UNITED STATES
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, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
COMMISSION FILE NUMBER 0-27175
ADVANCE TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
NEVADA 95-475536
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
716 YARMOUTH ROAD, NO. 215
PALOS VERDES ESTATES, CA 90275
(Address of principal executive offices) (ZIP Code)
(310) 265-7776
(Issuer's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, par value $.001 per OTC:BB
share
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 at least the past 90 days.
YES [X] NO [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and will not be contained, to the best
of registrant'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 $30,985.
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of September 30, 2001 was approximately $3,859,384.50.
On September 30, 2001, approximately 2,572,923 Shares of the Registrant's Common
Stock, $0.001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): YES NO [X]
--- ---
-2-
ADVANCE TECHNOLOGIES, INC.
FORM 10-KSB
For the fiscal year ended September 30, 2001
TABLE OF CONTENTS
PART I .................................................................4
ITEM 1. DESCRIPTION OF BUSINESS..........................................4
ITEM 2. DESCRIPTION OF PROPERTIES........................................8
ITEM 3. LEGAL PROCEEDINGS................................................8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............8
PART II .................................................................8
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........9
ITEM 7. FINANCIAL STATEMENTS............................................11
PART III ................................................................11
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...............11
ITEM 10. EXECUTIVE COMPENSATION..........................................12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..12
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................12
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K................................13
INDEX TO FINANCIAL STATEMENTS...............................................14
3
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
OVERVIEW
Advance Technologies Inc. is a developer of infrared Enhanced Vision technology
and commercial solutions. The Company has a worldwide 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.
The Company is currently engaged in the development of a night vision system
with applications in the military as well as the private sector.
Advance Technologies has entered into a licensing agreement with Kollsman, Inc.,
which has incorporated the Company's technology into an Enhanced Vision System
for use with Gulfstream Aircraft. On October 16, 2001, Gulfstream Aerospace
Corporation, a wholly owned subsidiary of General Dynamics, announced it has
received certification from the Federal Aviation Administration to install the
"revolutionary" Enhanced Vision System on the Gulfstream V ultra-long range
business jet aircraft. The FAA-issued Supplemental Type Certificate allows
Gulfstream to offer EVS as an option on new GV ultralong range business jet
aircraft and also to install the system as a retrofit on in-service GV aircraft.
The Company also has agreement with Telesis Technologies, a Taiwan company, in
which Advance Technologies is jointly developing an Enhanced Vision System for
use in Class A recreational vehicles.
CORPORATE BACKGROUND
Advance Technologies, Inc. was organized under the laws of the State of Delaware
in June 1969, under the name of PWB Industries, Inc. In November 1975, the name
of PMB Industries was changed to Sun Energy, Inc., and in February 1996, the
name Sun Energy, Inc. was changed to Sto Med, Inc. In August 1997, Sto Med, Inc.
changed its name to Advance Technologies, Inc. In August 1997, Advance
Technologies, Inc. acquired Seacrest Industries, Inc., which had acquired
Infrared Systems, Inc., the company originally formed by Mr. Gary Ball, the
co-inventor of the infrared imaging system.
Mr. Ball had been the Program Manager and lead engineer for the design and
development of Infrared Technology Programs at Hughes Aircraft Electro Optical
Systems Division. The last program Mr. Ball managed at Hughes Aircraft before
his retirement was the Infrared Commercial Landing Aid System (IRCLAS) Program,
in which Hughes had invested millions of dollars. From the beginning IRCLAS was
directed toward achieving two major goals: (1) improving aircraft safety through
the avoidance of aircraft collisions, and (2) providing a cost-effective
solution for performing high visibility takeoffs and landings under low
4
visibility conditions. The challenge was not only to obtain realtime visibility
through clouds, fogs, and other atmospheric obscurants, but to also present it
to the pilot in a HEAD-UP DISPLAY.
