrant, are the same board of directors as that of SEACREST
INDUSTRIES, INC.) and the SEACREST INDUSTRIES, INC. Stockholders, and
the Board of Directors of the Registrant used criteria used in similar
proposals involving the Registrant in the past, including the relative
value of the assets of the Registrant; its present and past business
8
operations; future potential of SEACREST INDUSTRIES, INC.; its
management; and the potential benefit to the stockholders of the
Registrant. The members of the Board of Directors determined in their
good faith that the consideration for the exchange was reasonable, under
these circumstances.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this Form 10-KSB Annual
Report:
See Attached Financial Statements: Exhibit A (16 pages)
ITEM 14. EXHIBITS, MANAGEMENT DISCUSSIONS AND OPERATIONS
The following document is filed as part of this Form 10-KSB Annual
Report:
See Attached Exhibit A (15 pages)
See Attached Exhibit B (6 pages)
Exhibit 99.1 - Certification
Exhibit 99.2 - Certification
9
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: December 30, 2002 Advance Technologies, Inc.
(Registrant)
By:/s/ GARY E. BALL
----------------------
Gary E. Ball
President and Director
10
EXHIBIT A
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Financial Statements
September 30, 2002 and 2001
11
C O N T E N T S
Independent Auditor's Report..................................................13
Balance Sheets................................................................14
Statements of Operations......................................................15
Statements of Stockholders' Equity............................................16
Statements of Cash Flows......................................................19
Notes to the Financial Statements.............................................21
12
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Advance Technologies, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Advance
Technologies, Inc. (a development stage company) as of September 30, 2002 and
2001 and the related statements of operations, stockholders' equity and cash
flows for the years ended September 30, 2002 and 2001 and from inception on
October 1, 1985 through September 30, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Advance
Technologies, Inc. (a development stage company) as of September 30, 2002 and
2001 and the results of its operations and cash flows for the years ended
September 30, 2002 and 2001 and from inception on October 1, 1985 through
September 30, 2002 in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has minimal assets and is dependent upon
financing to continue operations. These factors raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in the Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Chisholm & Associates
North Salt Lake, Utah
December 27, 2002
13
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
September 30,
_______________________
2002 2001
_________ _________
CURRENT ASSETS
Cash $ 1,719 $ 3,515
Total Current Assets 1,719 3,515
_________ _________
PROPERTY & EQUIPMENT, net 22,367 26,835
_________ _________
TOTAL ASSETS $ 24,086 $ 30,350
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued Interest $ 23,267 $ 13,007
Advance Royalties 25,000 25,000
Notes payable-officer 36,300 28,300
_________ _________
Total Current Liabilities 84,567 66,307
_________ _________
LONG-TERM DEBT
Line of Credit 85,500 85,500
_________ _________
TOTAL LIABILITIES 170,067 151,807
_________ _________
STOCKHOLDERS' EQUITY
Common stock, authorized 100,000,000 shares of
$0.001 par value, issued and outstanding 17,218,967
and 2,572,923 shares, respectively 17,219 2,573
Preferred Stock, Series A authorized 100,000,000
shares of $0.001 par value, issued and outstanding
38,808,057 and 50,204,102 shares, respectively 38,808 50,204
Additional paid-in capital 446,496 446,496
Retained earnings (deficit) $(648,504) (620,730)
_________ _________
Total Stockholders' Equity (145,981) (121,457)
_________ _________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,086 $ 30,350
========= =========
The accompanying notes are an integral part of these financial statements.