As a result of a change in Hughes Aircraft's Strategic Corporate Plan, in
October 1995, Mr. Ball was granted a worldwide license agreement for the use of
U.S. Patent Number 5,534,694 by the Hughes Aircraft Company for a key optical
element of the Infrared Aircraft Landing System. This license included the
patent submitted by Mr. Gary E. Ball and others, together with proprietary data
relating to the technology, proprietary business agreements, and unrestricted
use of the licensed information and EVS knowledge acquired during Mr. Ball's
tenure at Hughes Aircraft. The license is limited to the use of the technology
relating to commercial aircraft licensed to operate by the United States Federal
Aviation Administration or equivalent regulatory agency elsewhere. This
agreement requires the consent of Hughes Aircraft to sublicense the technology,
which consent will not be unreasonably withheld.
Recognizing the potential for the use of this "see through" technology in
critical sight situations, Mr. Ball, Advance Technologies' President, became the
founder and CEO of Infrared Systems International (ISI) for the purpose of
licensing and providing research and manufacturing support services for Infrared
Enhanced Vision System technology. ISI was later acquired by Seacrest
Industries, Inc., which was subsequently acquired by Advance Technologies,.
Because the application of advanced Infrared Technology has uncovered a
multitude of uses within diverse industries, the management of Advance
Technologies strategically elected to license its technologies to specialty
suppliers within each targeted industry:
COMMERCIAL AIRCRAFT
In July of 1999, Advance Technologies entered into a license agreement with
Kollsman, Inc., of Merrimack, New Hampshire. Kollsman, Inc. is a commercial
avionics and electronics company that designs, develops and manufactures flight
instruments. It is a leading developer of Forward Looking Infrared Systems.
These systems have primarily been utilized in military applications. Kollsman
has been licensed by Advance Technologies to manufacture and distribute the
Advance Technologies Enhanced Vision System(TM), an applied application evolving
from the IRCLAS research program. Kollsman is to pay a royalty to Advance
Technologies based upon the number of licensed products sold by Kollsman. The
Company's license agreement with Kollsman has the potential of earning more than
$30 Million in license royalties during its life.
The commercial aircraft system that has been designed by Kollsman employing the
Company's technology utilizes an infrared sensor unit that is placed in the nose
of an aircraft. Output from that sensor is transmitted through a video interface
and onto a head-up-display that presents the flight approach as a high quality
black and white image to the pilot. This enhanced vision enables the pilot to
"see" through fog, smoke, haze, rain and snow, day or night. In addition to this
improved situational awareness of the airport, traffic and the surrounding
terrain, the takeoff and landing minima results in fewer diversions,
cancellations and flight delays.
5
In October 1997, Gulfstream Aerospace(R), a world leader in business aviation
and a wholly owned subsidiary of General Dynamics, and Kollsman entered into an
agreement to utilize the Company's technology on Gulfstream IV-SP(R) and
Gulfstream V(R) aircraft. Gulfstream announced at the time that it was preparing
for pre-prototype flight tests whose goal is to utilize the technology where the
visual ceiling is no more than 50 feet and the runway visual range is no more
than 704 feet.
In October 2000, Gulfstream announced the inclusion of Enhanced Vision Systems
(EVS) as standard equipment on all Gulfstream G-V ER business jet production at
the National Business Aviation (NBAA) tradeshow.
On October 16, 2001, Gulfstream Aerospace(R), announced it has received
certification from the Federal Aviation Administration to install the
"revolutionary" Enhanced Vision System on the Gulfstream V ultra-long range
business jet aircraft. The FAA-issued Supplemental Type Certificate allows
Gulfstream to offer EVS as an option on new GV ultralong range business jet
aircraft and also to install the system as a retrofit on in-service GV aircraft.
The Company anticipates a positive cash flow now will be achieved by the 3rd
quarter of FY2002.
OTHER INDUSTRY APPLICATIONS
While the Company's primary efforts are directed toward supporting the Kollsman
license, the Company is pursuing other areas of development for the Enhanced
Vision System (EVS) Technology. Not only can the technology be used in a variety
of cameras to reveal images through clouds or smoke but also to reveal critical
characteristics that would otherwise not be seen. A multitude of opportunities
exist in --
o Military
o Trucking
o Recreation & Leisure
o Medical & Health
o Manufacturing
o Maritime
o Construction
o Preventative Maintenance
o Firefighting
o Security
SIGNIFICANT CORPORATE MILESTONES
o On October 12, 1999, the Research and Development Phase of an Adaptive
Optical Filter System was completed. This System's optical design employs
dynamic control of the thermal imaging process, which greatly expands the usable
scene dynamic range of IR images. The development was performed in conjunction
with Applied Physics Specialties Ltd., Toronto, Canada.