14
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
For the period
of entering
Development
Stage on
For the Year Ended October 1,
September 30, 1985 Through
__________________________ September 30,
2002 2001 2002
___________ __________ ______________
REVENUES $ 29,039 $ 30,985 $ 60,024
___________ __________ __________
EXPENSES:
Depreciation & Amortization 7,854 7,000 29,519
Organization Costs - - 11,331
Research & Development - 61,500 72,750
General and administrative 38,699 18,625 608,962
___________ __________ __________
Total Expenses 46,553 87,125 722,562
___________ __________ __________
INCOME (LOSS) FROM OPERATIONS: (17,514) (56,140) (662,538)
___________ __________ __________
OTHER INCOME (EXPENSE):
Interest Expense (10,260) (10,191) (23,267)
Miscellaneous Income - 98,000 98,000
___________ __________ __________
Total Other Income (Expense): (10,260) 87,809 74,733
___________ __________ __________
NET INCOME (LOSS) $ (27,774) $ 31,669 $ (587,805)
=========== ========== ==========
NET LOSS PER SHARE:
Loss Per Share $ (0.00) $ 0.01 $ (0.55)
___________ __________ __________
Weighted average shares outstanding 10,796,656 2,572,923 1,058,131
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
15
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders'
Equity (For the period of entering development stage on
October 1, 1985
through September 30, 2002)
Deficit
Accumulated
During the
Common Stock Additional Preferred
_________________ Paid-In Stock Development
Shares Amount Capital Shares Amount Stage
______ ______ __________ ______ ______ ___________
Balance, October 1,
1985 (beginning of
the development
stage) 6,487 $ 7 $ 58,161 - $ - $ (60,701)
Shares issued for coal
royalties at $0.01 4,369 4 1,525 - - -
Shares issued for
services at $0.25 554 1 4,849 - - -
Shares issued for
services at $0.03 1,601 2 1,680 - - -
Shares issued for
services at $0.25 1,274 1 11,145 - - -
Shares issued for
services at $0.01 2,290 2 798 - - -
Shares issued for
services at $0.25 37,203 37 325,487 - - -
Preferred shares
issued for services - - - 10,048 1,004 -
Preferred shares expire - - 1,004 (10,048) (1,004) -
Net loss since the
beginning of the
development stage
at October 1, 1985 - - - - - (344,001)
______ ______ ________ _______ ______ _________
Balance, September
30, 1995 53,778 54 404,649 - - (404,702)
Shares issued for
services at $0.25 5,714 6 49,994 - - -
Rounding up of shares (6) (1) - - - -
Net loss for
the year ended
September 30, 1996 - - - - - (50,000)
______ ______ ________ _______ ______ _________
Balance, September
30, 1996 59,486 59 454,643 - - (454,702)
The accompanying notes are an integral part of these financial statements.
16
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders'
Equity (For the period of entering development stage on
October 1, 1985
through September 30, 2002)
(Continued)
Deficit
Accumulated
During the
Common Stock Additional Preferred
_________________ Paid-In Stock Development
Shares Amount Capital Shares Amount Stage
______ ______ __________ ______ ______ ___________
Balance Forward 59,486 59 454,643 - - (454,702)
Shares issued for
services at $0.25 608 1 5,324 - - -
Net loss for
the year ended
September 30, 1997 - - - - - (5,325)
______ ______ ________ _______ ______ _________
Balance, September
30, 1997 60,094 60 459,967 - - (460,027)
Shares issued for
services at $0.001 12,828 13 436 - - -
Net loss for
the year ended
September 30, 1998 - - - - - (447)
______ ______ ________ _______ ______ _________
Balance September
30, 1998 72,922 73 460,403 - - (460,474)
Shares issued for
cash at $0.01 2,500,000 2,500 22,500 - - -
Shares issued for
common stock of
SeaCrest Industries
Corp. at $0.001 - - (36,407) 50,204,102 50,204 -
Net loss for
the year ended
September 30, 1999 - - - - - (90,126)
______ ______ ________ _______ ______ _________
Balance, September
30, 1999 2,572,922 2,573 446,496 50,204,102 50,204 (550,600)
Net loss for
the year ended
September 30, 2000 - - - - - (101,799)
______ ______ ________ _______ ______ _________
Balance, September
30, 2000 2,572,922 2,573 446,496 50,204,102 50,204 (652,399)
17
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders'
Equity (For the period of entering development stage on
October 1, 1985
through September 30, 2002)
(Continued)
Deficit
Accumulated
During the
Common Stock Additional Preferred
_________________ Paid-In Stock Development
Shares Amount Capital Shares Amount Stage
______ ______ __________ ______ ______ ___________
Balance Forward 2,572,922 2,573 446,496 50,204,102 50,204 (652,399)
Net income (loss)
for the year ended
September 30, 2001 - - - - - 31,669
______ ______ ________ _______ ______ _________
Balance, September
30, 2001 2,572,922 2,573 446,496 50,204,102 50,204 (620,730)
Shares issued for
services at $0.001 3,250,000 3,250 - - - -
Shares converted to
common stock 11,396,045 11,396 - (11,396,045) (11,396) -
Net income (loss)
for the year ended
September 30, 2002 - - - - - (27,774)
______ ______ ________ _______ ______ _________
Balance, September
30, 2002 17,218,967 $17,219 $446,496 38,858,057 $38,858 $(648,504)
========== ======= ======== ========== ======= =========
The accompanying notes are an integral part of these financial statements.
18
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the period
of entering
Development
Stage on
For the Year Ended October 1,
September 30, 1985 Through
__________________________ September 30,
2002 2001 2002
___________ __________ ______________
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (27,774) $ 31,669 $ (587,805)
Adjustments to reconcile net loss
to net cash, provided by operations:
Stock issued for services 3,250 - 403,025
Depreciation & Amortization 7,854 7,000 29,519
Organization Costs - - 11,331
Decrease in prepaids - 12,500 14,680
Increase (Decrease) in accrued
liabilities 10,260 (24,100) 23,269
___________ __________ __________
Net Cash Flows Used in Operating
Activities (6,410) 27,069 (105,981)
___________ __________ __________
CASH FLOWS USED IN INVESTMENT ACTIVITIES(39
Purchase of Equipment (3,386) (10,000) (39,386)
Investment in Subsidiary - - 286
___________ __________ __________
Net Cash Used in Investment
Activities (3,386) (10,000) (39,100)
___________ __________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid on Loan from Officer (8,000) (21,200) (41,200)
Proceeds from Loan from Officer 16,000 - 77,500
Proceeds from Line of Credit - 6,000 85,500
Proceeds from Issuance of Stock - - 25,000
___________ __________ __________
Net Cash Flows from Financing
Activities 8,000 (15,200) 146,800
___________ __________ __________
NET INCREASE (DECREASE) IN CASH (1,796) 1,869 1,719
CASH, BEGINNING OF YEAR 3,515 1,646 -
___________ __________ __________
CASH, END OF YEAR $ 1,719 $ 3,515 $ 1,719
=========== ========== ==========
19
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Continued)
For the period
of entering
Development
Stage on
For the Year Ended October 1,
September 30, 1985 Through
__________________________ September 30,
2002 2001 2002
___________ __________ ______________
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Paid for:
Interest $ - $ - $ -
Taxes $ - $ - $ -
SUPPLEMENTAL NON-CASH INFORMATION
During December 2001, the Company issued 3,250,000 shares of common stock for
services valued at $3,250 (or $.001 per share).
During the year ending September 30, 2002, a total of 11,396,045 shares of
preferred stock were converted to common stock.
The accompanying notes are an integral part of these financial statements.
20
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was organized under the laws of the state of Delaware
on June 16, 1969 as PWB Industries, Inc. On November 10, 1975, the
Company changed its name to Sun Energy, Inc. At that time, the
Company began operations in the oil and gas lease industry. By
1985, the Company discontinued its operations and became dormant.
On March 6, 1996, the Company attempted a merger which failed. On
August 23, 1997, the Company changed its name to Advance
Technologies, Inc. and changed its place of domicile to from
Delaware to Nevada.
On September 27, 1999, pursuant to a plan of acquisition, the
Company exchanged 50,204,102 shares of its Seris "A" preferred
stock for 50,204,102 shares of SeaCrest Industries Corporation's
common stock. This acquisition has been accounted for using the
purchase method of a business combination.