6
o On December 6, 1999, an Enhanced Vision System consulting serviced
contract was signed with Gulfstream Aerospace to evaluate EVS performance and
system benchmarking.
o On November 10, 1999, Advance Technologies completed the design and
fabrication of a prototype Recreational Vehicle (RV) Thermal Imaging System.
This system has been delivered to RY Systems of Oregon for in-vehicle testing
and data collection
o In the fourth quarter of 1999, Gulfstream G-V testing of EVS flight-
testing and system evaluation with Kollsman was performed to evaluate system
performance.
o On May 15, 2000, an independent technical audit and review of Kollsman's
EVS program and development process was completed and accepted.
o On June 1, 2000, Advance Technologies' Business Model was revised from a
third-party licensing model to a shared investment model.
o On August 1, 2000, a formal Development Program for EVS II, (patent
pending) was begun employing the dynamic optical enhancement technology that was
developed with Applied Physics Specialties Ltd. of Canada.
o Discussions with Telesis Technologies, Inc., a major Infrared technology
company in Taiwan were initiated in March 2000, to create a U. S. joint venture
focused on pursuit of key U. S. IR target markets.
o On June 1, 2000, the Gulfstream EVS consulting agreement was completed
and includes a final report for Program recommendations to enhance system
performance.
o On June 22, 2000, an agreement with Opgal, Israel, for marketing rights
and development of medical applications using the IVA-2000 certified thermal
imager was entered into.
o In April 2000, Advance Technologies' Adaptive Optical Filter System had
its first public showing at Aero-Sense 2000 Imaging tradeshow in Orlando, Fl.
o In October 2000, Advance Technologies and Telesis Technologies, Inc.
(Taiwan) entered into a Joint Venture Agreement to develop Niteagle(TM), an
advanced infrared vision product for use on recreational vehicles.
o In October 2000, the Federal Aviation Association (FAA) completed
"Proof Of Concept Testing" of Kollsman EVS system signaling the successful
conclusion of FAA required performance testing of EVS in actual operation.
o In October 2000, Gulfstream announced the inclusion of Enhanced Vision
Systems (EVS) as standard equipment on all Gulfstream G-V ER business jet
production at the National Business Aviation (NBAA) tradeshow.
7
o On July 24, 2001, Advance Technologies and Telesis Technologies
announced an expansion of their existing business relationship. Advance
Technologies agreed to assist Telesis Technologies in obtaining critical
component export licenses from the U.S. Commerce Department for TTI's imaging
products, including its Spectrum 9000MB Medical Thermal Imaging System(TM).
o On October 16, 2001, Gulfstream Aerospace(R), announced it has received
certification from the Federal Aviation Administration to install the Enhanced
Vision System on the Gulfstream V ultra-long range business jet aircraft.
COMPETITION
Advance Technologies' IR technology competes with a number of vision enhancement
devices. These devices include systems based not only on infrared technology but
also on radar-based technology. Advance Technologies believes that its
technology is not only a more proven, cost-effective, realtime solution to
Enhanced Vision, but that it is currently the only system which produces a
quality image in a critical vision environment that can be viewed in a
head-up-display within the user's line of sight.
EMPLOYEES
The Company employs a total of three (3) employees all, of which, are full time
employees.
ITEM 2. DESCRIPTION OF PROPERTIES.
The Company's executive offices are located in Palos Verdes Estates, California.
ITEM 3. LEGAL PROCEEDINGS.
There were no pending legal proceedings involving the Company as of September
30, 2001.
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 the fiscal year ended
September 30, 2001.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
8
MARKET INFORMATION
The Company's Common Stock is traded on the Over-the-Counter Bulletin Board
under the symbol "AVTX" with the high bid at $1.80 per share and the low bid of
$0.35 per share during the last fiscal year. Additional information required by
this item may be found in the Company's 2001 Financial Statements..