The Company is currently engaged in the development of a night
vision system with applications in the military as well as civil.
The Company has an agreement with a Taiwan company wherein they
are jointly developing the night vision system for use in Class A
coaches. The Company is also involved in the development of other
Electro-optical mechanical devices.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of
accounting.
c. Consolidation
The consolidated financial statement include the accounts of
Advanced Technologies, Inc. and SeaCrest Industries Corporation, a
wholly owned subsidiary. Intercompany transactions have been
eliminated.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
21
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on
the weighted average number of shares outstanding at the date of
the financial statements.
From
Inception on
For the Years Ended October 1,
September 30, 1985 Through
__________________________ September 30,
2002 2001 2002
___________ __________ _____________
Numerator - net loss $ (27,774) $ (31,669) $ (587,805)
Denominator - weighted
average number of shares
outstanding 10,796,656 2,572,923 1,058,131
=========== ========== ==========
Loss per share $ (0.00) $ 0.01 $ (0.55)
=========== ========== ==========
f. Provision for Income Taxes
No provision for income taxes has been recorded due to net
operating loss carryforwards totaling approximately $631,700 that
will be offset against future taxable income. These NOL
carryforwards begin to expire in the year 20004. No tax benefit
has been reported in the financial statements because the Company
believes there is a 50% or greater chance the carryforward will
expire unused.
Accordingly, per FASB 109, the potential tax benefits of the loss
carryforwards are offset by the valuation of the same amount.
Deferred tax assets and the valuation account is as follows at
September 30, 2002 and 2001.
September 30,
__________________________
2002 2001
___________ __________
Deferred tax asset:
NOL carryforward $ 214,700 $ 205,000
Valuation allowance (214,700) (205,000)
___________ __________
Total $ - $ -
=========== ==========
22
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. In these financial
statements assets and liabilities involve extensive reliance on
management's estimates. Actual results could differ from those
estimates.
h. Revenue Recognition
The Company has received revenue pursuant to an agent agreement
which allows the Company to receive fixed monthly service fees,
and to bill for additional services provided. The Company records
revenues when the services are performed. The Company has
recognized $-0- and $31,669 in revenues for services performed in
connection with this agreement for the years ended September 30,
2002 and 2001.
The Company is also entitled to reimbursement for various expenses
associated with the development fo its night vision technology
pursuant to the joint venture agreement with the Taiwan company.
These reimbursements are recorded as miscellaneous income when
received. The Company recognized miscellaneous income of $ -0- and
$98,000 during the fiscal years 2002 and 2001 from reimbursement
received from the joint venture partner.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is
dependent upon raising capital to continue operations. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty. It is management's
plan to raise capital in order to define their business
operations, thus creating necessary operating revenue.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It is concentrating
substantially all of its efforts in raising capital and developing
its business operations in order to generate significant revenues.
23
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2002 and 2001
NOTE 4 - PROPERTY & EQUIPMENT
Property & Equipment consists of the following at September 30,
2002 and 2001:
September 30,
_____________________
2002 2001
________ ________
Equipment $ 39,386 $ 36,000
Less: Accumulated Depreciation (17,019) (9,165)
________ ________
Net Property & Equipment $ 22,367 $ 26,835
======== ========
Expenditures for property and equipment and for renewals and
betterments, which extend the originally estimated economic life
of assets or convert the assets to a new use, are capitalized at
cost. Expenditures for maintenance, repairs and other renewals of
items are charged to expense. When items are disposed of the cost
and accumulated depreciation are eliminated from the accounts, and
a gain or loss is included in the results of operations.
The provision for depreciation is calculated using the
straight-line method over the estimated useful lives of the
assets. The useful lives of equipment are 5 years. Depreciation
expense for the years ended September 30, 2002 and 2001 are $7,854
and $7,000.
NOTE 5 - ADVANCED ROYALTIES
SeaCrest Industries Corporation, formerly Infrared Systems
International, Inc., entered into a licensing agreement for
marketing and distributing of infrared aircraft landing systems.