STOCKHOLDERS
On October 4, 1999 there was an escrow established by the Company at Pacific
Stock Transfer Company for 50,204,102 Shares of preferred stock for the exchange
of Seacrest Industries, Inc. common stock in conjunction with its acquisition.
As of September 30, 2001 43,123,202 shares of Seacrest had been exchanged.
Our Company's authorized capital stock as of December 31, 2001 consists of
52,770,025 shares divided into 2,572,923 shares of Common Stock, par value
$0.001 per share, and 50,204,102 shares of Preferred Stock, par value, $0.001
per share.
Common Stock has equal voting rights and, when validly issued and outstanding
are entitled to one vote per share in all matters to be voted upon by
shareholders. The shares of Common Stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully paid and
non-assessable shares. Cumulative voting in the election of directors is not
permitted, which means that the holders of a majority of the issued and
outstanding shares of Common Stock represented at any meeting at which a quorum
is present will be able to elect the entire Board of Directors if they so choose
and, in such event, the holders of the remaining shares of Common Stock will not
be able to elect any directors. In the event of liquidation of the Company, each
shareholder is entitled to receive a proportionate share of the Company's assets
available for distribution to shareholders after the payment of liabilities and
after distribution in full of preferential amounts, if any. All shares of the
Company's Common Stock issued and outstanding are fully paid and nonassessable.
Holders of the Common Stock are entitled to share pro rata in dividends and
distributions with respect to the Common Stock, as may be declared by the Board
of Directors out of funds legally available therefore. The Preferred Stock has
no voting rights and is convertible to common upon direction of the Board of
Directors. A majority of the Preferred Shareholders governs the convertible
ratio to common.
DIVIDENDS
We have not paid dividends on our Common Stock and do not intend to pay any
dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
9
From time to time, we may publish forward-looking statements relating to
matters, including anticipated financial performance, business prospects, the
progress and goals for our research and development program, marketing
strategies and other similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. To comply
with the terms of that 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 forward-looking statements.
When used in this discussion, the words "believes," "anticipated," "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 result 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.
PLAN OF OPERATION
Our plan of operation has been strongly affected by delays in the Certification
of the Enhanced Vision System by the Federal Aviation Administration. The
granting of the Supplemental Type Certification in October 2001 allows our EVS
to start production with initial sales in 2001.
By January 2002, we shall have sufficient visibility on sales in 2002 and beyond
to make reasonable projections of our anticipated royalties from these sales.
Positive cash flow should be achieved by 3rd quarter of 2002.
The certification delays have put us three years behind our original schedule.
These delays have forced us to use a line of credit to meet operational
expenditures as well as delaying other new product ventures.
Our current line of credit is adequate for our projected operating costs. We
continue to explore other avenues of Capital infusion, but the requirement for
these funds is tied to discretionary expenditures on new product and new
markets.
The Company does not anticipate purchasing or selling any significant equipment
during the next twelve months and the Company does not expect any significant
changes in the number of employees.
The new products and markets we have been exploring are all in Infrared Camera
applications for specific applications. These applications are: Recreational
Vehicle Systems, Security Systems, and Medical System Applications.
We have engaged in a strategic partnership arrangement with Telesis Technologies
Inc., a Taiwanese private corporation. Our talents appear to be complementary,
and we are exploring many opportunities to expand our joint participation.
Currently, our partnership is limited to the Recreational Vehicle System
venture.
10
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required by this Item are set forth beginning on page
14.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Directors and Executive Officers of the Company as of September 30, 2001
were:
NAME AGE POSITION
---- --- --------
Gary E Ball 63 President and Director
Gary L. Bane 63 Vice President and Director
Wendy Ball 54 Secretary
GARY E. BALL, President and Director, attended California State University at
Long Beach graduating in 1960 with a Bachelor of Science Degree in Electrical
Engineering and in 1967 with a Master of Science Degree in Electrical
Engineering. Mr. Ball started his career as an engineer specializing in product
design, development, and management for North American Aviation Autonetics
Division. He was Technical Manager in charge of the Pave Track Program for Ford
Aerospace. Mr. Ball was Program Manager for Northrop Electro-Mechanical in
charge of business development on several classified Department of Defense
programs including the AMIZAAM effort. As Program Manager for Hughes Aircraft,
where Mr. Ball developed the. Infrared Enhanced Vision System, he reported to
the President of EDSG for the IRCLAS Program. Mr. Ball was a member of NATO NIAG
study group on Aircraft Integration, and has authored several articles for trade
publications. Mr. Ball has been engaged by U.S. and foreign corporations to
provide consulting services in the field of IR technology.
GARY L. BANE, Vice President and Director, attended University of Southern
California obtaining a Bachekor of Science Degree in Mechanical and Aeronautical
Engineering in 1960. Master of Science Degree in Control Systems and
Instrumentation in1966. Mr. Bane also obtained a Master of Science degree in
Systems Management in 1968 from the University of California Los Angeles
studying Deep Submergence Vehicle Oceanography and Offshore Systems Engineering,
and Stanford University Executive Institute of Management for High Technology
Companies. Mr. Bane is a specialist in the development, and management of Deep
11
Ocean and offshore technology projects. He 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
Oceanics division where he was responsible for profit, loss and R&D for offshore
oil drilling and recovery projects.
WENDY BALL, Secretary, Age 54, graduated from University of Southern California
with a Bachelor of Science Degree, Cum Laude. Ms. Ball was a key employee at
Neiman Marcus Beverly Hills and was a key Buyer in New York. Ms. Ball was an
Account Executive for Carolee Jewelry for Southern California, Arizona and Utah.
She was a co-owner of Brava Specialty Clothing store in Redondo Beach,
California.
ITEM 10. EXECUTIVE COMPENSATION
Other than information provided in the Company's 2001 Financial Statements
incorporated herein, executive officers and directors have received no other
compensation.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Common Stock as of September 30, 2001 by (i) each person known
by the Company to own beneficially more than 5% of the outstanding Common Stock;
(ii) each director of the Company; and (iii) all executive officers and
directors as a group.
TITLE OF CLASS NAME & ADDRESS OF AMOUNT & NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF 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 Issue 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
12
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
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.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
The following documents are filed as part of this Form 10-KSB Annual Report:
1) Financial Statement
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the period covered
by this report.
ADDITIONAL INFORMATION
For further information with respect to the Company, we refer you to the
quarterly and annual reports that we file with the Securities and Exchange
Commission (the "Commission") as a reporting company under the Securities
Exchange Act. You may inspect these reports, including the exhibits thereto,
without charge, at the Public Reference Room of the Commission at 450 Fifth
Street N.W., Washington, D.C. and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York. You may obtain
copies of these reports from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the prescribed
fees. You may obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. You may also access such material
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
13
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report................................................F-2
Consolidated Balance Sheets ................................................F-3
Consolidated Statements of Operations.......................................F-4
Consolidated Statements of Stockholders' Equity.............................F-5
Consolidated Statements of Cash Flows.......................................F-6
Notes to the Consolidated Financial Statements..............................F-7
14
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Advance Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Advance
Technologies, Inc. (a Development Stage Company) as of September 30, 2001 and
the related statements of operations, stockholders' equity and cash flows for
the years ended September 30, 2001 and 2000 and from inception on October 1,
1985 though September 30, 2001. 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. The financial
statements for the period October 1, 1985 through September 30, 1995 were
audited by other accountants, who expressed an unqualified opinion on their
report dated February 12, 1996.