Seacrest received $25,000 in advances. These royalty revenues have
been deferred until future revenue streams occur, if any actually
do occur, and these royalty revenues have been recorded as a
liability.
NOTE 6 - RELATED PARTY TRANSACTIONS
As of September 30, 2002,the Company owes an officer the Company
$36,300 for loans made. This note payable-officer is considered a
current liability with no provision for interest.
NOTE 7 - LINE OF CREDIT
The Company has negotiated a Line of Credit with a corporation,
wherein the Company has a credit limit of $125,000. This line
accrues 12.0% interest annually and is due January 1, 2004. As of
September 30, 2002, the Company has borrowed a total of $85,500.
For the year ended September 30, 2002, the Company recorded
$10,260 in interest expense. As of September 30, 2002, the Company
has accrued interest totaling $23,267.
24
ADVANCE TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2002 and 2001
NOTE 8 - COMMON STOCK
During December 2001, the Company issued 3,250,000 shares of
previously authorized but unissued common stock for consulting
services for $3,250 (or $.001 per share).
During the year ended September 30, 2002, 11,396,045 shares of
preferred stock were converted to common stock.
25
EXHIBIT B
Advance Technologies Inc.
Management Discussion and Analysis
Year End, September 2002
MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Advance Technologies Inc. ("AVTX") is a developer of infrared (IR)
Enhanced Vision technology for commercial solutions and applications. The
Company engages in advance development activities and through strategic business
arrangements AVTX utilizes OEM suppliers and major system corporations to form
strategic business associations. This unique business model combines the
strength of our organization with the prior capital investment of the OEMs and
the in place established marketing and sales organization of the System
Integrator. Our ability to bridge advance IR technology into
application-specific markets shortens the development-to-market cycle and
associated high investment risks of this enterprise.
Business Overview
The tragic events of September 11, 2001 has produced economic and
bureaucratic shock waves that has had a direct effected on AVTX and our
strategic plans. The effect has been most notable in the decline of the price of
our common stock in recent months reflecting the general slow down that has
effected our markets.
The aftermath of 9-11 has effected Corporations such as Advance
Technologies Inc. through our significant involvement in Infrared Technology,
which is a controlled and regulated technology by the US Government. Since AVTX
is exclusively involved in commercial applications, and all of the technologies
we employ are considered "dual use technology" (military and commercial), the
governments restrictions have had little effect on the scope and direction of
our strategic plans. Thus, our plans for future products has not materially
changed. But, the government has imposed new requirements on Corporation like
AVTX to prove our system applications meet the commodity juristion regulations
(commercial non-military end-use) to the Department of State through compliance
to the International Traffic in Arms Regulation (ITAR), 22 CFR 120-130. This
burden of compliance has both lengthen and complicated the approval process.
This has contributed to a slow down thus effecting our rate of progress.
ATI entered into an agreement with an off-shore OEM strategic partner
Telesis Electronics September of 2000, a Taiwanese privately held corporation.
Under the terms of this agreement ATI is developing IR systems in conjunction
with Telesis for sale in the USA as well as other foreign markets. Export
licenses are required to provide critical components for this work. Approval for
these licenses are taking more than a year to obtain. Furthermore additional
end-user restrictions are being imposed complicating and lengthening the
process. This same activity in the past took less than 6 months prior to 9-11,
with far less paper work and disclosure documents.
The second event that has had an impact on AVTX stock has been the
authorization of a 30% of conversion of Advance Technology Preferred stock into
ATI common stock by the shareholder of record provided the holding period has
been met.
26
The resulting action has been to increase the number of shares of common stock
in the market (float), which under normal circumstances produces some degree of
pressure on the stock. This process of moving from a development Corporation
with restricted 144 stock to a fully free trading corporation is a common but
necessary growing pain of the maturation process.