We conducted our audits in accordance with generally accepted auditing standards
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, 2001 and
the results of its operations and cash flows for the years ended September 30,
2001 and 2000 and from inception on October 1, 1985 through September 30, 2001
in conformity with generally accepted accounting principles 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 18, 2001
F-2
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Consolidated Balance Sheets
ASSETS
September 30,
2001
----
Current assets
Cash $3,515
------
Total Current Assets 3,515
-----
Property & Equipment, Net 26,835
------
Total Assets $30,350
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Interest $13,007
Note Payable-Officer 28,300
Advance Royalties 25,000
------
Total Current Liabilities 66,307
------
Long Term Debt
Line of Credit 85,500
------
Total Liabilities 151,807
-------
Stockholders' Equity
Common Stock, authorized
100,000,000 shares of $.001 par value,
issued and outstanding 2,572,923 shares 2,573
Preferred Stock, Series A authorized
100,000,000 shares of $.001 par value,
issued and outstanding 50,204,102 shares 50,204
Additional Paid in Capital 446,496
Deficit Accumulated During the
Development Stage (620,730)
---------
Total Stockholders' Equity (121,457)
---------
Total Liabilities and Stockholders' Equity $30,350
=======
The accompanying notes are an integral part of these financial statements
F-3
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Consolidated Statements of Operations
Cumulative
For the Total since
years ended inception of
September 30, development
2001 2000 stage
---- ---- -----
Revenues: $ 30,985 $ - $ 30,985
Expenses:
Depreciation & Amortization 7,000 14,665 21,665
Interest 10,191 2,816 13,007
Organization Costs - - 11,331
Research & Development 61,500 11,250 72,750
General and Administrative 18,625 73,068 570,263
--------- --------- --------
Total Expenses 97,316 101,799 689,016
--------- --------- --------
Income/(loss) from operating activities (66,331) (101,799) (658,031)
--------- --------- --------
Other Income (Expense):
Miscellaneous Income 98,000 - 98,000
--------- --------- --------
Total Other Income 98,000 - 98,000
--------- --------- --------
Net Income (Loss) 31,669 $(101,799) (560,031)
========= ========= ========
Net Income/(Loss) Per Share 0.01 $ (0.03) (1.03)
==== ======= =====
Weighted average shares outstanding 2,572,923 2,572,923 541,673
========= ========= =======
The accompanying notes are an integral part of these financial statements
F-4
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Consolidated Statement of Stockholders' Equity
Deficit
Accumulated
Additional Preferred During the
Common Stock 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 -
Expiration of preferred shares - - 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 - - -
Fractional shares adjustment (6) (1) - - - -
Net loss for the year ended September 30,
1996 - - - (50,000)
---------- ------ -------- ---------- ------- ----------
Balance September 30, 1996 59,486 59 454,643 - - (454,702)
Shares issued for services at $0.25 609 1 5,324 - - -
Net loss for the year ended September 30,
1997 - - - - - (5,325)
---------- ------ -------- ---------- ------- ----------
Balance September 30, 1997 60,095 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 72,923 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 Corporation 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 2,572,923 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 2,572,923 $2,573 $446,496 50,204,102 $50,204 $ (652,399)
Net income for the year ended
September 30, 2001 - - - - - 31,669
---------- ------ -------- ---------- ------- ----------
Balance September 30, 2001 $2,572,923 $2,573 $446,496 50,204,102 $50,204 $ (620,730)
========== ====== ======== ========== ======= ==========
The accompanying notes are an integral part of these financial statements
F-5
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Consolidated Statement of Cash Flows
October 1,
(inception of
For the development
year ended stage) to
September 30, September 30,
2001 2000 2001
---- ---- ----
Cash Flows from Operating
Activities
Net Income (Loss) $ 31,669 $(101,799) $ (560,031)
Adjustments to Reconcile
Net Loss to Net Cash
Provided by Operations:
Depreciation & Amortization 19,500 14,665 34,165
Decrease in Prepaids - 2,180 2,180
Increase (Decrease) in Accounts Payable & Accrued Expenses (24,100) 31,045 13,009
Stock Issued for Services - - 399,775
Organization Costs - - 11,331
-------- --------- ----------
Net Cash Flows Provided
(Used) by Operating Activities 27,069 (53,909) (99,571)
-------- --------- ----------
Cash Flows from Investment
Activities:
Purchase of Equipment (10,000) (26,000) (36,000)
Investment in Subsidiary - - 286
-------- --------- ----------
Net Cash Flows Provided
(Used) by Investing Activities (10,000) (26,000) (35,714)
-------- --------- ----------
Cash Flows from Financing
Activities:
Cash Paid on Officer Loan
(21,200) - (33,200)
Proceeds from Loan from Officer - 1,500 61,500
Proceeds from Line of Credit 6,000 79,500 85,500
Net Proceeds from Issuance of Stock - - 25,000
-------- --------- ----------
Net Cash Flows Provided
(Used) by Operating Activities (15,200) 81,000 138,800
-------- --------- ----------
Net Increase (Decrease) in Cash 1,869 1,091 3,515
Cash, Beginning of Year 1,646 555 -
-------- --------- ----------
Cash, End of Year $ 3,515 $ 1,646 $ 3,515
======== ========= ==========
The accompanying notes are an integral part of these financial statements
F-6
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 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 that eventually failed. On August 23, 1997
the Company changed its name to Advance Technologies, Inc. and moved
its state of domicile to the state of Nevada.