ATI's management is recommending to the Board of Directors that the 50%
of the remain balance of the Preferred Stock be released for conversion to
Common Stock on June 1, 2003. It is our opinion that it is a good time to
authorize the conversion of additional preferred shares to common stock. This
opinion is based upon several factors. First, the present depressed value of the
stock is viewed as under-valued in our opinion, when our potential is taken into
consideration. Second, there is a need to continue an orderly process for the
conversion of the preferred to common stock. And lastly, we are optimistic that
profitability will be achieved in 2003 and beyond. The positive prospects in
2003 will help to offset the effect of additional dilution, which we believe
AVTX can form a base for future growth.
Enhanced Vision Activities
Enhance Vision System, our first project; has entered production.
Advance Technologies benefits through a license agreement with Kollsman
Inc.
The License Agreement between Advance Technologies and Kollsman
Instruments covers the transfer of proprietary intellectual property
owned by Advance Technology. The data package consisted of technical,
industrial, marketing, and FAA regulatory knowledge to facilitate the
development of the IR EVS and subsequent FAA certification. Included as
part of, but specifically partition within the Agreement is an option
for Kollsman to use a Hughes Aircraft patent that was licensed to
Advance Technologies in 1996. Kollsman elected to proceed forward with
an IR EVS system based upon the content of the License Agreement, but
without incorporating the Hughes Aircraft patent. There has been
concerns expressed that the lack of inclusion of the Hughes Patent
could in some way effect ATI our future revenue.
ATI provided the Hughes patent to Kollsman on a sub-license agreement
approved by Hughes Aircraft. In the sub-license agreement ATI provided
the right to use the Hughes Aircraft license on a zero dollar ($0) mark
up, passing the Hughes royalties through 1:1 with no increase. As a
result, royalties due to ATI under the License Agreement are unaffected
by either the use or non-use of the Hughes Patent.
At the time of the decision by Kollsman to proceed forward without
using the Hughes Patent in the development, ATI was fully consulted and
agreed with the interim approach selected by Kollsman. The need to move
forward quickly was deemed to be more important than a desire to
produce a more robust performing system at that time. This decision to
move forward as quickly as possible was a good business decision that
has allowed us to reach the market sooner than our competition.
27
ATI believes that the long term EVS will need to incorporate advance
optical techniques to achieve the performance level dictated by the
more difficult and demanding passenger carrying commercial aviation
markets (FAA Part -121 & Part -135 operations). ATI has maintained our
advance concept developments using both the Hughes Aircraft patent and
other proprietary techniques. Under the License Agreement with
Kollsman, ATI is obligated to offer these improvements to Kollsman as a
first right of refusal. A provision in our agreement that ATI has fully
comply with. We believe assisting in the development of a competing
system to Kollsman would not be in the best interest of AVTX or our
shareholders under current and foreseeable conditions.
ATI and Kollsman had discussed working on an Advanced EVS based upon
ATI's proprietary technology. Kollsman has taken an action to look into
providing ATI with certain hardware items to support ATI's internal
activities on the Advance System development. As of September no
progress has been made on this program.
Kollsman has issued the quarterly report required under the License
Agreement to ATI stating eleven (11) EVS have been delivered to their
customer. The definition of a delivered EVS system, is when Kollsman
receives payment for the delivered system the system is considered at
that time to have been sold. The time between Kollsman initial delivery
to the aircraft supplier and the final sell off was initially taking
10-12 weeks. The time in the pipeline has been decreased to 4-6 weeks,
as the integration team becomes more experienced and the rate of
delivery increased. The following table was constructed from the data
provided by Kollsman.
UNITS DELIVERED & SOLD VERSUS 2002 (QUARTERLY)
INITIAL DELIVERY UNITS SOLD ACCUMATIVE
1st Qt. 2002 2 0 0
2nd Qt 2002 7 5 5
3rd Qt. 2002 14 6 11
4th Qr. 2002 - -
The delivery rates are increasing as Kollsman ramps up production.
Kollsman has released no information on their future production plans.
Their end user continues to expand the application to additional
aircraft through certification activity with the FAA. This will serve
to increase the EVS market. No information has been released by either
party at this time on the details or the likely effect of this activity
on the overall EVS market.