On September 27, 1999 pursuant to a plan of acquisition, the
Company exchanged 50,204,102 shares of its Series "A" preferred stock
for SeaCrest Industries Corporation's 50,204,102 shares of 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 expense on the accrual basis of
accounting.
c. Consolidation
The consolidated financial statements include the accounts of
Advanced Technologies, Inc. and SeaCrest Industries Corporation, a
wholly owned subsidiary. Intercompany transactions have been
eliminated.
d. 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.
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
f. Provision for Income Taxes
No provision for income taxes has been recorded due to net
operating loss carry forwards totaling approximately $(604,000) that
will be offset against future taxable income. These NOL carry forwards
begin to expire in the year 2004 No tax benefit has been reported in
the financial statements because the Company believes there is a 50% or
greater chance the carry forward will expire unused.
F-7
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2001
NOTE 1 - Summary of Significant Accounting Policies (continued)
Deferred tax assets and the valuation account is as follows:
September 30,
2001
--------------
Deferred tax asset:
NOL carrry forward $ 205,000
Valuation allowance (205,000)
--------------
Total $ -
==============
g. Use of Estimates in the Preparation of Financial Statements
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 expenses during the reporting
period. In these financial statements, assets and liabilities involve
extensive reliance on management's estimates. Actual result could
differ from those estimates.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has few
assets and has had recurring operating losses and is dependent upon
financing 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 finish development of its night
vision technology and begin to market their product to generate the
necessary 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.
NOTE 4 - Revenues
During the fiscal year ended September 30,2001, the Company entered
into an agent agreement with the Taiwan company that is jointly
developing the night vision agreement. The Company has recognized
$30,985 as revenues from this agreement.
F-8
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2001
NOTE 5 - Miscellaneous Income
During the fiscal year ended September 30, 2001, the Company
entered into an agreement with the Taiwan company that is jointly
developing the night vision agreement. Per the agreement, the Company
is responsible for the market development stage of the night vision
system. The Taiwan company provided $98,000 to the Company in
connection with the market development stage. This stage of the
agreement has been substantially completed.
NOTE 6 - 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, if any occur, and has been recorded as a
liability.
NOTE 7 - Related Party Transactions
During prior fiscal years, an officer loaned the company $61,500
and was paid back $12,000. During the current fiscal year, this officer
was paid back $21,200. The balance due on the note as of September 30,
2001 is $28,300. The note payable-officer is considered a current
liability with no provisions for interest.
NOTE 8 - Property & Equipment
Property & Equipment consists of the following at September 30, 2001:
Equipment $36,000
Accumulated Depreciation (9,165)
-------
Net Property & Equipment $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 an 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
year ended September 30, 2001 is $7,000.
F-9
ADVANCE TECHNOLOGIES, INC.
(a Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2001
NOTE 9 - Line of Credit
The Company has negotiated a Line of Credit with a corporation,
wherein the Company has a credit limit of $125,000. The Company
received advances of $6,000 and $79,500 during the fiscal years ended
2001 and 2000, respectively. The company has recorded accrued interest
of $13,007 in connection with the advances. The principal and interest
is due January 1, 2004.
F-10
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: December 27, 2001 Advance Technologies, Inc.
(Registrant)
By:/s/GARY E. BALL
----------------------
Gary E. Ball
President and Director