28
The License Agreement (July 1997) between Kollsman and ATI has a
royalty schedule that was specifically tailored to achieve two key
elements (1) for rapid recovery of the development investment and (2)
maximize long term profits to ATI predicated upon a large EVS market.
Under the provisions that implement this strategy the initial
production units are royalty free. The royalty per unit increases in
four discrete steps to a maximum value per unit.
Kollsman Instruments released a PRESS RELEASE in September 2002,
titled, KOLLMAN'S ENHANCED VISION SYSTEM PRODUCTLINE EXPAND. The Press
Release announced the introduction of a "new reduced performance EVS
version" called Night Window TM, a low cost derivative of the high
performance Kollsman's "All-weather Window" system. The expansion of
Kollsman into the higher volume, lower cost EVS market has been
anticipated by Advance Technologies. This market is larger and is more
accessible from an FAA certification standpoint.
Kollsman has not released any additional information with regard to
application, host platforms, or future sales. As this information
become available, or creditable projections are made by independent
sources, Advance Technologies will make appropriate announcements.
ATI and Telesis Technologies signed an EVS agreement, which designates
Telesis Technologies as our EVS representative for Far East
opportunities. This agreement gives Telesis the right to present
limited information on EVS and the benefit that EVS can provide to
civil aviation. Discussions by Telesis in the Far East has provided no
specific opportunity to date.
Honeywell Technology License
Honeywell provided ATI initial terms for a "field application" and/or
"market use" of their Micro-bolometer technology. The terms and
conditions have been evaluation by ATI and our partner Telesis. It
appears the terms are reasonable based upon assumptions on the price
and availability of a low cost import from Taiwan. This product will
not be available until first quarter of 2003, therefore the need to
finalize an agreement with Honeywell has been delayed until first or
second quarter of 2003.
NITEAGLE(TM)
Telesis Technologies had provided two preproduction units for market
evaluation and product finalization. Tests have been completed and
detailed technical specifications of the production product completed.
This process included the review and incorporation of technical
advancements that have occurred in the last 18 months. The baseline
configuration is up to date with the latest advancements to ensure that
our economic base is solid and will not be obsoleted with near term
improvements. The rapid pace of these improvements has been an
impediment to finalizing the system and coming to market.
29
Meetings in September were conducted with the ATI-Telesis team meeting
with our potential launch customer (OEM RV supplier) and a key IR
supplier in the USA. With the present ITAR restriction levied by the
Department of State, ATI & Telesis concluded the initial production of
the restricted IR technology should be performed in the USA, while the
balance of the unrestricted hardware would be imported from the Far
East. The meetings exceeded our expectations, and the product near term
viability received a strong boost. Our business model was validated and
our cost model is meeting our expectations. As always we retain back up
and contingency plans to cover the unknown to the extent the unknown
can be anticipated.
The preliminary plan to launch the Niteagle project has been prepared
and submitted to Telesis Electronics Board of Directors for approval.
ATI has preciously approved the initial plan. We expect approval prior
to the end of this year and to initiate the most next and most critical
phase, a broad agreement that includes ATI, Telesis, The exclusive
launch customer, and our USA IR supplier. .
Spectrum 9000, Medical Equipment
ATI continues to provide export license support under a time & service
reimbursement agreement with Telesis Technologies. Telesis has not
announced a date for introduction of the Spectrum 9000 into the US
market. Additional discussions and meeting with medical equipment
experts in the USA. ATI believes that Telesis will become activity in
the US market in 2003, and what role ATI will play in that activity has
not been determined.
Development Projects
Advance Technologies Inc. continues development activities on new
Infrared systems for commercial markets. These projects cannot be
forecast with any degree of certainty and all strategic partnerships or
business arrangements remain confidential until such time as a formal
announcement is appropriate without compromising the development plan
and/or the application market.
CAPITAL RESOURCES
No commitment for capital resources has been made during this reporting
period.
FINANCIAL ANALYSIS
The results on the operation represent 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.
30